The Potential Impact of Increased Irrigation Water Tariffs in South Africa
In South Africa, a water scarce country, conflict between water users is mounting, while there are few remaining bulk water augmentation options. Water demand management is thus increasingly taking centre stage in water management debates. Water pricing is regarded as an important component of managing the demand for water resources. This article traces the efficacy of increasing irrigation water tariffs to save water and the impact thereof on the national economy and the Western Cape economy using the Computable General Equilibrium (CGE) model and Social Accounting Matrix (SAM) constructed by Hassan et al (2008). Two scenarios are investigated in which the water tariff is increased by 50 percent from a base of 2c/m³. In the first scenario water demand is fixed in agriculture; thus, water needs to be fully utilized in agriculture. In the second scenario it is assumed that all water does not have to be utilized. The study finds that, for both scenarios, increasing water tariffs by 50% raises the risk profile of agriculture, threatens food security, decreases national welfare, increases imports of staple foods, increases the prices of staple foods, decreases household welfare and decreases employment in agriculture. These adverse effects are more severe in the second scenario than in the first scenario. The introduction of irrigation water pricing shocks should thus be approached with due caution and alternative demand management approaches should be investigated.
|Date of creation:||Sep 2010|
|Contact details of provider:|| Postal: c/o FORMAT, 5th Floor, Muthaiga Mini Market, Limuru Road, P.O. Box 79 - 00621 Village Market, Nairobi, Kenya|
Phone: 254 20 6752866
Web page: http://www.aaae-africa.org
More information through EDIRC
Web page: http://www.aeasa.org.za/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- de Fraiture, Charlotte & Perry, C. J., 2007. "Why is agricultural water demand unresponsive at low price ranges?," IWMI Books, Reports H040602, International Water Management Institute.
- Rashid Hassan & James Thurlow, 2011.
"Macro–micro feedback links of water management in South Africa: CGE analyses of selected policy regimes,"
International Association of Agricultural Economists, vol. 42(2), pages 235-247, 03.
- Hassan, R. & Thurlow, J. & Roe, T. & Diao, X. & Chumi., S. & Tsur, Y., 2008. "Macro-micro feedback links of water management in South Africa : CGE analyses of selected policy regimes," Policy Research Working Paper Series 4768, The World Bank.
- van Heerden, Jan H. & Blignaut, James & Horridge, Mark, 2008. "Integrated water and economic modelling of the impacts of water market instruments on the South African economy," Ecological Economics, Elsevier, vol. 66(1), pages 105-116, May.
- Molle, Francois & Berkoff, J., 2007. "Water pricing in irrigation: mapping the debate in the light of experience," IWMI Books, Reports H040601, International Water Management Institute.
- Molle, Francois & Wester, P. & Hirsch, P. & Jensen, J. R. & Murray-Rust, H. & Paranjpye, V. & Pollard, S. & van der Zaag, P., 2007. "River basin development and management," IWMI Books, Reports H040208, International Water Management Institute.
- Dinar, Ariel & Rosegrant, Mark W. & Meinzen-Dick, Ruth, 1997. "Water allocation mechanisms : principles and examples," Policy Research Working Paper Series 1779, The World Bank.
- Phoebe Koundouri & Panos Pashardes & Timothy Swanson & Anastasios Xepapadeas, "undated". "The Economics of Water Management in Developing Countries Problems, Principles and Policies," DEOS Working Papers 0302, Athens University of Economics and Business.
- Phoebe Koundouri & Panos Pashardes & Timothy Swanson & Anastasios Xepapadeas, "undated". "The Economics of Water Management in Developing Countries Problems, Principles and Policies," DEOS Working Papers 0303, Athens University of Economics and Business.
- Koundouri, Phoebe & Pashardes, Panos & Swanson, Timothy & Xepapadeas, Anastasios, 2003. "The Economics of Water Management in Developing Countries Problems, Principles and Policies," MPRA Paper 38137, University Library of Munich, Germany.
- Dalton, Timothy J. & Porter, Gregory A. & Winslow, Noah G., 2004. "Risk Management Strategies in Humid Production Regions: A Comparison of Supplemental Irrigation and Crop Insurance," Agricultural and Resource Economics Review, Cambridge University Press, vol. 33(02), pages 220-232, October.
- Dalton, Timothy J. & Porter, Gregory A. & Winslow, Noah G., 2004. "Risk Management Strategies in Humid Production Regions: A Comparison of Supplemental Irrigation and Crop Insurance," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 33(2), October.
- Janis M. Carey & David Zilberman, 2002. "A Model of Investment under Uncertainty: Modern Irrigation Technology and Emerging Markets in Water," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 171-183.
- Olmstead, Sheila M. & Michael Hanemann, W. & Stavins, Robert N., 2007. "Water demand under alternative price structures," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 181-198, September.
- Sheila Olmstead & W. Michael Hanemann & Robert N. Stavins, 2007. "Water Demand Under Alternative Price Structures," NBER Working Papers 13573, National Bureau of Economic Research, Inc.
- Bontemps, Christophe & Couture, St phane, 2002. "Irrigation water demand for the decision maker," Environment and Development Economics, Cambridge University Press, vol. 7(04), pages 643-657, October.
- James Blignaut & Jan van Heerden, 2009. "Is Water Shedding Next?," Working Papers 141, Economic Research Southern Africa.
- James Blignaut & Jan van Heerden, 2009. "Is Water Shedding Next?," Working Papers 200918, University of Pretoria, Department of Economics.
- C.S. Kim & Glenn Schaible, 2000. "Economic Benefits Resulting From Irrigation Water Use: Theory and an Application to Groundwater Use," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 17(1), pages 73-87, September.
- Mateos-Planas, Xavier, 2004. "Technology adoption with finite horizons," Journal of Economic Dynamics and Control, Elsevier, vol. 28(11), pages 2129-2154, October.
- Feder, Gershon & Just, Richard E & Zilberman, David, 1985. "Adoption of Agricultural Innovations in Developing Countries: A Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 33(2), pages 255-298, January.
- Ada Jansen & Carl-erik Schulz, 2006. "Water Demand And The Urban Poor: A Study Of The Factors Influencing Water Consumption Among Housholds In Cape Town, South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 74(3), pages 593-609, 09. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ags:aaae10:96425. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.