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Abstract

In South Africa water law has recently changed, adopting the principle of water as an economic good, thus levying charges on its use. For small-scale irrigators this is an important change, because currently their water use is entirely subsidized. In the coming years, subsidies will gradually decrease and an essential expected benefit of this policy change is that water use efficiency will rise, leading to reduced consumption and possible reallocation of the water saved. The exact impact of the water pricing policy on the irrigation water use or on the farmers' production system is however unclear. This study introduces a new methodology, based on data envelopment analysis, that allows estimating the effects on the agricultural production process and water demand of introducing or raising a water price. It is revealed that a large majority of the farmers does not adjust water use. Production costs however were shown to increase significantly.

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