0308-C1

Water Policy and Pricing Timber Plantations in South Africa: Implications for Sustainable Forestry

Michael Jacobson[1]


Abstract

As a percentage of total land area, South Africa’s forest area is relatively small, but it is considered one of the most productive fast-growing timber plantation areas in the world. South Africa is the largest industrial roundwood producer in Africa. This is due in part to it being world leader in genetics and tree improvement research. It is estimated that the research programs have resulted in increased yields of 25% or more. The forest sector in South Africa continues to provide an important contribution to the economy through jobs, local empowerment and income opportunities. The industry is a significant player in the global timber trade. Timber products continue to provide important export earnings, while non-timber forest products and fuelwood are very important locally. However, there is growing concern in the forest sector that the post-apartheid government is not adequately supporting the industry and instead is harming it by introducing new charges such as the water tariffs. The post-apartheid government’s water policy is to recoup water management costs and determine the most efficient, equitable and sustainable use of South Africa’s scarce water resources, which includes ensuring adequate water for all South Africans. This has resulted in a radical shift in water policy, in which forest plantations are now categorized as streamflow reduction activities requiring them to be licensed and pay water charges. At present the water charges are low, and not directly affecting operations. However, the policy raises questions about whether it leads to efficient water use among land uses. This paper describes water use by timber plantations in South Africa, the implementation of the new policy, and discusses its potential impact on sustainable forestry.


Introduction

At the 2000 World Summit on Sustainable Development one the major outcomes was to halve the proportion of people who lack access to clean water (1.1 billion) or proper sanitation (2.4 billion) by 2015. South Africa is one country on target to meet this goal. Since the 1994 democratic elections, the post-apartheid government has a policy of providing water to meet human needs (25 liters per day minimum) to all. To date it has provided water to over ten million people (over 80% of those who previously were without) and is on track to realize the goal of water for all by 2008. Even today, many blacks use less than 20 liters of water per day, way below the 200 liters used by the average urban white, and below the 50 liters/day recommended by the World Health Organization. During the apartheid years blacks had limited water not because of water shortages but because many South Africans were excluded from access to land and water.

The allocation of water to millions of previously disenfranchised black users, plus the development needs of an expanding population puts pressure on current water users to show that they are important and continue to deserve their allotment. The National Water Act of 1998 calls for the licensing and registration of all users, including forestry. In addition, forestry is classified as a stream flow reduction activity implying it will be assessed a water management charge based on its use. This situation may seem somewhat ironic because generally forests around the world are recognized as important in regulating water cycles and contributing to excellent water quality (Brooks et al. 1992).

The increasing demand for water in all countries is requiring governments to come up with pricing schemes to meet these demands (Dinar and Subramaniam 1997). Many countries implement water charges to raise revenue for water management projects, reduce waste, and/or to induce water conservation. Water charges are generally targeted at urban, industrial, and irrigation users. No country has yet to set water prices to reflect economic costs, nor has any country implemented water charges for timber plantations

The main objectives of South Africa’s new water policy is to recoup water management costs and determine the most efficient, equitable, and sustainable use of South Africa’s scarce water resources (Department of Water Affairs and Forestry 1997). South Africa is a semi-arid and water-scarce country, and the average annual rainfall, albeit unevenly distributed, is about 500 mm. An estimated 1,400 cubic meters of available water per person ranks South Africa among the lowest countries with regard to water availability in the world. A little over 1% of the country is in closed canopy forests (primarily exotic timber plantations), but these plantations lie in the upper reaches of catchments that supply 60% of the country’s water supply (Figure 1).

Figure 1. The timber plantation areas (highlighted in dark). Source: Forestry South Africa

Water use by plantations

Nearly all of South Africa’s plantations are grown on previously native grasslands. By virtue of its location along streams, and because it was recognized as an important water use as the country sought to become self-sufficient in fiber production, forestry was allowed to flourish during the apartheid years. The naturally treeless catchments in South Africa are hydrologically sound, implying that exotic trees do little to improve hydrological conditions. Over 70 years of research in South Africa clearly shows planting grasslands and shrublands with deep-rooted and fast-growing evergreen trees (primarily eucalyptus and pines) significantly reduces streamflow. In some cases flow impacts are seen as soon as two years after planting (Nänni, 1970, Van der Zel 1996). In some studies mature eucalyptus was shown to transpire more water than the average annual rainfall.

Maximum streamflow reductions occur relatively early in the rotation, and then diminish toward the end of long rotations. Why do forests use more water than grasses? There are two main reasons: a) trees use more water since they are perennial and transpire water in winter, whereas grasses are dormant in winter, and b) trees are deep-rooted and can source water from a greater soil depth.

Figure 2 shows water use by sector in South Africa, with forest plantations using an estimated 8% of the 21 billion m3 available water (Department of Water Affairs and Forestry 1986). The amount of water actually used by plantations is controversial, as different studies report different results. Scott 1998 uses flow reduction curves to estimate that the 1.5 million ha (1.18% of land area) reduce total runoff in South Africa by about 3% (1,417 million m3 per year), which equates to mean incremental water use about 100 mm per year. Other research, however, shows substantially different estimates of water use by plantations at about 400 million m3 per year (Schulze et al. 2002). The latter study, based on a decision support system adjusts for all rainfall areas and does not include the estimated 25% of plantation area set-aside as riparian areas, wetlands or biodiversity conservation. The forest industry does not deny being a water user and has voluntarily taken steps to apply water conservation measures such as following best management practices of leaving riparian areas devoid of woody vegetation, and is complying with the licensing and pricing system.

Figure 2. Available water use in South Africa, by sector.

Water policies affecting forest plantations

The forest industry has in fact been regulated since the 1970s after years of complaints by downstream farmers blaming reduced streamflow on the upstream timber plantations. Permits were instituted for commercial plantations based on mean annual runoff in catchments, and required forest landowners to carry out certain prescriptions to minimize water reduction. The permit system did not have any direct impact on forestry expansion in South Africa, except to zone forest plantations (Van der Zel 1995). Licensing plantations, which began in 1999 replaces the permit system, but is a much more drawn out detailed process. It may take up to two years, and although the license fee is minimal the licensee is usually responsible for additional costs from wildlife, historical, archeological, or other environment impact surveys that may be quite expensive. The license, which is granted on 5 year cycles for a maximum of 40 years, includes a planting plan that specifies how much land may be planted and the species type allowed (Department of Water Affairs and Forestry 1999a). The licensing process is intended to provide a big picture of all land uses and their water consumption in a catchment. Once all land uses are licensed, the soon to be developed Catchment Management Agencies, made up of all stakeholders, will determine the efficient allocation of water.

Until the new National Water Act of 1998 only irrigated farming, industry, and domestic users were charged for water supplied from government water schemes, albeit at low rates. The new water pricing strategy assesses those who benefit from water use including: a) taking water from a water source; b) storing water (abstracting and refilling dams); and c) engaging in Streamflow Reduction Activity (SFRA). An SFRA is defined as a dryland cropping activity that uses more water than the natural vegetation. Forest plantations for commercial purposes, was and still is the only land-use officially declared a SFRA. There is much discussion about why dryland sugarcane, and maize, wheat, soybeans, and sorghum are not SFRAs. Part of the reason given by the government is that there is not as much known about water use by these land uses as compared to forestry. The government says they intend to eventually list other land uses as SFRAs.

The water pricing strategy classifies charges into three groups: a) on management; b) for water schemes and development; and c) for economic use. The last charge will be implemented at a “later stage.” The water management charges affect municipal, industrial, irrigation and forestry users. The price is based on the catchments budget, which includes monitoring and management of water, improving water availability, operating water schemes, and funding water conservation activities (Department of Water Affairs and Forestry 1999). Each catchment budget would then be divided into the volumetric use of each sector. For forestry, the volume used was based on average rainfall in the catchments by species using a forest water use volume of 60mm/year. In 2002 the forest charges ranged from 0.3 cents - 1 cent /m3, translating to about SAR2-R6/ha/yr.[2] This charge is relatively very small and perhaps the main reason for the industry’s willingness to accept the price is because the 1c/m3 maximum charge does not really affect operations. Although the price is currently low, forestry is concerned about the future charges, especially as budgets to run water management operations increase.

The cost of collecting charges from individual plantations may exceed revenue, especially if the thousands of small black growers are included. These are the thousands of predominately black farmers and landowners who plant a few hectares of exotic species, either under the auspices of an industry-sponsored program or on their own. The small growers are an important rural development program and create a dilemma for the government. On the one hand, DWAF want to promote rural development and empowerment by black landowners. However, water use also needs to be monitored. The transaction costs of processing each small farmer application would be overwhelming and in some cases impractical. Furthermore, the costs of collecting these charges will likely be more than the revenue generated. Also, licensing and charging these small growers could create disincentives to further production. Some are calling for general authorization or exemptions for the promotion of black farm forestry operations. Many of the black small grower operations not in an industry scheme have evaded registration and licensing simply because the government does not know where they are.

Implications for sustainable forestry

Although the water policy is new there is the question about whether the charges and licensing arrangements are leading to water efficiency among land uses. Any new policy, especially one involving complex issues takes time, and the government should be given a chance to iron out issues such as bottlenecks in the licensing process and setting fair prices for all users. However, one can argue that forestry is more efficient than other uses for a number of reasons. There are no transmission costs or losses as all water (in the form of rainfall) is used onsite. Furthermore, plantations water use is lower in dry years (as the water is not there to be used and as trees do regulate their water use in dry (water stress) conditions. A study looking at the total economic benefits of water use by pine plantations showed that it contributed about 16 times more value added and employment than other sectors (Hassan, Olbrich and Crafford 2001). From a water allocation perspective plantations are an unusual water user in that one cannot alter the water use very easily once the trees are planted. This irreversibility problem implies that existing plantations cannot provide more water downstream without changing the land use. Since the charges are expressed in cents per m3 and are based on estimated volumes of water used there are no incentives for water conservation unless new plantations use water-efficient species. This suggests that with respect to forests, the charges do little to efficiently and equitably allocate water, and are simply service charges, which may unduly impact forest operations.

South Africa’s forest area as a percent of total land area is relatively small but it is considered one of the most productive fast-growing timber plantation areas in the world. The forest sector in South Africa continues to provide an important contribution to the economy through jobs, local empowerment, and income opportunities. The industry is a significant player in the global timber trade. Timber products continue to provide important export earnings, while non-timber forest products and fuelwood are very important locally. Over three-quarters of the country’s industrial timber plantations are recognized and certified as well managed by the international Forest Stewardship Council. This implies they are doing the right thing. However, there is growing concern in the forest sector that the government is not adequately supporting the industry and instead is harming it by introducing new charges such as the water tariffs and land taxes. Much of the forest industry in South Africa depends on global markets and plays with small profit margins. Slight cost increases may drive industry offshore. In addition there is a ‘green lobby’ actively fighting timber plantations, addressing issues such as lack of biodiversity, alien species, and excessive water use as arguments for the conversion of plantations back to grasslands.

Conclusion

Forestry, although admitting its contribution to streamflow reduction, feels that the playing field for water allocation and pricing water use is not level. Most significant is that forestry was singled out among land uses. There are a number of opportunities for improving the water allocation process and at the same time addressing the needs of rural black communities. These include streamlining the water licensing process, developing fair and equitable prices for all relevant users, and promoting opportunities for forestry expansion in tribal and community lands. If the SFRA approach is not going to work other approaches the government could consider in lieu of water use charges include harvest yield taxes or reforestation taxes. The benefit of these taxes is that they are based on volume harvested (or in the case of reforestation, trees planted), and are not set annually, but when the event occurs. Another approach could be a land use charge. This charge would be based on a number of factors, including water use that affects the quality of the land for economic and environmental benefits. The charge could provide credits for sustainable practices and penalize “unsustainable” practices. This would bring issues of water quality, biodiversity, recreation, and wildlife habitat into the equation.

Realizing that the secure allocation of water, not the type of tax is the core issue, it is important that government guarantee a certain number of hectares to timber plantations. The uncertainty in the process is what most concerns the industry. Will their licenses hold, will water tariffs begin to exceed allowable costs, and how much of a voice will they have in the water allocation process? The impact on sustainable forestry is not yet apparent, but unless these uncertainties are addressed it is clear that members of the forest industry will reconsider their current activities in South Africa. It is also imperative that the industry continues to carry out best management practices such as clearing riparian areas and protecting natural vegetation.

It is the small grower initiatives that may provide the greatest hope for continued sustainable forest management in South Africa. They establish the link between the government’s objectives and the industry’s desire to expand production. Thousands of jobs to rural blacks and improved livelihoods are at stake. For many rural blacks, tree planting may be their only viable income source. It is hoped that the government will promote small grower schemes. Involving local communities in forestry will also help to diffuse the conflict over water use.

The government should be proud of the forest sectors accomplishments both in terms of productivity and environmental awareness. Until the new water policy succeeds through local control, community participation, integrated catchment management, and fair pricing of water use, the forest industry will always feel undone by the water allocation process. The growing pains of a new water policy must be compensated with frank and participatory discussions. To date the government has been listening, compromising and negotiating with forestry. It realizes the importance of the sector to the economy and need to appease its concerns.

What is the lesson for other countries that have similar water situations? It is that tradeoffs in water use and forestry development must be looked at in a holistic fashion. It is not productive to focus on only one sector--for instance forestry-- while ignoring the impact by other sectors on water use. Another lesson is that although the South African water policy is sound, the implementation process is questionable. Can the policies actually be carried out? It is too early to really evaluate the long-term impacts of the water policy on the forest sector. Other countries can learn from the pitfalls in carrying out new water policies in South Africa and help them avoid the same mistakes.

Literature Cited

Brooks, K, P Ffolliott, H. Gregersen, and J Thames. 1997. Hydrology and the management of watersheds. Iowa State University Press, Ames, 502 p.

Department of Water Affairs and Forestry. 1986. Management of the water resources of the republic of South Africa. Pretoria.

Department of Water Affairs and Forestry. 1997. White paper on a national water policy for South Africa. Pretoria, South Africa.

Department of Water Affairs and Forestry. 1999a. Water-use licensing: The policy and procedure for licensing stream flow reduction activities. Pretoria.

Department of Water Affairs and Forestry. 1999b. Establishment of a pricing strategy for water use charges in terms of section 56(1) of the National Water Act, 1998. Government Gazette 20615. Pretoria.

Dinar, A. and A. Subramaniam 1997. Water pricing experiences: An international perspective. World bank Technical Paper No. 386. Washington, DC, 164 p.

Hassan, R., B. Oldrich, & J. Crafford. 2001. Measuring total economic benefits from water in plantation forestry: Application of quasi I-O framework to the Crocodile catchment in South Africa. South African Forestry Journal, 193:(5-14).

Nänni, U.W. 1970. Trees, water and perspective. South African Forestry Journal, 75:(9-17).

Schulze R.E., M.J. Summerton, K.B. Meier, A.B. Pike, & S.D. Lynch. 2002. The ACRUforest decision support system to assess hydrological impacts of afforestation practices in South Africa. Book chapter not yet published.

Scott D.F. 1998. Forestry and Water Resources: Correct Figures. South African Forestry Journal, 181:(51-52).

Van der Zel D.W. 1995. Accomplishments and dynamics of the South African afforestation permit system. South African Forestry Journal, 179:(49-58).

Van der Zel D.W. 1996. How much water do South Africa’s plantation use? ARBOR, December. Pg 8-9.


[1] Pennsylvania State University, School of Forest Resources, 7 Ferguson Building, University Park, PA. 16802. Tel: (814) 863-0401; Fax: (814) 865-6275; Email: mgj2@psu.edu
[2] In 2002 US$1 equals about SAR9. SAR is South African Rand.