Smallholder farmers' willingness and ability to pay for improved irrigation: a case of Msinga Local Municipality, KwaZulu-Natal Province.

Abstract

Water is the essence of life for humankind. Due to water scarcity from increased population and increased demand for the resource, there is a need to allocate the water efficiently. Economists have proposed water pricing as a mechanism for allocative efficiency, arguing that this will prompt the farmers to use the water on crops with relatively high returns, as well as make farmers value the resource. Water can no longer be considered a free commodity, but rather an economic one. However, the willingness and ability of smallholder farmers to pay for water use in irrigation need to be an integral parts of policy formulation to enhanced agricultural production. This study sought to determine farmers’ willingness to pay (WTP), and ability to pay (ATP), for improved irrigation in rural areas of KwaZulu-Natal, South Africa, using the farm gross margins and also to identify factors affecting farmers’ WTP and ATP. The analysis was based on a sample of 161 irrigators. The binary and ordered probit models were used to investigate factors affecting WTP, which was generated through the contingent valuation method. Empirical results indicate that factors such as extension services, training, use of motorised pumps (diesel), farmer perceptions of scheme management, duration of the farmer in the scheme, livestock ownership and road conditions positively influence WTP. In contrast, factors such as conflicts, household size and total land holdings influence WTP negatively. Production data was collected from the irrigators and the residual imputation method (RIM) was then used to calculate gross margins/profits received by the farmers. An Ordinary Least Squares regression was used to investigate factors affecting ATP. Factors such as labour, training, household assets and road conditions were found to have a positive influence on ATP. The study concluded that farmers are willing and able to pay for improved irrigation water supply. A further conclusion was that support services and institutions could be manipulated through policy, to enhance both WTP and ATP. It is, therefore, recommended that if government had to formally introduce water charges, it could start with a charge of R50 per month per plot and then increase the charge gradually, over time.