Market-based pollution control strategies for the Olifants River, South Africa

Toxic Waste

Feasibility of Market Approaches to Pollution Control on the Olifants River, South Africa

Introduction significant portion of the mining, agricultural, and power generation requirements of South Africa is currently managed with water from the Olifants River. Because of the very real problem of drought in the region, it is crucial that the water resources that available from the river are managed in an effective manner that efficiently distributes the limited resource to as many interests as possible in the highest quality form available. At issue is the matter of pollution of the Olifants River. This has been primarily attributed to runoff from existing and older, disused mines. Waste pollution from these operations, as well as from power generation and agriculture, significantly increases pollution in the river. In the past, river flow was high enough to dilute this effluent; however, decreases in river flow and increases in mining have both contributed to pollution concentrations that cannot be absorbed by the river.

The purpose of this study is to evaluate the feasibility of implementing market-based pollution control strategies in the Olifants River region of South Africa. Solutions include a discharge tax that would require mines and other operations to pay a tax based on the amount of effluent they release into the river system. Further pollution credits could be traded to help manage the release of effluent during periods of low river flow. The following study is divided into three sections to fully examine the issue. One, we will examine the current situation on the Olifants River and the extent of the pollution that is occurring. Two, we will consider similar market-based approaches to pollution control. Three, some suggestions will be made regarding the feasibility of applying similar market-based pollution controls in the Olifants River in South Africa.

The Situation: Discharge and Pollution in Olifants River

The Olifants River is one of the more significant river basins in South Africa and in much of sub-Saharan Africa. The Olifants River drains a catchment area of roughly 54,575 square kilometers through South Africa, into Mozambique, and then into the Indian Ocean ("Rivers and Catchments"). As it is such a significant river system, it is little wonder that the Olifants River represents one of the largest water resources in the region. In addition to supplying fresh drinking water to the 3.4 million people who live in the region by recharging subsurface aquifers, the Olifants River also supplies water to a significant number of other interests. The river provides irrigation for agriculture, water for mines, power for hydroelectric plants, water for industrial development, and water resources for the Kruger National Park through which the Olifants River flows.

In total, then, the Olifants River is a significant water resource in a region that is well-known to experience significant droughts. Additionally, because many different interests use the river continuously, it is crucial that the quality of the water be preserved so that it can meet the demands of all of the parties that depend on the Olifants River for their survival. The River passes through three provinces in South Africa before it heads farther down into Mozambique and then into the Indian Ocean. While the river itself is the longest and largest in the region, it is scarcely able to meet the burdens that are placed on it, even without taking into consideration the damage done by pollution. Currently demand for the river's resources are exceedingly the supplies the river can supply, with total water resources projected to be fully utilized by 2010 ("Olifants River Basin"). In the past, the river has been known to have some periods of zero flow conditions, though this situation has improved somewhat thanks to the efforts of government officials who are becoming more serious about managing the limited water resources available ("Olifants River Basin"; Wray and Venter). The cessation of flow of the Olifants River can be largely attributed to demands made by the agricultural industry, which seasonally has a very high demand for the water that the river provides.

In addition to agricultural uses for the river, a number of other interests lay claim to the water that flows through the Olifants basin. For instance, the people of the region already lay claim to the water that the Olifants drains through South Africa for drinking. But a large number of the people in this area live in Third World conditions. If development proceeds apace, the demand for water will grow significantly in the coming years ("Rivers and Catchments"). In addition, the river is a source of significant electrical power. There are currently thirty major dams along the river -- including hundreds more that are much smaller. These dams store water for later use but are also put to work to provide hydroelectric power for communities all throughout South Africa.

Both of these interests contribute in some ways to the deterioration of the water quality in the Olifants River. Human communities, combined with poor sanitation facilities, can result in raw sewage leaking into the water table or, worse, being dumped directly into the river (Wray and Venter). The power plants can contribute to the build up of silt in the water supply be preventing the natural behavior of the river that would transport that silt downriver and out into the ocean.

Agriculture has become a growing concern for those who are watching the water quality of the Olifants River. Pesticide use, fertilizers, and poor farming practices contribute to the contamination of the river when these chemicals find their way into the river in the form of field runoff. Overgrazing fields through the river basin leads to greater erosion of the land and results in more silt ending up in the river ("Rivers and Catchments"; Wray and Venter). However, the most significant and concerning source of pollution in the Olifants River remains the mining industry ("Olifants River Basin"). Existing mines channel runoff into the river that contains acids, chemicals, and heavy metals. Defunct mines channel similar substances into the river, but without any kind of control or oversight. This pollution has a significant impact on the quality of the water that flows through the Olifants River. While the national government has become increasingly strict with effluent violations by mining companies, the potential for abuse is still high and the threat to water quality is still quite significant (Wray and Venter).

The mining industry channels salts, heavy metals, and silt into the Olifants River. At times, the sheer volume of the river can account for this kind of influx of foreign materials. However, since there has been increased demand on this limited resource, the flow of the Olifants River has been significantly below its historical highs. This means that the river is less able to absorb these pollutants and the concentrations of salts, heavy metals, and silt is far above safe levels in many parts of the Olifants River Basin. These high concentrations have led to the disappearance of at least five different species of fish that once lived in the Olifants River. In some case, the concentrations can be high enough to render the water from the river and the surrounding water table entirely non-potable ("Rivers and Catchments").

For example, the Highveld Steel and Vanadium Corporation, which operated at least one mine in the Olifants River Basin, was discovered to have contaminated groundwater supplies by operating an unpermitted and unlined hazardous waste dump (Van Der Walt). A effluent like this one will not only contaminate the water of the river, it will also deposit heavy metals into the soil of the river. Added to the chemicals that are the byproduct of any industrial operation, and this effluent will have a significant detrimental effect on the water quality of the river.

In the long-term, then, those individuals, corporations, and governmental agencies with an interest in the health of the Olifants River must face a series of interrelated concerns for the coming years. These include:

Water quality of the river system because of pollution

Limited supplies, exasperated by water quality issues

The expansion of demand, such as calls for more irrigated land, the development of more mines, and urbanization

Increasingly vocal demands from downstream interests in Mozambique who also can lay claim to the water resources of the Olifants ("Olifants River Basin")

Managing these competing interests while providing for the health of the Olifants River Basin is an exceptionally complex and challenging task, but one upon which the future of the region literally rests.

Application: Feasibility in the Olifants River Situation

The feasibility of such a market-based solution in the Olifants River region of South Africa is dependent upon a number of factors. Primarily, we need to evaluate whether or not the nation and the consequent communities possess the institutional and infrastructural sophistication to support the creation and development of a new market based on the trading of pollution credits. The system may have been successful in Australia, but that is a First World nation with all the benefits of the modern world -- both technically and politically. As already admitted, the Olifants River Valley is comprised mostly of communities still locked in a Third World developmental phase. Their capacity for integrating a pollution-trading scheme into the local economies may be asking too much. An analysis of some recent attempts to control pollution in the region should be illustrative as to the potential that exists in South Africa for such a scheme.

As a strike against institutional suitability, a recent case study found that the political organization of the agencies involved in managing water quality in South Africa is complicated and sometimes in conflict (Helmer and Hespanhol 347). This means that there are different agencies that manage the environmental health of the region, separating roughly by land, water, and air. This complicates the application of any market-based solution because river effluent pollution is not simply a matter for one agency to regulate or control. The same pollution that affects the water table will probably contaminate the land as well as clog the atmosphere. Further problems arise as we consider the variety of sources that all vie for a piece of the limited resources available and the different ways in which they all can negatively impact the overall quality of the water. Since any market approach will depend on the careful application of credit value by a central authority that sets the environmental loads permissible, the institutional climate in South Africa may prevent the easy application of such a mechanism.

Currently, efforts are under way in South Africa to provide a purely regulatory solution in the Upper Olifants River region that stress interagency cooperation in a bid to set and control levels of all forms of pollution that could occur from any activity in the region (Helmer and Hespanhol 349-351). While preliminary results indicate that some progress is being made, the environmental agencies in the country have decided to favor a purely regulatory approach to the matter of water quality, rather than setting limits and allowing stakeholders to compete for their share of a strictly controlled pie. While the market based approach could be ultimately much more efficient in this type of situation, it would require a level of institutional sophistication that may not be possible yet in South Africa.

Indeed, other studies seem to indicate that this is exactly the case after all. A feasibility study of a market-based solution to water quality and quantity issues in the Lower Olifants River Basin concluded that the region lacked the institutional and infrastructural capability to support a market solution at this time (Wise and Musango 13). In short, better support in both these aspects would be required to successfully implement the pilot plan suggested. The study examined the possibility of allowing downstream stakeholders to purchase more quality or quantity from upstream stakeholders, money which could be invested in better catchment systems, more efficient water use, and less polluting runoff. Since access to water in quantity and quality is an issue along the Olifants, especially during period of low flow, a market approach seemed at least feasible for solving the problem by allowing stakeholders to pay for as much improvements in the available resource as they were willing (Wise and Musango 11-13).

Unfortunately, the study found a lack of clear support for a mechanism that would support such a new market in the region. Clearly, in order to function correctly, the participating stakeholders would need easy access to credit, clearly defined property rights, enforceable water use rights, and water monitoring systems to ensure buyers got what they paid for (Wise and Musango 5). It was the conclusion of the study's authors that these preconditions did not exist in sufficient force or consistency to support the creation of a market solution to the problem of high quality water supply in the Olifants River Basin. The implication for the application of any market based approach to pollution control is equally clear. While the market solution of trading pollution credits is theoretically simple and straightforward, it relies upon preexisting conditions that are largely taken for granted in First World nations. Many developing nations and communities, like the Olifants River Basin in South Africa simply lack the institutional and infrastructural history to support the successful implementation of such a solution, at least as it was implemented in our earlier example in Australia.

Conclusion and Policy Recommendations

In the final analysis, market-based pollution controls offer one of the best means of improving the quality of the water resources in the Olifants River. By associating a firm cost with dumping effluent into the river, firms can evaluate the value of investing in desalination facilities, investigating alternative pollution controls, or trading their pollution credits so as to release their pollution during periods of high river flow.

Though the use of market-based solutions still does not eliminate the possibility that pollution will be released into the Olifants River, it provides river management agencies with the capacity to directly regulate the amount and kind of pollution that reaches this water system. In this fashion, better river management can be achieved and it the chances of protecting the limited water resources of the Olifants River will be possible. Unfortunately, there is every indication that these approaches toward resource management in South Africa on the Olifants River will not be successful until the nation and its communities have developed the necessary institutional and infrastructural components necessary to support the creation of a new market.