Economic Value of Water

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Economic value of water
A Multi-Criteria Analysis approach
Introduction

Water is an essential resource that has a multiplicity of use in domestic, Industrial, agricultural, hydropower generation, mining, environmental etc activities but the present unsustainable use and mismanagement in the Kafue Basin of Zambia has put pressure on the resource and conflicts among stakeholders have emerged due to the diminishing quality and quantity of the water from the main source- the Kafue River.

The current trends in the appropriation of water resources of the Kafue flats for human use, and particularly for irrigated agriculture are not sustainable. The water uses have risen due to low taxes and heavy subsidies on water by the Government of the republic of Zambia. Compounded to this problem, are the issues of water scarcity, pollution, conflicts and overdrawn aquifers. The knowledge available on the water demands clearly indicates the necessity for the establishment and implementation of effective legislation, which devises optimal water distribution and utilization in order to achieve socioeconomic development in a harmonious way.

Therefore, conceptually correct and empirically accurate estimates of the economic value of water are central to rational allocation of scarce water across locations, uses, users, and time periods. This kind of information would enable the institutions responsible for the management of the water resources to effectively plan for a coordinated and sustainable water management in conformity with the national development plans.

Study Area

The Kafue basin has a total catchment of 154000 km2 which is nearly one fifth of the total area of the Country. The Kafue River extends for 1,577 kilometers, rising from the northwestern and Copperbelt provinces of Zambia near the border with Zaire to the Zambezi River. On its way southward the river passes through the Lukanga Swamps and then curves eastward at Itezhi-tezhi to enter the Kafue Flats. In Zambia 90% of all economic activities takes place in the Kafue basin and is home to the mines, petroleum refineries, fertilizers manufacturers, hydropower generation, agriculture etc and over 50% of the 10.4 million population reside in the major cities in the Kafue basin with their sole water supplies coming from the Kafue river and its small tributaries. (CSO, 2003). Importance

The fact that market based valuation would provide a basis for policy makers to decide on rules on how best to govern the water resources in the basin, these rules usually exclude social ones thereby fail to meet the desired outcomes. The concept of value ought to take into account both economic and social concerns so that the society as a whole and their environment are in a balanced state of equilibrium. Therefore to adequately reflect the true value of the water resource, the valuation should also define the relationship between society and nature and how the interface between society and the ecosystems has evolved over a period of time.

Total economic value TEV of water is therefore an extended concept that would account from the perspective of both the private and social concerns. The willingness to pay (WTP) measures what a consumer is willing to pay for a resource in a market but would not be applicable in certain societies where different mechanisms such as barter, kinship, reciprocity etc coordinate the exchange of goods. Therefore it is crucial to include both the socio-economic and natural scientific aspects in the TEV of the water resource. The essence of socio-economic valuation is to determine how society is affected by the many functions that are derived from such resources. (Gatzweiler, 2003)

Thus:
TEV = (DUV)pr + (DUV)so + (IUV)pr + (IUV)so + (OV)pr + (OV)so+ (BV)pr + (BV)so + (XV)pr + (XV)so

Where;
DUV = Direct Use value BV = Bequest value OV = Option value IUV = Indirect use value XV = Existence value...
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