"Coast Water Services Board has unearthed a cartel involving some water kiosk owners in Mikindani, Mombasa who conspire to create an artificial shortage in the area.
"The water board boss Andy Tolla said some of the water kiosk owners have been filling their huge underground water tanks and wait untill the pipes run dry before selling the water for as much as Sh7 per 20-litre jerrican."
Ksh 7/20 liters is equivalent to US$3.73 per cubic meter--about 2.7 times what my family pays per unit volume for in-home water supply services. The successful rent-seeking by kiosk operators thus illustrates the claim that researchers have been making for some time: Even urban poor families are willing to pay considerable amounts of money for water supply services. (This is not to be confused with the normative question of whether charging such high prices is an acceptable thing to do, which is a separate issue.)
But the curious thing here is the proposed solution:
"Tolla however said measures have been put in place to break up the cartel. He said new regulations that are being implemented will effectively stop the practice.
In the new policies, water companies like the Mombasa Water and Sewerage Company will regulate water kiosks. The companies will decide how many kiosks are needed in what areas. Licences will only be given to water kiosks where the companies deem absolutely necessary."
Given the obvious challenges with regulation of the kiosk sub-sector, wouldn't the most cost-effective solution to collusion be increasing, rather than decreasing, competition? Won't the restriction of license supply, and the concentration of power over who gets them into a few hands, simply create opportunities for new types of rent-seeking (and reduce the availability of water supplies to households)?