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Confronting South Africa’s Water Challenge: A Decomposition Analysis of Water Intensity

Water resource intensity measures the intensity of water use in terms of volume of water per unit of value added. It is an internationally accepted environmental indicator of the pressure of economic activity on a country’s water resources and therefore a reliable indicator of sustainable economic development. The indicator is particularly useful in the allocation of water resources between sectors of the economy since in water stressed countries like South Africa.  The study focuses on economy-wide changes in South Africa’s water intensity using both decomposition and regression analysis in an effort to identify and understand the impact of economic activity on changes in the use of the economy’s water resources. The regression analysis suggests that in the long run, water use in the economy of South African is related to the capital stock and that the capital stock is getting more water efficient over time, but that this change is gradual. The study results caution against monitoring South Africa’s water/output ratio, and drawing strong conclusions from this regarding changes in water use intensity as the interpretation of this indicator is fraught with difficulties.

Working paper 605
1 May 2016
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