A new methodology for assessing the impact of water pricing scenarios: case study of small-scale schemes in South Africa
Faculty of Sciences. Bioscience Engineering
S.l. , 2008
Engineering sciences. Technology
EAAE Congress, August 2008, Gent
University of Antwerp
Worldwide growing water scarcity has increased the call for economic instruments to stimulate rational water use in agriculture. In addition costrecovery is now widely accepted as a cornerstone of sustainable water management. As a consequence now in developing countries, where currently agricultural water use is often still heavily subsidized, a tendency exists of introducing water-pricing as a policy to achieve more sustainable water use. The exact impact of water pricing policies on irrigation water use or on the farmers production system is however mostly unknown. A new two-stage methodology that allows estimating at the farm level the effects of introducing or raising a water price on the agricultural production process and water demand is introduced in this study. The first stage comprises the construction of a technical efficiency frontier and the calculation of the technical and allocative efficiency levels of each farm. This representation of the technology is used in the second stage in a profit maximization model. As an example the method is applied to the case of small-scale irrigators in South Africa. It is shown that water demand of farmers is quite responsive even to small changes in the water price. Moreover, the introduction of a water price is shown to significantly decrease farm profit. This appears to be mainly a problem for the poorer farmers.