Effective Local Management of Water Resources with Reference to the Middle Orange River
Report No 1134/1/04
December 2004


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 water.
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 Africa.
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 irrigation needs.


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
Map of Study area

Figure 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 of 1998.

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
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.

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.

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.


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 considering.

Capacity was built at least at four levels:
  1. 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 Australia. 
  2. 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.
  3. With officials of DWAF and WUAs who cooperate in this research project.
  4. Irrigation farmers participating in this research project.   
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.