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Valuing the benefits of restoring the water regulation services, in the subtropical thicket biome: a case study in the ‘Baviaanskloof-Gamtoos watershed’, South-Africa Lennart van der Burg October 2008 i Valuing the benefits of restoring the water regulation services, in the subtropical thicket biome: a case study in the ‘Baviaanskloof-Gamtoos watershed’, South-Africa Lennart van der Burg Supervisors: Dr.Rolf Groeneveld Environmental Economics and Matthew Zylstra, Natural Resources Group Dieter van den Broeck, [email protected] EarthCollective Dr Dolf de Groot, Email: [email protected] Environmental Systems Analysis group, [email protected] Wageningen UR PO Box 47, 6700 AA Wageningen, The Netherlands Email: [email protected] A thesis submitted in partial fulfillment of the degree of Master of Science at Wageningen University, the Netherlands. Master thesis project assigned by the Subtropical Thicket Restoration Programme - STRP, South Africa. Co-funded and supported by the Speerpunt Ecosysteem- en Landschap Services (SELS)- WUR, Department of Water Affairs and Forestry – DWAF/Working for Water and Gamtoos Irrigation Board - GIB, South Africa. In collaboration with Rhodes Restoration Research Group - R3G, South Africa. Facilitated by PRESENCE learning network and EarthCollective. Front page Pictures: Kouga Dam reservoir (l) and an aerial photo of the start of the Gamtoos valley wit h the Baviaanskloof watershed in the background (r). 1 Citation: van der Burg, L. 2008. Valuing the benefits of restoring the water regulation services, in the subtropical thicket biome: a case study in the ‘Baviaanskloof-Gamtoos watershed’, South-Africa MSc thesis. Wageningen University, The Netherlands. Commissioned by the PRESENCE learning network ii Preface The research conducted in the Gamtoos valley between March and August 2008 was part of my masters‟ environmental economics at Wageningen University. The great research opportunity created by EarthCollective was the main reason for the decision to come to South Africa, which I have experienced as a fantastic country. There was a unique chance to undertake research in my main field of interest, namely economics and natural resource (water) management. Therefore I would like to thank Dieter van den Broeck and Matthew Zylstra from EarthCollective for taking me on board of the research team and advising me during the entire research process. A further thanks to the diverse research team, consisting of the Wageningen master students: Eliska, Janneke Natasha and Haider, who provided the needed support and created an excellent research environment. This environment was strengthened by Gamtoos irrigation board (GIB). A special thanks to Pierre Joubert and Edwill Moore from GIB for their ongoing support, friendliness and cooperation which was crucial. I appreciate the openness of Mike Powell from Rhodes Restoration Research Group. Especially for the provided expert knowledge as well as the hospitality for the, sometimes unexpected, visits to Grahamstown. The same counts for Mat McConnachie from Rhodes University as I am grateful for his friendship. This research was heavily reliant on the data provided by all the local stakeholders and would not have been possible without their full collaboration. I am very thankful for all the stakeholders and experts, as listed in appendix 1, for their time and invaluable input. In particular I would like to show gratitude to all the farmers in the Gamtoos valley who where patient and took time for the lengthy interviews in English or in my „Dutch-Afrikaans‟. A final thanks to my supervisors Rolf Groeneveld and Dolf de Groot from Wageningen University. Their valuable (theoretical) advice was motivating me, especially during the writing phase, to produce this final structured report. I really enjoyed working in an interdisciplinary and international team in probably the most amazing part of South Africa. The excellent facilitation made it possible to develop a wide range of skills and through all the experience, I enlarged my worldview. I am convinced that this research and the generated knowledge will contribute to the sustainable social, environmental and economic development in South Africa. Thanks to all of you! Lennart ii Contents thesis SUMMARY V 1 INTRODUCTION 1 1.1 BACKGROUND 1 1.1.1 Project motivation 1 1.1.2 Ecosystem and watershed services 3 1.2 RESEARCH OBJECTIVES 3 1.2.1 Research problem 3 1.2.2 Conceptual design 4 1.2.3 Scope and delineation 4 1.3 APPROACH 5 1.3.1 Analytical framework and theoretical assumptions 5 1.3.2 Technical research design 6 1.4 OUTLINE REPORT 8 2 LITERATURE REVIEW 9 2.1 WATERSHED SERVICES 9 2.1.1 Protection of Watershed Services 9 2.1.2 Watershed restoration case studies 10 2.1.3 Watershed services provided by the subtropical thicket biome 11 2.2 ECONOMIC VALUATION 12 2.2.1 Motivation for valuation 12 2.2.2 Valuation methods applied 13 2.2.3 Valuation complexity 15 2.3 NATIONAL WATER ACT 1998 16 2.3.1 Water requirements 16 2.3.2 Water Allocation Reform 16 3 KOUGA-BAVIAANSKLOOF-GAMTOOS WATERSHED 18 3.1 UPSTREAM AREA 18 3.1.1 Kouga- Baviaanskloof watershed 18 3.1.2 Water availability: western Baviaanskloof 18 3.2 DOWNSTREAM AREA 20 3.2.1 Gamtoos watershed and conveyance system 20 3.2.2 Water availability: Gamtoos valley 20 3.3.3 Agricultural water use and production 21 - MAIN RESULTS – 24 4 WATERSHED RESTORATION PROCESS 24 4.1 BAVIAANSKLOOF RESTORATION MODEL 24 4.1.1 Ecological impacts 25 4.1.2 Hydrological impacts 27 4.1.3 Economic impacts 31 4.1.4 Economic instruments 33 4.1.5 Institutions 36 4.1.6 Interventions required 38 4.2 BENEFIT DISTRIBUTION 39 4.2.1 Spatially 39 4.2.2 Temporally 39 5 VALUING WATERSHED SERVICES 41 iii 5.1 DIRECT ECONOMIC BENEFIT WATER USERS 41 5.1.1 Increased water supply 41 5.1.2 Increased assurance of supply 43 5.2 INDIRECT ECONOMIC BENEFIT WATER USERS 47 5.2.1 Flood damages Baviaanskloof 47 5.2.2 Flood damages Gamtoos valley 48 5.2.3 Drought damages 49 5.2.4 Mitigation cost 51 5.3 REPLACEMENT COSTS 54 5.3.1 Watershed restoration cost 54 5.3.2 Augmentation options 55 5.4 WATER VALUE 56 5.4.1 Crop water productivity 56 5.4.2 Water pricing 57 5.4.3 Opportunity cost 58 5.5 SECONDARY BENEFITS 59 5.5.1 Benefits of restoration upstream 59 5.5.2 Benefits downstream 59 6 NEGOTIATION BASIS FOR PWS 61 6.1 SCENARIO ANALYSIS 61 6.1.1 Scenario elements 61 6.1.2 Final output 64 6.2 STAKEHOLDER INVOLVEMENT 64 6.3 PAYMENT FOR WATERSHED SERVICES IN PRACTICE 66 6.3.1 Payment mechanisms 66 6.3.2 SWOT analysis for PWS in the Baviaanskloof 67 7 DISCUSSION 70 7.1 LIMITATIONS AND UNCERTAINTY OF THE METHODS 70 7.1.1 Technical research design 70 7.1.2 Theoretical assumptions 71 7.2 VALIDITY OF THE RESULTS 72 7.3 IMPLICATIONS MAJOR OUTCOMES 74 8 CONCLUSIONS AND RECOMMENDATIONS 76 8.1 MAIN CONCLUSIONS 76 8.2 RECOMMENDATIONS 78 8.2.1 Suggestions for further research 78 8.2.2 Implementation actions required 80 LIST OF ACRONYMS 81 REFERENCES 82 APPENDIX 1 STAKEHOLDERS INTERVIEWED AND EXPERTS CONSULTED I APPENDIX 2 RESEARCH CONTEXT III APPENDIX 3 BAVIAANSKLOOF RESTORATION MODEL V APPENDIX 4 LETTER OF SUPPORT GIB VI APPENDIX 5 FARMERS SURVEY GAMTOOS VALLEY VII APPENDIX 6 SURVEY OUTCOMES (Q. 2-5) XV APPENDIX 7 SURVEY OUTCOMES (Q. 6- 8) XXVIII iv Summary This report entitled „Valuing the benefits of restoring the water regulation services, in the subtropical thicket biome: a case study in the „Baviaanskloof-Gamtoos watershed‟, South- Africa‟ is initiated and facilitated by the EarthCollective2 as part of the PRESENCE3 network. There was a need for additional research on the valuation of the thicket ecosystem services (ES) that deliver tangible benefits and wherefore potential markets exist. This research is focusing on the water regulation services provided by the Baviaanskloof watershed, to the downstream beneficiaries in the Gamtoos valley. The Baviaanskloof is located in the Eastern Cape Province. It consists of a world heritage nature reserve (190,425ha) and additionally a large area of farmland (50,000ha). Through historically overgrazing both areas are heavily degraded which brings the need for thicket restoration. Valuing the watershed services (WS), provided by especially thicket and wetland restoration, gives insights into their relative importance for the local economy. Further on it provides the rationale for restoration from this perspective. Fresh water retention, storage and supply are the main water provisioning service where sediment supply, disturbance regulation, erosion control and water purification are the main water regulation services. The economic value of these WS can give an indication of the feasibility and potential for payment for watershed services (PWS) to finance large scale restoration in the Baviaanskloof. In this practice orientated research knowledge will be gained concerning WS and the perceived economic benefits. The main research questions formulated are: What are the expected hydrological and economic benefits of restoration of the ecosystem service: water regulation? What possible financing mechanisms can be developed for the water regulation service? Through conducting an economic analysis these sub- and main questions are answered consistently per step. Summarizing; 1) stakeholder identification, 2) examining market distortions, 3) identification WS, 4) distribution benefits, 5) estimation economic values of WS, 6) indication Willingness to Pay (WTP) beneficiaries and 7) exploration financing mechanisms. A combined desk and field research is undertaken to gather both qualitative and quantitative data.
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