The Reconstruction and Development Programme commits the government in South Africa to the provision of adequate access to water for all citizens. Severe backlogs in urban water supply, a growing urban population, and large capital requirements pose great challenges to South Africa's water supply authorities. The aim is to present recent research on the scale of the urban water supply problem and to provide a brief overview of the main issues in developing an economically and environmentally sustainable water supply approach while meeting basic-needs. A key concern is the level of cost recovery, and the setting of tariffs and income policy in the context of a very low-income consumer base.