Implicit water pricing in Namibian farmland markets

Abstract

Groundwater can augment total agricultural water supply in areas where rainfall is persistently low, but can also function as a buffer source of water in areas where rainfall is high but variable. In arid countries it is important to examine which of these functions dominates, as this has implications for water policy. As aquifers become depleted, the buffer function can be replaced by other local water supply schemes. However, if groundwater is mainly used to augment total water supply, the only replacement is long-distance supply schemes that may not be economically desirable. This study used Namibian farm price data to estimate implicit water values. The results are consistent with a buffer function for groundwater, but do not show conclusively that this function is more important than other functions. On precautionary principles, one should therefore assume that it will become necessary to decrease agricultural water use as aquifers become depleted.