Economic and environmental related aspects of water storage in

Sub-Saharan Africa

Stefanos Xenarios, Matthew McCartney

East Africa& Nile Basin Office

• There are always trade-offs – some people benefit and some lose

• Divergence of values, needs and interests of different groups

• Biases and subjectivity in valuations and interpretations of “facts”

• Disagreements in which cultural, social, economic and ecological dimensions are intertwined

• Unequal power and influence of actors

Why decision-making about water storage is difficult

The Problem of Assessment

• Economics have tended to dominate decision-making processes

• Cost and benefit like analyses (CBA) for the optimal solutions in water storage is a common principle

• If the expected economic benefits of storage are deemed to outweigh the predicted costs the project goes ahead

• However, often reductionism with loss of information

• Especially problematic in developing countries where components are more heterogeneous (i.e. irrigation, poverty alleviation, environmental flows, hydro-power)

What is needed?

• More equitable distribution of benefits to be gained from storage

• Inclusion of all stakeholders in the planning and management of storage

• Greater consideration of social and environmental, not just economic factors

What is proposed

•A more diffused approach based on diversified qualitative-quantitative criteria and outranking methodology

• The economic efficiency principle is still pursued but with an attempt to overcome CBA related weaknesses

• Approach tested in selected representative water storage options in Ethiopia and Ghana

A simple example of prevailing (CBA) economic approach

Ranking 6 Components 5 Components 4 Components 4 Components

First Best A B C A

Options : A= Small reservoir (pumps) , B= Dug Well + Canal, C= Shallow well+Rainfed

• A is more beneficial than B ( A>B, 10-5), A better than C (A>C, 10-4), B better than C (B>C, 5-4)

• The ranking of options is like A>B>C • Complete and transitive ranking reveals first best case • But although majority points Option A, an almost equal amount depicts A

as worst caseRanking 6 Components 5 Components 4 Components 4 Components

Second Best C C C A

Third Best B C A A

Options : A= Small reservoir (pumps) , B= Dug Well + Canal, C= Shallow well+Rainfed

An alternative approach – Borda’s rule + weights + thresholds

• Borda’s rule through outranking and pairwise conditions, acknowledged in voting systems and social choice theory

Ranking Formula (points)

6 Components 5 Components 4 Components 4Components

First Best N A B C A

Second Best n-1 C C C A

Third Best n-2 B C A A

Options : A= Small reservoir (pumps) , B= Dug Well + Canal, C= Shallow well+Rainfed

• After calculations, C (65 points) becomes first best, A follows (42 points) and far behind is B (21 points)

• Approach follows a consensus-based ranking system, considering all values adopted

An alternative approach – Borda’s rule + weights + thresholds

• For distribution-equity, weighting factor attributes significance to selected groups (e.g landless- marginal farmers). For instance:

Comp1= component related to the costs required for irrigation purposesComp2= component related to willingness to pay for water quality

A weighting factor is introduced in subsets of selected groups as: Wi Comp1k,2k,

where Wi is the weighting factor and Kn the subset of selected weak stakeholder groups

• Irreversibility and ecosystem complexity constraints handled with introduction of veto threshold among two alternatives

1. If difference between components is bigger than veto threshold, process is halted (Comp1 - Comp2 >Veto = 0)

2. If difference is smaller than veto, process goes ahead (Comp1 - Comp2 <Veto = 1)

Components selected for economic efficiency: two groups

Revenues from Agriculture (Cultivation &Livestock)

Cost from Agriculture (Cultivation &Livestock)

Cost of Water Use for farming Economics of domestic water use

Willingness to Pay for water quality and quantity status

Economic Impact of Water Use on Health

Level of Satisfaction of quantitative and qualitative water status in agricultural and domestic sectors

Investment on Water Conservation Practices

Investment on Soil Conservation practices

Level of difficulty from applyingWater and Soil Conservation practices

Level of improvement from applyingWater and Soil Conservation Practices

Technical efficiency of water and storage types

Economic efficiency of water and storage types

Choice experiment on different water storage options

1st Group Relation with Agricultural-domestic water use and water status

2nd Group Relation with water and soil conservation practices

Water Storages Cases selected in Ghana and Ethiopia

• In Ghana: small reservoirs with upstream and downstream cases, deep wells

• In Ethiopia: small and large reservoirs (upstream and downstream ), shallow wells

• Data extraction : Questionnaire forms (500 hsds in each country), stated preference (direct market when possible- hypothetical when missing)

Blue Nile basin watershedsKoga – Gumara – Indris

Volta basin watershedsVea (Yaragagna) – Saata – Golinga

Comp. % Comp. % Comp. %Points

5 Landless Marginal 4 Landless Marginal 4 Landless Marginal

C * 20 20 A 10 10 B 20 20 3

B 10 15 A 30 5 C 10 15 2

A 20 20 B 15 25 C* 15 10 1

* There is a threshold value between the Choice Experiment and WTP criteria because Low Fees Preference and High WTP bid are presented. Thus these two criteria are excluded from the counting

Options : A= Small reservoir (pumps) , B= Dug Well + Canal, C= Shallow well+RainfedCalculations

5 Components 4 Components 4 Components

C 4* (3*0.6+3.1*0.2+3.05*0.2) A

4* (3*0.85+3.1*0.1+3.05*0.15) B 4* (3*0.6+3.1*0.2+3.05*0.2)

B 5* (2*0.85+2.1*0.1+2.05*0.15) A 4* (2*0.6+2.1*0.2+2.05*0.2) C 4* (2*0.75+2.1*0.1+2.05*0.15)

A 5* (1*0.6+1.1*0.2+1.05*0.2) B 4* (1*0.85+1.1*0.1+1.05*0.15) C 3* (1*0.85+1.1*0.15+1.05*0.1)

Points

5 Components 4 Components 4 Components

C 12.12 A 13.27 B 12.12

B 11.087 A 8.12 C 8.07

A 5.15 B 4.47 C 3.36

Ranking: B(27.67)> A(26.54)>C (23.55)

Some very prime results from Ethiopia

Constraints Response

Potential manipulation of preference intensity for the support of specific water storage option

No group surveying, reasoning of intensive preference, no outliers

Weighting and veto thresholds, strong analyst’s intervention, subjectivity

Components alleged as inappropriate or of limited applicability ; High uncertainty if applied in other sub-Saharan country

Comparison of different storage types in different locations may lead to asymmetrical solutions

Literature review, consulted experts, key stakeholders

Attempt to design components as to be representative to Sub-Saharan context; adjustment to examined cases

Attempt to harmonize results with ranking procedure and consider highly irrelevant water storage options

Conclusions

• Approach borrows elements from outranking Multi Criteria Decision Aid methods (MCDA) which are often deemed to be highly subjective and so produce artificial results

• The approach still builds on economic theory and is aligned with the concept of economic efficiency

• Further elaboration is needed to ensure that aspects of ranking-weights- thresholds are transparent

• Learning process will be achieved through a more extensive analysis of results

• Hope to provide evidences for a more appropriate economic assessment of water storage in developing country context

Acknowledgements

The research was conducted for the project entitled: Rethinking water storage for climate change adaptation in Sub-Saharan Africa, funded by the German Gesellschaft für Technische Zusammenarbeit (GTZ) as part of its programme on Adaptation of African Agriculture to Climate Change