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Abstract
In the face of declining public subsidies, municipalities will have to find additional revenue to meet the expectations of growing populations that cannot afford to pay. Conventional approaches to setting user fees do not evaluate the benefits to members of society who do not directly use the service. This paper presents a study that measured the willingness of the ‘non-poor’ residents of Cape Town, to pay for the benefits of improving services in informal settlements. The respondents expressed highest preference for shared facilities followed by yard facilities, and were willing to pay USD 11.21; and USD 7.73 per month respectively. Willingness-to-pay was influenced by proximity to the informal settlement and on method of payment. The potential revenue from non-user value exceeded the installation costs for shared and yard facilities, suggesting that municipalities could finance upgrades by harnessing the non-user value among the non-poor residents. The method applied in this study could be used to improve policy planning and subsidy targeting.