Explaining variation in the economic value of irrigation water using psychological capital: a case study from Ndumo B and Makhathini, KwaZulu-Natal, South Africa

S Phakathi,E Wale

doi:10.4314/wsa.v44i4.15

Abstract

This study investigates the economic value of irrigation water using data collected from 200 smallholder producers in Makhathini and Ndumo areas, KwaZulu-Natal.The study accounts for psychological capital (individual mind-set and attitude affecting motivation to take initiatives) as an important aspect of farm management. This concept focuses more on the ‘soft’ aspects of farm management, which have not been adequately studied in the context of smallholder farming. A sustainable livelihoods framework is employed as a conceptual framework and the role of psychological capital is integrated to explain the variation in water values. The study employs the residual valuation method to estimate water values, principal component analysis to generate an index for psychological capital, and the general linear model to explain variation in water values. The findings suggest that variation in water values was mainly influenced by the location of the farmer, farmer type, physical capital, social capital, land size, farming experience, crop type and psychological capital. The results reinforce the importance of institutional arrangements and collective bargaining as an important element of managing a smallholder farm to increase the economic value of water. To build and develop positive psychological capital for smallholders, it is recommended that government should re-visit the usual model of ‘hand-outs’ (input, finance). It is time to re-consider direct farmer support that entails being heavily involved in their day-to-day activities (i.e., purchasing inputs and running the irrigation schemes on their behalf). Going forward, the focus should rather be on enabling them to change their behaviour to be self-reliant and own their own destiny through on-farm and off-farm economic activities. Moreover, government and other development partners have to understand the long-term behavioural impact (on farmers) of what they do, for instance, entrenching expectations.

Highlights

South Africa is regarded as the 30th driest country in the world since it receives about half of the average annual global rainfall in terms of available water per capita (Cousins, 2013; Perret, 2002)
Irrigation is important in South Africa because rainfall is unreliable, droughts are common and crop production in most of the country is inherently risky (Cousins, 2013)
Due to the fact that fixed costs could not be accounted for because of lack of data, this could lead to over-estimation of the average water values

Summary

Introduction

South Africa is regarded as the 30th driest country in the world since it receives about half of the average annual global rainfall in terms of available water per capita (Cousins, 2013; Perret, 2002). The major bottleneck is the way in which they practice farming, buying inputs, acquiring services (such as tractor) and selling outputs individually, which directly increases transaction costs, relative to transacting as a co-operative or small informal group which is the case for most scheme irrigators.

Results

Conclusion