As water resources become increasingly scarce in Africa, the need for the use of economics to aid in decision-making and management becomes apparent. Global experience shows that economic approaches may achieve the best results. Water is the basis of the economy as well as essential for human life and biodiversity. The Pangani River Basin in north-eastern Tanzania provides a good starting point for evaluating the economic issues around water resources and how economics can be used to improve their management to align with national goals.
This document presents the findings of in-depth research into the economic benefits of the various activities in the Pangani River Basin. Decisions about the management, allocation and use of water should ideally maximise economic outputs from basin water uses and water utilisation over the long term. It should also sustain the ecosystems that supply and depend on water resources.
Macroeconomic and sectoral policies in Tanzania have a major impact on how water resources are used and managed, and currently provide little incentive for landowners to conserve catchment areas important for water supply, for industries and households to curb pollution, or for anyone with access to water to use it sparingly. At the same time, landowners in important catchment areas are not rewarded for conserving forests and soil, which would usually carry a cost to the landowner.
A drastic improvement in the management of the basin’s water resources will also require improved funding. As it is, the Pangani Basin Water Office cannot meet their obligations adequately with their existing funding. There is an enormous capacity to increase the revenues from user fees due to the large degree of non-payment, and due to the fact that most users are currently not charged for water use at all. At the same time the high value of water in various uses underlines the capacity to institute some form of “payment for environmental services” scheme, where downstream water users compensate upstream catchment managers for the provision of ecosystem water services. The increasing scarcity of water resources in the Pangani River Basin calls for strategic water resources management that will ensure the sustainability of water supply and the goods and services supplied by aquatic environments, as well as the efficient and equitable use of these resources. Sustaining water supplies for the numerous users in the basin will depend on reducing losses due to catchment degradation and wastage due to inefficient practices. The former will need to be addressed by creating incentives for catchment managers to maintain catchment forest areas, preferably through a system of ‘payments for ecosystem services’ which involves payment by those that benefit from the service, via the PBWO, to catchment managers. The price increases required for this will also serve as a demand management tool that encourages more efficient use of the water that is allocated to various uses.