Effective Local Management of
Water Resources with Reference to the Middle Orange River
Report No 1134/1/04
The necessity for South Africa to employ all means to enhance water use
efficiency is generally accepted. This is very relevant for the
irrigation sector that uses almost 60 per cent of the total available
To manage water resources on a local basis and to transfer water within
integrated catchments to avail it for different users, an appropriate
decision support management system is needed. Capacity sharing, an
institutional arrangement and property rights structure for allocating
water among multiple users of water resource systems that was developed
in Australia, was selected to be investigated for application in South
In the Orange River basin, one of the most important irrigation areas
in South Africa, knowledge is lacking regarding the value of water to
irrigation farming and other water use sectors. Given the important
role the Orange River plays in the water system of South Africa,
carrying more than 20 per cent of the total river flow in the country,
providing the life blood for the socio-economic development of the
north western part of South Africa, sharing water with neighbouring
countries Lesotho and Namibia and playing a major role as net inter
basin transfer scheme to the Buffels, Lower Vaal, Riet and Fish Rivers,
it is essential that the knowledge vacuum is erased or at least
minimised. The relevance of this is emphasised by the forecast that the
transfer of water away from the Orange River to other basins will
increase considerably in future.
An institution that has considerable potential to improve efficiency
and that is acknowledged in the White Paper on a National Water Policy
for South Africa, is the water market. For water markets have to work
effectively appropriate institutional arrangements must be in place.
These markets started to emerge in the Lower Orange River, as well as
in other rivers like the Great Fish and Sunday Rivers. Capacity Sharing
as developed in Australia and based on clearly defined property rights,
is an institutional arrangement that is especially geared to provide
information and support for water markets to function optimally.
Testing Capacity Sharing in the Middle Orange River area of
South Africa was therefore a sensible research project to undertake.
Figure 1 provides the orientation map for the study area. The Orange
River catchment between Gariep and Vanderkloof Dams was used in the
generation of the hydrological data for Vanderkloof Dam, which is the
focus of the study. Irrigation farmers involved in this study are
located downstream of Vanderkloof Dam along the Ramah Canal.
The study is limited to Ramah Canal, as all farmers along the canal
extract water from the facility, which was built exclusively to serve
The main aim of this research is to evaluate Capacity Sharing (CS) as
an alternative institutional arrangement and determine its
applicability to South Africa.
To achieve this aim the following objectives have to be addressed
Objective No. 1:
To evaluate institutions and legislation for effective water resource
management in South Africa.
Objective No. 2:
To evaluate capacity sharing as an alternative institutional
arrangement for South Africa.
Objective No. 3:
To determine the short-run marginal value of water for farmers served
by the Vanderkloof Dam’s Ramah Canal along the Orange River.
Objective No. 4:
To determine marginal value products of reservoir water, reservoir
inflow and reservoir capacity shares, as well as optimal water-use
policies, for farmers along the Ramah Canal using the SIM-DY-SIM water
allocation model adopted from Australia.
The following methods were applied regarding the different objectives.
A comprehensive study of the South African water institutions to assess
the adequacy of the current institutional arrangement in meeting
economic and social objectives was done. The focus was on the classes
of institutions that will shape the allocation of water in South Africa
in general and which will influence critically the extent of
market-type transfers. Institutions considered were water use rights,
water markets, pricing and allocation rules and water management
authorities. An ideal water institutional framework was formulated and
used to evaluate the South African water institutions, focusing on
types of decision mechanisms and models involved in
1: Orientation Map of Study area
Source: Water Resource Planning (WRP), 2001
water distribution, as well as provisions that must be made to
accommodate water markets and ownership rights.
Capacity sharing (CS) was studied to determine whether it is a viable
option for augmenting the present South Africa water institutional
provisions. Efforts were directed at determining whether the
institutional form of CS is compatible with the new National Water Act
A survey was conducted to gather data from farmers on finances,
cropping patterns, land use and any other relevant data required for
running a linear programme (LP) model. A LP matrix for representative
farmer groups was then developed and seasonal gross margins calculated
at various water application levels, from which short term marginal
value products (MVPs) were determined.
Seasonal hydrological inflows into Vanderkloof Dam were compiled and
used with the gross margins derived from the LP output to run a
pre-dynamic programming simulation. A dynamic programme and finally a
post-dynamic programming simulation were conducted.
The evaluation of institutional arrangements for water management in
South Africa revealed that a great deal of progress has been made
towards effective, efficient and sustainable water
management. The new National Water Act (NWA) of South Africa
drew international attention on its position regarding identifying and
making efforts to address issues like:
To steer water management thinking more along current international
trends minor adjustments of the NWA may be necessary for more efficient
water resource management with regard to
- guaranteeing access to sufficient water for basic needs of
- ensuring that the requirements of the environment are met
relative to other uses;
- sustainability and renewability of water resources;
- provisions for the transfer of water between catchments;
- honouring obligations to its neighbours; and
- fulfilment of commitment as custodian of the
nation’s water resources.
Evaluating CS within the framework of the NWA showed that CS can serve
the needs of South Africa well because of its improvements to the
functioning of water markets. It does so by strengthening
security of tenure, predictability, flexibility, opportunity cost
pricing and efficiency of water use.
- excessive central government control of water management
- bureaucratic consented water re-allocations;
- administratively set pricing mechanisms;
- lack of appropriate arrangements to facilitate tradable
entitlements (e.g. defining exclusive rights to entitlements);
- discouraging and unclear water transfer arrangements; and
- lack of definitive institutional provisions for integrated
demand and supply management.
However, the status in the NWA with regard to attenuation of water
rights, restrictions on certain forms of water trading, bureaucratic
control over water trading and water pricing as well as general
administrative interference in water management issues do not make the
prospects attractive for the adoption of CS in South Africa.
On the other hand the provisions in the NWA for the establishment of
CMAs and WUAs and the progress made thus far in this regard opens the
door for a more relaxed water management environment where CS is most
likely to be considered. CMAs (or through delegation, WUAs)
for instance will progressively monitor and measure stream inflows,
storage levels of the reservoir and record all losses due to
evaporation, seepage and reservoir spills. These records,
together with ordered releases by each of the bulk users, will assist
CMAs to update capacity shareholdings of users. Computer
printouts of these records (water accounts) reflecting user’s
reservoir capacity will be sent to holders of bulk shares
periodically. WUAs, will operate at retail level with
responsibilities similar to those of CMAs, who oversee bulk shares, but
in this case a large number of smaller shareholders will
exist. Essentially WUAs will:
To determine the short-run marginal value products of water for farmers
served by Vanderkloof Dam, two crop mix cases were investigated with a
linear programming model, namely, lucern, maize/wheat (LMW) and potato,
maize/wheat (PMW). For the crop mixes investigated, the MVPs
differ significantly for the two seasons. For LMW MVPs range
between R0,09 and R 0,39 per m3 and for PMW
between R0,09 and R 3,64 per m3 This implies
that farmers cultivating LMW and PMW will be able to pay as much as R
0,39 per m3 and R 3,64 per m3
respectively for water delivered onto the farm for immediate use.
- administer capacity share accounts;
- electronically distribute account printouts and any
relevant information to groups,
individuals or group representatives;
- play a vital role when a combination of retail/bulk shares
are required to address the needs of the emerging or small
- be responsible for training water users, as this will
empower them to operate their shares effectively and efficiently.
Inter-seasonal MVPs of water located in the reservoir, as well as
optimal water use policies for farmers along the Ramah Canal, at
Vanderkloof Dam using the SIM-DY-SIM simulation model were
determined. Results show that inter-seasonal MVPs of water
for LMW and PMW cover a wide range form R0,09 to R 3,64 per m3
depending on crop mix, farmer’s planning horizon and water
availability (i.e. inflow shares and capacity share content scenarios).
In the comparison of using of water under Stochastic Dynamic
Programming (SDP) derived rules (i.e. based on optimal policies
generated from SDP) as against no rules (i.e. using water as it becomes
available in the capacity share), contents of reservoir capacity shares
and CS inflows were calculated at the beginning of each
season. It was noted that both reservoir capacity and inflow
shares were better managed using SDP derived rules than using no rules.
The effect of reservoir capacity share and inflows on seasonal as well
as annual gross margins were investigated using SDP derived policies
and using water just as it becomes available. Results
confirmed that the annual gross margins are higher using SDP-derived
policies as against using reservoir water as it becomes available.
The use of computer models to determine the long-term MVPs for IS and
CS is explained with examples for different situations and scenarios to
provide guidelines to potential CS practitioners.
CONCLUSION WITH REGARD TO
Capacity sharing has considerable potential as one of the appropriate
alternative institutional arrangements for South Africa and can be used
fully or partly to augment the current arrangements. The
concept of CS should not be viewed as a too complex and unworkable
water institutional arrangement. Adequate provisions should
therefore be made for its implementation at least at the bulk share
level, sectorally and at retail level for the agricultural sector in a
selected catchment, to test its feasibility.
Deficiencies in the current NWA may lead to inefficiency in water
allocation and use and hence aggravate the water scarcity situation in
the long run. The following policy recommendations are therefore worth
- The institutional provision for water rights has to be
revisited. Water rights need not necessarily be
granted in perpetuity, but a considerably long period of time must be
guaranteed the user to exercise user rights. In addition, water rights
must be more clearly defined, exclusive, transferable and protected by
- Although the scarcity value of water is increasing, the
political-rooted system of public provisions seemingly insulates the
water economy from the influence of actual market forces, possibly due
to the weakness of water markets regarding equity. As a suggestion,
allocations to address social equity in particular have to be
safeguarded by the public sector through market means yet supervised or
controlled by CMAs and WUAs. A special institutional arrangement like
CS which has the potential to achieve this, has to be given serious
consideration as a new institutional arrangement to manage water on
sustainable and at the same time addressing social equity.
- The administrative pricing system that takes precedence
over pricing via auctions, or water markets needs further evaluation
before it becomes fully institutionalised. Preferably, a market
oriented institutional arrangement like CS, which facilitates
integrated demand and supply in water management and makes provision
for shadow prices (which are good estimates of opportunity cost) to be
calculated, has to be thoroughly investigated and streamlined for
specific sites before being adopted.
- The strong equity concerns about water markets in South
Africa cannot be ignored. Water
being vital to life as well as to livelihoods, strong social norms will
always argue against it being treated as a simple marketable commodity.
For South Africa, the possible negative equity effects on water markets
can be mitigated through appropriate policies. From a liberal market
viewpoint, one alternative is to use market-based allocations, combined
with reduction in the massive capital and operating subsidies on
irrigation and water supply, which usually favour better-off producers
and urban consumers. This would possibly free-up budgetary resources to
target water subsidies to the poorest sectors of the population in both
rural and urban areas.
- Inter-sectoral water allocation mechanisms in South Africa
at basin and lower levels need to be well developed. Also regional
mechanisms like Catchment Management Agencies and Water User
Associations have to be autonomous and non-bureaucratically linked to
centralised state apparatus in order to promote true decentralisation.
Capacity was built at least at four levels:
Besides technology transfer that happened during discussions with
irrigation farmers involved in the project and officials of the Orange
Riet Water User Association and the Department of Water Affairs and
Forestry, the main fora for technology transfer thus far was with
posters and papers at conferences and with accredited publications.
- With the study leaders
involved, namely Prof. M.F. Viljoen, Dr. L.A. du Plessis and Dr. F.O.C.
Nwonwu, who worked closely with Dr. Norman (N.J.) Dudley from
- With two students E.F.Y.
Gakpo and J.M. Mahlaha who obtained their M.Sc Agric degrees based on
the research. The titles of their master theses were
Alternative institutional arrangements towards optimal water allocation
and Optimal allocation of water resource in irrigated farming at the
Ramah Canal Vanderkloof Dam. Gakpo received his masters
degree with distinction and was awarded a prize by the Agricultural
Economic Association of South Africa in 2003 for the best Master thesis
compiled during 2002 from a South African student.
- With officials of DWAF
and WUAs who cooperate in this research project.
- Irrigation farmers participating
in this research project.