A watershed computable general equilibrium model: Olifantsriver catchment, Transvaal, South Africa, 1995

Current uses of water in South Africa are severely distorted towards commercial agriculture, industry, and in some parts of the country, electricity generation. This pattern of water consumption comes at the expense of water use--both for productive and domestic purposes--for a large portion of the black population of South Africa.; Integral to the inefficiency and inequality of South Africa's water policy are the rules and laws on which water ownership are based. They have enabled a situation where landowners are literally pumping rivers and aquifers dry. The accelerated rate of groundwater abstraction and the construction of private dams has resulted in a dramatic decrease in the amount of water reaching the rivers.; It is becoming increasingly clearer that the current situation regarding water allocation and water management in South Africa is not sustainable, neither from a socio-political nor from an environmental point of view. Policymakers in post-apartheid South Africa have begun to challenge the current distribution of water and question current water management practices.; In this research, a Social Accounting Matrix (SAM) is formulated to capture the distribution of resources in the Olifantsriver Watershed in the Transvaal province of South Africa. Subsequently, a computable general equilibrium (CGE) model is formulated to examine the economy-wide linkages between all water users in the Watershed, and simulate wide-reaching water and land policy reforms. The CGE model combines an optimizing, programming model of land and water use in all economic sectors, with a simulation model.; Empirical results indicate that there is tendency for the formal sectors--both agricultural and non-agricultural--to use water inefficiently. When a meaningful scarcity price for water is charged, those sectors which use water relatively less intensively are considerably less disadvantaged compared to those that use it more intensively. Even small changes in the scarcity price of water can effect very large changes, and re-orient the economy to more efficient water allocations. Modest water and land reform policies that target the previously disadvantaged homeland agricultural sector can effect dramatic and positive changes for that sector, especially if the overall policy environment moves towards increased marketability of water.