This document summarizes an economic evaluation of scenarios for water use in the Letaba Catchment area. It finds that scenarios 5, 9, and 10 performed the best across key economic indicators like GDP and employment, particularly for irrigation agriculture, urban/domestic use, and light industry. Scenario 5 achieved the highest employment impact while scenario 10 achieved the highest GDP impact. The document concludes by recommending scenarios 9 and 10 as economically viable options, while noting scenario 5 may have negative social/environmental consequences. The worst performing scenario was REC (restore ecological connectivity), which had negative economic impacts.

1. Letaba Catchment: ECONOMICS –
Scenario Evaluation
Presented by:
William Mullins
Mosaka Consulting Economists
3 April 2014

2. Water Economics
Total Economic Value
Direct Use Values
Informal and Formal
Indirect Use Values
Out of River use In River use
Consumptive Use e.g.:
Irrigation, mining,
domestic, industry.
Non-consumptive use
e.g.: tourism, hydro
electricity
Goods and Services –
(ecosystem functions)
Sense of the resource
e.g. tourism,
conservation of the
source.

3. The informal sector has the following two
components:
1) Employees working in establishments that
employ less than five employees, who do
not deduct income tax from their
salaries/wages; and
2) Employers, own-account workers and
persons helping unpaid
Source: StatsSA
Definition of informal
economy

4. Relevant quantum
 South Africa’s informal economy represents
28% of national GDP and in the Limpopo
province 34% of the provincial economic
activities.
 The largest sector is retail - Often products
produced in the formal sector are marketed
by the informal sector
Source: South African LED Network

5. Approach in Evaluating the
Scenarios
The following sectors were used in evaluating the
different scenarios:
A. Irrigation Agriculture --- Currently operating
 Formal
 Informal – Gardens - very often “formal” produced crops are
marketed informally.
B. Household Sector – Why?
 Partly to accommodate the informal sector.
 Urbanisation supports the service sector – formal and
informal
C. Light Industry – Currently some basis
 Formal and Informal
 Not all water driven, but water supply helps creates the basis
for development (Gauteng)

6. Irrigation Scenario Evaluation
Irrigation – GDP deviation
Irrigation – Employment
deviation

7. Discussion of Results
 From the above graphs it can be seen that
scenarios 5, 9 and 10 perform well against
the PES scenario in both GDP and
employment
 The REC scenario performs the worst in
both graphs and together with 6 projects a
negative impact.
 The scenario that performs the best in GDP
creation, compared to PES is scenario 10
and the scenario that performs best in
employment compared to PES is scenario 5.

8. Urban and Domestic use
Additional GDP created per
Scenario
Additional Employment created
per Scenario

9. Urban and domestic results
 In both graphs scenarios 5, 9 and 10 do
comparatively better than the rest
 The best performing scenario under additional
GDP created is scenario 10 with R 658 million
while the best performing scenario for
employment creation is scenario 5 with 1089
additional jobs created
 The scenario that performed the worst under
additional GDP created if compared to PES with
R140 million additional GDP and 164 jobs are
REC.
 Note that the scenario 6 provides better results
for this activity than in the case of irrigation.

10. Light Industry
Additional GDP created
Additional Employment
created

11. Light industry results
 Scenario 5 performed significantly better
under additional GDP and additional
employment created against all the other
scenarios.
 The REC scenario performed the worst in
both cases. Note that this scenario is worse
than the PES scenario in both cases.

12. Determining the Final
Ranking
Sector Gross
Domestic
Product
Employment
Irrigation 0.50 0.60
Urban and
Household Sector
0.25 0.25
Light Industry 0.25 0.15
Total
1.00 1.00

13. Total Impact
Total GDP created
Total Employment
created

14. Percentage deviation from
PES
GDP Employment

15. Rating
Gross Domestic Product Employment

16. Conclusion
 In conclusion, scenario 5 is economically
viable but is likely to have serious negative
consequences for other users.
 Scenarios 9 and 10 are acceptable from an
economic viewpoint.
 The REC scenario had an overall negative
impact and is therefore not advised.

17. Thank You!