An estimation of the value of water in the commercial forestry : two case studies from KwaZulu-Natal, South Africa.

Abstract

The aim of this dissertation is to estimate the value of water in the commercial forestry in selected areas of Kwazulu-Natal. Furthermore, the essay focuses on two species:Eucalyptus grandis and Pinus patula. The estimation of the value of water is done using two types of water and they are evapo-transpiration (ET) and stream flow reduction (SFR). ET water is used because it has been discovered that there is a loss of water due to afforestation. On the other hand, SFR water is used because the existence of trees means that the water that is supposed to flow to the streams does not, as it is absorbed by the trees. Moreover, the essay develops two methods that can be used to estimate these two types of water in the commercial forestry. The methods are the residual method and the marginal value product (MVP) method. In the case of the residual method, the results are diverse. This means that the values of water for eucalyptus using the ET water, ranges from 05 cents to 23 cents. With the pinus patula, the values of water ranges from 01 cents to 03 cents. This is clear that the value of water for eucalyptus grandis using the ET water is higher than the pinus patula. The value of water using the MVP method using the ET water is decreasing. This means that the values of water starts from higher values to the lowest. This is due to the fact that we are estimating the marginal product. The values start from 72 cents and go down to 28 cents in the case of eucalyptus grandis. The values for the pinus patula start from 26 cents and go down to 12 cents. When estimating the value of water using SFR water, we do not use the residual method. We use the MVP method instead. The values obtained show that eucalyptus grandis values are higher than those of the pinus patula. They start from R5.1 0 cents and go down to R2.77 cents for eucalyptus grandis and from R2.39 to R1.03 for pinus patula. The methods used show that the economies of scale are present, because when we add more water, the value falls. Furthermore, The law of diminishing marginal retums is present because when we add more water; the values reach a maximum point and then start to fall. These two factors comply with the economic theory.