452 SAmMS NS Vol 5 (2002) No 2 Economic Analysis of the Eradication and Management of Invasive Alien Vegetation in the Mhlatuze River Catchment (KwaZulu-Natal, South Africa) Jennifer Cooper and Jessica Schroenn School of Business, University of Natal, Pietermaritzburg Nevil Quinn Centre for Environment and Development, University of Natal, Pietermaritzburg ABSTRACT Alien invasive vegetation threatens the functioning and existence of natural ecosystems in South Africa because many of these plants have no predators or competitors, allowing them to dominate the ecosystem which they inhabit. The rapid proliferation of this alien vegetation, ascribed to the increase in afforestation and changes in land use, has had significant adverse impacts on water resources, biodiversity and the stability as well as integrity of these ecosystems. Although eradicating alien invasive vegetation gives rise to a number of different benefits, this process entails enormous costs. Consequently, in order to establish the economic viability of alien plant eradication it is essential to analyse these costs as well as the benefits associated with eradication. JELQ20 1 INTRODUCTION The Mhlatuze River Catchment, which is considered the most severely affected tertiary catchment in KwaZulu-Natal in terms of alien vegetation infestation, was selected as the focus of this study. Although the cost-benefit analysis (CBA) was conducted in a small area, its fmdings can be extended to regional, national or even global situations. At the very least, this analysis offers insight into the feasibility of alien plant eradication and ascertains whether or not this eradication is beneficial to both landowners and the broader society. This paper reviews the literature pertaining to alien invasive vegetation and outlines the methods selected for valuing the impacts of its eradication. Based R ep ro du ce d by S ab in et G at ew ay u nd er li ce nc e gr an te d by th e P ub lis he r (d at ed 2 00 9) . SAJEMS NS Vol 5 (2002) No 2 453 on the analysis of data generated by the study, the economic efficiency of the clearing process was established, and future actions required to manage invasive alien vegetation identified. 2 THEORETICAL FRAMEWORK The prevalent attitude towards eradicating alien invasive vegetation among timber producers is one of apathy; most producers undertake sporadic clearing, rather than the rigorous removal and sustained management of alien plants. In order to uncover the economic rationale for these attitudes, it is helpful to consider the economic theory underlying project appraisals as well as sources of inefficiency which lead to market failure. The Hicks-Kaldor criterion (i.e. accept any project which results in a potential Pareto improvement) is central to the theoretical justification of CBA in welfare economics and provides the rationale for selecting projects whose benefits outweigh their costs (perkins, 1994: 50). CBA is purely concerned with the economic efficiency of a project and whether or not this increases social welfare. Equity effects are thus ignored: the project decision does not depend on to whom the benefits and costs accrue, or on whether society considers the prevailing distribution of income to be desirable. Some CBA frameworks, for example that proposed by the World Bank, address this issue by advocating the use of distributional weights. In the idealised world of perfect competition, the interaction of many profit- maximising producers and utility-maximising consumers gives rise to a Pareto- optimal situation, which is efficient. Under these circumstances, prices reflect marginal economic costs and the private and social optimums coincide (Munasinghe, 1993: 1732). The existence of prices means that scarcity can be gauged through the market forces of demand and supply, which ensures the efficient allocation of society's scarce resources (Perkins, 1994: 95). In the real world, however, distortions ascribed to monopoly practices, external economies and diseconomies, or interventions in the market process culminate in market (or financial) prices for goods and services that do not fully reflect the marginal benefit of their consumption to society and which may diverge substantially from their true economic values or shadow prices (Munasinghe, 1993: 1732). The failure of the market to price resources efficiently inevitably leads to their over-exploitation and/or inefficient utilisation. Consequently, an argument can be developed for government intervention. R ep ro du ce d by S ab in et G at ew ay u nd er li ce nc e gr an te d by th e P ub lis he r (d at ed 2 00 9) . 454 SAJEMS NS Vol 5 (2002) No 2 An externality exists where the action of one economic agent affects the utility or production possibilities of another in way that is not reflected in the marketplace (Just et al., 1982: 269). Externalities are particularly relevant to this study, since those individuals not currently engaging in alien plant eradication produce more output than the socially optimal level and adversely affect the welfare of downstream users, who as a result of this inactivity produce less output than the social optimum. In practice, the correction of such distortions is difficult, since many environmental effects (e.g. increased biodiversity) display public good aspects (Le. non-rivalry and non-exclusiveness in consumption), and fail to be recorded by market price movements. This explains why environmental effects are often excluded from analyses. For purposes of this study, environmental goods and services are relevant both in carrying out the CBA of eradicating invasive alien plants as well as the resulting decision on project choice (Hanley & Spash, 1993: 10). Thus, it is imperative to ensure that such effects are included and, where possible, quantified. 3 IMPACTS ASSOCIATED WITH ALIEN INVASIVE VEGETATION The invasion of natural ecosystems by alien plants is a serious environmental problem that threatens the sustainable use of benefits derived from such ecosystems (Van Wilgen et al., forthcoming: 2). Although alien invasive vegetation may have benefits, for example it may provide food for human consumption (e.g. guavas) or may have aesthetic beauty, substantial costs are associated with this vegetation. Adverse impacts include: Streamflow reduction; Loss of biodiversity (as well as ecosystem resilience); Increased costs of fire protection and damage in wildfires; Loss of potentially productive land and Loss of grazing potential and livestock production (OW AF, 2000: 16) .. 4 CHARACTERISTICS OF THE MHLATUZE CATCHMENT The study area comprises a total of 48 633 hectares, of which approximately eight per cent (3 767 hectares) is densely infested with invasive alien vegetation. This heavy infestation is ascribed to the establishment of plantations of alien species as well as changes in land use. The area is dominated by the agricultural, forestry and industrial sectors, all of which are important in terms R ep ro du ce d by S ab in et G at ew ay u nd er li ce nc e gr an te d by th e P ub lis he r (d at ed 2 00 9) . SAJEMS NS Vol 5 (2002) No 2 455 of their contribution to the local economy and/or their employment of local people. The Mhlatuze Catchment has been classified as 'water stressed', since more water has been allocated to users than is actually available (Versveld et ai., 2000: v). It is anticipated that this sceQ.ario will deteriorate in the future, due to increased demand as a result of population and economic growth as well as the launching of the Richards Bay SDI. Furthermore, this catchment is characterised by high levels of unemployment, with most people in the rural areas engaged in a subsistence lifestyle. 5 METHODOLOGY A multidisciplinary approach was adopted to document the findings of this study due to the wide range of biological, economic and social implications associated with the eradication of invasive alien vegetation. Data were gleaned from an array of sources, which included books, journals, reports and government as well as policy documents. The research area was visited on a number of occasions and formal in-depth interviews were conducted with experts, major stakeholders and WFW employees. The purpose of these interviews was to identify the most significant impacts and capture salient information concerning the actual costs and benefits associated with the eradication process. A total of thirteen stakeholders located in the study area and five experts were interviewed. In addition, thirty Working for Water (WFW) employees residing and working in the study area were interviewed in order to evaluate the social effects of alien plant eradication, and to establish the benefits received from the WFW Programme. Based on the responses elicited and on the literature survey conducted, those impacts with the highest relative importance were identified. The impact parameters selected include: harvesting of alien vegetation, streamflow amount, biodiversity and fire control. Where possible, the values of impact parameters connected with the eradication process were quantified. An the data generated from this process were used to compile the results section of the report, and based on the findings, suitable recommendations were formulated. R ep ro du ce d by S ab in et G at ew ay u nd er li ce nc e gr an te d by th e P ub lis he r (d at ed 2 00 9) . 456 SAJEMS NS Vol 5 (2002) No 2 6 RESULTS AND DISCUSSION Analysis of the results indicates that all the private farmers and other major stakeholders in the study region are engaged in some form of alien plant control. However, this clearing has been more rigorous on private farmland. 6.1 Costs associated with alien invasive plant eradication Alien plant eradication costs are dependent on the control method adopted (mechanical, chemical or biological control), as well as on the stage and frequency of clearing. Individuals in the study area use mechanical as well as chemical control methods, and are responsible for the full costs connected with alien plant eradication, except where the WFW Programme is operating on the individual's land. The costs associated with these control methods include capital, operating and maintenance costs as well as the costs of follow-up operations. Rehabilitation costs are excluded from this analysis, since it was evident from stakeholder responses that no individual had been engaged in such a process. The total costs of eradicating alien invasive vegetation depend on the degree of infestation (the density of alien plant cover), the type and age of the invasive species, and ease of access to the area (Hosking & Du Preez, 1999: 445). The total costs associated with clearing alien plants over a ten-year period were elicited from stakeholders. It was estimated that on average 65 per cent of the total costs pertained to labour, whilst 25 and 10 per cent were correlated to herbicide and other costs like hired equipment and transport respectively. The average costs associated with the various phases of alien plant removal (refer to Table 1) are based on the above categorisation and on the following assumptions: The average weighted daily wage rate for labourers was fixed at R25 per person. All stakeholders adopted the same control methods. Garlon was the only herbicide considered in this analysis, since it was found that over 85 per cent of stakeholders in the area used Garlon. The cost of Garlon is R142 per litre (PPRI, 2000: 20). Four follow-up operations were required to ensure alien plant density declines to less than 10 per cent cover (Goodall pers comm.). Each stage of eradication is initiated annually in order of sequence (refer to Table 1). R ep ro du ce d by S ab in et G at ew ay u nd er li ce nc e gr an te d by th e P ub lis he r (d at ed 2 00 9) . SAJEMS NS Vol 5 (2002) No 2 457 Table 1 Total costs associated with eradicating alien invasive vegetation for different phases Stages of eradi- Labour cost Herbicide cost! Otber costs Total cost cation (Randslhectare) (Randsl (Rands! (Randsl bectare) • hectare) hectare) Initial eradication I 1,300 500 200 2,000 First foUow-up 494 190 76 760 Second follow-up 280 107 43 430 Tbird follow-up 156 60 24 240 Fourth follow-up • 123 48 19 190 Maintenance 104 40 16 160 This table highlights that so long as regular (that is, at least annual) alien plant eradication is carried out, total costs associated with clearing will decline with each successive year up until the maintenance phase, where costs will stabilise. Using the total invaded area of 3 767ha in the study region and the costs referred to in the table above, it is instructive to depict the change in total costs associated with alien plant eradication over the ten-year lifespan of the project (refer to Figure 1). It must be noted that the total costs will only follow this given trend if each and every eradication phase is properly and effectively implemented. Figure 1 Total costs associated with eradication in the study area RB.ooo R 7,000 c .. R6,OOO ::.~ '8;;. R5,ooo ~ 'g R4.ooo co :: e ::I R 3,000 ~ ~ R2,ooo R 1,000 RO ~ \ \ \ \ "" ........ 2345" 8 9 R ep ro du ce d by S ab in et G at ew ay u nd er li ce nc e gr an te d by th e P ub lis he r (d at ed 2 00 9) . 458 SAJEMS NS Vol 5 (2002) No 2 6.2 Benefit now of alien vegetation eradication It is necessary to distinguish between private and social benefits in this analysis, to establish the positive impacts of alien plant eradication and to highlight the distribution of these benefits. The ignorance of social benefits has given rise to the misallocation of resources in the past, and their inclusion in this analysis is thus a significant aspect of the study. 6.2.1 Private benefits Private benefits are those accruing entirely to the proprietor, for example, income derived from the harvesting of alien vegetation and reduced fire management costs. Monetary values for such benefits are generally easy to derive from markets. a) Utilisation of alien vegetation The harvesting of alien vegetation is a consumptive use value that is dependent on the species eradicated, the relative age and the extent of infestation. From interviews conducted, it was apparent that the only alien invasive vegetation harvested were commercial timber species (Eucalyptus, Pinus and Acacia mixed species). Stakeholders estimated that on average, 20 tonnes of timber per densely invaded hectare were likely to be extracted in the initial phase of eradication. Further, they confirmed that there would be market demand for this additional timber at current prices. Thus to derive a monetary value for this vegetation, the extraction rate was multiplied by the profit per tonne (i.e. the market price less transport and processing costs) derived from the different timber species used for paper and pulp purposes, and summed (refer to Table 2). Table 2 Total value (August 2001 values) of commercial forestry species located in invaded areas of study area Commercial Size of area 1 Tonnes of timber Average profit Total value forestry species (hectares) to be extradedl pertonne3 (Rands) per bectare (Rands) Eucalyptus spp. 68 20 R200 R272,OOO Pinus spp. 26 20 RI30 R67,600 Acacia mixed spp. 1921 20 R290 R 11,141 800 TOTAL 2015 - - R 11,481,400 Area OCCUPied by harvestable commerCial forestry species wlthm the densely invaded area of the study region (i.e. 3767 hectares). 2 This is with reference to the initial eradication phase only. R ep ro du ce d by S ab in et G at ew ay u nd er li ce nc e gr an te d by th e P ub lis he r (d at ed 2 00 9) . SAJEMS NS Vol 5 (2002) No 2 459 3 Average profit (i.e. net of costs) for specified commercial timber, which was derived from stakeholders in the study area (August 200 I). The value of harvesting alien vegetation in the initial phase of eradication in the study region amounts to RII 481 400 (refer to Table 2). The largest proportion of this potential income will accrue from the harvesting and sale of Acacia species, which occupy 51 per cent of the total invaded area. This is based on the assumption that the entire invaded area is cleared in the first year. b) Costs associated with burning From questionnaires administered, it was estimated that the average cost of burning open grassland per hectare is R46/ha per annum. The presence of alien invasive vegetation increases this average cost to R 7 4/ha per annum. Consequently, ceteris paribus, alien plant eradication would reduce fire hazard or management costs by the same proportion, that is R28/ha per annum or 60 per cent. In order to establish the annual reductions in fire management costs associated with alien plant eradication over the ten-year project period it was essential to examine the rate of recovery over time (i.e. establishment of indigenous vegetation). The following assumption was made: The expected rate of recovery over time will give rise to reductions in fire management costs of: 100 per cent in the initial year, 95 per cent, 90 per cent, 85 per cent, 70 per cent, 60 per cent, 50 per cent and 45 per cent in each successive year thereafter subsequent to alien plant eradication. Therefore, the maximum reduction in fire management costs occurs in year one, followed by small increments in costs up to the point where costs reach 55 per cent of their pre-eradication levels (i.e. a sustainable saving of 45 per cent of the base year costs). Based on this assumption, the annual reduction in fire management costs in the study region was calculated. In the first year, provided that all alien vegetation is eradicated, these costs will decline by 100 per cent or RI05 476. As indigenous vegetation establishes in cleared areas, the reduction in costs declines somewhat, as shown in Figure 2. R ep ro du ce d by S ab in et G at ew ay u nd er li ce nc e gr an te d by th e P ub lis he r (d at ed 2 00 9) . 460 SAJEMS NS Vol 5 (2002) No 2 Figure 2 Annual reduction in fire management costs associated witb the different stages of alien plant eradication for tbe ten-year project .. R 120.000 ,--------------------, e ~ t ;: :. R 100.000 +-=~="""4'--==----.. --------____1 .5 c ~ ~ :5 ';" R 80.000 +---------= ............ :::......:-::-------------' ~\i ~ :0 8 R 60.000 +-----------" ....... ~--------t Ie I ________________ ~_=~~~~ ii ~ R 40,000 +- § ~ R 20,000 +-----------------·--jl « c E RO+-~ __ -~-_-r_--~-_-_~ 2 3 4 5 6 7 8 9 10 Year 6.2.2 Social benefits The social benefits flowing from alien plant eradication are those which accrue to society as a whole and include increased streamflow, increased biodiversity as well as employment benefits. It is important to incorporate these impacts into the analysis, and where possible quantify them, in order to prevent the misallocation of resources stemming from incorrect pricing information. a) Streamflow increase From previous studies, it is evident that streamflow reduction is positively related to vegetation biomass and age. Based on expert opinion, it was established that medium trees (which includes young Acacia and EucaJyptus species) dominate the invaded area of the study region, occupying over 70 per cent of the total invaded area (refer to Appendix I). Using the data contained in Appendix I, streamflow reduction associated with the alien plants was calculated for riparian and non-riparian zones. The findings suggest that alien invasive vegetation in the study area reduces total streamflow by approximately 4.6 million m3 per annum. Consequently, the eradication of this vegetation is expected to increase streamflow by the same amount. It is anticipated that only a portion of this increased streamflow will be reliably captured and extracted given existing infrastructure (Wood pers comm.). Based on catchment characteristics, experts predict that a minimum of 50 per cent of the increase in streamflow (about 2.3 million m3 per annum) will be available R ep ro du ce d by S ab in et G at ew ay u nd er li ce nc e gr an te d by th e P ub lis he r (d at ed 2 00 9) . SAJEMS NS Vol 5 (2002) No 2 461 for downstream use. In order to provide a more prudent appraisal, this conservative estimate was employed. Using estimates of current water allocation in the catchment as well as the prices each sector is required to pay (refer to Table 3), the total monetary value associated with increased streamflow per annum was calculated. It is estimated that if all alien vegetation were removed from the study area in the first year, the monetary value of increased streamflow would amount to R422 584 (refer to Figure 4). This initial amount would be expected to decline somewhat over time, as indigenous vegetation reclaims the cleared areas. Table 3 Current allocation of water and differential water tariffs sustained by sectors located in the Mhlatuze Catchment (van der Merwe pers comm.) ~ectors of water use Current aUocation of Current water price I available water (%) cents/m3) rrigation sector 60 2.08 Pomestic sector 14 42.34 ndustrial sector 26 .42.34 Pnce mcludes infrastructure and catchment management charge Increased streamflow arising from eradicating alien invasive vegetation accrues to those individuals situated downstream from this clearing activity, which for purposes of this study includes rural communities, private farmers as well as industries. Increased streamflow is an example of a positive externality, in that it enhances society's welfare and downstream users are able to produce at their socially optimal output level. Because of the social nature of this benefit, private individuals generally fail to take it into account when allocating resources. R ep ro du ce d by S ab in et G at ew ay u nd er li ce nc e gr an te d by th e P ub lis he r (d at ed 2 00 9) . 462 SAJEMS NS Vol 5 (2002) No 2 Figure 4 Annual value of tbe anticipated increase in streamflow over tbe project life span ~ R 500,000 ~---------------------; 'E ~ R400,000 .J----.:="",.~-------------_____j • 'i : i R300,OOO f 0:: U .. .E II: R 200 000 -f---------------::lI-_==-=.-! '0 ' ~ ~ R 100,000 +-----------------_____j 'ii " 0:: 0::