South Africa faces water scarcity due to the contribution of climatic, geographic, and human variables. As reported by Statistics South Africa, persistent water scarcity and distributional inequity has arisen in a changing political arena from the period of colonization to the most recent chapter of South African governance from 1994 onwards [1]. In the policy context of a state struggling with the legacy of apartheid, conflicts regarding the pricing of freshwater resources have arisen [2].

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... discrepancies between the higher price for water required to promote efficiency and conservation, and the alternative pricing system that would meet the South Africa's responsibility to improve distributional fairness, the most recent challenges took place between 1994 and 2000 [3]. Consequently, the predominant problem linked to South Africa's freshwater resources is how to allocate water amongst the competing uses of long term environmental and human welfare, without compromising the needs of the country's urban poor. One perspective, which can provide insight on the issue of water scarcity in South Africa, is free market environmentalism. This branch of economic thought supports a system of water markets with prices that reflect the true cost of providing the resources along with subsidies to address the needs of the poor. Based on an evaluation of the impact of market incentives in South Africa since the 2001 market reforms, it has been determined that a pragmatic, free market environmentalist approach to water can yield economically efficient outcomes for the resource while mitigating distributional equity issues.