Financing active restoration in South Africa : an evaluation of different institutional models

Abstract

The restoration of natural capital is increasingly becoming important to counter ongoing land degradation. The Natural Resource Management programme of the Department of Environmental Affairs (DEA: NRM) has long been investing in options to improve the effectiveness of active restoration. The aim of this study is to conduct a cost-benefit analysis of two approaches to active restoration at selected sites in KwaZulu-Natal, South Africa. This study compares a barter approach to a financial compensation approach, both of which are used to finance and advance active restoration. The barter system relies on community members to grow various tree seedlings, and they then receive various goods in exchange for the seedlings grown, whereas the financial compensation sources the seedlings from various commercial nurseries. We use a system dynamics model to evaluate the benefits and costs of these restoration approaches. The main finding is that restoration through the reintroduction of indigenous trees contributes a great deal towards increased carbon sequestration, with the barter option marginally cheaper than the nursery option. The model estimates an annual saving of more than R120 000 per annum with the barter approach in terms of the total restoration costs. However, the financial saving is not significant, as the model concludes that the financial compensation approach is more economically attractive considering a broader range of variables. The model estimated the value of water lost to be -R2 929 992.14 for the financial compensation model and -R2 920 412.76 for the barter financing model over 30 years. With the financial compensation model, the rate of clearance was found to be higher, thus translating directly into a greater accumulation of benefits. The lesser losses in water value, coupled with the higher gains in value-added products for the financial compensation model, are the main reason the financial compensation model is the more economically attractive financing approach.