ABSTRACT
This paper outlines the demand-side approach to the valuation of groundwater focusing on a case study conducted in Franschhoek, South Africa. Significant drivers of the demand for groundwater are also expounded.
The study is confined to the domestic sector of the sample area and utilises two approaches to ascertain the Total Economic Value (TEV) of groundwater in the research area; analysis of municipal water-billing archives to determine the consumer surplus of direct use value (market value); and contingent valuation to determine the non-market value. A survey was conducted, via face-to-face interviews, in order to facilitate the contingent valuation assessment. Demographic and perceptual household data were collected as well.
Economic expansion and immigration of people into the study area are identified as the most significant drivers of growth in the demand for groundwater for domestic consumption. Indeterminate results were obtained in the determination of the direct use value since the market did not show any significant response to changes in the price of water, as the price of water was too low to effect any significant change in consumption levels. Income levels, respondent age, municipal satisfaction levels, and Living Standard Measure (LSM) were identified as significant drivers of demand for the non-market values of groundwater. The contingent valuation produced a willingness-to-pay estimate for the non-market values of groundwater which was R498 125.00 per month for the research area.
