Programme  OS6c Water markets and water sharing approaches  abstract 450

The challenge of agricultural Water Conservation and Water Demand Management in South Africa.

Author(s): Andrew Pott, Jason Hallowes, Gerhard Backeberg, Max Döckel, L. Nieuwoudt
Mr Pott, Dr Backeberg, Prof Nieuwoudt, Prof Dockel

Keyword(s): WC & WDM, incentives, defining use entitlements, water metering, information systems, water trading

Article: abs450_article.pdf
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Session: OS6c Water markets and water sharing approaches
AbstractWater is currently, and will continue to be, a scarce resource in South Africa. More than 50% of South

Africa’s catchments are deemed to be over-allocated. Although new augmentation options will need to be

considered, such as the building of dams, the construction of inter-basin transfers and/or the construction of

desalination plants, the reality of the situation is that these options are very expensive, and often environmentally

unsustainable. There is an increasing recognition that better management of available water resources is required

through improved Water Conservation and Water Demand Management (WC&WDM) policies, institutions and


Inter-related initiatives should be adopted that will incentivise the sustainable uptake of water

conservation and water demand management by water users in South Africa, after the initial round of water use

licenses have been issued. The initiatives include, first, reviewing the way in which the water use licenses are defined.

The paper discusses the merits of moving to a Fractional Water Allocation and Capacity Sharing (FWA-CS) water

apportionment system. It is argued that this initiative will promote WC & WDM for the following reasons: The

property rights are very well defined in this system, thereby enabling improved water audits to be undertaken, which

are required to ensure that water users comply with their water use license conditions. The FWA-CS system

enables water banking to be undertaken in large dams. Water banking provides incentives for the holders of water

licenses to optimize the use of water over time, which is not the case in the currently adopted “use-it-or-lose-it”


Secondly, water resource management systems need to be improved. The key component of such a

management system is a network of abstraction meters, as well as flow gauges. A stage has been reached in the

development of water resources where water metering is absolutely essential. Meters with associated information

management systems are required to uphold the issuing of water use licenses. The improved management of the

water resources will improve investor confidence, which is central to the adoption of WC & WDM. The installation

of water meters will also enable water use charges to be levied on actual water use (or a two-part charging system),

with a component being a flat rate and a component being levied on the actual use.

The third yet critical

mechanism through which WC & WDM is being incentivised is through trade of water use licenses in water markets.

This includes the permanent sale of a water use licenses (in part or in entirely), or the temporary lease of water use

license (in part or in entirety) from one water user to another. It is this process that provides the incentives for users

to continually seek and adopt technologies and practices for the efficient use and transfer of water. It is shown that

by reducing risk and increasing income, water use licenses are transferred from lower to higher valued uses. The key

management challenge is to ensure that water licenses are impartially enforced and to reduce the transaction costs

with market trades.

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