Search

Twenty years ago it was argued that rotational wheat production systems will reduce the economic risks to farmers and restore soil quality. Here we reflect on this assertion by analysing the evidence of a 12-year data window within a trial on a mixture of crop rotation systems at Langgewens Research Farm, South Africa. It was been found that production systems that include rotations with medics and/or medic-clover show some potential for improvement compared with wheat only, with a combination of the annual legume pasture with an added saltbush pasture showing the greatest improvement when taking into consideration the benefits from livestock production that are derived from pastures. Pastures are more resilient to changes in rainfall compared with wheat only. Planting pastures in alternate years also improves the yields from wheat, and this is beneficial in periods of low rainfall. Rotation systems on this farm that include lupin perform worse than the wheat-only model. Furthermore, when modelling the effect of drought on the system, the results of the multi- and rotation production systems actually improve.

The purpose of this chapter is to show how double dividends could be obtained from using market instruments to tax water use in a developing country. The double dividends are namely environmental (water conservation) on the one hand, and poverty reduction dividends on the other. We apply a water tax on selected industries in South Africa to reduce demand for water, and then transfer the revenue from this tax to the poor to achieve reduction in absolute levels of poverty. South Africa is classified as a semi-arid country. Precipitation has been fluctuating over the years with an average of 500 mm per annum, well below the world average of about 860 mm (DWAF 2002). The total flow of all the rivers in the country combined amounts to approximately 49 200 million m³ per year, while the National Water Resource Strategy estimated the total water requirement for the year 2000 at 13 280 million m3 per year, excluding environmental requirements. In addition, South Africa is poorly endowed in groundwater as most of the country is underlain by hard rock formations that do not contain any major groundwater aquifers (DWAF 2002). While currently only about 24% of rural people have access to water on site, additional sources of water supply are environmentally, financially and politically hard to develop. At the same time, unemployment in rural areas of South Africa is extremely high, which results in severe poverty conditions in these areas.

This paper applies a discrete choice model to determine specific characteristics that influence South African grain farmers’ preferences to hedge against uncertainties. This is the first empirical study on South African grain producers’ preferences to adopt derivative contracting and is based on the survey data of Grain South Africa for 2006. With the application of separate binary logit models for each major grain commodity, this paper establishes that different grain farmers are significantly heterogeneous. The results also show that grain farmers’ preferences to adopt derivative contracting are mostly influenced by the farmers’ prediction of daily grain prices and trends, farm size and various geographic characteristics. From a policy perspective it has been indicated that food and income insecurity will be reduced if farmers can adopt derivative contracting at large scale since it will enable the producers to produce staple food on a continuous basis at a relatively profitable level.

South Africa is a water-stressed country where water availability is an important constraint to economic and social development, and will become even more so in the future if this scarce resource is not managed effectively. In order to manage this scarce supply of water, we need to value it. This study focuses on the value of water in the agricultural sector, in particular the marginal revenue of water for six irrigation commodities namely avocados, bananas, grapefruit, mangoes, oranges and sugarcane. A quadratic production function was fitted with an SUR model specification in a panel data study from 1975 to 2002 to obtain marginal revenue functions for each of the six commodities. We found that mangoes are the most efficient commodity in its water use relative to revenue generated (marginal revenue of water equals R25.43/m³ in 2002) and sugarcane the least efficient (marginal revenue of water equals R1.67/m³ in 2002). The marginal revenue of water is not an indication of the true “market” price. Neither is it an indication what the administered price should be. The marginal revenue of water is rather a guideline for policy makers to determine which industries or commodities within an industry can generate the largest revenue per unit water applied

Irrigation farmers in the lower reaches of the Vaal and Riet Rivers are experiencing substantial yield reductions in certain crops and more profitable crops have been withdrawn from production, hypothesised, as a result of generally poor but especially fluctuating water quality. In this paper secondary data is used in a linear programming model to test this hypothesis by calculating the potential loss in farm level optimal returns. The model is static with a time frame of two production seasons. Linear crop-water quality production functions (Ayers & Westcot, 1983; adapted from Maas & Hoffmann, 1977) are used to calculate net returns for the eight most common crops grown. Results show optimal enterprise composition under various water quality situations. Leaching is justified financially and there is a strong motivation for a change in the current water pricing system. SALMOD (Salinity and Leaching Model for Optimal irrigation Development) is the Excel Solver model used to derive the preliminary results, but is currently being developed further in GAMS (General Algebraic Modelling System). Useful results have already been obtained on which this paper is based. The ultimate aim for SALMOD is a mathematical model using dynamic optimisation, simulation and risk modelling techniques to aid in whole farm and system level management decisions to ensure sustainable irrigation agriculture under stochastic river water quality conditions.

Macroeconomic policy should be guided by a long-term strategy based on the needs of the country. This is an essential message of the term ‘sustainable development’. It is, therefore, inevitable that the country’s natural and environmental resources should be considered when shaping such a policy. Current macroeconomic policies in South Africa have tended to ignore, rather than incorporate, these issues. This paper provides a framework for integrating environmental values into macroeconomic policy-making in South Africa. This is done by focusing on 1) the different theories on the linkage between the economy and the environment, 2) conceptualising the input of environmental values in the macroeconomic policy arena and 3) making recommendations for incorporating environmental factors into South African macroeconomic policy.