Resource information
The pressure on an already stressed
water situation in South Africa is predicted to increase
significantly under climate change, plans for large
industrial expansion, observed rapid urbanization, and
government programs to provide access to water to millions
of previously excluded people. The present study employed a
general equilibrium approach to examine the economy-wide
impacts of selected macro and water related policy reforms
on water use and allocation, rural livelihoods, and the
economy at large. The analyses reveal that implicit
crop-level water quotas reduce the amount of irrigated land
allocated to higher-value horticultural crops and create
higher shadow rents for production of lower-value,
water-intensive field crops, such as sugarcane and fodder.
Accordingly, liberalizing local water allocation in
irrigation agriculture is found to work in favor of
higher-value crops, and expand agricultural production and
exports and farm employment. Allowing for water trade
between irrigation and non-agricultural uses fueled by
higher competition for water from industrial expansion and
urbanization leads to greater water shadow prices for
irrigation water with reduced income and employment benefits
to rural households and higher gains for non-agricultural
households. The analyses show difficult tradeoffs between
general economic gains and higher water prices, making
irrigation subsidies difficult to justify.
