Macro-Micro Feedback Links of Water Management in South Africa: CGE Analyses of Selected Policy Regimes

74 Pages Posted: 20 Apr 2016

See all articles by R. Hassan

R. Hassan

University of Pretoria

James Thurlow

UNU-WIDER; International Food Policy Research Institute (IFPRI)

T. Roe

Applied Economics

Xinshen Diao

International Food Policy Research Institute (IFPRI)

Sinqobile Chumi

University of Pretoria

Yacov Tsur

Hebrew University of Jerusalem - Department of Agricultural Economics and Management

Date Written: November 1, 2008

Abstract

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.

Keywords: Water Supply and Sanitation Governance and Institutions, Town Water Supply and Sanitation, Water Supply and Systems, Water and Industry, Water Conservation

Suggested Citation

Hassan, R. and Thurlow, James and Roe, T. and Diao, Xinshen and Chumi, Sinqobile and Tsur, Yacov, Macro-Micro Feedback Links of Water Management in South Africa: CGE Analyses of Selected Policy Regimes (November 1, 2008). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2008. Available at SSRN: https://ssrn.com/abstract=1297807

R. Hassan (Contact Author)

University of Pretoria ( email )

Physical Address Economic and Management Sciences
Pretoria, Gauteng 0002
South Africa

James Thurlow

UNU-WIDER ( email )

Katajanokanlaituri 6B
Helsinki, FIN-00160
Finland

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

T. Roe

Applied Economics ( email )

Ruttan Hall
1994 Buford Ave
St. Paul, MN 55108
United States
612-625-6706 (Phone)

Xinshen Diao

International Food Policy Research Institute (IFPRI) ( email )

2033 K Street, NW
Washington, DC 20006
United States
202-862-8113 (Phone)
202-467-4439 (Fax)

Sinqobile Chumi

University of Pretoria ( email )

Physical Address Economic and Management Sciences
Pretoria, Gauteng 0002
South Africa

Yacov Tsur

Hebrew University of Jerusalem - Department of Agricultural Economics and Management ( email )

P.O. Box 12
Rehovot, 76100
Israel

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