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Water marketing in the Crocodile River, South Africa

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Author Info

  • Nieuwoudt, W. Lieb
  • Gillitt, C.G.
  • Backeberg, G.R.
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    Abstract

    Transfers of water in the Crocodile River above and below the gorge (near Nelspruit and Malelane) were studied based on a survey in the area during November 2003, followed up by telephonic interviewing during March 2004. Almost all the water trades (permanent and rentals) observed in this study were from farmers above the gorge to farmers below the gorge. In order to study whether the water market promotes efficiency the data were subjected to several statistical analyses (Principal Components, Ridge Regression, Logit). It is concluded that in the transfer of water some attributes in the purchasing area such as lower production risk (sugar cane) and lower financial risk and better cash flow (bananas and sugar cane) were more important than the income per cubic meter of water. Water supply in this area is highly irregular while farmers were found to be extremely risk averse especially as far as down-side risk is concerned. The average water price in this area in recent years (2002 to 2003) was between R2,000 and R3,000 per ha (1ha = 8,000 cubic meter). Buyers are large progressive farmers that purchase (and rent) from many sellers (or lessees). It is concluded that information (sale prices and rents) is asymmetrical. Few permanent transfers have taken place in the Crocodile River in recent years. It is concluded that there are reasons why transfers at present are not processed and role players should discuss these reasons and possible solutions before further action is taken.

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    Bibliographic Info

    Article provided by Agricultural Economics Association of South Africa (AEASA) in its journal Agrekon.

    Volume (Year): 44 (2005)
    Issue (Month): 3 (September)
    Pages:

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    Handle: RePEc:ags:agreko:31727

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    Web page: http://www.aeasa.org.za/
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    Related research

    Keywords: Resource /Energy Economics and Policy;

    References

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    1. Huffaker, Ray G. & Whittlesey, Norman K., 1995. "Agricultural Water Conservation Legislation: Will It Save Water?," Choices, Agricultural and Applied Economics Association, vol. 10(4).
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    Cited by:
    1. R. Quentin Grafton & Clay Landry & Gary D. Libecap & Sam McGlennon & Robert O'Brien, 2010. "An Integrated Assessment of Water Markets: Australia, Chile, China, South Africa and the USA," NBER Working Papers 16203, National Bureau of Economic Research, Inc.
    2. Grove, Bennie & Oosthuizen, Lukas Klopper, 2010. "Stochastic efficiency analysis of deficit irrigation with standard risk aversion," Agricultural Water Management, Elsevier, vol. 97(6), pages 792-800, June.

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