Water is a complex economic good. It requires optimal management to control rising scarcity and competition for use. South Africa like many other parts of the world is in the process of implementing market based water policy reforms to attain equity, efficiency, and sustainability in water use. However, these reforms have not been entirely successful and water allocation problems persist, while their economic evaluation is lacking. The current study assessed the effects of water policy on irrigation water use efficiency and quality in the Olifants basin of South Africa. The study uses Data Envelopment Analysis and regression technique approaches to ascertain the effects of water policy on water use efficiency and quality.Results from the Data Envelopment Analysis show that the average water use efficiency for irrigation water users was as low as 31 percent. Among the policy factors of interest, compulsory licensing significantly influenced water use efficiency. Water pricing, compulsory licensing and membership in WUAs on the other hand significantly influenced water use quality. These factors can act as policy indicators towards better water reform and management.


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