Microsoft Word - 8 Vundla et al - SAJEMS 19(5) 2016.docx 814 SAJEMS Asset research NS 19 (2016) No 5:814-830 How to cite DOI: http://dx.doi.org/10.17159/2222-3436/2016/v19n5a8 ISSN: 2222-3436 THE OPPORTUNITY COST OF NOT UTILISING THE WOODY INVASIVE ALIEN PLANT SPECIES IN THE KOUGA, KROM AND BAVIAANS CATCHMENTS IN SOUTH AFRICA Thulile Vundla1*, James Blignaut2, 3, Nonophile Nkambule1, 4, Tshepo Morokong1 and Shepherd Mudavanhu1, 5 1ASSET Research, Pretoria 2Department of Economics, University of Pretoria 3South African Environmental Observation Network, Pretoria 4Department of Agricultural Economics and Management, University of Swaziland, Swaziland 5Department of Agricultural Economics, University of Stellenbosch Accepted: October 2016 This study estimates the opportunity costs of using woody invasive alien plants (IAPs) for value-added products by estimating the net economic return from the value-added industries in South Africa. By 2008, IAPs were estimated at the national level to cover an area of 1 813 million condensed hectares in South Africa. A market has formed around their use for value-added products (VAP) like charcoal, firewood and timber in the Kouga, Kromme and Baviaans River catchments in the Eastern Cape province of South Africa. The net economic return from these value-added industries was estimated for the purpose of several management scenarios, and was then used to estimate the opportunity costs if they were not used. A system dynamics model was used to value and analyse the Net Present Value of clearing in the study area and to estimate the opportunity cost of the non-use of VAP. The study showed that the inclusion of VAPs in the project would yield higher net present values for clearing. The findings from this study suggest that a co- finance option of the total economic returns from VAP for clearing costs is the best management scenario for reducing the costs of clearing and maximising the net economic returns from clearing. The net economic returns of VAPs by 2030 are estimated at R23 million without the co-finance option and R26 million with the option. The cumulative net income from VAPs with co-financing over the period of valuation is estimated to be R609 million. Key words: opportunity cost, alien invasive plants, direct use value, eradication through utilisation JEL: Q24, 25, 42 1 Introduction Biological invasions are a significant threat to land productivity, biodiversity and the ecosystem goods and services provided for society in general (Nellemann & Corcoran, 2010). In South Africa the National Department of Environmental Affairs: Natural Resource Management (DEA:NRM) is tasked with the management and control of invasive alien plants (IAPs). As early as the 1900s, the potentially unfavourable impact of IAPs on South Africa’s natural fynbos vegetation was acknowledged (Moran, Hoffman & Zimmermann, 2013). Later, (Cowling, 1992), the DEA:NRM programme was commissioned in 1995 to control IAPs (Van Wilgen, Cowling & Burgers, 1996; Blignaut, Marais & Turpie, 2007; Blignaut, Mander, Schulze, Horan, Dickens, Pringle, Mavundla, Mahlangu, Wilson, McKenzie & McKean, 2010). Research on resource economics has been instrumental in providing motivation for the expensive DEA:NRM programme, and several South African studies have used a cost-benefit analysis of clearing IAPs to inform decision-making (e.g. Van Wilgen, Cowling & Burgers, 1996; Higgins, Richardson & Cowling, 1996; Hosking & Du Preez, 1999; Hosking & Du Preez, 2004; Turpie & Heydenrych, 2000; De Wit, Crookes & Van Wilgen., 2001; Wise, Van Wilgen & Le Maitre, 2012). This study is intended to contribute to the growing number of studies by investigating the potential benefit of private-sector investment in the DEA:NRM programme. Abstract SAJEMS Asset research NS 19 (2016) No 5:814-830 815 Potential economic gains from IAPs present an opportunity for government to source co- funding from the private sector for the control and management of IAPs, and, in the process, support rural livelihoods through the sale of products derived from IAPs (Van Wilgen & Richardson, 2012; Shackleton, Le Maitre, Pasiecznik & Richardson, 2014). However, there are challenges, especially when it comes to the extraction of IAPs. Mugido, Blignaut, Joubert, De Wet, Knipe, Joubert, Cobbing, Jansen, Le Maitre & Van Der Vyfer (2014) suggest on-site processing as a possible alternative to addressing the issue with transportation. It is also clear that conflict-of-interest species, such as black wattle, pine trees and Prosopis, require innovative methods of management. Currie, Milton, & Steenkamp (2009) conducted a cost benefit analysis (CBA) of clearing Pinus species and restoring fynbos in the Assegaaibos mountain catchment area in the Western Cape province of South Africa. They found that the NPV of clearing Pinus species and restoring fynbos was always negative, regardless of the discount rate used. However, if the economic value of the IAPs is used to co-finance the operations, this could result in a feasible option. Thus, this study sought to determine the costs and benefits of early restoration in the Kouga-Krom catchment area in the Eastern Cape province of South Africa. As some of the species that are being cleared by the DEA:NRM are of commercial value, this study estimated the opportunity costs of not using IAPs for value-added industries. Further, the study also estimated the Unit Reference Value (URV) for clearing IAPs in the Kouga-Krom study area. 2 Site description The study area (referred to as Kouga-Krom) falls within the Kromme, Kouga and Baviaans river catchments in the Eastern Cape Province, near Jeffrey’s Bay. It spans a total of 5 234.24 km2, with a mean annual rainfall ranging between 500–2 000 mm per annum (SAWS, 2015). It consists of two biome types, fynbos (80 per cent) and Albany thicket (20 per cent) (Mander, Blignaut, Van Niekerk, Cowling, Horan, Knoesen, Mills, Powell & Schulze, 2010), both of which are biodiversity hotspots and areas of high endemism (Global Biodiversity Outlook, 2010; Hoare, Mucina, Rutherford, Vlok, Euston-Brown, Palmer, Powrie, Lechmere-Oertel, Proches, Dold & Ward, 2006; Myers, 1990) because of the geological features of the area. The fynbos biome is one of the most invaded biomes in South Africa (Richardson, MacDonald, Hoffman & Henderson, 1997; Kotzé, Beukes, Van Den Berg & Newby, 2010). The study area comprises 14 sub-quaternary catchments, L81A-C, L82A-J & L90A-C within the Fish to Tsitsikamma river catchment. The majority of the land is under private land tenure (Mander, Blignaut, Van Niekerk, Cowling, Horan, Knoesen, Mills, Powell & Schulze, 2010), with intensive deciduous fruit, lucerne and citrus production (Jansen, 2008). Protected areas are limited to the upper regions of the study area in the Baviaans catchment and it is recognised internationally as a world heritage site (Jansen, 2008). The study area is largely rural, containing only small communities, while the population density is generally low, with 20–40 people/km2 and unemployment in the area is high, ranging from 30–40 per cent (StatsSA, 2011). The study area is under additional pressure from extensive farming and other agricultural activities in the area (Mander, Blignaut, van Niekerk, Cowling, Horan, Knoesen, Mills, Powell & Schultze, 2010; Jansen, 2008). IAPs are an increasing problem, particularly in the lower regions, with Acacia baileyana, A. dealbata & A. mearnsii (hereafter referred to as Wattle spp) being one of the greatest threats in the area (Mander, Blignaut, van Niekerk, Cowling, Horan, Knoesen, Mills, Powell & Schultze, 2010). Table 1 outlines the current extent of invasion in the study area. These pressures increase the strain on the availability of water for the catchment 3 Methods and material 3.1 Data collected Primary data was sourced during a series of site visits and group discussions, with experts, as well as implementing agents for the DEA:NRM programme. The data gathered from experts and 816 SAJEMS Asset research NS 19 (2016) No 5:814-830 implementing agents was supplemented with data from the literature on the indicators required for an economic analysis. The condensed values for the IAPs and related information were extracted from the. (2010) database for Kotzé, Beukes, Van Den Burg & Newby (see Table 1). This study focuses exclusively on the five dominant species found in the areas noted by Kotzé, Beukes, Van Den Berg & Newby (2010). Table 1 Current extent of invasion in the study area and spread rates of the respective species Species Extent of invasion (condensed ha) Spread rates (% per year) Species density (%) Wattle spp 8 584.38 10.00 4.18 Hakea spp 3 761.88 8.80 4.72 Other 2 483.08 - 0.14 Pinus spp 2 055.51 8-15 0.55 Acacia saligna 679.77 10.00 0.31 Atriplex donax 254.06 10.00 0.21 Sources: Adapted from Kotzé et al. (2010) and Van Wilgen & Le Maitre (2013) 3.1.1 Value added products Only the main benefits deriving from Wattle spp. and Acacia saligna and Pinus species were considered in this study, as the benefits of the other IAP species are not considered economically significant (CABI, 2016). Wattle spp., for example, are Australian Acacia species and comprise a combination of Acacia baileyana, A. dealbata and A. mearnsii. These were intentionally introduced into South Africa for the ecological services they provide, such as serving as wind breaks and providing fuel (De Wit, Crookes, Van Wilgen, 2001; Nyoka, 2003). Wattle spp. have become one of South Africa’s most widespread IAPs (Nyoka, 2003; Versfeld, Le Maitre & Chapman, 1998; Dye & Jarmain, 2004), and thus became the most targeted IAPs, with almost a third of all the clearing costs attributed to the control of Wattle spp. (Wise, Van Wilgen, & Le Maitre, 2012). The investment in controlling IAPs in the Kouga-Krom catchment for the period 2008-2014 is provided in Table 2. Table 2 Historical nominal and real values for clearing data from DEA: NRM: Kouga-Krom. Year Actual clearing costs (R) Clearing costs in constant 2014 prices (R) Area cleared (condensed ha) 2008 2 604 939.68 3 695 156.72 1 994.21 2009 3 446 823.56 4 612 627.45 793.05 2010 6 590 916.35 8 320 880.04 2 740.38 2011 8 669 108.25 10 325 046.63 3 339.05 2012 7 386 950.53 8 299 977.62 3 793.70 2013 5 998 088.38 6 357 973.68 481.42 2014 5 700 437.89 5 700 437.89 315.07 Source: Adapted from DEA: NRM (2015) While it is important to control IAPs with their detrimental effects on a range of ecosystem goods and services, such as water flows, they can be used to generate value through a range of value- added products (VAP), which are listed in Table 3. SAJEMS Asset research NS 19 (2016) No 5:814-830 817 Table 3 Benefits associated with the five dominant species of the study area Benefit Description Species Tannins extracted from bark Tanning agents used in the production of soft leather Wattle spp. Acacia saligna Timber Building materials and mining timber Wattle spp. Pine spp. Acacia saligna Pulp Mainly exported, for the production of paper and other products Wattle spp. Pine spp. Wood chips Used in the production of paper Wattle spp. Pine spp. Charcoal Fuel used in barbecues Wattle spp. Pine spp. Acacia saligna Firewood An important fuel source for rural communities Wattle spp. Acacia saligna Building materials Used to support housing structures in rural areas Wattle spp. Carbon sequestration Standing plantations and invasions store carbon as a counter to carbon build-up in the atmosphere, mainly from fossil fuel burning, which can potentially be traded Wattle spp. Pinus spp. Acacia saligna Nitrogen fixation Addition of nitrogen through fixation by roots could be regarded as either a benefit or a cost in some areas Wattle spp. Acacia saligna Medicinal products Possible use as styptics or astringents Wattle spp. Combating erosion Decrease erosion in severely degraded sites away from river courses Wattle spp. Pinus spp. Aesthetic Non-direct use, but appreciation of resource Pinus spp. Hakea spp. Source: Adapted from De Wit et al. (2001) and CABI (2016) 3.2 Development of an economic model The economic model used in this study is a system dynamics model based on the work of Forrester (1961), and will be described below. Vensin® software was used for the conceptualisation and development of the economic model to estimate the opportunity costs of not using IAPs for commercial benefit (Ventana Systems, 2003). 3.2.1 Model description The model investigated the benefits and cost of early restoration in relation to waiting until an area becomes heavily invaded. The model further investigates the potential benefits of value-added industries to the DEA:NRM programme through recommending a policy variable co-financing to reduce the costs of clearing . The model was run for 22 years (2008–2030) and consisted of six sub-models, which were land use, clearing cost, value-added products, water consumption, carbon sequestration and economic factors. The sub-model for land use focused on the extent of alien invasion and clearance at the study area (see Figure 1). The parameters informing this sub-model are listed in Table 1. The stock variables are areas invaded by Hakea spp., Wattle spp., Pinus spp., Atriplex donax, Acacia silinga and other species. The ‘other species’ represent the less dominant IAPs found at the study site. Each stock variable in the land-use sub-model depicts the extent of invasion, which is increased by regrowth and reduced by clearance. The IAP regrowth is increased by the spread rate and the area invaded. The IAP clearance is a function of person days which, in turn, are a function of the budget. Regression models were run in the Vensim® modelling software to estimate the functions. 818 SAJEMS Asset research NS 19 (2016) No 5:814-830 The value-added products sub-model in this study was concerned with estimating the net ecominc returns from VAPs. The biomass values were allocated to a selection of VAPs (see Table 4) . The value-added industries considered were charcoal, firewood, briquette, pulp and timber. The quantities were corrected for losses and then multiplied by the corresponding prices to yield the total revenue from each. The summation of the total revenue multiplied by the profit margin ratio yielded the net income from VAPs. The parameters informing this sub-model are listed in Table 4. Values that inform more than one sub-model are not repeated. To establish confidence in the developed model several validity test were applied in Vensim ®. A short description of the validity test applied in this study in the Appendix. Figure 1 Land use sub-model for the Kouga-Krom study area Initial area Hakea species Initial area Atriplex donax Initial area Wattle species Initial area Acacia saligna Initial area Pinus species Area Hakea species Hakea species regrowth Spread rate Hakea species Area Pinus species Pinus species regrowth Spread rate Pinus species Area Acacia saligna Acacia saligna regrowth Spread rate Acacia saligna Area Atriplex donax Atriplex donax regrowth Spread rate Atriplex donax Area Wattle spp Wattle spp regrowth Spread rate Wattle spp Initial area other species Area other species Other species regrowth Spread rate others species Grand initial alien area Proportion of Hakea species Proportion of Wattle species Proportion of Pinus species Proportion of Acacia saligna Proportion of other speciesProportion Atriplex donax Person days Effect of budget on person days Budget (Deak) Effect of PD on ha cleared Pinus species clearance Atriplex donax clearance Acacia saligna clearance Other species clearance Wattle species clearance Elasticity of person days to budget Elasticity of ha cleared to person days Area cleared Hakea species clearance Annual alien clearance Cumulative invaded area Budget Do nothing