Alternative institutional arrangements towards optimal water allocation
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Date
2002-11
Authors
Gakpo, Emmanuel Foster Yao
Journal Title
Journal ISSN
Volume Title
Publisher
University of the Free State
Abstract
The limited natural availability of water resources in South Africa coupled with the
increasing competition between water users demands that, reallocation and
sustainable use of water be given serious attention.
Bringing into perspective factors leading to the vulnerability of water resources, focus
is placed on institutional issues, which is becoming a thorny issue nationally.
Drawing on institutional economic theory a generic water institutional framework is
developed to assist in shaping institutional arrangements towards achieving economic
and social objectives simultaneously, in order to guarantee water security.
In this thesis an ideal institutional framework was developed and used in conjunction
with global trends and patterns in water policy and institutional arrangements, to
evaluate the South African water law and water policy. The evaluation revealed that
factors like: excessive government control of water management institutions;
bureaucratic consented water reallocations; administratively set pricing mechanisms;
lack of appropriate arrangements to facilitate tradable entitlements (like defining
exclusive rights to entitlements); unclear water transfer arrangements; and lack of
definitive institutional provisions for integrated demand and supply management,
deviate from current international water institutional trends and also fall short of an
ideal institutional arrangement that will lead to water security.
The weaknesses in the current South African water laws and policies prompted the
search for alternative institutional arrangements, which particularly have the
potential to offer more opportunities for effective water allocation and management,
and largely based on decentralisation and full stakeholder participation.
A number of alternatives were studied and Capacity Sharing (CS) was identified as
the most appropriate. Capacity sharing is an institutional arrangement with property
rights structured to allocate water among multiple users of water resource systems.
This form of institutional arrangement provides each user or group of users of
reservoir water with perpetual or long-term rights to a percentage of reservoir
inflows and a percentage of reservoir storage capacity.
Capacity Sharing has the capacity to solve the potential South African water scarcity
problem, because of its dependence on water markets, as well as its decentralised
tendency. In addition, the attributes of flexibility, predictability and security of tenure,
rank CS as one of the best alternative institutional arrangements. However, critical
issues like: water rights; water transfers; water markets; and the general
administrative control, need some minor institutional amendments if CS is to be
adopted in South Africa.
A case study at Vanderkloof dam assumes the existence of CS in which the
arrangement provides Ramah Canal irrigation water users exclusive right to allotted
reservoir capacity shares as well as inflow shares, in an effort to test the applicability
of CS, as well as the benefits it can offer the water user.
A simulation model SIM-DY-SIM was used to determine Marginal Value Products
(MVPs) for 75-hectare farm, under two Crop Mix scenarios of cultivating lucern,
maize and wheat; potatoes, maize and wheat. The results show that, MVPs (which
determine the farmer's ability to pay for water) differ significantly with respect to
crop mixes and also across seasons.
The shadow prices (MVPs) were also derived at different water scarcity scenarios to
determine the optimal water use policies that the farmer would pursue. The MVPs,
indicating the ability to pay in the immediate season or in the future, provide the
capacity for determining water prices in both the present and in the future. This
characteristic is very vital for trading water rights.
The MVPs also facilitate good water use decision-making since they are linked to the
decision to release or save water. The implications of these MVP values for water
transfers and trading and hence allocation and efficient use of water becomes
apparent.
The other set of results compared the use of SDP derived rules with the alternative of
no rules pertaining to the farmer's water supply reliability. It is noted that reservoir
capacity and inflow shares, which ultimately determine the farmer's water supply
reliability, were better-managed using SDP derived rules than without rules.
Deductions from the SDP simulations from the viewpoint of the usefulness of MVPs to
value water, to the advantages of using SDP derived rules to make optimal water use
decisions, opens a new frontier for efficient allocation and use of South Africa's water
resources.
Description
Keywords
Water-supply -- South Africa, Water transfer -- South Africa, Water use -- South Africa, Dissertation (M.Sc. Agric. (Agricultural Economics))--University of the Free State, 2002