Abstract:
This paper employs an economy-wide framework to evaluate impacts of water and trade policy reforms in South
Africa (SA) on virtual water flows. To pursue this analysis, the study derives net virtual water trade flows between
SA and its partners to assess implications of recent trade agreements within the South African Development Community
compared to economic cooperation with other major trading blocks (e.g. European Union, Asia, and
Brazil, Russia, India and China (BRIC)). Recent trends in actual trade confirm model predictions that liberalization
of water allocation would switch water from field crops to horticulture and promote growth in non-agricultural
exports. The results suggest that it is necessary to introduce policies that enhance likely outcomes of liberalization
promoting higher water use efficiency within irrigation agriculture such as increased adoption of more efficient
irrigation methods (sprinkler, drip, etc.) as water becomes more expensive under wider open competition. Moreover,
investment in higher water use efficiency and improved competitiveness of dryland agriculture therefore
represent the sound economic options for strengthening the capacity to achieve food security objectives as the
country strives to lower net water exports. Finally, careful coordination of trade and water policy reforms is another
necessary challenge for SA’s strive to manage a water stressed economy.
