Investing in Natural Assets
A business case for the environment
in the City of Cape Town
Martin de Wit, De Wit Sustainable Options (Pty) Ltd (Project Leader)
Hugo van Zyl, Independent Economic Researchers
Doug Crookes, Independent
James Blignaut, Beatus CC
Terence Jayiya, Jaymat Enviro Solutions CC
Valerie Goiset, De Wit Sustainable Options (Pty) Ltd
Brian Mahumani, De Wit Sustainable Options (Pty) Ltd
Prepared by
Natural Value Joint Venture
c/o PO Box 546
Brackenfell
7561
Prepared for
Arne Purves
City of Cape Town
Acknowledgements
Many people in and outside the City contributed to this project, most notably the project
leader Arné Purves, the ever-vigilant project steering committee, many City line managers
and staff who have attended our participatory workshops and were willing to be interviewed,
as well as a group of natural resource economists who helped us shape a more robust
valuation methodology. We specifically thank the following people for their involvement and
commitment on this project:
Project Steering Committee:
Amy Davison, Arné Purves, Barry Coetzee, Candice Haskins, Carol Wright, Catherine
Stone, David Gretton, Gregg Oelofse, Jeremy Marillier, Joanne Jackson, Johan Steyl,
Norah walker, Patricia Holmes, Quintus Thom
Interviewees:
Barry Wood, Candice Haskins, Carl Theunissen, Carol Wright, Craig Haskins (†), Greg
Oelofse, Jeremy Marillier , Joanne Jackson, Joe Olivier, Johan Steyl, Patricia Holmes,
Phumla Mrubata, Sakhile Tsotsobe
People who attended workshops to develop the methodology:
Albert van der Merwe, Jackie Crafford, Lozelle Reed, Lisa Thompson-Smeddle, Myles
Mander, Theo Kleynhans, Willem de Lange, Erika Espach
People who attended a workshop to test the methodology:
Amy Davison, Arné Purves, Barry Coetzee, Candice Haskins, Charlene Dickson, Cliff
Dorse, Dalton Gibbs, Desireè Galant, James Hallinan, Jan Botes, Jim Hallinan, Joanne
Jackson, Joe Olivier, Julia Wood, Kevin Samson, Natasha Wilson, Norah Walker, Phil
Ngozi, Sakhile Tsotsobe, Sharon Pherfer
We gratefully acknowledge funding from DANIDA and thank Leandri van der Elst from
Unboxed Publishing Consultancy for the proofreading and layout.
This report is dedicated to our colleague and friend Craig Haskins who tragically died during
the course of the project. We dearly miss him.
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Executive Summary
The City of Cape Town’s natural assets – land, coast, biota, atmosphere and waterbodies –
are under pressure. Without a sustainable decoupling between economic and population
growth, and the use of resources and the pollution of the environment, pressures on natural
assets are likely to continue in a developing city such as Cape Town. The municipality is
considering reinvesting more of the proceeds of growth into maintaining the natural assets.
There are good reasons for doing this. First, natural assets produce a flow of goods and
services that has value for people living in and visiting the City of Cape Town. A second
related reason is that the degradation of urban natural assets impedes on the ability of the
municipality to deliver services in a cost-effective way. Arguments to preserve the
environment have traditionally not focused on the financial logic of investing in natural
assets. The rationale for this study is to develop a financially-motivated business case for
investing in natural assets in the City. The focus of the overall project is to influence budget
allocations by developing focused economic arguments for investing, maintaining and
expanding the City’s natural assets.
Chapter 1 provides a literature overview on what ecosystem goods and services are,
presents international best practices used to value the natural environment and reports on
valuation studies that were already done within the City. Not all values are included in an
economic analysis. The focus of this study is on anthropocentric values and, therefore,
does not include any values that are independent of humans as brought forward by
theocentric and ecocentric approaches to valuation. Human values are also not
homogeneous. There are different types of users of environmental services, often with
conflicting values. Despite these limitations, there is a need to value the environment in
economic terms. If such values are not known it can easily lead to a misallocation of
resources and an abuse of environmental services.
Economists working on environmental issues use the now widely-accepted Total Economic
Value (TEV) framework to value market and non-market benefits of the environment. Such
benefits include the provision of food, water, shelter, materials and medicines for
consumption; non-consumptive tourism and recreational values; a sink for pollution and
waste; and a habitat to live. The Ecosystem Goods and Services (EGS) approach, as used
by the Millennium Ecosystems Assessment, categorise environmental functions as
(intermediate) supporting services, as well as regulating, provisioning and cultural services.
The EGS approach provides a useful framework to categorise goods and services from the
environment which, in turn, can be translated into economic values by using the TEV
approach. In terms of the TEV framework, provisioning services largely fall within the direct
use category, regulating services are mainly indirect use values, and cultural services
comprise both a direct use component for values such as recreation and an existence value
component for the remainder.
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Ecosystem services are often crucially important for all constituents of human wellbeing.
Ecosystems often directly contribute to the real economy (such as Gross Domestic Product
and employment). Damage to ecosystems erodes natural capital and can also have
profound impacts on the livelihoods of those dependent on natural capital even if this is not
always reflected in commonly used economic statistics.
The beneficiaries of ecosystem goods and services can be categorised according to three
main groups, namely private individuals, commercial enterprises and public bodies. Each of
these groups has benefits on a local, national/regional or global level. Before conducting a
valuation study it is crucial to understand who the beneficiaries are and if they are included
or excluded in the valuation study.
Valuation techniques are powerful tools for assessing the monetary values of environmental
goods and services. Environmental valuation has the ability to express in monetary terms
goods and services that would otherwise be regarded as “free”. As such, valuation is an
appropriate approach to developing a business case for the environment. There are two
important considerations when selecting a valuation technique. The first consideration
relates to the availability of data and the selection of an appropriate framework. The second
consideration relates to, given the data, which is the most appropriate technique in a given
context. In choosing a valuation technique, preference should be given in the first instance
to where market prices are available. Shadow prices, or direct or indirect proxies for market
prices can also be used. Where no proxies are available at all, stated preference
techniques are useful.
A number of local case studies are also reviewed. These discuss land uses applicable to
the City of Cape Town, including terrestrial, riverine and marine. These valuation studies
indicate that wetlands, parks, agricultural landscapes and beaches yield relatively higher
environmental values. The high relative values for wetlands and parks are related to the
house price premium that is derived from living in close proximity to these areas. Despite
providing valuable baseline data, existing valuation studies in the City are still partial and
inconclusive on a city-wide level.
Chapter 2 reports on interviews with selected senior staff and decision-makers within the
municipality. The purpose of these interviews was to compile an inventory of the ecosystem
goods and services and to identify the people who are benefiting from these goods and
services.
The City’s natural and semi-natural environment is a significant service provider. The first
step towards a comprehensive assessment of ecosystem goods and services involves the
translation of ecological or natural complexity (structures and processes) into a limited
number of ecosystem or environmental functions. These functions, in turn, provide the
goods and services that are valued by humans.
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The City of Cape Town has a number of line function departments with branches that are
tasked with managing the City’s natural/semi-natural environments or areas. The majority of
the officials interviewed were drawn from these line function departments or branches. A
total of 13 interviewees were asked to describe the natural or semi-natural environment (or
asset/amenities, open-space type areas) under their jurisdiction. They were also asked to
provide a list of goods and services which might be associated with the City’s natural/seminatural environments or at least the areas which are managed by the line function
departments.
The interviewees asserted that ecosystem goods and services are essential to all
communities living in the City of Cape Town but may, in specific cases, be particularly
important in contributing towards meeting the basic needs (i.e. water, firewood, etc.) of
poorer communities that do not have access to adequate infrastructure and services. It is
further emphasised that goods and services flowing from the environment are benefiting
most people living in and visiting the City, dispelling the notion that the environment is
limited to maintaining reserves, plants and animals only.
A number of key natural/semi-natural environment beneficiaries were identified during the
interviews and include: tourists (international, national, local), recreation groups (beach
bathers, sailors, surfers, rowers, people who picnic & braai, walkers, cyclists, hikers, sports
groups), harvest groups (fishers, wild plant harvesters, urban agriculturalists, fuelwood
gatherers), informational and cultural groups (education, scientific research, religious
experience, book writers), industry groups (film, advertising and events industry, shipping,
tourism, manufacturing, crafts) and residential groups.
In many instances, the City’s environmental services are often public goods, which means
that they may be enjoyed by any number of people at any given time without affecting other
people’s enjoyment. For example, an aesthetic view in Blaauwberg or any part of the City is
a public good. No matter how many people enjoy the view, others can also enjoy it. The
problem with public goods is that, although people value them, no one person has an
individual incentive to pay for or maintain the good.
Interviewees suggested that it would be helpful if resource economics made it possible to
convert the somewhat elusive value of natural/semi-natural environments and their
associated goods and services into something understandable (i.e. a monetary value) to
policy-makers and the general population.
Chapter 3 provides a methodology to value ecosystem goods and services within the
context of a municipality. The methodology prioritises those goods and services that have
the highest impact on beneficiaries, are clearly linked to the City’s development objectives,
are within the City’s mandate and ability to influence, and have high socio-ecological risks
when not managed well.
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In order develop the methodology, it is important to distinguish between two related
concepts, namely natural assets and ecosystem goods and services (EGS). Natural assets
are the stocks of environmental resources owned by the City (the City’s natural capital).
Ecosystem goods and services (EGS) are the flows of benefits derived from these assets
(the interest or services generated by the natural capital).
A comprehensive list of EGS was defined based on inputs from city officials as identified in
the literature. Intermediate supporting services, such as primary production systems and
ecological cycles, support or contribute to the generation of regulating, provisioning and
cultural services. The final list includes the following goods and services:
Table a:
List of ecosystem goods and services
Ecosystem goods and services
Water regulation (flows, etc.)
Natural hazard regualtion (floods, etc.)
Water purification and waste treatment, assimilation
Erosion regulation
Regulating
Pollination
Disease regulation
Pest regulation
Climate regulation – local (air quality)
Climate regulation – global
Space for biota to live and reproduce (refugia)
Fresh water provision
Supporting services
Photosynthesis
Soil formation
Primary production
Nutrient cycling
Water cycling
Fuelwood provision
Building materials provision (wood, sand, etc.)
Wild flowers for harvesting
Provisioning
Provision of plant and animal material for medicines and
biochemicals
Provision of materials for crafts, fashion (e.g. shells)
Fish and marine resources
Genetic resources with potential pharmaceutical and other
biochemical uses
Small-scale urban farming
Recreation and tourism
Provision of inspirational beauty
Aesthetic values and sense of place
Cultural
(information)
Educational uses (e.g. school excursions, scientific research)
Use in cultural and artistic practices and ceremonies
Use in religion practices and ceremonies
Use in productions (film and events), advertising and publications
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It is neither practical nor desirable to value all goods and services generated by natural
assets in the City, necessitating a logical and replicable methodology for prioritising natural
assets for valuation.
A methodology was developed according to the following six steps:
• Assess the relative importance of different natural assets for the generation of EGS
• Estimate the importance of EGS to users/beneficiaries
• Establish the links between EGS and development objectives
• Assess the ability of the City to influence the value of EGS through management
• Assess the ability of ecosystems to yield a sustainable flow of EGS and prioritise
according to risks
• Apply valuation techniques to selected case studies
This methodology was tested using a valuation study done for the Zandvlei area as part of
a wider City-funded study on the value of open-space areas. This case study offers the
opportunity to consider a number of benefit streams from a well-defined natural asset, using
a variety of valuation techniques. The Zandvlei case study shows that the vlei is a source of
significant benefits for a wide variety of users.
The prioritisation of EGS in the City was done during a participatory and facilitated setting
with invited City line function managers and senior staff representing all functions related to
ecosystem goods and services in the City. A participatory rapid appraisal approach was
followed. Participants were asked to identify and shortly motivate what, in their view, the
most important linkages are between all identified EGS in the City and beneficiaries, the
achievement of development objectives, the City’s environmental mandate and ability to
influence and ecological and socio-economic risks.
Based on a score of the most important linkages, the following ecosystem goods and
services were identified for more intensive valuation:
• natural hazard regulation (buffering function performed for flooding, fires and coastal
surge/sea level rise),
• provision of natural characteristics that are conducive to tourism and recreation,
• the improvement of water quality and the assimilation of waste,
• provision of space for globally important biota, and
• the aesthetics and sense of place provided by the natural environment.
Educational benefits of the natural environment were included in the discussion on the
value of biota. The importance of the natural environment to enhanced health and
wellbeing, the Cape Town brand in general, the film and advertising sector, and the
enhancement of property values are included in the discussion on values associated with
aesthetics and sense of place.
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Chapter 4 presents the results of valuing these selected services for the City of Cape Town.
It is estimated that the ecosystem services of natural hazard regulation, tourism and
recreation, and support to the film industry provide a benefit of between R1.5–R4 billion per
annum to people living in and visiting the City. When conservatively adjusted for other
ecosystem services, a benefit of between R2–R6 billion per annum is provided by the City’s
natural assets. Not all ecosystem goods and services could be measured in the study and
this is, therefore, a conservative estimate. These values are an estimation of nature’s share
in the production and consumption of ecosystem goods and services.
The tourism value of natural and other areas is commonly measured using the travel cost
technique. This technique is based on the assumption that tourists’ willingness to spend on
travel to a given place reflects the value that they attached to it. This can then be
supplemented by considering the entry fees paid by tourists at natural areas. The following
steps were thus followed:
1. Estimate the travel costs associated with all tourist trips that include the City of Cape
Town in their itinerary (i.e. the cost of transport).
2. Isolate the relative prominence or weight of the City of Cape Town in the travel
decision of tourists including the City in their travel itineraries.
3. Isolate the relative prominence or weight of the City of Cape Town’s natural assets in
the travel decision of tourists coming to the City.
4. Add entry fees paid by tourists to access natural areas to their travel costs.
Using this approach, total tourism values associated with natural assets fall in the range of
R965 million to R2.95 billion per annum.
Some of the most prominent values associated with natural environments in the City of
Cape Town are the many and varied recreational opportunities offered by these
environments. The City’s parks, nature reserves, beaches and other open spaces allow
residents to engage in a number of activities and play a crucial role in promoting wellbeing.
A conservative average value of local green open spaces is between R270 and R326
million per annum. This information was supplemented by gate fee data in order to estimate
total travel and entry costs at all TMNP sites and Kirstenbosch of between R68 and
R83 million per annum. The recreational value of the beaches included in the study is
estimated at between R70 and R85 million per annum. This is probably a particularly
conservative estimate when one considers that a number of the key beaches have been
enhanced to the point of achieving Blue Flag status. The combined recreational values for
local green open spaces (including City nature reserves), TMNP, Kirstenbosch and local
beaches in the City of Cape Town is estimated to be between R407 and R494 million per
annum. These values were largely driven by the quality of management and the public’s
perception of the relationship between these areas and their role in social issues such as
crime. Particularly in lower income areas, the availability of facilities and areas for the
recreational use of natural assets and local green open spaces are still severely limited
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resulting in artificially low current values. However, with additional facilities and
management, values in these areas and others stand to increase significantly.
It is difficult to overestimate the importance of the City of Cape Town from a biodiversity
value perspective. The Cape Floral Region (CFR) with the City of Cape Town at its heart
has almost 9 000 different plant species. Approximately 70% of these species are endemic
(i.e. confined) to the region. While foreign donor funding of conservation does not provide a
reliable estimate of the value of biodiversity, it provides an indication of the importance of
the biodiversity of the CFR at a global scale. In 2004, the C.A.P.E. programme received two
Global Environment Facility grants totalling US$14 million in addition to a Critical
Ecosystem Partnership Fund five-year grant of US$6 million to the (CFR) from 2002 to
2006. This funding equates approximately R225 million in current values – a highly
significant recognition of the international importance of the biodiversity contained in the
Cape Floristic Region. The City of Cape Town’s various natural assets also provide for
more fulfilling and varied educational experiences among learners. During the year July
2008 to June 2009, a total of 23 781 learners (equivalent to 59 708 days of education) from
roughly 500 schools attended environmental education programmes on City reserves.
Natural hazards including fires, flooding and storm surges have significant negative impacts
on the safety and wellbeing of Capetonians, their property and other assets. Ecosystems,
however, naturally act as barriers, or buffers, against natural hazards, thus mitigating their
negative impacts. The summer months in the City of Cape Town are prevailingly dry, hot
and windy and as a result the area is highly vulnerable to wildfires. These fires are
associated with injury, loss of life, community dislocation, damage to property and
ecological damage. In addition, disaster management expenditure on controlling fires and
cleaning-up after them is significant. The presence of Invasive Alien Plants (IAPs) in the
City of Cape Town remains a serious cause for concern with regard to fire mitigation. On
the whole, these plants remain relatively widespread and are a major aggravating factor
with respect to wildfire frequency, extent and intensity. They also pose a key threat to local
biodiversity and are associated with increased security and water supply risks.
Among natural threats, floods are one of the most destructive often targeting the most
vulnerable. The impacts of flooding events, especially in densely developed and populated
urban areas, are thus of growing concern. Flooding affects thousands of Capetonians each
year, and puts their property and belongings, businesses, safety, health and sometimes
even their lives at risk. In the July 2008 floods, approximately 30 000 people were affected
and 7 500 structures damaged. In order to estimate likely total property damage costs that
would be associated with flooding, data from the City of Cape Town GIS database was
used to estimate the total number of properties within the 1 in 100 year flood line per
property type (e.g. residential, business, schools, etc.). Potential damages to each structure
were then estimated and a total potential damage cost estimate of R545 million spread over
100 years was generated. This translates to around R5.45 million per annum. To this
property damage figure one needs to add costs broadly associated with disruptions (i.e.
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transport delays, lost time at work, etc.), health costs and any other social costs. Flooding
risks, however, can be managed to acceptable levels through appropriate stormwater
infrastructure, disaster management as well as land use planning and environmental
management. Limiting the development of natural areas is known to play a key role in
mitigating floods as it is one of the only ways to limit the imperviousness (i.e. not able to
absorb and slow down water flows) of areas. High levels of impervious ground cover have
predictable global impacts on the nature of flooding events. The implication of these altered
relationships in the water balance equation is that runoff in a built-up area becomes
‘peaked’ and ‘flashy’ in nature. All indications are that it is more cost effective, in the longterm, to favour development in areas where flood risk and flood severity are minimal, as
opposed to implementing costly flood mitigation works or bearing damage costs resulting
from failure of infrastructure.
One of the anticipated consequences of climate change is a rise in observed sea level –
which is a function of mean sea level, tidal influences and meteorological forcing of sea
level. Although climate-induced changes to mean sea level are not the same in all regions
of the world, available evidence suggests that the mean sea level around the City of Cape
Town increases according to the mean global rate, which was approximately 2 cm per
decade. Current understanding is that global warming, in conjunction with increased
intensity and abbreviated return times of storms, will give rise to periods (of about 1–4
hours) during which the “observed” sea level could be 1 to 15 metres higher than the
current mean sea level leading to floods and significant socioeconomic damages. In earlier
studies, the increased risks of storm surges and their associated costs in the City of Cape
Town have been assessed in terms of loss of real estate value, damage to infrastructure
and foregone tourism revenue. It was estimated that the total potential value at risk was
between R4.4 billion and R10.5 billion spread over 25 years. This translates into between
R176 million and R420 million per year. These figures are highly significant but also open to
misinterpretation. These figures should rather be regarded as representing the cumulative
total value at risk, over a period of 25 years, at all points of the coast. It also assumes the
total destruction of the real estate and infrastructure in question as opposed to partial
damages. Total destruction of all structures seems highly unlikely given experiences with
flooding in the City of Cape Town which results in similar outcomes associated with
inundation. Following a more realistic approach actual damages would amount to between
R26.4 million and R63 million per annum. High levels of uncertainty exist regarding the
most appropriate solutions to risk minimisation. However, natural solutions and the use of
existing natural assets offer sustainability advantages and are more likely to allow for the
realisation of multiple benefits with “least regrets” when compared to engineering solutions.
The damage and management costs avoided as a result of the optimisation of natural asset
functions is estimated to range from R2.6 million to R50.4 million per annum. When
combining the value of natural assets in natural hazard regulation for all three natural
hazards (i.e. fire, floods and storm surges), a total value of between R4.6 million and
R60.4 million is reasonable. Relatively high levels of uncertainty exist with regard to these
predicted values and more research is needed on the links between ecosystems and
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natural hazard regulation. However, enough is known about the links between the
conservation and proper management of natural assets to make it clear that investment in
these assets needs to be an integral part of disaster management.
Natural assets have significant value as purifiers and assimilators of waste, essentially
acting as natural versions of built infrastructure such as ‘sewage outfalls’ and ‘water
treatment plants’. As with built infrastructure, however, the natural environment can only
cope with a certain maximum amount of waste or pollution before it becomes inefficient. At
best, absorptive capacity will be impaired in these situations, but outright ecological
infrastructure failure also becomes a distinct possibility. In the City of Cape Town, urban
lakes have developed substantially in line with urbanisation and population growth trends,
resulting in ever-increasing loads of urban run-off being conveyed to them. They now act as
very effective waste and sediment traps and, over the years, have silted up and become
increasingly eutrophic, and are characterised by noxious, sometimes toxic algal blooms and
a stunted biota. Zeekoevlei, for example, has been abused to the point where it can be
argued that it is currently more of a liability than an asset. Current estimates indicate that
the necessary dredging of the vlei would cost R60 million–R70 million. Aside from the costs
associated with poor stormwater management at such vleis, knock-on effects can extend to
the sea although these are not as widely recognised. The failure of Fish Hoek beach to
attain Blue Flag status is a case in point. The swimming area is vulnerable to bathing water
contamination caused by outflows of faecal and other pollution material. It has forced the
City to abandon all plans to pursue Blue Flag accreditation for Fish Hoek beach. This is an
unfortunate and frustrating reality from the viewpoint of the Fish Hoek community as a
whole and its tourism sector in particular.
Certain elements of natural landscapes, such as the presence of water, topographic
variation and vegetation, have repeatedly been associated with a high landscape
preference and good scenic (aesthetic) value while built features and degraded landscapes
have consistently been associated with low preference. Researchers also believe that there
is a direct relationship between the ecological diversity and functioning of the landscape
and perceived scenic beauty. There can be little doubt that the City of Cape Town
possesses spectacular aesthetic features linked to its natural assets and that these features
contribute to the unique sense of place in the City, as well as the image of the City, thereby
creating multiple significant value streams. Key value streams that flow from aesthetic and
sense of place values associated with the City of Cape Town’s natural assets are enhanced
health and wellbeing, contributions to the City of Cape Town brand, and an enhanced
business environment. There are also benefits flowing to specific sectors, namely film and
advertising and property value enhancement. The occurrence of natural assets in cities and
suburbs can increase their aesthetic appeal and provide a diversity of experiences in
people’s everyday lives. The City of Cape Town’s efforts towards creating a winning brand
is also strongly linked to its environmental assets and the management of the environment
have borne initial fruit in the form of many awards bestowed on the City. Gains have been
made, but the City’s natural environment continues to come under increasing pressure as
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development accelerates and increasingly difficult trade-offs are required. The City of Cape
Town has also seen extraordinary growth in its film and advertising industry. Total
expenditure in the Western Cape amounted to a significant R2.6 billion from roughly 2 730
productions of varying sizes. The City of Cape Town’s expenditure was estimated at R2
billion or 77% of Western Cape expenditure. Discussions with key role players in the local
industry provided confirmation that the City of Cape Town’s many and varied natural assets
provide extensive opportunities to the film and advertising industry. It seems reasonable to
conclude that 5% to 15% of total production expenditure, or between R133 million and
R398 million per annum, can be linked to the City of Cape Town’s natural assets.
The City of Cape Town boasts some of the most sought after property in the world. This
largely relates directly to the amenity values associated with the City’s natural assets which
are reflected in property prices. These values mainly include aesthetic or sense of place
values primarily in the form of views and recreational values (e.g. easy access to worldclass beaches and green open spaces). Local case studies indicate the significant property
value premiums created at Zandvlei, the Lower Silvermine River and the values created by
the rehabilitation of the Westlake River in Kirstenhof. In addition, the Table Mountain
National Park has a profound influence on the overall property market.
Chapter 5 reports on actual and budgeted expenditure on the natural environment in the
City based on the City’s own financial database. Operational expenditure on the
environment is estimated at R371 million, or 2.5% of all OPEX in the municipality, and
capital expenditure at R110 million, or 2.1% of all CAPEX, in 2009. These figures include
the category of environmental protection, as well as estimated environmental expenditure in
the line functions Planning and Development, Communication and Social Services, Sport
and Recreation, Solid Waste Management, Waste Water Management, Road Transport,
Water Utilities, Electricity, and Tourism Development. On capital expenditure, road
transport (roads and stormwater) and electricity distribution is expected to have an
increasing share of the total budget over the next three years. Capital expenditure related to
environmental protection (health services as well as environmental resource management)
is almost negligible when compared to total expenditure. The Environmental Resource
Management (ERM) department utilised the bulk of the capital allocation for environmental
protection for activities related to the protection of biodiversity and landscapes. The share of
City health (pollution control), however, has declined. On operational expenditure, electricity
distribution has the highest allocated share of the total budget allocation. This is followed by
water distribution, solid waste and sewage. The budget forecast from 2009/10 to 2011/12
shows that electricity distribution costs are expected to command an increasing share of the
budget. Operational expenditure on pollution control and biodiversity and landscape
protection both show increasing trends, but the overall budget is low compared to many
other line functions. Some modest increases are expected for the ERM operational budget
in the 2008/9–2011/12 budget years. In the sport and recreation function, the parks budget
is almost negligible. Parks expenditure is expected to decline as overall share of the budget
allocated to community and social services. An analysis of changes in both capital and
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operational environmental expenditure as compared to overall changes in budget indicates
that spurts of environmental expenditure has not had a significant impact overall on the
City’s budget. This would suggest that, on the whole, environmental feedbacks have not
worked through the budgetary system yet. The study recommends the development of a
more robust definition of environmental expenditure within the City’s budgetary process.
A financial-economic model is developed in Chapter 6. This model attempts to provide
insights into the levels of environmental expenditure in relation to the benefits received from
the natural environment. This is done for all ecosystem goods and services in the City and
for the respective line functions that have some level of expenditure on the environment. As
a first indicator, the net present value of natural assets combined is estimated at between
R43 billion and R82 billion. In economic theory, when it is not possible to determine the
market value of any particular capital stock, the value of that stock is provided by the net
present value of the sum of the value of the flows derived from that stock. Like any other
capital, natural capital has a stock value that produces flows, namely ecosystem services.
The net present value method is considered to be a lower bound estimate of the capital
value of an asset since i) it is not always possible to include all flows, and ii) the synergy
among the flows often implies that the capital stock value is more than just the mere
aggregation of the present value of a set of services.
A second indicator is the ratio of environmental expenditure to the value generated by
ecosystem goods and services compared to the leverage achieved by the municipality in
the broader City economy. In a conventional sense any form of a capital investment project
has a large upfront capital component with ongoing operating and maintenance cost. By
comparing the return to the investment over time with the upfront investment, it is possible
to determine a return on investment. In the case of managing natural capital, we do not
have a once-off capital investment, but an ongoing process of restoration, conservation,
expansion, management and maintenance of the natural asset base. It is, therefore, not
possible to calculate a conventional return on investment figure, but it is indeed possible to
derive a relationship in similar fashion to that of a return on investment to indicate the asset
value that the related expenditure is generating. For every R1 spent by the municipality in
2008/9 approximately R7.30 of value added was generated in the City economy. For every
R1 of expenditure by the municipality on the environment almost R8.30 of ecosystems
goods and services were generated. This is a conservative estimate and the ratio can be as
high as R13.50 for every R1 when a higher value scenario of R6 billion per annum is used.
This means that the leverage of municipal expenditure on the environmental sector is
considerably higher, i.e. between 1.2 and 2 times, than that of municipal expenditure on the
City economy.
A third indicator is the unit reference value. This is a common metric used to compare the
return of different water augmentation schemes. The URV gives the cost to produce R1’s
worth of benefits. A URV>1 implies the cost exceeds the benefits, and vice versa. The cost
to produce R1 of benefit for the natural capital stock is only 16c, compared to between R2
xiii
and R5 in the water sector. Overall, these financial indicators provide evidence for
ecosystem goods and services as a high-performing growth supporting sector.
Chapter 7 reports on the question how to develop an effective argument to increase
investment in natural assets in the context of municipalities. It cannot be assumed that a
more rigorous valuation of ecosystem goods and services and model results justifying
increased investment will automatically lead to improved decisions. There are at least three
main reasons for this. First, the diffusion of scientific knowledge into decision-making is
surprisingly non-linear. Second, policy- and decision-making are processes which include
several steps and the utilisation of increased knowledge would have to go through several
phases before making an impact. Third, analysts and decision-makers often have divergent
objectives, values and cultures. This study does not attempt to feed directly into decisionmaking, but may be used as an instrument of persuasion (i.e. mobilisation of support) to
invest in natural assets. The focus of this study is thus deliberately on the argument itself,
as well as the transmission and cognition of the argument. It is recognised that good data
and evidence will have little impact or influence over decision-makers unless packaged
carefully and communicated effectively. Making a case for environmental investment
implies that data should be packaged and presented in such a way that it is targeted, clear,
relevant and credible. It is important to be clear on the reasons for environmental
investments, and have a target audience who is willing and able to affect change. The main
lines of reasoning, the key messages, the steps in the argument, and the supporting data
and evidence also need to be very clear. Only relevant information needs to be presented,
focused on the needs of a specific audience. Furthermore, the evidence must be credible,
based on data from the area or sector the audience represents. The messenger also needs
to be credible and could include a champion other than the researchers themselves.
One can have a well-packaged argument, but this will have little impact if not heard,
understood and acted upon. In addition to having an effective and well-packaged argument
and a well-designed communication strategy, it would help to better understand the context
wherein the receptor operates. It will also be insightful to understand whether this context
has some level of emerging simplicity, and maybe even some level of predictability, that
may help to focus both the argument and communication.
Focusing on the receptor, complexity emerges within systems, such as a municipality which
consists of several different line functions, physical offices, budgets, individuals and
cultures to name a few, all of which interact and may lead to complex outcomes. The key
driver of these outcomes is human behaviour. Even within budgeting processes complexity
emerges. One can expect a large number of small, incremental changes in budgets from
year to year, followed by sudden rapid changes. It is argued that underlying to this
behaviour is an attention-driven decision-making model. Budget choices are not made
based on perfectly rational, weighted indices, but rather driven by certain heuristic rules
influenced by the positions of party leaders, by interest groups or by a focus on single-focus
issues. In addition, decision-making processes are not nearly as linear as one might expect.
xiv
This is also the case for the budgeting process. Although more predictable outcomes can
be expected in administrative processes than within political processes, complex outcomes
still emerge from such processes as well. The receptor can therefore not be viewed as a
homogeneous, economically rational entity that will soak up any scientific research outputs
that are pushed in its direction. Being aware of emerging complexity and the realities of the
decision-making process adds to the importance of having an effective transmission
mechanism.
It is well recognised that analysts and decision-makers generally have difficulty
communicating effectively with each other. Where analysts are intrinsically focused on
searching some measure of the truth through rational science, decision-makers are looking
for policies that satisfy an electorate or accommodate certain pressure groups. Despite this
real divergence, research on the barriers to the utilisation of research shows that personal
relationships and trust between researchers and policy-makers continue to be important
facilitators of the use of research evidence in policy-making.
In the case of the City of Cape Town, socioeconomic inequalities and population growth
specifically are both very pertinent variables and can be expected to have a significant
effect on the adoption of environmental policies and, thus, environmental investments. It is
interesting to note that people living in the City of Cape Town are already better resource
conservers than elsewhere in the country which may provide indications on preference for
environmental policies. It is, however, evident that environmental signals have not yet
translated into rapid budgetary changes in the City.
With no convincing evidence of budget adjustments to invest in natural assets, the focus
changes to a discussion on environmental signals in the system. Based on an analysis of
search terms in all media releases, speeches and documents housed on the City of Cape
Town’s website from 2001 onwards, environmental signals are strongest on the natural
assets ‘water’, ‘river’, ‘mountain’, ‘garden’ and ‘beach’ and weakest for terms such as ‘open
space’, ‘fynbos’ and ‘wetlands’. Ecosystems goods and services related to the terms
‘tourism’, ‘fire’, ‘waste’, ‘stormwater’, ‘recreation’, and ‘conservation’ were mentioned most.
A measurement of the demand for issues related to the environment was done by using
trends derived from search volumes on the internet. Based on an analysis using Google
Trends, the environmental signal by internet users within the Western Cape is
predominantly focused on natural assets such as ‘water’, ‘beach’, ‘fish’, ‘river’ and
‘mountain’ and on ecosystems services such as ‘tourism’.
Higher signals would better reflect the public’s attention, and support a broader acceptance
of arguments. It can be concluded that natural assets and ecosystem services related to the
terms ‘water’, ‘beach’, ‘river’, ‘mountain’ and ‘tourism’ provide the strongest combined
environmental signals. There is also some evidence that lower income groups indicate a
strong preference for environmental services such as a clean and natural environment as
well as recreation, but more immediate issues such as jobs, housing, education and income
xv
dominate perceptions of what a “good life” entails. There are strong enough environmental
signals both from within the municipality and from user groups in the City to conclude that
attention to environmental issues is prevalent.
When focusing on the budget process, the neat construction of a strategy–planning–budget
process does not always hold. Strategy, for example, is continually evolving. There are also
several unknowns that influence the budgeting process itself. Issues such as the
curtailment of revenue sources and inflationary pressures have implications for City
budgets as well. On the expenditure side, massive ad hoc expenditures have been included
such as the 2010 World Cup and the Bus Rapid Transfer System. The budgetary process
for the City of Cape Town follows an orderly process, but there are sufficient opportunities
for politicians to include certain items on the budget or influence departmental allocations.
Given the complex and changing receiving environment and an inherent divergence
between analysts and decision-makers, a well thought through communication strategy
becomes increasingly important. Communication theory, in essence, starts with the maxim:
Who Says What In Which Channel To Whom With What Effect? A communication strategy
is essential in achieving the core goal of the project, namely to motivate for investment in
natural assets. A template for effective communication was presented to assist in the
development of a communication strategy for the argument presented in this study.
xvi
Table of contents
Acknowledgements ....................................................................................................... ii
Executive Summary...................................................................................................... iii
List of Tables ............................................................................................................ xxiii
List of Figures ............................................................................................................ xxv
List of Boxes ............................................................................................................. xxvi
Introduction .................................................................................................................... 1
Chapter 1: Economic valuation of natural assets and ecosystem goods and
services: A review of the literature
1.1 Introduction ............................................................................................................ 3
1.2 What is value? ....................................................................................................... 4
1.2.1 Classifications of value ............................................................................. 4
1.2.2 Whose values count? ............................................................................... 5
1.2.3 Why do we need to value the environment?............................................. 6
1.2.4 The TEV approach ................................................................................... 7
1.3 The environment-economy interface ..................................................................... 8
1.3.1 Why is the environment important? ......................................................... 8
1.3.2 Integrated valuation framework ................................................................ 9
1.3.3 Categories of Environmental Goods and Services ................................. 10
1.3.4 Links between EGS and human wellbeing ............................................. 14
1.3.5 The environment and economic welfare ................................................. 15
1.3.6 Beneficiaries ........................................................................................... 16
1.3.7 Integrating EGS and TEV approaches ................................................... 17
1.4 Valuation techniques ........................................................................................... 19
1.4.1 Overview of valuation techniques ........................................................... 19
1.4.1.1 Change in productivity ............................................................. 19
1.4.1.2 Human capital and Cost of Illness ........................................... 20
1.4.1.3 Preventative costs ................................................................... 21
1.4.1.4 Hedonic pricing ........................................................................ 21
1.4.1.5 Travel cost .............................................................................. 22
1.4.1.6 Replacement cost .................................................................... 23
1.4.1.7 Contingent valuation ................................................................ 24
1.4.1.8 Choice modeling ...................................................................... 24
1.4.1.9 Benefit transfer ....................................................................... 26
1.4.2 Practical considerations when choosing a valuation technique .............. 26
1.5 Case studies ........................................................................................................ 30
1.5.1 Recreational and agricultural zones ....................................................... 30
1.5.2 Geological features ................................................................................ 33
1.5.3 Rivers and wetlands ............................................................................... 33
1.5.4 Coastline ................................................................................................ 34
xvii
1.5.5 Summary ................................................................................................ 35
1.6 Valuation and other mechanisms ........................................................................ 35
1.6.1 Payment for Ecosystem Services (PES) ................................................ 36
1.6.2 Environmental Fiscal Reform ................................................................. 36
1.6.3 Budgetary processes .............................................................................. 37
1.6.4 Alternative measures of sustainability ................................................... 37
1.6.5 System of national accounts................................................................... 37
1.6.6 Green funds and other measures ........................................................... 38
1.7 Conclusion ............................................................................................................... 38
Chapter 2: Ecosystem goods and services: Reporting on consultations
2.1 Introduction .......................................................................................................... 40
2.2 Methods ............................................................................................................... 41
2.3 Natural resource flows ......................................................................................... 43
2.3.1 Natural or semi-natural areas managed by the interviewees.................. 43
2.3.2 Natural/semi-natural environment functions ........................................... 44
2.3.3 Natural/semi-natural environmental goods and service .......................... 46
2.3.4 Beneficiaries .......................................................................................... 47
2.3.5 Priorities for further study ....................................................................... 49
2.3.6 Threats to the natural capital base ......................................................... 50
2.3.7 Current uncertainties .............................................................................. 50
2.4 Conclusion ........................................................................................................... 51
Appendix 2.1: List of people interviewed ..................................................................... 52
Appendix 2.2: Questionnaire ....................................................................................... 53
Appendix 2.3: Goods and Services from the interviewees .......................................... 55
Appendix 2.4: List of users as suggested by interviewees .......................................... 56
Chapter 3: Methodology to prioritise and value the natural and environmental
resources of the City of Cape Town
3.1 Introduction .......................................................................................................... 57
3.2 Approach to methodology development .............................................................. 58
3.2.1 Definition of terms .................................................................................. 58
3.2.2 Categorising and listing ecosystem goods and services ........................ 58
3.2.3 Beneficiaries or users ............................................................................. 60
3.3 Key considerations in methodology development ............................................... 61
3.4 The six-step valuation methodology ................................................................... 65
3.4.1 Assess the relative importance of different natural assets for the
generation of EGS .................................................................................. 66
3.4.2 Estimate the importance of EGS to users or beneficiaries ..................... 66
3.4.3 Establish links between EGS and development objectives .................... 68
3.4.4 Assess the City’s ability to influence the value of EGS through
management .......................................................................................... 69
3.4.5 Assess the ability of ecosystems to yield a sustainable flow of EGS
and prioritise them according to risks ..................................................... 70
xviii
3.4.6
3.5
3.6
3.7
Apply valuation techniques to selected case studies .............................. 70
3.4.6.1 Techniques commonly used for valuation................................ 71
3.4.6.2 Practical considerations when choosing a valuation
technique ................................................................................. 72
Case study: Zandvlei ........................................................................................... 74
3.5.1 Assess the relative importance of different natural assets for the
generation of EGS .................................................................................. 75
3.5.2 Estimate the importance of EGS to users/beneficiaries ........................ 75
3.5.3 Establish links between EGS and development objectives .................... 76
3.5.4 Assess the City’s ability to influence the value of EGS through
management .......................................................................................... 77
3.5.5 Assess the ability of ecosystems to yield a sustainable flow of EGS ..... 77
3.5.6 Applying valuation techniques ............................................................... 77
3.5.6.1 Choosing valuation techniques ................................................ 77
3.5.6.2 Replacement cost technique ................................................... 78
3.5.6.3 Hedonic pricing/property value technique ................................ 79
3.5.6.4 Travel cost technique............................................................... 79
3.5.6.5 Contingent valuation techniques .............................................. 79
3.5.6.6 Discussion ............................................................................... 79
Prioritising EGS in Cape Town using the methodology ....................................... 80
Conclusion ........................................................................................................... 83
Chapter 4: Economic valuation
4.1 Introduction ......................................................................................................... 84
4.2 Tourism value of natural assets ........................................................................... 85
4.2.1 Measuring tourism values....................................................................... 85
4.2.2 The role of Cape Town’s natural assets in tourism................................. 90
4.3 Recreational value to local residents ................................................................... 94
4.3.1 The value of local green open spaces .................................................... 95
4.3.2 The value of Table Mountain National Park sites and Kirstenbosch....... 95
4.3.3 The value of Cape Town’s beaches ....................................................... 96
4.3.4 The combined recreational value of Cape Town’s natural assets .......... 97
4.3.5 Future recreational value opportunities .................................................. 98
4.3.5.1 The impact of management on values ..................................... 98
4.3.5.2 Availability of facilities and areas for recreation ....................... 99
4.4 Values associated with globally significant biodiversity ..................................... 101
4.4.1 Threats to biodiversity values ............................................................... 103
4.5 Natural hazard regulation .................................................................................. 104
4.5.1 Wildfire prevention and mitigation ....................................................... 105
4.5.1.1 Fire damage costs ................................................................. 105
4.5.1.2 Fire management costs ......................................................... 105
4.5.1.3 The role of Invasive Alien Plants in fire .................................. 106
4.5.1.4 Status of IAPs and clearing costs .......................................... 107
4.5.1.5 The role of natural assets in managing risks ......................... 107
xix
4.5.2
Flood attenuation .................................................................................. 109
4.5.2.1 Flood damage costs .............................................................. 110
4.5.2.2 Flood management costs ...................................................... 112
4.5.2.3 The role of natural assets in managing risks ......................... 112
4.5.3 Storm surge attenuation ....................................................................... 115
4.5.3.1 Costs associated with storm surges ...................................... 115
4.5.3.2 Storm surge management costs ............................................ 117
4.5.3.3 The role of natural assets in managing risks ......................... 118
4.5.4 Combined values associated with natural hazard regulation ................ 120
4.6 Water purification and waste treatment, assimilation......................................... 121
4.6.1 Urban lakes: Multiple use amenities or malfunctioning waste
dumps?................................................................................................. 121
4.6.2 Towards value creation and cost minimisation ..................................... 122
4.6.3 Knock-on effects of poor stormwater management .............................. 124
4.7 Aesthetic values and sense of place ................................................................. 125
4.7.1 Enhanced health and wellbeing............................................................ 126
4.7.2 Contribution to the Cape Town brand and an enhanced business
environment ......................................................................................... 127
4.7.3 Benefits flowing to specific sectors: the film and advertising industry ... 128
4.7.3.1 Economic value of the film and advertising industry .............. 129
4.7.3.2 Filming and natural assets ..................................................... 129
4.7.4 Property value enhancement................................................................ 130
4.8 Conclusion ......................................................................................................... 131
Appendix 4.1: Summary information on valuation studies conducted in Cape
Town .................................................................................................. 135
Appendix 4.2: Detailed Calculation of travel and entry costs for TMNP sites and
Kirstenbosch ...................................................................................... 147
Appendix 4.3: Additional options to respond to sea level rise in the City of Cape
Town .................................................................................................. 149
Chapter 5: An analysis of expenditure patterns related to the environment for
the City of Cape Town
5.1 Introduction ........................................................................................................ 150
5.2 Capital expenditure (CAPEX) ............................................................................ 152
5.2.1 Capital expenditure in absolute values (R million) ................................ 152
5.2.1.1 GFS 09 – Environmental protection ....................................... 152
5.2.1.2 Other SEE capital expenditure .............................................. 153
5.2.1.3 Total capital expenditure........................................................ 162
5.2.2 Capital expenditure as percentage of total budget ............................... 163
5.2.2.1 2004/5 Budget ....................................................................... 163
5.2.2.2 2005/6 Budget ....................................................................... 163
5.2.2.3 2006/7 Budget ....................................................................... 164
5.2.2.4 2007/8 Budget ....................................................................... 164
5.2.2.5 2008/9 Budget ....................................................................... 165
xx
5.3
5.4
5.5
5.6
5.2.2.6 Budget forecast: 2009/10–2011/12 ........................................ 165
5.2.3 Capital expenditure as a percentage of city line function ..................... 166
5.2.3.1 GFS 09 – Environmental Protection ...................................... 166
5.2.3.2 Other SEE capital expenditure .............................................. 167
Operational expenditure (OPEX) ....................................................................... 175
5.3.1 Operational expenditure in absolute values (R million) ........................ 175
5.3.1.1 GFS 09 – Environmental protection ....................................... 175
5.3.1.2 Other SEE operational expenditure ....................................... 176
5.3.1.3 Total operational expenditure ................................................ 185
5.3.2 Operational expenditure as percentage of total budget ........................ 186
5.3.2.1 2004/5 Budget ....................................................................... 186
5.3.2.2 2005/6 Budget ....................................................................... 186
5.3.2.3 2006/7 Budget ....................................................................... 187
5.3.2.4 2007/8 Budget ....................................................................... 187
5.3.2.5 2008/9 Budget ....................................................................... 188
5.3.2.6 Budget forecast: 2009/10–2011/12 ........................................ 188
5.3.3 Operational expenditure as percentage of city line function ................. 189
5.3.3.1 GFS 09 – Environmental protection ....................................... 189
5.3.3.2 Other SEE sector expenditure ............................................... 190
5.3.3.3 Total operational expenditure ................................................ 198
Realistic environmental expenditure (REE) ....................................................... 199
5.4.1 Capital expenditure .............................................................................. 199
5.4.1.1 GFS 09 – Environmental protection ....................................... 199
5.4.1.2 Other REE sector expenditure ............................................... 200
5.4.1.3 Total capital expenditure........................................................ 204
5.4.2 Operational expenditure ....................................................................... 205
5.4.2.1 GFS 09 – Environmental protection ....................................... 205
5.4.2.2 Other REE sector expenditure ............................................... 206
5.4.2.3 Total operational expenditure ................................................ 210
Operational expenditure: Environmental Resource Management ..................... 211
5.5.1 Departmental expenditure .................................................................... 212
5.5.1.1 Environment and heritage management ................................ 212
5.5.1.2 Environmental head office ..................................................... 212
5.5.1.3 Nature conservation............................................................... 213
5.5.2 Operational expenditure: total for ERM ................................................ 213
Trend analysis ................................................................................................... 214
5.6.1 Capital expenditure .............................................................................. 214
5.6.1.1 Absolute differences (R million) ............................................. 214
5.6.1.2 Percentage change ............................................................... 216
5.6.2 Operational expenditure ....................................................................... 218
5.6.2.1 Absolute differences (R million) ............................................. 218
5.6.2.2 Percentage change ............................................................... 220
5.6.3 REE Capital expenditure ...................................................................... 222
5.6.4 REE Operational expenditure ............................................................... 222
xxi
5.7 Discussion ......................................................................................................... 223
5.8 Conclusion ......................................................................................................... 223
Appendix 5.1: International standards (GFS functions and sub-functions) used ....... 224
Chapter 6: A financial-economic evaluation model for the City of Cape Town’s
natural capital
6.1 Introduction ........................................................................................................ 228
6.2 Expenditure on ecosystem services in the City of Cape Town: An
assessment ....................................................................................................... 232
6.2.1 The value of the capital asset ............................................................... 232
6.2.2 Leveraging value ................................................................................. 232
6.2.3 Unit reference value ............................................................................. 234
6.2.4 Distribution patterns of capital and operational expenditure
between the environmental and non-environmental sectors ................ 235
6.3 Conclusion ......................................................................................................... 236
Appendix 6.1: Details of weighing the GFS sector expenditure on ecosystem
service delivery................................................................................... 237
Chapter 7: Developing effective arguments for investing in the natural
environment
7.1 Introduction ........................................................................................................ 238
7.2 How arguments bring change ............................................................................ 239
7.3 Understanding the receptor: The municipality and the budgeting process ........ 241
7.3.1 Complexity and human behaviour ........................................................ 241
7.3.2 Decision-making processes.................................................................. 242
7.4 Understanding the transmission from argument to receptor .............................. 242
7.4.1 Divergence ........................................................................................... 242
7.4.2 Communication .................................................................................... 244
7.5 Case study: Cape Town Municipality................................................................. 246
7.5.1 Argument .............................................................................................. 246
7.5.2 Receptor ............................................................................................... 247
7.5.2.1 Budget adjustments and attention to environmental signals .. 247
7.5.2.2 Budget process ...................................................................... 251
7.5.3 Transmission and communication ........................................................ 254
7.6 Conclusion ......................................................................................................... 256
Discussion and conclusion ...................................................................................... 258
References ................................................................................................................. 260
xxii
List of Tables
Table a:
Table 1.1:
Table 1.2:
Table 1.3:
Table 1.4:
Table 1.5:
Table 1.6:
Table 1.7:
Table 1.8:
Table 1.9:
Table 1.10:
Table 1.11:
Table 1.12:
Table 1.13:
Table 2.1:
Table 2.2:
Table 2.3:
Table 3.1:
Table 3.2:
Table 3.3:
Table 3.4:
Table 3.5:
Table 3.6:
Table 3.7:
Table 3.8:
Table 3.9:
Table 4.1:
Table 4.2:
Table 4.3:
Table 4.4:
Table 4.5:
Table 4.6:
Table 4.7:
Table 4.8:
List of ecosystem goods and services ..........................................................vi
Classification of environmental values ......................................................... 5
Main ecosystem types and their services ................................................... 11
Functions, goods and services of natural and semi-natural
ecosystems ................................................................................................ 13
Linkages between components of wellbeing and ecosystem
services ...................................................................................................... 15
Beneficiaries of ecosystem services provided by the environment ............ 17
Examples of use and non-use values for selected ecosystems ................. 18
Sources of bias in contingent valuation studies .......................................... 25
Valuation techniques and their compatibility .............................................. 28
Avoiding common pitfalls to valuation ........................................................ 29
Values (R/ha) from a CV and hedonic study for the CCT ........................... 30
CCT nature reserves (excluding wetland reserves).................................... 32
Wetlands values (R/ha) for the CCT........................................................... 34
Summary of valuation studies for CCT natural areas ................................. 35
Functions performed by natural and semi-natural environments
which occur within the boundaries of the City of Cape Town ..................... 45
The various types of goods and services provided by the
interviewees can be sorted according to the specified categories .............. 47
Categories, types and examples of natural/semi-natural
environment beneficiaries .......................................................................... 48
Categories of ecosystem goods and services ............................................ 59
User groups identified during the consultative process .............................. 60
Natural asset categories of ecosystem goods and services ....................... 66
Matrix of beneficiaries plotted against EGS category ................................. 67
Avoiding common pitfalls in valuation......................................................... 73
Ecosystem goods and services provided by Zandvlei ................................ 75
Matching EGS to valuation techniques at Zandvlei .................................... 78
Summary of value estimates for Zandvlei ................................................. 80
Relative importance of EGS based on perceptions of City line
function managers and senior staff ............................................................ 82
Western Cape regions visited by tourists .................................................. 86
Tourist visit purposes in Cape Town and the Western Cape ..................... 87
Travel costs associated with trips including Cape Town in their
itineraries ................................................................................................... 88
Travel costs that can be associated with Cape Town ................................ 90
Travel costs associated with natural assets in Cape Town ....................... 94
Value of local green open spaces in Cape Town ....................................... 95
Local recreational value of TMNP sites and Kirstenbosch ......................... 96
Local recreational value of Cape Town’s beaches .................................... 97
xxiii
Table 4.9: Total recreational value of Cape Town’s natural assets ............................. 98
Table 4.10: Value of damages and management costs that could be avoided
through IAP clearing and control ............................................................. 108
Table 4.11: Impacts of the July 2008 floods in Cape Town ....................................... 111
Table 4.12: Potential damage costs from flooding in the City of Cape Town over
100 years ................................................................................................ 112
Table 4.13: Value of flood buffering by natural assets ............................................... 114
Table 4.14: Scenarios of the loss of real estate value along the Cape Town
coast ........................................................................................................ 116
Table 4.15: Summary of the value of total risks over 25 years associated with
increased storm surges in Cape Town .................................................... 117
Table 4.16: Value of storm surge buffering by natural assets .................................... 120
Table 4.17: Consolidated value of natural assets in natural hazard regulation .......... 121
Table 4.18: Number of productions and expenditure in the Cape Town and
Western Cape film industry (2005/2006) ................................................. 129
Table 4.19: Value of natural assets in the film and advertising industry ..................... 130
Table 4.20: Summary of values associated with natural assets in Cape Town .......... 133
Table 6.1: The value of ecosystem services to the City of Cape Town: 2008: R
million: A partial analysis .......................................................................... 229
Table 6.2: Actual expenditure by sector: The City of Cape Town.............................. 230
Table 6.3: Contribution of GFS expenditure sector to ecosystem service
delivery ..................................................................................................... 231
Table 6.4: Capital value of the nature-based asset: R million: 2008 ......................... 232
Table 6.5: Return on capital investment .................................................................... 233
Table 6.6: Relationship between public value generation and public
expenditure .............................................................................................. 234
Table 6.7: Unit reference value of the natural capital stock of the City of Cape
Town ........................................................................................................ 234
Table 6.8: Ratio: Capex to Opex: Summary .............................................................. 235
Table 6.9: Ratio: Capex to Opex: By GFS sector ...................................................... 235
Table 6.10: Comparison of environmental to non-environmental expenditure ............ 236
Table 7.1: Mapping facilitators and barriers to research utilisation............................ 244
Table 7.2: Essentials of communications .................................................................. 245
Table 7.3: Environmental signals based on terms used in media releases,
speeches and documents by the City of Cape Town ............................... 249
Table 7.4: Environmental signals based on search volume on the internet in
the Western Cape .................................................................................... 250
Table 7.5: Budget process, City of Cape Town ......................................................... 252
xxiv
List of Figures
Figure 1.1: A categorisation of value perceptions........................................................... 6
Figure 1.2: Diagrammatic representation of the Total Economic Value
framework .................................................................................................... 8
Figure 1.3: An integrated framework for valuing ecosystem goods and services ......... 10
Figure 1.4: Categories of ecosystem goods and services ............................................ 12
Figure 1.5: Marshallian demand curve and consumer surplus ..................................... 16
Figure 1.6: Monetary valuation techniques and economic welfare ............................... 19
Figure 1.7: Choosing a valuation technique ................................................................. 27
Figure 2.1: Framework for integrated assessment and valuation of ecosystem
functions, goods and services ................................................................... 42
Figure 3.1: Six-step valuation methodology ................................................................. 65
Figure 3.2: Monetary valuation techniques and economic welfare ............................... 71
Figure 3.3: Choosing a valuation technique ................................................................. 72
Figure 4.1: Relative importance of activities ................................................................. 91
Figure 4.2: Preferred scenery types ............................................................................. 92
Figure 4.3: Tourist highlights ........................................................................................ 93
Figure 4.4: Natural hazard buffering by ecosystems ................................................. 104
Figure 4.5: Responses to storm surge risks likely to entail least regrets .................... 119
Figure 7.1: Making the case ....................................................................................... 240
xxv
List of Boxes
Box 1.1:
Box 3.1:
Box 4.1:
Box 4.2:
Box 4.3:
Box 4.4:
Box 4.5:
Box 4.6:
Box 4.7:
Box 4.8:
Box 7.1:
Box 7.2
Economic benefit of trees in cities .............................................................. 31
Ecological challenges in the City of Cape Town ......................................... 69
Cape Town’s travel awards ........................................................................ 89
Blue Flag beaches – benefits and risks of a loss of status ........................ 97
Value creation at Zandvlei and the Lower Silvermine River ..................... 100
The role of community support and partnership in creating value ............ 101
Educational values associated with the City’s natural assets ................... 103
Non-fire impacts associated with invasive alien plants ............................. 109
City of Cape Town Management of Urban Stormwater Impacts
Policy........................................................................................................ 124
Awards bestowed on Cape Town for its quality of life .............................. 128
Proposed core messagess ....................................................................... 246
Investing in natural assets: Communications template............................. 254
xxvi
Introduction
by
Martin de Wit
The City of Cape Town’s natural assets – land, coast, biota, atmosphere and water bodies
– are under pressure. The City’s latest State of the Environment Report indicates that over
60% of the City’s original vegetation has been lost and 30% of the remaining vegetation is
considered either endangered or critically endangered. Pollution of freshwater and coastal
ecosystems, largely as a result of unsatisfactorily treated wastewater and polluted urban
stormwater runoff, is an intensifying problem. Access to nature for people living in and
visiting Cape Town is also on the decline. There are, however, also some encouraging
signals of pressures abating, such as improving air quality, reduced water use and reduced
pressure on landfills from solid waste. These reduced pressures may or may not be
temporary. Without a sustainable decoupling between economic and population growth,
and the use of resources and the pollution of the environment, pressures on natural assets
are likely to continue in a developing City such as Cape Town.
The municipality is considering reinvesting more of the proceeds of growth into maintaining
natural assets. There are good reasons for doing this. First, natural assets produce a flow
of goods and services that have a value to people living in and visiting the City of Cape
Town. These values arise from healthy ecosystems and include clean air and water, the
regulation of natural hazards such as fires, floods and coastal storm surges, biodiversity
and aesthetically pleasing areas and landscapes supporting tourism, recreation, economic
activities such as the film industry and education. Urban natural assets, if not managed and
protected well, are prone to degradation. The flows of goods and services from such
degraded assets are of a lesser quality or might even cease.
A second related reason is that the degradation of urban natural assets impedes on the
ability of the municipality to deliver services in a cost-effective way. The natural
environment supports the municipalities’ mandate of service delivery. If ecosystems
services are lost, municipal service delivery declines. At best this can be substituted or
remedied with costly engineering solutions, but in many instances nature’s services cannot
be easily replaced at all. The value derived from urban natural assets under control of the
municipality can be enhanced by better management, but can also be lost due to a lack of
management.
From a financial point of view the decision to invest in urban natural assets is not primarily
based upon environmental considerations. It is based on broadly-accepted rules of financial
management that assets need to be maintained to yield a healthy flow of valuable goods
and services. Continued destruction of assets will eventually, depending on the resilience of
the asset in question, lead to a loss of economic, social or cultural values and impede
municipal service delivery.
1
Arguments to preserve the environment have traditionally not focused on the financial logic
of investing in natural assets. The argument that the natural environment needs to be
preserved for its own sake may have raised awareness and educated people on the
importance of the natural environment, but have not provided a convincing financial
rationale to invest in natural assets. The broader economic value of the natural assets and
the goods and services these assets generate for the City is poorly understood and largely
ignored as part of decision-making processes. The real value of these ecosystem goods
and services is not acknowledged in municipal accounting systems and, therefore, not
sufficiently included in budget allocations for the management and expansion of natural
assets.
The rationale for this study is to develop a financially motivated business case for investing
in natural assets in the City. The broad objective of this study is to develop a coherent
natural resource economics model and methodology for the City of Cape Town that can be
used to guide the generation of a business case for the environment. The focus of the
overall project is to influence budget allocations by developing focused economic
arguments for investing, maintaining and expanding the City’s natural assets.
The overall study is constructed according to the following phases:
• Phase 1: International review of valuation techniques and their applicability, pros,
cons and data requirements
• Phase 2: Consultation with City line functions in order to better understand the
ecosystem goods and services found in the City, using a participatory approach
• Phase 3: Development of a methodology to value the natural resource base of the
City of Cape Town
• Phase 4: Pilot valuation to demonstrate and test the valuation methodology
• Phase 5: Development of the business case
This report is presented in the following seven chapters:
• Chapter 1: Literature review
• Chapter 2: Report on consultation
• Chapter 3: Methodology for valuation
• Chapter 4: Valuation studies
• Chapter 5: Environmental expenditure
• Chapter 6: Modelling
• Chapter 7: Effective argumentation
2
Chapter 1: Economic valuation of natural assets and
ecosystem goods and services: A review of the literature
Lead author:
Doug Crookes
With contributions from:
Martin de Wit
1.1 Introduction
The City of Cape Town (CCT) is renowned as one of the most attractive cities in the world
to live in and boasts a particularly high quality of life. It provides a home for a melting pot of
cultures, racial and ethnic groups. Its mild Mediterranean climate, scenic beaches and close
proximity to the wine route and other attractions have also meant that it has long been a
favoured destination for national and international tourists and other visitors. The iconic
Table Mountain, along with the Cape Floristic Kingdom creates a unique and diverse set of
ecosystems with the CCT as its capital. The CCT is faced with balancing the need to
maintain these natural assets on the one hand, and the challenges it faces with the day-today management of the city, including service delivery, housing demand, waste disposal
and pollution management, on the other hand. These factors are compounded by the fact
that there are strong linkages between the natural resource base and economic activity in
the CCT, notably tourism, agriculture and fishing, and indirectly in other sectors such as
manufacturing. This report stems from the need to mainstream biodiversity in decisionmaking and planning processes by developing a business case for the environment.
The CCT in its Integrated Metropolitan Environmental Policy (IMEP) strategy committed
itself, amongst others, to the following measures:
• Adopting and implementing the principles and underlying approaches to sustainable
development of the CCT, and ensuring the integration of environmental issues into
local government decision-making at all levels;
• Ensuring that current generations use natural resources in such a way so as to
maximise the benefit to all, while ensuring that those resources are protected for the
use of future generations;
• Developing and implementing detailed sectoral strategies, in order to implement and
enforce the general policy principles, for all environmental issues so as to meet the
commitments described in the sectoral approaches;
• Using a holistic approach to the environment and to protecting the CCT’s unique
biodiversity;
• Taking special responsibility on behalf of the global community to ensure the
conservation and protection of the Cape Floristic Kingdom.
3
Environmental resource economics (ERE), and more specifically the valuation of
ecosystem goods and services (EGS), is a tool that may be used to meet these
commitments. Firstly, valuation tools provide a framework for providing a common currency
through which information may be shared with relevant decision makers and across line
functions. Secondly, environmental valuation provides a framework for valuing the benefits
that accrue to future generations. Thirdly, ERE valuation tools can address sectoral issues
such as environmental governance, biodiversity resources and cultural heritage, thereby
contributing towards a holistic approach to environmental management. Finally, valuation
can be used to assess the benefits derived from the many ecosystem services that are
associated with the natural resources in the CCT and how those benefits are distributed.
This chapter encompasses the following:
• A study of best practice international approaches to natural resource valuations.
• A clear and concise summary of approaches used, the pros and cons of each, and
their data requirements.
In order to achieve this, the chapter includes:
• a classification of economic and non-economic interpretations of value
• a discussion on categories of environmental goods and services (EGS)
• a discussion on the link between natural resources, environment and EGS to human
wellbeing and economic welfare
• a case for the use of the Total Economic Value (TEV) approach addressing the
question why monetary valuation is important in decision making
• an approach integrating TEV and the EGS approaches
• a discussion on the criteria for selecting specific valuation approaches
• the link between valuation and real world mechanisms
The chapter comprises a number of sections. Section 1.2 develops the concept of value as
it relates to the various perspectives on value and the various parties in a valuation
exercise. The framework of Total Economic Value within this context is also discussed. In
section 1.3 a framework for valuing the environment is presented, linking ecosystem goods
and services with environmental beneficiaries. Section 1.4 highlights a number of valuation
techniques, along with a framework for selecting a technique and common pitfalls in the
valuation process. Section 1.5 examines selected case studies drawn from the CCT’s
various habitats, and section 1.6 concludes with a brief discussion on the economic
instruments or measures that can be used to capture values or better reflect them.
1.2 What is value?
1.2.1 Classifications of value
A growing body of environmental ethics literature distinguishes between various
classifications of value. Two primary categories stem from this literature: anthropocentric
4
perspectives and ecocentric (or biocentric) perspectives. A third category, the so-called
theocentric approach, 1 is sometimes also distinguished. The anthropocentric perspective is
based on the view that the environment exists for the benefit of humankind. The ecocentric
position, however, argues that the environment is the primary consideration and humans
are subservient to this. A number of schools exist in each position, ranging from a resource
exploitative position which does not take the environment into consideration, on the one
hand, to the perspective of ‘deep ecology’ on the other which adopts an extreme ecosystem
preservationist stance. The field of environmental and resource economics falls largely
between these two extremes, with the Total Economic Value framework and
anthropocentric view based on the concept of environmental stewardship for the benefit of
current and future generations. Table 1.1 provides a further categorisation based on the
distinction between intrinsic values (values which are beneficial on their own merits) and
instrumental values (values which are beneficial to the extent that they benefit others).
Table 1.1:
Classification of environmental values
Anthropocentric
Non-anthropocentric
Instrumental
Total Economic Value:
personal use and non-use
(incl. existence value related
to others’ use)
The values of other animals,
species, ecosystems, etc.
(independent of humans)
Intrinsic
“Stewardship” value
Value an entity possesses
(unrelated to any human use) independently of any valuer
Source: Eftec 2006
“Stewardship values” are subjective values dependent on the cultural context in which a
valuation takes place. Non-anthropocentric intrinsic values, however, are values from an
objective sense, independent from any human valuer. Total Economic Value falls within the
shaded area in the table, with existence values related to conservation of resources ‘for
their own right’ falling into the intrinsic value category (Turner et al. 2002).
1.2.2 Whose values count?
Given the number of different potential users of natural resources, and the polarisation
between development and conservation on the one hand, and rich and poor on the other
hand, the question may be asked, which of these perspectives matter? While this is largely
a normative question, a valuation study is made easier if there are fewer actors or role
players to take into account. The various parties may be categorised based on their
differing value perceptions (see Figure 1.1). Commercial users are interested in the market
values of natural resources, or in alternative landuses. Subsistence users are interested in
natural resources as a source of livelihood. Ecological groups are interested in natural
resources as part of a broader ecosystem.
1
Theocentricism is the perspective that God is the central consideration, rather than humans (anthropocentrism). It holds
to the view that humans should look after the natural environment in the way that God wants them to.
5
In addition, users may also be categorised in terms of those who currently utilise the
resource, and those who will use the resource in the future. Finally, the different users may
have different land use objectives, for example, commercial users may be interested in the
restoration of natural capital for economic development purposes.
Figure 1.1: A categorisation of value perceptions
Source: Based on De Wit et al. (2000)
1.2.3 Why do we need to value the environment?
The environment provides a vast number of goods and services (see the next section for a
discussion of some of these services). In some cases these services are “free” goods, in
the sense that society does not pay for them. However, this does not mean that they are
not valuable. On the contrary, these services can be highly valuable to society with the true
worth only being realised once that benefit is lost. An example of this is the waste
assimilation properties of the ocean absorbing sewage discharges, or the carbon
sequestration properties of certain plants and shrubs. In other cases, prices for
environmental goods do not reflect their full value to society, for example the entry fee
visitors pay to access Table Mountain National Park may not reflect their full willingness to
pay. If the true value of environmental amenities is not known, it can result in resource
misallocation and can also result in EGS not being factored into decision-making
processes.
There are at least four reasons why it is important to value the environment. Firstly,
integration between the natural and the social sciences provides better information to
facilitate the policy and decision-making processes. For example, valuation of open spaces
can provide an indication of those areas that enhance property values and those areas that
diminish property values. This provides a means of prioritising budgets towards improving
degraded areas and a motivation for maintaining good areas. Secondly, understanding the
importance beneficiaries place on the natural environment motivates for the business case
6
for the environment and also allows budgetary processes to be correctly prioritised. In
addition, understanding the value of resources can also ensure that valuable species and
habitats are conserved. Thirdly, the Bill of Rights enshrined in the Constitution gives
government the responsibility to take reasonable measures to ensure that the environment
is protected for the benefit of present and future generations. In order to do this it is
necessary to gather information on how current losses to the environment may impact on
these beneficiaries. A number of other frameworks such as the Western Cape Sustainable
Development Implementation plan (DEADP 2005) also support the implementation of
environmental and resource economics approaches. Fourthly, high quality natural capital is
increasingly becoming the limiting factor to development. This suggests the need to invest
in this limiting factor, and requires a strategic reprioritisation of economic objectives in the
light of these scarcities.
A number of case studies both locally and abroad indicate the efficacy of economic
valuation techniques. For example, a landmark judgement in the United States occurred
when damages resulting from an oil spill off the coast of Alaska were apportioned on the
basis of a contingent valuation study (the Exxon Valdez case). In South Africa, a number of
examples where the use of environmental valuation techniques resulted in the change in
the outcome of Environmental Impact Assessments are documented in Crookes and De Wit
(2002). The reader is also referred to the case studies in Chapter 5 of this report for further
applications of environmental valuation in the City of Cape Town.
1.2.4 The TEV approach
The Total Economic Value (TEV) approach is widely used as a framework for incorporating
the complex and interrelated interactions between the physical attributes of the environment
and the associated value flows (see Figure 1.2). The framework is used to value both
market and non-market benefits, as well as values derived from future use, along with
values totally unrelated to future consumption.
There is no universally accepted framework for Total Economic Value. Usually a distinction
is drawn between use and non-use values, the former being those values that involve some
interaction with the environment and the latter being those values derived from the
knowledge that a resource exists. However, this categorisation creates a problem for the
so-called option values, which involve preservation of a resource in order that it may be
used in the future. Some would classify these as use values, while others classify them as
non-use values. In addition, so-called quasi option values is the value of future information
made available through the preservation of a resource.
Using the use value/non-use value categorisation, a distinction can be drawn between
direct use values and indirect use values. Direct use values are those associated either with
the consumptive use of the resource (e.g. food, fuel, water, timber) or non-consumptive use
(e.g. tourism). Indirect use values are associated with the benefit derived from the
ecosystem, without directly consuming it. Examples include climate regulation, carbon
7
sequestration and erosion control. Non-use values are usually divided into two categories:
existence and bequest values, although sometimes altruistic values are also included in this
category. Existence values are those values associated with knowing that a resource is
available, irrespective of whether the individual will ever benefit directly or indirectly from it.
This value is highest for charismatic species such as the big five, or Asian Pandas. Bequest
values measure the willingness-to-pay by current generations to ensure that the
environment is preserved for future generations. Altruistic values are similar to existence
values, except that a value is placed on contemporaries deriving a benefit from the
resource.
Figure 1.2: Diagrammatic representation of the Total Economic Value framework
1.3 The environment-economy interface
1.3.1 Why is the environment important?
The natural environment of the CCT provides a vast number of benefits. With regard to its
function as a ‘waste sink’, it assists the CCT with in absorbing wastes generated by
production and consumption activities. For example, air and wind circulation around the
CCT disperse air pollution and reduce overall concentrations of toxic gasses. In addition,
landfill sites absorb and process solid wastes and biodegrade them. Trees and other
natural barriers absorb noise pollution generated by the CCT’s traffic. And oceans, rivers
and wetlands process some of the grey (non-potable) and waste water outfalls. At the same
time it should also be recognised that the environment can also be a source of costs (disamenities) such as a security risk or source of fires. Many of these costs and risks can be
ameliorated through the application of sound management principles.
8
In addition to its ‘waste sink’ functions, the environment of the Western Cape is unique and
provides a rich habitat for endemic reptiles, amphibians, fish, invertebrates and a sanctuary
for 15 of the 21 critically endangered vegetation types in South Africa (DEADP 2005). The
environment contributes directly to humans living in the area through improved health, and
the provision of water, food, shelter and building material, as well as supplying local
medicines and through bioprospecting potential. The environment also benefits the CCT
indirectly through tourism, agriculture (through a number of services such as nutrient
cycling and pollination), and employment. For example, it has been estimated that 20% of
manufacturing jobs in the CCT are agriculture related (CNDV Africa 2005).
1.3.2 Integrated valuation framework
An integrated framework needs to consider the services that ecosystems provide, the
impact these goods and services have on economic systems such as crops, water,
livestock and energy, and how this relates to Total Economic Value (see Figure 1.3).
Natural capital is defined broadly to include mineral deposits, land and other aspects of
ecological systems. Human capital includes both the supply of labour and the knowledge
that this encompasses. Social capital is the range of institutional arrangements and
interpersonal interactions that follow from this. Manufactured capital encompasses the
fundamental elements of the economic system. These various forms of capital have limited
substitutability and, in turn, contribute to the supply of ecosystem goods and services and
other factors of production. These goods and services have a value in their own right (that
can be assessed using the Total Economic Value framework), but also impact on the
generation of cultural values and the benefits derived from economic goods and services
such as food. Waste from the production of economic goods negatively impacts the forms
of capital, in particular the availability of natural capital. It also impacts negatively on the
sense of wellbeing that a society enjoys. While the environment contributes to wellbeing,
other socio-cultural values such as health expenditure and education can also contribute,
along with other marketed goods that may be purchased. Benefits from the enjoyment of
environmental and other goods and services are either distributed spatially (at a local,
regional or international level), temporally (on a short-term or long-term basis) or at the level
of the user (individual, commercial or public entity). Whether an impact is of a short- or
long-term duration is dependent on the nature of the impact and the environmental stressor
concerned. For example, the water purification functions of wetlands are important for
sustaining fish stocks, and short-term changes will have immediate consequences, while
other changes such as habitat destruction might only impact future generations. In addition,
certain effects are reversible while others are permanent.
9
Figure 1.3: An integrated framework for valuing ecosystem goods and services
Source: Based on Eftec (2005) and Constanza (2001)
1.3.3 Categories of Environmental Goods and Services
There are at least two ways of categorising environmental goods and services. The first is
by categorising them in terms of alternative definitions of landuse, and the second is
categorising them by ecosystem function. The former approach is adopted by the World
Bank and the latter is adopted by such proponents as the Millennium Ecosystem
Assessment (MEA) and authors such as Rudolf de Groot. However, these different
approaches should not be considered independent of each other as there are strong
overlaps. For example, the World Bank study categorisation is based on the goods and
services mentioned in the MEA. We will now discuss each of these classifications in turn.
The World Bank distinguishes between 11 goods and services provided by the
environment, and 10 ecosystems (of which only nine are reported on in the current context).
Results range from island habitats, which provide four out of the 11 goods and services
mentioned, to forest ecosystems that provide all of the mentioned services (see Table 1.2).
It is unlikely that many other cities around the world would have an environment that
encompasses so many of these ecosystem categories, with only the polar environment of
no relevance to the CCT.
10
Table 1.2:
Main ecosystem types and their services
Ecosystem
service
Cultivated
Dryland Forest Urban Inland Water Coastal Marine
Freshwater
•
Food
•
•
•
Timber, fuel, and
fiber
•
Novel products
•
•
•
Biodiversity
regulation
•
•
•
Nutrient cycling
•
•
•
Air quality and
climate
•
•
•
Human health
•
Detoxification
•
•
•
•
•
•
•
Natural hazard
regulation
Mountain Island
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Cultural and
amenity
•
•
•
•
•
•
•
•
•
Total number of
goods and
services
7
8
11
6
10
10
7
6
4
Source: Pagiola et al. (2004a)
A weakness of this categorisation is that it is difficult to see where the fynbos biome would
be categorised. In practice it is likely that it would fall into a number of different categories,
including coastal, mountain and island. A categorisation of ecosystems relevant to the CCT
and how they relate to total economic value is developed in a subsequent section.
Related to the World Bank categorisation is the Millennium Ecosystem Assessment (MEA)
categorisation. The Millennium Ecosystem Assessment (2005) distinguishes among four
categories of goods and services, namely:
• provisioning services that relate to the products derived from ecosystem, including
food, fiber and fuel, genetic resources, medicines and pharmaceuticals
• regulating services that involve the benefits derived from the regulation of ecosystem
processes, such as air quality regulation, climate regulation, water regulation,
erosion regulation, disease regulation, pest regulation and natural hazard regulation;
• cultural services are the benefits people obtain from ecosystems such as reflection,
recreation, inspiration and aesthetic enjoyment, and include cultural diversity and
educational values; and
11
•
supporting services are those necessary for the production of all other ecosystem
services, such as soil formation, photosynthesis, primary production, nutrient cycling
and water cycling.
In terms of the Total Economic Value framework, provisioning services fall largely within the
direct use category, regulating services are largely indirect use values, cultural services
comprise both a direct use component for values such as recreation, and an existence
value component for most of the remainder (see Figure 1.4).
Figure 1.4: Categories of ecosystem goods and services
Source: Based on Millennium Ecosystem Assessment (2005) and Pagiola et al. (2004b)
Supporting services on the whole do not form part of TEV, but are valued indirectly through
the services they provide to other ecosystem goods and services.
A second framework that is commonly proposed is similar to the MEA approach in that four
ecosystem functions are distinguished: regulation functions, habitat functions, production
functions, and information functions. Table 1.3 provides a description of each of those
functions, and examples of goods and services that stem from each of those functions. A
strength of this framework, that distinguishes it from the MEA approach, is the prominence
of the concept of ecosystem maintenance (Blignaut & Aronson 2008). The term
‘maintenance’ has a multifaceted connotation that includes a forward looking orientation
12
(taking action today to secure future benefits), protecting, safeguarding or restoring a
natural asset.
Table 1.3:
Functions, goods and services of natural and semi-natural ecosystems
Functions
Goods and services (examples)
Regulation Functions
Maintenance of essential ecological processes and life support systems
1 Gas regulation
•
•
•
UVb-protection by O3 (preventing disease).
Maintenance of (good) air quality.
Influence on climate (see also function 2.)
2 Climate regulation
•
Maintenance of a favourable climate (temp., precipitation)
3 Disturbance
prevention
•
•
Storm protection (e.g. by coral reefs)
Flood prevention (e.g. by wetlands and forests)
4 Water regulation
•
•
Drainage and natural irrigation
Medium for transport
5 Water supply
•
Provision of water for consumptive use (e.g. drinking, irrigation and
industrial use)
6 Soil retention
•
•
Maintenance of arable land
Prevention of damage from erosion/siltation
7 Soil formation
•
•
Maintenance of productivity on arable land
Maintenance of natural productive soils
8 Nutrient regulation
•
Maintenance of healthy soils and productive ecosystems
9 Waste treatment
•
•
•
Pollution control/detoxification
Filtering of dust particles
Abatement of noise pollution
10 Pollination
•
•
Pollination of wild plant species
Pollination of crops
11 Biological control
•
•
Control of pests and diseases
Reduction of herbivory (crop damage)
Habitat Functions
Providing habitat (suitable living space) for wild plant and animal species
12 Refugium function
•
Maintenance of commercially harvested species
13 Nursery function
•
•
Hunting, gathering of fish, game, fruits, etc.
Small-scale subsistence farming & aquaculture
Production Functions
Provision of natural resources
14 Food
•
•
•
Building and manufacturing (e.g. lumber, skins)
Fuel and energy (e.g. fuel wood, organic matter)
Fodder and fertilizer (e.g. krill, leaves, litter)
15 Raw materials
•
•
Improved crop resistance to pathogens and human pests
Other applications (e.g. health care)
16 Genetic resources
•
•
Drugs and pharmaceuticals
Horticulture, floriculture
13
Functions
Goods and services (examples)
17 Medicinal resources •
Variety in (bio)chemical substances in, and other medicinal uses of,
natural biota
18 Ornamental
resources
•
Information Functions
Providing opportunities for cognitive development
19 Aesthetic
information
•
Enjoyment of scenery (scenic roads, housing, etc.)
20 Recreation
•
Travel to natural ecosystems for eco-tourism, outdoor sports, etc.
21 Cultural and artistic •
information
Use of nature as motive in books, film, painting, folklore, national
symbols, architect., advertising, etc.
Resources for fashion, handicraft, jewellery, pets, worship, decoration
and souvenirs (e.g. furs, feathers, ivory, orchids, butterflies, aquarium
fish, shells, etc.)
22 Spiritual and
historic information
•
Use of nature for religious or historic purposes (i.e. heritage value of
natural ecosystems and features)
23 Science and
education
•
•
Use of natural systems for school excursions, etc.
Use of nature for scientific research
Source: De Groot et al. (2002)
While all of these frameworks are respected and utilised, we would like to suggest that the
MEA categorisation is probably the most widely accepted and applied. One of the strengths
of the of this framework way it develops the linkages between the environment and human
wellbeing, a topic we now turn to.
1.3.4 Links between EGS and human wellbeing
Human wellbeing comprises a number of facets, including basic materials for a good life,
health, security and positive and cohesive social relations (see Table 1.4). Basic materials
for a good life comprise the means for maintaining a living, including income, food and
shelter. This component is heavily influenced by socioeconomic circumstances, particularly
in terms of the provisioning functions of the ecosystem such as food, fuel and timber:
wealthy individuals will be able to purchase these goods from any location while the poor
are more strongly influenced by local materials. The health component of wellbeing relates
to the ability of an individual to lead a healthy life free of sickness and disease. Again
socioeconomic linkages are likely to be highest for the provisioning services such as
medicinal plants, water and other resources. The linkages with socioeconomic conditions
are also highest for this component. Good social relations relate to the presence of social
cohesion, mutual respect and the ability to help others. These are most strongly affected by
the cultural services that ecosystems provide for those cultures with strong links to the
environment. Finally, security relates to three elements: personal, tenure and
environmental. The provisioning services are most strongly influenced by socioeconomic
conditions of the users, since a loss of access to these resources can affect the security of
poorer households. Changes in the regulating functions of ecosystems such as disease
14
regulation, pest regulation and natural hazard regulation can have a strong influence on
security.
Table 1.4:
Linkages between components of wellbeing and ecosystem services
Component
Freedom
of choice
and
action
Constituents of
wellbeing
Basic materials for • Income
a good life
• Employment
• Food
• Water
Strength of linkage (medium, high)
Socioeconomic
circumstances
Ecosystem
service &
wellbeing
Provisioning (high) Provisioning (high)
Regulating (med) Regulating (high)
Health
• Nutrition
• Water and
sanitation
• Vector borne
diseases
• Medicines
Good social
relations
• Social cohesion
• Mutual respect
• Ability to help
others
Security
• Personal safety Provisioning (high) Regulating (high)
• Secure resource Regulating (med) Provisioning
Cultural (med)
(med)
access
• Security from
disasters
Provisioning
(med)
Regulating (med)
Provisioning (high)
Regulating (high)
Cultural (med)
Cultural (med)
Source: Millennium Ecosystem Assessment, 2005.
When viewed holistically, it is clear that ecosystem services are often crucially important for
all constituents of human wellbeing. Cutting across the components that make up wellbeing
is the individual’s freedom of choice and action, which affect the extent to which someone is
able to achieve and do what he or she values doing. This is predicated on the other
components of wellbeing. In addition, ecosystems contribute to the real economy (such as
Gross Domestic Product and employment). Damage to ecosystems erodes natural capital
and can have profound impacts on the livelihoods of those dependent on natural capital
even if this is not always reflected in commonly used economic statistics.
1.3.5 The environment and economic welfare
The concept of economic welfare is important to valuation studies, and should not be
confused with the more all-encompassing concept of human wellbeing. Economic welfare
as commonly applied in economics is primarily related to the price of a good. For example,
entry to a park may be charged at R10.00. However, an individual might derive
15
considerably more utility (benefit) than the price reflects. One measure of economic welfare
is the concept of consumer surplus. This measures the amount the consumer is willing to
pay over and above the price. Consider the demand curve PQ for a particular good as
given in Figure 1.5. Price P0 is what the consumer pays for a given quantity Q0 of that good.
The shaded area represents the consumer surplus. To understand this concept, consider
quantity demanded Q1. At this quantity the consumer pays price P0, but they are willing to
pay price P1. The distance P1 - P0 is therefore the consumer surplus at quantity Q1.
Applying this approach for all the quantities between 0 and Q0 gives the total welfare gain
that the consumer experiences at the price P0 for a given demand curve.
Figure 1.5: Marshallian demand curve and consumer surplus
Such measures provide an indication of how consumers value scarce resources and can
also be used to determine the welfare effects of unpriced goods. The measure can also be
used to examine the welfare effects of changes in price, since the higher the price charged
for a good, the lower the overall consumer welfare will be for a given demand. In Figure 1.5,
this is illustrated by considering the effect if price P1 is charged for the good. The consumer
surplus is then reduced to the triangular area between the horizontal line at P1, the vertical
axis and the demand curve. A number of other welfare measures exist, such as (Hicksian)
compensating variation and equivalent variation (these concepts are illustrated further in
Chapter 2 under ‘valuation techniques’).
1.3.6 Beneficiaries
A key component of any valuation study is to understand who benefits from ecosystem
goods and services. Although these questions are not answered directly by the valuation
exercise per se, it is possible to identify three main categories: private individuals,
commercial enterprises and public bodies. Table 1.5 summarises the various spatial scales
16
on which these benefits are incurred. On a local level, individual users such as recreational
visitors, businesses and local government benefit from goods and services. For example, a
local municipality might benefit from the water purification function of a wetland or the waste
assimilation properties of the ocean.
Table 1.5:
Beneficiaries of ecosystem services provided by the environment
Local
National/Regional
Global
Individual
Local users (e.g.
recreational users)
Tourists, consumers, students Everyone (climate
regulation, existence
values)
Commercial
entity
Local industry (e.g.
entrepreneurs, farmers,
traders, artisans)
Economic sectors, national
and regional GDP
Public sector
Local Government (e.g.
tax revenue)
National Government (e.g. tax International Community
revenue, foreign revenue from
sale of concessions)
International enterprise
(e.g. fishery and forestry
industry)
Source: Eftec (2006)
At a national level, tourists, the regional and national economy, and national Government
and parastatals benefit from economic sectors dependent on the natural environment, as
well as the other provisioning and cultural services associated with EGS. Globally,
international enterprises benefit from the natural resource sector, for example the fishing
waters off a country’s coastline. In addition, all beneficiaries gain from the regulating
functions of local ecosystems, as well the existence, option and bequest values of the
natural environment.
1.3.7 Integrating EGS and TEV approaches
There are numerous ecosystems within the city limits, including terrestrial, marine, rivers
and wetlands, and many subcategories. To illustrate the link between ecosystem goods and
services and Total Economic Value, Table 1.6 categorises four EGS based on landuse
(three terrestrial and one aquatic) in terms of the economic values that are derived from
them. It is evident from this that most of the direct use benefits accrue on a local, regional
and global level, most of the indirect use values (with the exception of carbon storage and
sequestration) accrue on a local and regional level, and option and non-use values impact
on all levels (local, regional and global). Fynbos has the most direct use values of the
ecosystems discussed, although many fynbos products are derived from a limited number
of species. Bear in mind that one can also argue that a number of adverse consequences
arise from these ecosystems – for example, the presence of fynbos could be said to
increase the risk of the more rapid spread of fires. However, one needs to examine these
adverse consequences relative to the alternatives to fynbos such as alien vegetation
(higher risk of spread of fires and greater intensity of fires combined with negative impacts
on the water environment) or urban sprawl (habitat loss associated with lost ecosystem
services and amenity and reduced urban efficiency).
17
Table 1.6:
Examples of use and non-use values for selected ecosystems
Forests
Wetlands
Agrosystems Fynbos
Direct use
Products
Fuelwood, NTFPs
L
Flowers
Building materials
LRG
LRG
Livestock, fisheries, hunting
L
LR
Other food & beverage
Fibre
Visual amenity
LRG
LRG
LRG
LR
LR
L
LR
LR
Genetic information
Pharmaceuticals
LRG
LRG
Traditional medicine
L
L
Genetic diversity
LRG
Research
G
Recreation
LRG
LRG
G
LRG
LRG
Indirect use
Pest control
LR
Rainfall regulation
R
Flood regulation
LR
LR
Erosion control
LR
LR
Storm buffering
LR
Nutrient cycling
LR
Pollination
LR
Carbon storage and sequestration
G
Water quality and quantity
LR
LR
LR
LR
LR
G
G
G
LR
LR
Health
L
Option (future uses of above)
LRG
LRG
LRG
LRG
LRG
LRG
LRG
LRG
Non-use
Cultural knowledge and traditions
Other values of habitat and species
L = Local, R = Regional, G = Global
LRG
LRG
Source: Based on Eftec (2005) and Turpie et al. (2003)
18
1.4 Valuation techniques
1.4.1 Overview of valuation techniques
Valuation techniques may be divided into demand curve approaches and non-demand
curve approaches (see Figure 1.6). Demand curve approaches are welfare measures in the
sense that the implications of changes in environmental quality or attributes on society can
be assessed. In addition, values are derived rather than prices. Non-demand approaches
are easier to estimate than demand curve approaches, and are generally more appropriate
when there are not large disparities between price and value.
Figure 1.6: Monetary valuation techniques and economic welfare
Source: Adapted from De Wit et al. (2000)
1.4.1.1
Change in productivity
Definition
As the name of the technique suggests, the objective of this economic valuation tool is to
assess physical changes in production and to place an economic value commensurate with
prevailing market prices.
19
When should this be used?
If market prices are assumed to prevail and markets are relatively free of distortions, then
this is an appropriate technique to employ.
Strength
• Relatively easy technique to apply
Weaknesses
• Cause-effect relationships may be difficult to establish
• Benefit transfer may also not be appropriate in this instance, for example soil erosion
effects may differ from site to site depending on a variety of factors
• Only a small proportion of Total Economic Value is estimated
Data requirements
Change in ecosystem service, impact on production, net value of marketed resources
1.4.1.2
Human capital and Cost of Illness
Definition
Both approaches measure the cost of bad health resulting from environmental change. The
COI approach measures sickness-related costs such as medicines, doctors visits and
hospitalisation, while the human capital approach measure the associated effects on the
productivity of labour.
When should this be used?
The Cost of Illness approach is most appropriate to value the cost of pollution-related
morbidity, while the human capital approach measures loss of earnings as a result of
mortality.
Strength
• Useful approach for conceptualising environmental hazards
Weaknesses
• Dose-response relationships not always available
• Sometimes wrongly interpreted as a measure to place a value on a human life
• Only values direct costs and loss of earnings. Other costs such as pain and suffering
not included
• Difficulty in defining the population impacted
Data requirements
Numeric data on the following:
• Amount of pollutant (e.g. tonnes per annum)
• Dose response relationship (effect of a unit change in pollutant on human health)
20
•
Market value of health impact (loss of earnings, cost of illness)
1.4.1.3
Preventative costs
Definition
A number of similar techniques in this category include valuing environmental change
through costs of mitigating or preventing a loss or changing behaviour to acquire greater
environmental quality. This technique is also known as the averting behaviour technique.
When should this be used?
When costs of environmental damage a suitable measure for environmental change.
Examples include water quality, noise nuisance and air pollution.
Strengths
• Relatively easy to use, provided appropriate market data available
• Good welfare measure in certain cases, for example if the change in the price of
environmental quality is low
Weaknesses
• Usually only provide a partial assessment of environmental impact, e.g. does not
include effect on ecosystems
• Actual expenditures may be constrained by income thereby underestimating value,
or alternatively there may be secondary benefits associated with expenditures in
which case actual expenditure will be overestimated
Data requirements
• Nature of preventative, mitigatory or averting behaviour
• Costs expended in such behavior
1.4.1.4
Hedonic pricing
Definition
This approach is based on the supposition that the benefit an individual derives from an
environmental good or service is based on the attributes it possesses. The property market
is a case in point: if people pay higher prices to live in a particular area, this is usually as a
result of a number of characteristics and features in that area, including environmental, as
well as the socioeconomic profile of that individual. Hedonic pricing estimates consumer’s
willingness to pay for a particular good based on a function of these and other attributes.
When should this be used?
• May be used for a variety of applications, including:
o Air and water pollution
o Noise pollution, e.g. road traffic
o Proximity of environmental features such as water, woodland
o Proximity of environmental hazards such sewage works, power stations
21
•
o Evaluating the impact of neighbourhood improvements in poorer parts
o Cultural benefits
Suitable for longstanding environmental effects
Strengths
• Has the potential to assess option values
• True (Marshallian) welfare measure
• Uses real market data
Weaknesses
• Less appropriate where effects cannot be visually observed (e.g. productivity or
groundwater impacts)
• Reliant on properly functioning property markets
• Data-intensive approach
• Can be cumbersome and difficult to apply
• Environmental quality variables may not be measurable
Data requirements
• Housing data, for example plot size, number of rooms, garage space
• Socioeconomic data, for example unemployment rate, racial composition, social
conditions, wage differentials, quality of schools
• Environmental data, including environmental quality, access to services, and others
1.4.1.5
Travel cost
Definition
Observed behaviour is used to derive a demand curve and to estimate a value (including
consumer surplus) for an unpriced environmental good by treating travel costs as a
surrogate for variable admission prices. There are at least four types of travel cost models:
the zonal travel cost model (ZTCM) divides travellers into zones and estimates visit rates
from each zone. Visit rates are then associated with the costs of visiting along with
socioeconomic variables in each zone. The individual Travel Cost Model (ITCM) is similar
to the zonal TCM except that that visits by an individual or household are used as the basis
for analysis. A third variety is the Random Utility Model (RUM), which has the advantage of
taking into consideration the choice between different sites. An individual will choose a site
where he or she derives the most utility (benefit) based on the site’s characteristics,
socioeconomic variables describing the individual, and a random term that reflects
uncertainty. A fourth type of model is the hedonic travel cost model (HTCM), is similar to the
RUM except that the individual chooses that site which provides the visitor with a given
number of attributes at the lowest cost. Other sites are not visited.
22
When should this be used?
This technique is appropriate when:
• EGS have a recreational benefit, such as woodlands, wetlands, national parks, rivers
and lakes, and coastal areas
• There is no charge for the good or service, or the charge is low
• People expend significant time or other costs to travel to the site
Strengths
• Benefits from unvalued or low valued recreational sites may be determined
• Demand curve may be derived, as well as an estimate of consumer surplus
• Uses real market data
Weaknesses
• Only appropriate for recreational benefits
• Hard to use when visits are to multiple destinations
• Underestimates TEV as it only estimates use values
• May have substantial data requirements
Data requirements
Survey to eliciting information such as: number of visitors, place of origin, frequency of
visits, direct travel expenses, duration of journey, time spent at site, and other
characteristics.
1.4.1.6
Replacement cost
Definition
This technique measures the value of an environmental asset by estimating the cost of
replacing or restoring it once it is damaged.
When should this be used?
• The magnitude of damage is measurable
• The replacement costs are calculable and not greater than the value of productive
resources destroyed
• There are no secondary benefits associated with expenditures
Strengths
• This approach has wide application in assessing the physical effects on a wide range
of media
• It is relatively easy to apply
Weakness
• Has a tendency to overestimate the true value of an environmental resource
23
Data requirements
• Data on extent of environmental damage incurred
• Costs of replacing or restoring that loss
1.4.1.7
Contingent valuation
Definition
This is a survey approach that aims to elicit respondent’s willingness-to-pay (WTP) for a
particular set of environmental qualities or a change in those qualities, or willingness-toaccept (WTA) as compensation for a loss in environmental qualities. In theory WTP and
WTA measures should produce equivalent results.
When should this be used?
• When environmental changes have no impact on market behaviour
• It is not possible to observe preferences directly
• The population in the sample is representative and interested in the subject of the
valuation study
Strengths
• In theory applicable to all contexts, including where no market exists at all
• Useful for valuing all components of Total Economic Value, including option and
existence values
• Completed surveys provide profile of target population
• Suitable for valuing changes in environmental quality
Weaknesses
• May be vulnerable to various form of bias (see Table 1.7)
• Can be costly in terms of budgets and manpower
• Some surveys may provide too much of a cognitive burden for respondents
• Can be difficult for unqualified observers to assess quality of results
Data requirements
Survey in which a scenario is presented and which gathers information such as
respondent’s WTP, socioeconomic characteristics and other factors.
1.4.1.8
Choice modelling
Definition
Choice modelling (also called conjoint analysis) is based on the notion that value is derived
from the attributes of a particular good or situation. CM is used to see how consumers
respond to changes in those attributes. Respondents are presented with different
combinations of attributes, each with a price attached to it. By making their choice,
respondents indicate their willingness to pay or willingness to accept different
24
environmental attributes or scenarios. Choice modelling techniques include choice
experiments, contingent ranking, contingent rating and paired comparisons.
When should this be used?
• It is appropriate for use in valuing any environmental good or service
• When only selected attributes of a resource are affected
Table 1.7:
Sources of bias in contingent valuation studies
Category
Bias
Explanation
Strategic
Free rider
problem
If asked to pay a price in excess of cost of provision may understate WTP to
avoid that additional cost
Direction
Respondents may favour a certain outcome and over- or under-state their true
WTP in a way that they believe will support that outcome
Compliance
Respondents may be tempted to give answers that they believe the
interviewer wants to hear
Starting point
Price initially suggested by interviewer may influence WTP of respondent
Vehicle
Instrument of payment may influence WTP, e.g. a tax may be less favourable
than an entrance fee
Information
Sequence in which information given, or amount and quality of the information
might lead respondent to believe certain features more important than others
Hypothetical
Arises when hypothetical bids differ from actual bids. Difference arise in that
in an actual market respondents suffer a cost while in a hypothetical market
they incur no loss
Operational
Where the operating conditions in the hypothetical market differ from actual
market conditions. This necessitates for example the need for the
respondents to know the goods that they are asked to value
Design
Market
Source: Based on Pearce and Turner (1990) and Blignaut and Lumby (2004)
Strengths
• This technique may be used to value both use values and non-use values
• Given that only one attribute needs to be varied, this approach can be used to value
individual environmental attributes
• Welfare impacts of a change in environmental quality can be determined
• Does not directly ask willingness-to-pay questions
Weaknesses
• Analysis of the data selected is complex
• As for CVM, many types of biases exist in responses
• Constraints in cognitive ability of respondents to process complex choices with
multiple attributes
• Not as widely tested as contingent valuation
25
•
Some techniques are not based on economic theory
Data requirements
Survey in which good, services, attributes and prices are accurately specified.
1.4.1.9
Benefit transfer
Definition
Although not a valuation technique per se, benefit transfer has been widely employed
where time and budgetary constraints preclude a detailed valuation study from being
performed. Adjusting valuation results from other studies in similar contexts for application
within the current study is a simple and potentially rigorous approach if conducted in the
appropriate manner.
When should this be used?
When the study site is comparable to the policy site, the issues are similar in the two cases
and the original valuation procedures were sound. Problems potentially arise when these
conditions are not met, or where the underlying assumptions on which the valuation study
were conducted are no longer valid.
Strengths
• Detailed valuation study not required
• Not as complex as many other valuation methods
Weakness
• May result in inaccurate estimates where correct assumptions are not employed
Data requirements
Valuation data from a comparable site.
1.4.2 Practical considerations when choosing a valuation technique
Aside from the restrictions that the availability of an adequate budget imposes, there are
two important considerations when selecting a valuation technique. The first of these
relates to the availability of data and the selection of an appropriate framework. The second
relates to, given the data, which is the most appropriate technique in a given context.
With regard to the first consideration, there are a number of approaches for developing a
framework for selecting a valuation technique. One approach is the impacts method which
essentially links likely value outcomes to impacts such as those on human health, amenity,
productivity, etc. (e.g. Dixon et al. 1994; Winpenny 1995). This framework is relevant for
assessing a change in environmental quality but is less relevant when evaluating the
benefits of existing ecosystem goods and services. A second approach that is adopted in
this review is to categorise values on the basis of the nature and availability of prices
26
(Blignaut & Lumby 2004). Five categories are distinguished: market prices, shadow prices,
direct or indirect proxies, or no proxies at all. Figure 1.7 provides a framework for selecting
an appropriate valuation technique based on these categories.
Figure 1.7: Choosing a valuation technique
Source: Based on Blignaut and Lumby (2004)
The options are as follows:
• If efficient market prices are available, changes in productivity techniques are
employed.
• If non-distorted (efficient) market prices are not available, surrogate market
approaches such as the travel cost and hedonic pricing methods are used.
• When market prices are not available, but direct (efficient) proxies are, a variety of
assumed preference techniques are indicated such as replacement cost, cost of
illness, opportunity cost or dose response methods, or other benefit transfer methods
(BMTs) are applicable.
• When indirect proxies are available, revealed preference methods such as the travel
cost method and the hedonic pricing method are appropriate.
• Finally, if no market prices or proxies are available, non-market methods such as the
contingent valuation method or choice modelling approaches may be used.
27
It should be noted however that often it is necessary to use a combination of valuation
techniques rather than a single technique to value environmental benefits. Some
techniques lend themselves more readily for use in combination with other techniques.
Table 1.8 indicates which technique is appropriate for use in which context.
Table 1.8:
Valuation techniques and their compatibility
Technique
Use in combination with other methods
Market price
proxies
Some aspects of pricing approaches, such as mitigation costs, may serve as inputs into the
production function approach framework
Production
function
Mitigation costs/averting expenditures and avoided costs may be included within the
production function framework, since these actions will alter production and cost functions.
Market prices (and even WTP or WTA estimates for non-market changes) can be
incorporated to estimate the economic value of the change, where production function is used
to estimate the physical change.
Hedonic
pricing
The hedonic pricing method is principally a stand-alone method with relatively small scope for
combination with other methods.
Travel cost
method
The travel cost method is closely related to the random utility model. Additionally, the survey
aspect of the method implies that it can be combined with stated preference methods, where
it is possible to elicit information on travel costs and values for a simulated market involving
the environmental good of interest.
Random
utility model
The ability to explain choice among alternative sites comes at the expense of the ability to
explain total demand for recreation. Hence the travel cost method and random utility model
are complementary methods for estimating the value of environmental goods and service
from travel cost surveys, and the decision as to apply which will depend on the required
output. As with the travel cost method, the random utility model can also be used in
conjunction with stated preference methods if a survey is used to collect the data.
Contingent
valuation
The method can be combined with deliberative and participatory methods. For instance, oneto-one in-depth interviews, focus groups and workshops could be used to investigate
methodological issues such as consumer versus citizen preferences. Contingent valuation
studies may also be carried out in conjunction with travel cost studies or avertive expenditure
studies since data necessary for all these studies could be collected through a single
questionnaire.
Choice
modelling
The potential for combination is similar to that of contingent valuation.
Source: Eftec (2006)
Once a technique is selected based on the availability of data, and issues of compatibility
with other techniques are investigated, a number of failsafe principles need to be applied
(see Table 1.9).
28
Table 1.9:
Avoiding common pitfalls to valuation
Use net benefits, not gross
benefits
Failing to consider the costs involved in using resources (the cost of
harvesting products, for example, or the cost of piping water from its
source to the user) results in an over-estimate of the value of ecosystem
services.
Include opportunity costs
The cost of an action is not limited to the out-of-pocket costs involved in
implementing it. They also include the opportunity costs resulting from the
foregone benefits of alternative actions (or inaction). Omitting opportunity
costs makes actions seem much more attractive than they really are.
Don’t use replacement costs
… unless you can demonstrate (i) that the replacement service is
equivalent in quality and magnitude to the ecosystem service being
valued, (ii) that the replacement is the least cost way of replacing the
service, and (iii) that people would actually be willing to pay the
replacement cost to obtain the service.
Don’t use benefits transfer
… unless the context of the original valuation is extremely similar to the
context you are interested in. Even then, proceed with caution. However, it
is a good idea to compare your results to those obtained elsewhere.
Don’t use value estimates
based on small changes in
service availability to assess
the consequences of large
changes in service availability
Economic value estimates are not independent of the scale of the
analysis. Value estimates are almost always made for small (‘marginal’)
changes in service availability, and should not be used when
contemplating large changes.
Be careful about doublecounting
Many valuation techniques measure the same thing in different ways. For
example, the value of clean water might be measured by the avoided
health care costs or by a survey of consumer WTP for clean water. But
consumer WTP for clean water is due (at least in part) to their desire not to
fall sick, so these two results should not be added together. If they are, the
value of clean water will be overestimated.
Don’t include global benefits
when the analysis is from a
national perspective
More generally, only consider benefits (or costs) that affect the group from
whose perspective the analysis is being undertaken. Including benefits
which are primarily global in nature in an analysis undertaken from a
national perspective is a particularly common form for this mistake, and
results in an over-estimate of the benefits to the country.
Adjust for price distortions
… when conducting the analysis from the perspective of society as a
whole, but not when conducting the analysis from the perspective of an
individual group.
Avoid spurious precision
Most estimates are by necessity approximate. Don’t simply paste the
result in the spreadsheet, with its three decimal points, into the report:
round the result appropriately. When there is substantial uncertainty,
report the results as ranges.
Submit results to sanity
checks
Are the results consistent with other results? Are they reasonable in light
of the context? Extraordinary results are not necessarily wrong, but must
be checked carefully. Extraordinary results require extraordinary proof.
Source: Pagiola et al. (2004b)
For example, a technique may be compatible with other techniques, but do they value the
same thing in different ways? If so, issues such as double counting may be a factor.
Furthermore, while a technique such as benefits transfer might be easy to apply in practice
the results of certain valuation studies may not be readily transferable to a local context. In
all cases the given context of a study is important for all valuation studies. In addition to
these principles, it might also be appropriate in certain instances to control for income
29
differentials between groups; otherwise it suggests that poor people value the environment
less, which is clearly not an accurate interpretation.
1.5 Case studies
A number of local case studies discuss landuses applicable to the CCT, including
terrestrial, riverine and marine. Box 1.1 summarises benefits from trees as an example of
other benefits from natural resources in urban spaces.
1.5.1 Recreational and agricultural zones
A detailed pilot study of urban open spaces in the Cape Metropolitan area (Turpie et al.
2001) provides some indications of the value of undeveloped land in the CCT. The study
considered open space values within two areas of the Metropole, the Southern region
(comprising Grassy Park, Lakeside, Lavender Hill, Lotus river, Marina da Gama,
Muizenberg, Pelican Park, Phillipi, Retreat, Steenberg, Zeekoevlei and Zerilda Park) and
the South Eastern region (comprising Bloekombos, Brackenfell, Driftsands, Eersterivier,
Eersterivier South, Khayelitsha, Kuilsrivier, Macassar, Mfuleni, Mitchells Plain, Penhill,
Rustdal and Sarepta). A contingent valuation study estimated the value of use, option and
existence values of open spaces, while a hedonic study determined the impact of open
spaces on property values. Not all open spaces produce a positive value: vacant lots
provide a disamenity of R6 082 per hectare in Metro SE due to uncertainty about future use
and increased security risk. Close proximity to parks on the other hand provides a premium
of R104 239 per hectare (annualised) in 2007 prices (see Table 1.10).
Table 1.10: Values (R/ha) from a CV and hedonic study for the CCT
Landscaped parks
Contingent Valuation
Hedonic pricing
Metro S
Metro SE
Metro SE
4 050
3 181
104 239
20 394
36 570
19 563
Natural vegetation
7 081
1 165
-
Vacant land
1 021
316
-6 082
57 684
937
-
Sports fields
Agricultural fields
All values are in 2007 rands. Landscaped parks = mowed areas with swings; sports fields = golf courses,
soccer fields, etc.; natural vegetation = fynbos and strandveld; vacant lots = grassy or with aliens or barren;
agricultural fields = grazing lands, vineyards, etc.
Source: Based on Turpie et al (2001)
The results of contingent valuation surveys indicate that people were willing to pay between
R1 021 and R57 684 per hectare to conserve open spaces in the relatively wealthier Metro
South region, with agricultural fields being the most valuable. A smaller range of willingness
to pay is encountered in the South East, with sports fields the most valuable at R36 570 per
30
hectare. The results indicate the benefits of rehabilitating marginal areas such as vacant
lots.
Box 1.1:
Economic benefit of trees in cities
Trees in urban centres provide a number of benefits. These include:
A. Energy and human health
• Heating and cooling costs – A 25 foot tree reduces annual heating and cooling costs of a typical
residence by 8 to 12%, producing an average $10 savings per US household. Also, buildings and
paving in city centres create a heat-island effect. A mature tree canopy reduces air temperatures by
about 2.5 to 5.5° C, influencing the internal temperatures of nearby buildings.
• Air quality and cleansing – A typical person consumes about 175 kg of oxygen per year. A healthy
tree can produce about 118 kg of oxygen annually – therefore it takes 1.5 trees to supply the oxygen
needs of one person for a year. Also, cooler air temperatures created by tree canopies reduce smog
levels by up to 6%, producing savings in air clean-up campaigns. Finally, a mature tree absorbs from
55 to 110 kg of the small particles and gases of air pollution. In Sacramento, CA, for instance, this
represents a value of $28.7 million.
• Improved water quality – The canopy of a street tree intercepts rain, possibly reducing the amount of
water that will fall on pavement and then must be removed by a stormwater drainage system. In one
study, 32 ft. tall street trees intercepted rainfall, reducing stormwater runoff by 1 240 litres. Savings
are possible since cities can install surface water management systems that handle smaller amounts
of runoff.
B. Retail and commercial
• Consumer patronage – In a survey of one US community, 74% of the public preferred to patronise
commercial establishments whose structures and parking lots are beautified with trees and other
landscaping.
• Commercial land values – In a survey of real estate appraisers, 86% of respondents agreed that
landscaping added to the dollar value of commercial real estate. 92% also agreed that landscaping
enhances the sales appeal of commercial real estate.
• Boosted occupancy rates – One study looked at 30 variables – architecture and urban design – of
potential importance in determining office occupancy rates. Results suggest that landscape amenities
have the highest correlation with occupancy rates, higher even than direct access to arterial routes.
C. Residential property values
• Increase house prices – Several studies have analyzed the effects of trees on actual sales prices of
residential properties. Homes with equivalent features – square footage, number of bathrooms,
location – are evaluated. In one area a 6% increase in value was associated with the presence of
trees; an increase of 3.5 to 4.5% was reported in another study.
• Tree size and value – A team of researchers compared tree size and public valuations of homes.
Tree size did not affect the judgments of price for low price homes, but did affect values of more
costly houses. For more expensive homes, small and medium-sized trees enhanced the public’s
perception of real estate value.
Source: University of Washington (1998)
The nature reserves falling under the jurisdiction of the CCT comprise diverse landscapes,
from lowland and mountain Fynbos, to Renosterveld in the centre and Strandveld along the
coastline (see Table 1.11). These reserves support a variety of ecosystems and as yet
unvalued benefits from recreation and ecosystem goods and services. The CCT’s 2006
Sustainability report highlighted a number of challenges associated with these areas,
including promoting accessibility to good quality open spaces through improved
transportation linkages to these areas, and also regulating the cost of entry for local
31
inhabitants. Maintaining and improving the quality of these reserves contributes towards the
CCT’s objective of recreating a dignified and aesthetically pleasing city.
Table 1.11: CCT nature reserves (excluding wetland reserves)
Vegetation
Location
Area (ha)
Mamre Nature Garden
Lowlands fynbos
North
200
Rondebosch Common
Lowlands fynbos
South
40
Kenilworth Racecourse Conservation Area
Lowlands fynbos
South
42
Harmony Flats Nature Reserve
Lowlands fynbos
East
9
Helderberg Nature Reserve
Mountain fynbos
East
407
Silverboomkloof Nature Reserve
Mountain fynbos
East
5
Kogelberg Nature Reserve
Mountain fynbos
East
3500
Tygerberg Nature Reserve
Renosterveld
Central
300
Durbanville Nature Reserve
Renosterveld
Central
6
Bracken Nature Reserve
Renosterveld
Central
36
Blaauwberg Conservation Area
Strandveld
North
1000
Atlantis Dunefields & Silwerstroom CA
Strandveld
North
3000
Wolfgat Nature Reserve
Strandveld
South Central 248
Macassar Dunes Conservation Area
Strandveld
South Central 1116
The CCT also contains a number of other important parks and reserves within the City
limits. Although these parks are not under their administration, they are still important to the
environment and aesthetics of the City. The most important of these include Table
Mountain National Park (administered by SANParks), Robben Island World Heritage Site,
Driftsands nature reserve and parts of Kogelberg biosphere reserve and Hottentots Holland
nature reserve (Cape Nature), Cape Flats nature reserve (University of the Western Cape),
the Plattekloof Natural Heritage Site and Koeberg Nature reserve (Eskom) and
Kirstenbosch National Botanical gardens (administered by SANBI). These areas are also
important draw cards for foreign tourists, with 60% of tourists using Table Mountain
Cableway, 56% visiting Cape Point, and 36% visiting Kirstenbosch during the summer of
2002 (Standish et al. 2004). For domestic tourists this was slightly lower, with 50% using
the cableway, 34% visiting Cape Point and 25% visiting Kirstenbosch. The knock-on effects
of these visitors on tourism in the CCT, and Western Cape region, is substantial. In 2005
the tourism sector contributed 14% to the gross geographic product (GGP) of the Western
Cape (Lynn Brown Tourism Budget Speech 2008/9). The Western Cape received 1.74
million international visitors in 2006 and 3.2 million domestic visitors. The WC is also the
province to receive the highest proportion of domestic holidaymakers, 44% of whom visit
the CCT (SADTS 2001; 2006). Tourism is very clearly a growth industry for the province
and the CCT, with an increase of 11% in international arrivals between April and September
2006 compared with the same period in 2005.
32
In addition to the recreational value of parks and nature reserves, a consumptive use
benefit has also been derived from the harvest of forest stands for timber in the Table
Mountain National park. The two main areas where harvesting has taken place since the
year 2000 are Newlands forest and Orange Kloof (Standish et al 2004). Between 2000 and
2005 roughly 34 hectares of trees were felled to a total (2003) value of R2.7 million. Felling
of stands, in particular pine, is nonetheless a controversial activity with unknown impacts on
recreational users. We are not aware of any local studies that have looked at the
opportunity costs of harvesting these resources. Non-commercial timber harvesting of
mostly invasive alien stands for fuelwood also takes place in a number of areas around
Cape Town. In addition to timber harvesting limited harvesting of medicinal plants, flowers
and ornamental plants also occurs. This harvesting creates values and supports livelihoods
although much of it is thought to occur illegally and with no real regard to sustainable
extraction rates.
1.5.2 Geological features
The study reported in Turpie (1998) used the hedonic pricing method to access whether
property prices were affected by proximity to Table Mountain. A second component of the
study determined whether a premium was charged for hotel rooms with mountain views.
The study results were not significant for properties and hotel rooms in the City bowl. Of 44
hotels surveyed, only 9% placed a premium on rooms with a mountain view. A higher
premium was placed on rooms with sea views, with mountain views rated second. The
hedonic study, on the other hand did find a significant relationship between property prices
in the Newlands area and proximity to the mountain. The study concludes that proximity to
the City centre is a factor influencing property prices in the City bowl, and this has
confounded the influence of the mountain views.
1.5.3 Rivers and wetlands
The CCT manages approximately 10 wetland areas with a total area of around 4 626
hectares. The CCT’s wetlands have been the subject of a number of economic valuation
studies. These have been considered from a number of perspectives. Firstly, wetlands may
have either a positive or negative impact on the prices of properties in close proximity to
them. In Zandvlei, for example property prices premiums were in the order of R 92.2 million
in 2001 (van Zyl 2007). For Zeekoevlei houses on the vlei generated a premium of between
14% and 29% and this diminishes rapidly with distance from the vlei (Van Zyl & Leiman
2001). Secondly, a number of recreational and other values for wetlands are also estimated
using expressed preference and revealed preference methods (Joubert & Turpie 2001;
Turpie & Joubert 2001). Thirdly, a replacement cost study (Harding 2001) estimates the
costs of constructing an artificial wetland, as well as water purification and storage
functions. The wetlands selected for this study were, for Metro South: Langevlei, Little
Princess Vlei, Princess Vlei, Rondevlei, Zandvlei, Zeekoevlei, and for Metro South East:
Nooiensfontein Vlei and Khayelitsha wetlands. More recently, Lannas (2008) elicits direct
33
use values from agricultural production for Mfuleni wetland. Results are summarised in
Table 1.12.
Table 1.12: Wetlands values (R/ha) for the CCT
River/Wetland
Technique
Metro S
Metro SE
All areas
Contingent Valuation
2 533
5 838
Zandvlei (S), Kuilsriver (SE)
Contingent Valuation
5 606
28 593
Zandvlei
Travel cost
6 131
-
Zandvlei (S), Kuils River (SE)
Hedonic pricing
75 159
56 091
Selected (see text)
Replacement cost
26 173
29 207
Mfuleni
Household survey
-
12 315
All values are in 2007 rands
Many of the rivers in the greater Cape Town region are in poor ecological health (River
health programme 2005). This has impacted on property prices in the City. For example,
properties adjacent to Lotus River are on average lower by between 10% and 14% (Van Zyl
& Leiman 2001). The Kuils River is an example of how rehabilitation can affect prices.
Before rehabilitation property prices adjacent to the river were on average 10–12& lower
than the surrounding areas (Van Zyl & Leiman 2001). After rehabilitation this discount had
disappeared.
1.5.4 Coastline
The coastline of the CCT is an area of approximately 308 km, stretching from north of
Melkbosstrand on the West Coast to Kogelberg in the east. The area provides an interface
between the marine environment with its protected and restricted use areas on the one
hand, and fishing grounds on the other which provide a significant direct use benefit to the
CCT, and the terrestrial environment with sand-dunes and shore-based fishing activities
and collection of marine organisms. The existence value of the South African coastline was
estimated by a contingent valuation study to be worth R75 million, of which R28.8 million is
conservatively ascribed to the Cape Floristic Region (Turpie et al. 2003). It is probable that
the majority of this value is attributable to the CCT given the hugely disproportionate share
of population in this area compared with the rest of the CFR. Ballance et al. (2000) used the
travel cost method to estimate the recreational use value of ten beaches along the Cape
Peninsula. Extrapolating across all beaches in the CCT gave a value of between R9 and
R50 million per year. The results from this survey indicated that between 85% and 97% of
respondents would not visit the beaches if excessive litter was present, resulting in
significant losses to the regional economy.
34
1.5.5 Summary
Table 1.13 summarises the results of valuation studies, and associated values for the
various landuses in the CCT. Estimates for the fynbos and strandveld reserves are based
on the Turpie et al. (2001) value for natural vegetation. All values are inflated to the year
2007 to ensure comparability between studies. The high relative values for wetlands and
parks are related to the house price premium that is derived from living in close proximity to
these areas. The study did not report any estimates of hedonic values for those living in
close proximity to reserves, so it is possible that these results would be much higher if this
was the case. Furthermore, it should be noted that these results only summarise findings of
existing valuation studies and are not meant to infer the total economic value of these
ecosystems. The direct and indirect use values associated with nature-based tourism,
fishing and other commercial sectors are not reported and are likely to be significant.
Table 1.13: Summary of valuation studies for CCT natural areas
R/ha
ha
Low
High
Average value
Valuation
2007 R million
Technique
Reserves
Mountain fynbos
3 912
1 165
7 081
16.1 CVM
Lowlands fynbos
291
1 165
7 081
1.2 CVM
5 364
1 165
7 081
22.1 CVM
42
-
-
4 626
2 533
75 159
-
-
-
1 962
3 181
10 4239
105.4 HP & CVM
260.4
19 563
36 570
7.3 HP & CVM
7 729.8
-6 082
1 021
-19.6 HP & CVM
3 265.9
937
57 684
-
-
-
Strandveld
Renosterveld
Wetlands
?
179.7 HP & CVM
Recreational
Beaches
Parks1
Sports fields1
Vacant land
1
54.5 TCM
Other
Agriculture1
Geological
95.7 CVM
? HP
1 Metro South and South East only
1.6 Valuation and other mechanisms
The preceding sections have focused on environmental values and their measurement in
monetary terms. It is important to also be aware of the economic instrument or measures
that can be used to capture values or better reflect them. With this in mind, some of the
main measures with potential relevance are briefly introduced here.
35
1.6.1 Payment for Ecosystem Services (PES)
Payment for ecosystem services (PES) involves compensating landowners in recognition of
the ecosystem services provided on their lands. This system has been used extensively in
Latin America. In Costa Rica, for example, landowners are compensated for reforestation,
natural forest management, forest regeneration and protection practices. Financing of the
transfer payments comes from a variety of sources, including a fuel tax, a tax on wood
products, the issue of ‘forest bonds’ and from other beneficiary payments (Pearce 2004). In
1997 $14 million was disbursed for the conservation of 79 000 hectares, or around $180
per hectare. Environmental valuation is an important stage in the development of PES
programs (Pagiola et al. 2004b). The payment vehicle needs to be set in such a way that
the value of money received as compensation exceeds the cost of the alternative landuse,
otherwise landowners will not be encouraged to switch behaviour. In addition, the cost to
those making the payment must be less than the perceived benefits of conservation,
otherwise they will not be willing to compensate landowners to conserve the land.
1.6.2 Environmental Fiscal Reform
Environmental fiscal reform (EFR) is a system of taxation or other pricing instruments that
serve to increase state revenue, while at the same time promoting environmental goals
(World Bank 2005). EFR measures can achieve the goals of raising funds for conservation
while at the same time achieving the joint objectives of poverty reduction and service
delivery. Examples of EFR measures include a tax on natural resource use (e.g. forestry or
fishing) to limit excessive exploitation, user charges and fees (such as charging gate entry
fees to parks), subsidy reform including the elimination of adverse incentives, and pollution
taxes. There are several situations where monetary valuation may be used in this context.
Firstly, valuation may be used to determine the optimal level of abatement of pollution
taxes. This occurs where the value of averted pollution damage equals the cost of
abatement at the margin. However, valuation techniques are not yet at a point where this
can be optimally determined. Secondly, valuation techniques may be used to determine
user charges, for example based on the benefits of forests and other natural resources.
Thirdly, valuation can eliminate asymmetric information that exists between stakeholder
groups with regard to the value of goods and services provided by the natural resource
base.
The South African National Treasury has embarked on a process of reviewing and
evaluating EFR options with a view to implementation and have released a discussion
document entitled “A framework for Considering Market-based Instruments to Support
Environmental Fiscal Reform in South Africa” (National Treasury 2006). With regard to
reforms that would support biodiversity conservation, the focus has been on assessing the
elimination of distortions and the introduction of incentives for conservation stewardship in
the income tax and municipal property rates regimes.
36
1.6.3 Budgetary processes
The priority that is placed on environmental conservation, and the associated amount
directed towards conserving the natural resource base, may be indicative of the value of the
environment. For example, the CCT in its biodiversity strategy has indicated that:
“Critical to the success of any strategy, programme, or initiative, is the role of
budgets and business planning. It is imperative that biodiversity be placed high on
the agenda when budgets are finalised each year, within each of the relevant line
functions” (City of Cape Town 2003:14).
Furthermore, the fact that the World Bank invested US$11 million out of a total project cost
of US$55 million over five years (2004–2008) in the Cape Floristic Region via the Cape
Action for People and the Environment (C.A.P.E) programme is indicative of the value of
this biodiversity hotspot not only to the local inhabitants but also to the international
community.
Often, however, these environmental resources that offer “free” services to the City do not
receive equal rating along with other infrastructure programmes that are perceived to
provide a financial benefit. Economic valuation may be used to provide a mechanism for
quantifying these benefits, thereby enabling the natural environment to be compared more
equitably with other projects and activities. An example of this is the case of Madagascar’s
protected areas, where an analysis of the ecosystem benefits such as watershed protection
provided an incentive to enhance the country’s PA network.
1.6.4 Alternative measures of sustainability
Traditional measures such as Gross Domestic Product (GDP) measures economic activity
but does not measure true social and economic prosperity. A number of other measures
have been developed, such as the Index of Sustainable Economic Welfare (ISEW),
Genuine Progress Indicator (GPI), Green Net National Product and the associated Genuine
Savings measure. While many of these indicators are often data intensive to develop, they
have the advantage that natural capital is taken into account. These approaches also differ
from other welfare measures such as the UN Human Development Indicator in that
environmental costs and benefits are explicitly quantified.
1.6.5 System of national accounts
The System of National Accounts (SNA) is an accounting system that reflects the flow of
goods and services through the economy. Traditionally this system has not taken into
consideration the flow of environmental goods and services. More recently, the UN has
developed a System of Environmental and Economic Accounting (SEEA) that integrates the
environment into the economic framework through a system of satellite accounts. South
Africa has adopted this framework, and already a number of satellite accounts exist, notably
37
for minerals and for water. In theory, valuation techniques may be used for comparing
information across these accounts, although in practice it is more common to reflect the
physical flows of resources in these accounts.
1.6.6 Green funds and other measures
A number of other approaches aim at creating markets for biodiversity products and
capturing their value. For example, Bioprospecting is the sale of the right to prospect for
medicinal plants and genetic material to pharmaceutical companies. A number of valuation
studies have attempted to value the benefits of biodiversity for bioprospecting purposes
(Pagiola et al. 2004b). The Biodiversity Act 10 of 2004 contains important provisions on the
fair and equitable sharing of benefits arising from the prospecting of indigenous biological
resources.
Labelling and product differentiation initiatives such as the Biodiversity and Wine Initiative
(BWI) result in positive outcomes for biodiversity conservation by introducing it as a product
differentiator in the marketplace. Companies undertake environmentally friendly actions
(such as committing parts of their wine farms to conservation) on the basis that they will be
able to sell their environmental bona fides to consumers that are increasingly demanding. In
a similar vein, green funds such as that associated with Nedbank’s Green Affinity account
allow Nedbank to make a contribution to nature conservation. They also allow the bank to
attract more clients on the basis of their commitment to conservation.
A further market-based approach is the so-called debt for nature swaps. DfNS involve the
purchase, usually by an international conservation organisation, government or individual of
a country’s secondary debt in exchange for environmental conservation. This option is
appropriate where traditional revenues from protected areas are not available. Monetary
valuation may be used in this instance to motivate the case for the conservation of nature.
1.7 Conclusion
Valuation techniques are powerful tools for assessing the monetary values of environmental
goods and services. We have highlighted a number of different techniques, and given an
indication of when it is appropriate to use them and what their strengths and limitations are.
While environmental valuation is widely applicable, it is not appropriate when:
• time and budget constraints prohibit this
• political decisions concerning the natural resource base have already been made
• alternative approaches are more feasible given prevailing political realities and a
given context
Environmental valuation has the ability to express in monetary terms goods and services
that would otherwise be regarded as “free”. As such, valuation is an appropriate approach
for developing a business case for the environment. A further strength of valuation in the
context of city planning processes is that it communicates to decision-makers in monetary
38
terms those issues that are important to their constituents. In economic terms this means
that it is a human welfare measure. If the environment is highly prized, as would appear to
be the case in the CCT, then it yields a high economic value. It also provides a framework
for identifying priority areas where environmental rehabilitation is required. A limitation of
the approach is that it cannot answer normative questions. For example, the issue of
whether alien vegetation should be removed cannot be adequately addressed by valuation.
If something has a benefit to a user, for example the existence value of a 300-year-old oak
tree, then it can be expressed in monetary terms.
The choice of valuation technique is contingent on a number of factors, including the
availability of data, markets and resources. Certain techniques are also easier to apply than
others. There is a growing body of literature on environmental valuation in South Africa, and
as capacity develops to conduct these studies they are gaining increasing prominence in
the policy arena in South Africa. Locally and abroad, environmental valuation is widely used
as a framework for quantifying environmental benefits. This chapter has highlighted a
variety of contexts in which valuation may be applied. While valuation is just one tool, we
believe that it is an important tool that is able to make a significant contribution to the
management of environmental resources in the City of Cape Town and beyond.
39
Chapter 2: Ecosystem goods and services: Reporting on
consultations
Lead author:
Terence Jayiya, Natural Value JV and Jaymat Enviro Solutions CC
Contributing author:
Martin de Wit
2.1 Introduction
The City of Cape Town is a global urban biodiversity hotspot. It is located within an area of
world-class biodiversity and unique conservation value. This is a result of both the inland
aquatic and terrestrial ecosystems and the diverse coastal and marine habitats created by
the relatively warm waters of False Bay and the colder waters of the Atlantic Ocean (CCT
2003). Also, the floral diversity relates to the steep environmental gradients, including
altitudinal, geological and rainfall gradients, which have combined to create a large number
of different habitats.
This status of ‘biodiversity hotspot’ is further entrenched by the fact that the City of Cape
Town is unique in that:
• an entire National Park, the Cape Peninsula National Park (CPNP), is situated within
the City’s administrative borders,
• the City is bordered by, and overlaps with, two Biosphere Reserves (the Kogelberg
and West Coast Biosphere Reserves) administered by the Western Cape Nature
Conservation Board, and
• the City of Cape Town itself administers 23 nature reserves which form part of the
Cape Floral Kingdom. These reserves are seen as supporting species that are
unique to Cape Town, many of which are under threat of extinction mainly from
habitat destruction and invasion by alien plants.
Besides the floral diversity, the environment in the City includes rivers, wetland bodies,
coastal areas and other natural/semi-natural environments which add to the scenic nature
of the City. The City also boasts numerous reserves and parks which are popular areas for
recreation and relaxation.
The City’s environment provides a space for people to use and there are opportunities for
the City to derive some financial value from its use. Currently, the environment is used for a
variety of reasons, including recreation, tourism, historic, cultural heritage, and intangible
attributes such as character and landscape. Apart from its aesthetic appeal, the City’s
natural resources are considered as playing a vital role in the regulation of its environment.
40
The challenge here is how to put a monetary value on the different ways in which people
perceive the environment.
This chapter attempts to show that the City’s natural and semi-natural environment is in fact
a significant service provider, and that it provides “goods” (e.g. water for consumption) and
“services” (e.g. waste treatment) that are important in meeting people’s basic needs and
improving their quality of life. The specific purpose of this chapter is to present the
outcomes of a series of interviews on ecosystem service provision held with the City’s
relevant line function departments.
The purpose of the consultative process (i.e. interviews) is to compile an inventory of the
ecosystem goods and services produced by the City’s natural capital and, in so doing,
identify the people who are benefiting from these goods and services. For the purposes of
the consultation process we have included all open-space natural or semi-natural areas
(e.g. floodplains, wetlands, City parks, sandy beaches or rocky beaches) when referring to
natural and semi-natural environments.
This chapter is divided into four sections. Section 2.1 gives the purpose and structure of this
chapter. Section 2.2 is the outline of the method used to identify perceived goods and
services from the relevant line function departments. Section 2.3 deals with the outcome
(flow of goods and services) of the consultative process and all other stakeholder issues
emanating from the interviews. Section 2.4 presents the conclusions of the consultative
process.
2.2 Methods
In total, 13 people from within the City were interviewed during the consultation process
(see Appendix 2.1). These people are considered to either work with the City’s natural
environment or have some information relating to it. A structured, generic questionnaire
(see Appendix 2.2) comprising open-ended questions was compiled and used for
interviewing key City line function people in order to understand what they consider to be
(a) the functions performed by these natural areas, (b) goods and services, and (c) the
beneficiaries of these goods and services. Thus, the information provided in this chapter
relates to the answers provided by the City officials listed in Appendix 2.1.
In developing the questions for the interviews, we adopted the conceptual framework of De
Groot et al. (2002) which provides a framework for integrated assessment and valuation of
ecosystem functions, goods and services. Figure 2.1 illustrates the framework by providing
a comprehensive and consistent overview of all functions, goods and services provided by
natural and semi-natural open-space ecosystems. It further describes their linkages with
available valuation methods. (NB: The interviews were limited to the functions, goods and
services, and beneficiaries and did not focus on valuation methods.)
41
Figure 2.1:
Framework for integrated assessment and valuation of ecosystem functions,
goods and services
Source: Adapted from De Groot et al. (2002)
As shown in Figure 2.1, the first step towards a comprehensive assessment of ecosystem
goods and services involves the translation of ecological or natural complexity (structures
and processes) into a limited number of ecosystem or environmental functions. These
functions, in turn, provide the goods and services that are valued by humans.
De Groot et al. (2002) defines ecosystem functions as “the capacity of natural processes
and components to provide goods and services that satisfy human needs, directly (food for
consumption, wood for energy) or indirectly (ecological regeneration, peoples appreciation
of nature)”. Using this definition, ecosystem functions are best conceived as a subset of
ecological processes and ecosystem structures (see Figure 2.1). Each function is the result
of the natural processes of the total ecological sub-system of which it is a part. Natural
processes, in turn, are the result of complex interactions between biotic (living organisms)
and abiotic (chemical and physical) components of ecosystems through the universal
driving forces of matter and energy.
Apart from the three key questions (functions, goods and services, and users) of the
interview process there was also a second set of questions which were intended to:
• establish the beneficiaries or users of the City’s natural and semi-natural
environments,
• describe the priorities for further study and research through resource economics,
• describe the threats and uncertainties facing the natural capital base of the city, and
• describe the political choices which have been made regarding the natural/seminatural environment.
42
Answers to the questionnaire provided by the interviewees were then clustered under each
question. Some interpretation of the answers in these clusters was done.
2.3 Natural resource flows
This section discusses the inputs gathered during the one-on-one interviews. Each question
in the questionnaire is given here as a sub-section. For each question (sub-section), the
inputs that were provided during the interviews are then tabulated or bulleted and
discussed, giving an interpretation of the answers.
2.3.1 Natural or semi-natural areas managed by the interviewees
The City of Cape Town has a number of line function departments with branches that are
tasked with managing the City’s natural/semi-natural environments or areas. These
departments are key participants in the consultative process. The majority of the officials
interviewed were drawn mainly from these line function departments or branches. All
interviewees were asked to describe the natural or semi-natural environment (or
asset/amenities, open-space type areas) under their jurisdiction. A number of natural/seminatural areas (assets) managed by the interviewees were identified. They are the following:
• Blaauwberg Conservation Area (BCA) is an area of approximately 2000 ha,
comprising a rich mosaic of natural, cultural and historic elements. It is considered
an important part of the City’s biodiversity network. It consists of a coastal area, a
wetland and an inland more terrestrial component. The BCA provides numerous
economic, educational and recreational opportunities to the City’s residents.
• False Bay Ecology Park (FBEP) is a multi-use park covering an area of 1200 ha.
This includes Rondevlei and Zeekoevlei Nature Reserves, a coastal strip, waste
water treatment works, and a solid waste landfill site. It provides numerous
recreational, tourism and educational opportunities.
• Biodiversity: The Biodiversity Management Branch is responsible for the
conservation of biodiversity within the City’s boundaries. This includes the
Biodiversity situated in the City’s 23 reserves, as well as outside the City reserves
(such as in City parks). Included in this are also the six endemic national vegetation
types that occur in the City.
• The City Parks: All of the City’s parks are managed under one department. City
parks include playgrounds, cemeteries, crematoriums, landscaped road reserves,
traffic intersection and scenic drives. City parks are seen as very important for
recreational activities and also for aesthetic enjoyment.
• Freshwater river systems.
• Coastal areas which are mainly used for recreational purposes.
• Urban storm water and river management (including watercourses and wetlands) are
managed by the City’s Roads and Stormwater Department.
43
•
Watercourses and wetlands are considered to be important components of the City’s
biodiversity network and represent an essential element in restoring the urban fabric
of the City by providing both recreational and economic opportunities.
Apart from the people managing these areas, there were other interviewees who are not
directly responsible for managing environmental areas/assets (e.g. finance, economic
information, etc). This mix of people were able to speak about the specific areas under their
jurisdictions and what they considered to be environmental goods and services emanating
from the City’s natural/semi-natural areas.
Given that different natural/semi-natural environments have varying abilities to perform
functions and supply environmental goods and services, it was necessary to establish the
areas managed by the interviewees. Thus, the first question was intended to establish the
natural/semi-natural environments (assets) administered or managed by the interviewees.
This is very important when one considers the goods and services answers provided by the
interviewees. It is also important because it shows that the consultative process has
covered a wide range of natural/semi-natural areas while seeking to understand the
environmental functions, goods and services, and users of the City of Cape Town’s
natural/semi-natural environment.
2.3.2 Natural/semi-natural environment functions
After describing the natural/semi-natural areas under their jurisdiction, interviewees were
asked to describe the natural/semi-natural environment functions which deliver goods and
services. These functions can be described as the physical, chemical and biological
processes or attributes that contribute to the self-maintenance of the environment,
production of natural products or provision of space for other living organisms. In other
words, the functions are defined as the capacity of the natural processes and components
to provide goods and services that satisfy human needs, directly or indirectly (De Groot et
al. 2002). With this definition illustrated, the nature of the City’s natural/semi-natural
environment functions were given by the interviewees as represented in Table 2.1.
44
Table 2.1: Functions performed by natural and semi-natural environments which occur
within the boundaries of the City of Cape Town (Table based on answers
provided by interviewees.)
Functions
Description of the function
Oxygen production
This is the production of oxygen which is required to sustain life. The
function also relates to the production of other atmospheric gases.
Waste absorption/breakdown
Unwanted or undesired substances are broken down naturally by
microorganisms in the environment. This is assuming that the waste is
biodegradable.
Carbon sequestration
This is the absorption and removal of carbon from the atmosphere through
photosynthesis.
Soil binding, filtration and
erosion control
Relates to the role of soil components and vegetation in minimising soil loss
and filtering sediments from water to improve water quality.
Nutrient breakdown
The process of storing, recycling and re-distributing nutrients.
Water transport/capture
Collection and distribution of water through rivers, wetlands and
groundwater systems. The mitigation of floods is also included in this
function.
Water treatment/purification
This is the treatment or purification of water into a state which could be
used by biota.
Plant pollination
The pollination function is very important since it leads to the creation of
new seeds that grow into plants.
Education function
The environment serves a subject of interest for numerous groups (e.g.
school children).
Spiritual, cultural and historic
information
The environment provides areas where people can practice spiritual and
cultural rituals, gather information or use space for spiritual and cultural
purposes.
Provision of shade and shelter Trees provide numerous plants and animals with shade.
Aesthatic space/areas
Many areas provide attractive landscapes features.
Habitat space
Provision of space which could be used by plants and animals for
reproduction, growth, etc.
Production of resources
This function relates to the capacity of the environment to produce food,
material and other products which could be useful to living organisms.
Genetic diversity
Genetic diversity plays a role in sustaining production systems and
maintaining and regenerating natural habitat. It provides the basis for future
development of species in horticulture, agriculture and medicine.
Although a wide range of functions were provided during the consultation process with the
City line function departments, it is possible to categorise the functions given in Table 2.1
into the four categories as illustrated by De Groot et al. (2002). The nature of these
categories include:
• Regulatory functions: The capacity of the natural and semi-natural environments to
regulate essential processes and life-support systems through biogeochemical
45
•
•
•
cycles and other biospheric process. Examples from Table 2.1 include water
purification, pollination, soil binding and carbon sequestration.
Habitat functions: This is the provision of habitat to wild plants and animals, thereby
contributing to conservation of biological and genetic diversity.
Information functions: Natural and semi-natural environments provide almost
unlimited opportunities and reference functions by providing opportunities for
reflection, mental development, spiritual reflection and leisure. Examples from
Table 2.1 include education function and aesthetic space.
Production function: This relates to the capacity of the environment to produce
material that is of benefit to other living organisms. An example from Table 2.1 is the
production of resources.
The functions listed in Table 2.1 help to illustrate how the City’s natural and semi-natural
environment regulates itself and contributes to the general aesthetic appeal of the City. The
lesson here is that the management of the environment as a City line function will ensure
that natural resources continue to perform these essential functions. Conversely, if the
environment is not managed properly, some functions may cease to exist and this will affect
the ability of the environment to deliver goods and services to the City.
2.3.3 Natural/semi-natural environmental goods and service
This section focuses on the range of goods and services provided by the City of Cape
Town’s natural/semi-natural environment. This concept is used to demonstrate that the
City’s natural environment is in fact a significant service provider and that it provides
“goods” (e.g. water for consumption) and “services” (e.g. flood attenuation) that are
important in meeting people’s basic needs and improving their quality of life. This contrasts
with perceptions of the environment as an elite agenda focusing on plant and animal
requirements rather than human needs (Roberts et al. 2005).
A total of 13 interviewees were asked to provide a list of goods and services which might be
associated with the City’s natural/semi-natural environments or at least the areas which are
managed by the line function departments. This question yielded a number of ecological
and socio-economic goods and services provided by the City’s natural and semi-natural
environments. The complete list is given in Appendix 2.3. This is clearly a long list which
needed some form of classification and grouping. For this reason, the goods and services
resulting from the interviews were categorised (see Table 2.2) according to the method
followed by De Groot et al. (2002) and the functions given in section 2.3.2.
46
Table 2.2: The various types of goods and services provided by the interviewees (see
Appendix 2.3) can be sorted according to the specified categories.
Information related
Regulation related
Habitat space related
Production related
Use for school
excursions
Water for consumption
Space for biota to live
and reproduce
Fuel and energy
Conservation of living
resources
Material for craft and
fashion
Travel to historic/religious Storm water
sites
purification/drainage
Use of scenic areas for
enjoyment/relaxation
Preventing flooding of
areas
Small-scale urban
farming
Use in the production of
films/events
Pollution abatement
Plant or animal material
for medicines
Use in advertising and
books
Healthy soils for
production
Wild flowers for
harvesting
Beauty, inspiration and
recreation
Oxygen provision
Resources for collection
Use for scientific
research
Waste assimilation
The interviewees asserted that the above goods and services are essential to all
communities living in the City of Cape Town but may, in specific cases, be particularly
important in contributing towards meeting the basic needs (such as water, firewood, etc.) of
poorer communities that do not have access to adequate infrastructure and services.
2.3.4 Beneficiaries
In trying to understand goods and services, and consequently which environmental
resources are important to sustainable development in the City of Cape Town, it is
necessary to identify the beneficiaries (users) of the goods and services in the City. For this
purpose, a number of key natural/semi-natural environment beneficiaries were identified
during the interviews and are listed in Appendix 2.4. The detailed list given in Appendix 2.4
is categorised and represented in Table 2.3.
47
Table 2.3: Categories, types and examples of natural/semi-natural
beneficiaries (A detailed list is given in Appendix 2.4.)
environment
Categories
Types (examples)
Notes
Tourist groups:
Interviewees explained that Cape
Town was a favoured tourist
destination partly as a result of its
natural environment.
International tourists
Data and levies related to
tourism is available at:
• Nature reserves
• Tourism organisations
• City parks
Recreation groups:
Interviewees noted that the Cape
Town environment offers space for
a wide variety of recreational
activities.
Beach bathers
National tourists
Local tourists
Sailors, surfers and rowers,
horse riding
Picnics and braais
A number of the organised
recreational groups keep data
pertaining to their members.
These will include sailing clubs,
etc.
Walkers, cyclists and hikers
Sports
Harvest groups:
The activity of harvesting natural
resource and other resources is a
limited activity.
Fishing
Wild plant harvesting
Urban agriculture
Gathering fuelwood
Information and cultural groups:
The natural environment provides
space for learning and human
development.
School excursions
Scientific research
The nature reserves will have
data related to school
excursions, gate fees, etc.
History enthusiast
Religious experience
Book writers
Industry groups:
These are business activities which
make use of the City’s natural
environment.
Film and events industry
Shipping industry
Tourism industry
The City of Cape Town’s
economic information group has
industry specific
information/data that could be
accessed.
Manufacturing and construction
Advertising industry
Craft makers
Residential groups:
Residential households derive a
variety of benefits from the natural
environment. This is the protection
from floods and natural drainage
provided by the environment.
Households (Properties)
48
These resource users have different needs with respect to goods and services supplied by
the natural/semi-natural environment. Goods and services are sometimes used directly as
an input for consumers (e.g. household water) and for production processes (e.g. water for
industry), and also indirectly by land users to ameliorate their impacts on the environment.
In many instances, the City’s environmental services are often public goods, which mean
that they may be enjoyed by any number of people at any given time without affecting other
people’s enjoyment. For example, an aesthetic view in Blaauwberg or any part of the City is
a public good. No matter how many people enjoy the view, others can also enjoy it. The
problem with public goods is that although people value them, no one person has incentive
to pay for or maintain the good.
2.3.5 Priorities for further study
Interviewees were also asked to provide what they consider to be priority research areas for
the future. This is environmental economics research that could be useful in the
management of the City’s natural/semi-natural environment. Interviewees suggested a
number of key resource economics priorities (some of which are overlapping) for the future.
These include the following:
• There is a need to show the value of what is being lost due to development. This
could help advance the case for biodiversity within the City.
• There is a need to show how we value the system so that we can get developers to
pay for the natural drainage system and its maintenance. This should be part of the
bulk infrastructure charge.
• We need to understand the value of ecosystem goods and services. This would
enable us to motivate for the required budgets for the management of these areas.
• There is a need for a study to show how environmental management leads to
tourism.
• Urbanisation, bulk service infrastructure, resource depletion, loss of habitat,
inappropriate off-road vehicle use.
The main suggestion here is that it would be helpful if resource economics made it possible
to convert the somewhat elusive value of natural/semi-natural environments and their
associated goods and services into something understandable (i.e. a monetary value) to
policy-makers and the general population. In a way this could help develop the required
political understanding and support for natural resources within the City. This will avert
situations where a lack of understanding of the interrelated nature of social, ecological and
economic concerns results in natural resources concerns being marginalised when social
and economic pressures are high.
49
2.3.6 Threats to the natural capital base
The City of Cape Town’s natural beauty, perceived quality of life and vast economic
opportunities create pressure on the City’s natural resource base. Interviewees stated that
the threats are numerous and are showing no signs of abating. In order to protect the
natural capital of the City, it is necessary to understand where the threats are emanating
from. For this purpose, a number of threats to the natural capital base have been identified
by the interviewees as the following:
• Urban sprawl and urban development are seen as key driving forces behind the
consumption of natural resources and replacement of natural space.
• Sand mining poses a threat to biodiversity.
• Privatisation of natural resources. If a space is privatised, it limits the number of
people who might benefit from its goods and services, or the environment can be
altered once it is in private hands.
• Exclusion of the environmental agenda from development planning.
• Illegal off-road driving in protected areas.
• Water pollution.
• Illegal water abstraction.
• Invasive alien plants which pose a direct threat not only to biodiversity, but also to
water security, the ecological functioning of natural systems and the productive use
of land.
Interviewees agreed that the City of Cape Town’s environment has been steadily eroded by
the combined effects of the above threats and especially by the patterns of urban
developments which have dominated the City’s recent history. It was noted that the price of
allowing these threats to continue may be the extinction of species, the disappearance of
accessible open-space and ultimately the loss of the City’s aesthetic appeal.
Although the interviews revealed threats to the environment, it is also important to note that
City’s residents value their access to the Cape Town natural landscape and the City has
enacted some of South Africa’s progressive laws in an attempt to protect the natural
resource base of the City.
2.3.7 Current uncertainties
A number of uncertainties facing environmental management in the City were identified.
These uncertainties include the following:
• It is not clear what the political decisions are going to be in the future, and these
might have implications for the management of the City’s natural resource base.
• It is uncertain how climate change will affect the natural environment.
• It is also not clear how the population growth is going to affect the natural
environment. It is, however, expected that more people will require more resources
and this would put pressure on the natural environment.
50
2.4 Conclusion
The consultative process was designed to assist in the development of an inventory of
goods and services flowing from the natural capital of the City of Cape Town. This
approach was useful in that it focused on the goods and services that people discern from
natural or semi-natural areas within the City of Cape Town.
From the interviews with City line function departments it was learned that the natural/seminatural environments perform certain functions that are:
• important for the maintenance of the natural/semi-natural environment,
• producing a wide range of goods and services,
• of benefit to the City communities and its visitors.
The conclusion of this is that the City must act in a way that promotes the continued proper
functioning of its natural/semi-natural assets to the benefit of its inhabitants and visitors.
The interviewees also considered it important to mention potential threats and uncertainties
facing the natural/semi-natural environment and thus its ability to perform its functions and
offer benefits to all communities in the City of Cape Town. It is concluded that interviewees
see the biggest threat as the form and shape of the development occurring in the City.
Environmental goods services flow from natural assets (soil, water systems, plants,
animals, other living organisms and the atmosphere) to provide the City with financial,
ecological and cultural benefits. Examples of goods and services flowing from the City’s
natural environment include: provision of clean water, flood attenuation, tourism
opportunities, pollution control, and fulfillment of cultural, religious and intellectual needs.
Most importantly, the goods and services from the environment are clearly benefiting all
communities of the City and this dispels the notion that the environment is only about
maintaining plants and animals.
From the interview process with City line function departments it became clear that the
challenge for the current project and indeed the City environment department is how to
present to policy-makers and decision-makers the fact that if natural/semi-natural assets
are not maintained the benefits from environmental goods services will decline over time.
This decline will have an effect of threatening certain industries in the City and also the
social wellbeing of the city’s residents. Conversely, if we maintain our natural assets and
use them more effectively, they will continue to perform a wide range of functions and their
associated goods and services will continue to flow, with the City benefiting from greater
returns.
51
Appendix 2.1: List of people interviewed
List of the interviewees from the City of Cape Town line function departments:
Name
City Line Function
Contact Details
Patricia Holmes
Biodiversity Management Branch
021 710 9358
Barry Wood
Catchment, Stormwater & River Management Branch
021 400 1204
021 400 3088
Greg Oelofse
Environmental Strategy and Partnerships Branch
021 487 22 39
Joanne Jackson
Environmental Strategy and Partnerships Branch
021 487 2184
Craig Haskins
Information and knowledge management Branch
021 400 2066
Carol Wright
Jeremy Marillier
Economic Development Department
021 483 9023
Joe Olivier
Sakhi Tsotsobe
Sport, Recreation and Amenities Branch
021 400 4181
Johan Steyl
Budgets Department
021 400 2070
Phumla Mrubata
Carl Theunissa
City Parks
021 400 2947
Candice Haskins
Catchment, Stormwater & River Management Branch
021 400 3088
52
Appendix 2.2: Questionnaire
1. Could you list and describe the
natural or semi-natural ecosystems
(or natural areas/amenities, openspace type areas) falling under your
jurisdiction? This could include area,
size or number of areas, and might
be wetlands, rivers, urban parks,
urban amenities such as the planting
of trees in road servitudes, etc.).
(Box 1)
Box 2:
2. Could you describe the ecosystem
functions that deliver the goods and
services in the natural area (e.g.
habitat function, cycling carbon,
trapping of nutrients). (Box 2)
We are using a value approach rooted in
people’s appreciation of nature. Some
functions may be production of goods and
services (for consumption for instance), and
some may be regulation of the systems
(nutrient cycling) some may be habitat
provision.
3. Please describe the goods and
services that result from the
functions, e.g. better fishing, better
views, reduced human health, flood
prevention. (Box 3)
4. Could you identify the users of the
environmental services? These are
people who benefits from the goods
and services. (Box 4)
Box 1:
The term ecosystems on its own may lead to
a limited response – there are very little full
ecosystems in cities under city mananger
control – for this question we rather speak of
anything related to open space systems
natural amenity/area/function as listed in the
question.
Box 3:
Examples of these could be appreciation of
scenery (scenic roads, housing, etc.); fuel
and energy (e.g. fuel wood, organic matter);
provision of water for consumptive; flood and
pollution control.
Box 4:
These could include Industrial users, (formal
and informal residential, tourist who visit the
city etc), Informal settlements on catchments,
and users of fire wood.
5. What are the priorities for further
study and management for the area
you manage?
6. What are the current threats to the
natural capital base of the City and
thus to the provision of ecosystem
goods and services?
7. Could you describe the current
uncertainties you have to deal with in
53
managing these ecosystem/natural
areas/amenities?
8. Could you describe any political
choices that have already been made
with regard to the management of
these ecosystems/natural areas/
amenities?
9. Are the identified value of ecosystem
goods and services currently linked to
your financial/budget processes? If
so, how?
10. Any other expert outside the city who
we need to consulted about your area
of management?
54
Appendix 2.3: Goods and Services from the interviewees
List of goods and services as given by the interviewees (these have been
categorised in Table 2.2):
Goods and Services
Drainage, natural irrigation and flood attenuation
Clean air quality
Use for religious purposes
Scenic areas (roads, houses and parks)
Use of environment for school excursions
Tourism opportunities
Trapping of nutrients
Pollution abatement
Transport of water
Information that could be used for education, religious and cultural activities
Opportunities for eco-tourism and outdoor sports
Conservation of resource
Open quality space
Urban agriculture
Water recharge
Storm water purification
Fuel and energy
Drainage/natural irrigation
Collection of material for craft, shells
Oxygen and other atmospheric gases
Small-scale urban farming
Use of areas for filming and events
Supply of drinking water
Clean environment free of waste
Living space for plants and animals
55
Appendix 2.4: List of users as suggested by interviewees
Beneficiaries or user groups:
1. Cape Town residents
2. International tourists
3. National tourists
4. Industry
5. Information groups
6. Spiritual groups
7. Interest groups
8. Fishermen
9. People interested in history
10. Surfers and kite people
11. Walkers/Hikers
12. Botanist
13. Animal/Plant enthusiasts
14. Education sector
15. Bird watchers
16. Sailors/Rowers
17. Boating
18. Beach Bathers
29. Film Industry
20. Events companies
21. Craft designers
22. Film Industry
23. Oil and Gas sector
24. Transport sector (shipping)
25. Urban agriculture
26. Biota
27. School children
28. Harvest groups
29. Gathering fuel wood
30. Advertisers
31. Tourism industry
56
Chapter 3: Methodology to prioritise and value the
natural and environmental resources of the City of Cape
Town
Lead author:
Martin de Wit
Contributing authors
Hugo van Zyl
James Blignaut
Doug Crookes
3.1 Introduction
The overall project and process of developing the methodology started with an international
review of valuation techniques in Chapter 1. This review provided clarity on the current best
practice in the field and started the process of conceptualising the methodology
development. It was followed, as discussed in Chapter 2, by a consultation process with
City line functions to generate a list of the ecosystem goods and services, and its users or
beneficiaries. These lists were then reconciled with the international literature on ecosystem
goods and services in order to refine and add to them. The first two phases thus provided
much of the ‘raw material’ that was needed to develop the methodology which could then
be analysed further. Aside from the internal study team processes, two workshops were
held with key resource economists in order to develop and test the methodology. These
workshops proved insightful and allowed for a relatively wide range of views to be brought
to bear on the subject. In addition to expert resource economics inputs, City staff were
consulted to ensure that the methodology was adequately scrutinised from the perspective
of a group of line function managers and senior staff.
The development of a methodology is important as this allows for a clear and logically
repeatable framework for the valuation and the building of a business case. At the heart of
the methodology is the need to prioritise assessment in order to optimise on both the return
and the risks of using the City’s natural resources.
This chapter is organised as follows: in section 3.2 the overall approach to methodology
development is discussed, including main definitions used and an overview of EGS and
beneficiaries in the City. Section 3.3 reports on key considerations in the development of a
methodology to value the natural and environmental resources of the City of Cape Town. In
section 3.4 a six-step valuation methodology is proposed and in section 3.5 this
methodology is applied to a City-specific case study. Section 3.6 reports on how EGS were
prioritised for further valuation in support of the business case and section 3.7 gives the
conclusion.
57
3.2 Approach to methodology development
3.2.1 Definition of terms
In order develop the methodology, it is important to distinguish between two related
concepts, namely natural assets and ecosystem goods and services (EGS). Natural assets
are the stocks of environmental resources owned by the City (the City’s natural capital).
Ecosystem goods and services (EGS) are the flows of benefits derived from these assets
(the interest or services generated by the natural capital). In order to clarify these concepts
an analogy of a bank account may be used. The amount of money deposited by the
account holder is the asset component, while the interest earned on the account is income
and, therefore, a flow value. If the asset value of the money deposited is withdrawn, or in
other words, the capital is spent, the interest earnings are lost. So too with natural capital, if
the stock of natural assets are destroyed, the flow of ecosystem goods and services are
also forfeited. Ecosystem goods and services are categorised in section 3.2.2.
3.2.2 Categorising and listing ecosystem goods and services
The valuation exercise should begin with the consideration of a comprehensive list of EGS
in order to ensure that the multi-faceted nature of the environment is captured and no EGS
are overlooked. Before continuing with a methodology, it is important to categorise and
develop a comprehensive list of EGS. The consultation process with City line functions
yielded an exhaustive list of the EGS which were reconciled with the international literature
on EGS to generate an EGS list for the City. At a conceptual level, this list is based on the
Millennium Ecosystem Assessment (2005) framework which was chosen because of its
international acceptance and logical nature. In addition, this framework can be reconciled
with resource economics frameworks such as the Total Economic Value (TEV) framework.
The Millennium Ecosystem Assessment (2005) distinguishes among four categories of
goods and services:
• Supporting services are those services necessary for the production of all other
ecosystem services, such as soil formation, photosynthesis, primary production,
nutrient cycling and water cycling. These are intermediate services which form the
basis for provisioning, regulating and cultural services and, as such, are seldom
valued separately.
• Provisioning services relate to the products derived from ecosystems, including
food, fiber and fuel, genetic resources, medicines and pharmaceuticals.
• Regulating services include benefits derived from the regulation of ecosystem
processes, such as air quality regulation, climate regulation, water regulation,
erosion regulation, disease regulation, pest regulation and natural hazard regulation.
• Cultural services are the benefits people obtain from ecosystems such as
reflection, recreation, inspiration and aesthetic enjoyment. It includes cultural
diversity and educational values.
58
In terms of the TEV framework, provisioning services largely fall within the direct use
category, regulating services are mainly indirect use values, and cultural services comprise
both a direct use component for values such as recreation and an existence value
component for the remainder. Table 3.1 presents the EGS list for the City of Cape Town
and shows how intermediate supporting services, such as primary production systems and
ecological cycles, support or contribute to the generation of regulating, provisioning and
cultural services. These three categories of EGS are then used by beneficiaries and,
therefore, have value.
Table 3.1:
Categories of ecosystem goods and services
Ecosystem goods and services
Water regulation (flows, etc.)
Natural hazard regualtion (floods, etc.)
Water purification and waste treatment, assimilation
Erosion regulation
Regulating
Pollination
Disease regulation
Pest regulation
Climate regulation – local (air quality)
Climate regulation – global
Space for biota to live and reproduce (refugia)
Fresh water provision
Fuelwood provision
Supporting services
Photosynthesis
Soil formation
Primary production
Nutrient cycling
Water cycling
Building materials provision (wood, sand, etc.)
Wild flowers for harvesting
Provisioning
Provision of plant and animal material for medicines and
biochemicals
Provision of materials for crafts, fashion (e.g. shells)
Fish and marine resources
Genetic resources with potential pharmaceutical and other
biochemical uses
Small-scale urban farming
Recreation and tourism
Provision of inspirational beauty
Aesthetic values and sense of place
Cultural
(information)
Educational uses (e.g. school excursions, scientific
research)
Use in cultural and artistic practices and ceremonies
Use in religion practices and ceremonies
Use in productions (film and events), advertising and
publications
59
3.2.3 Beneficiaries or users
The economic value of EGS is determined by people’s active and passive use of these
goods and services. A number of different user categories are distinguished. In this study
the user categories are identified through a synthesis of the beneficiary categories identified
in the international review chapter and information derived from the consultative process.
The user groups identified during the consultative process (see Chapter 2) are given in
Table 3.2.
Table 3.2:
User groups identified during the consultative process
Categories
Types (examples)
Notes
Tourist groups:
Interviewees explained that Cape
Town is a favoured tourist destination
partly as a result of its natural
environment.
International tourists
National tourists
Local tourists
Data and levies related to tourism
are available at nature reserves,
tourism organisations, city parks
Recreation groups:
Interviewees noted that the Cape Town
environment offers space for a wide
variety of recreational activities.
Sailors, surfers, rowers
Horse riding
Walkers, cyclists, hikers
Sports
A number of the organised
recreational groups keep data
pertaining to their numbers.
These include sailing clubs, etc.
Harvest groups:
The activity of harvesting natural
resources and other resources is a
limited activity.
Wild plant harvesting
Urban agriculture
Gathering fuelwood
Information and cultural groups:
The natural environment provides a
space of learning and human
development.
School excursions
Scientific research
History enthusiast
Religious experience
Book writers
The nature reserves have data
related to school excursions, gate
fees, etc.
Industry groups:
These are business activities which
make use of the City’s natural
environment.
Film and events
industry
Shipping industry
Tourism industry
Manufacturing and
construction
Advertising industry
Craft makers
The City of Cape Town’s
economic information group has
industry specific information/data
that can be accessed.
Residential groups:
Households
Households derive a variety of benefits (properties)
from the natural environment. This is
the protection from floods and natural
drainage provided by the environment.
In order to choose appropriate user categories, high-level distinctions were first made
between ‘local users’ and ‘regional, national and international users’. Among the local
users, further distinctions were made among ‘residents’, ‘key commercial groups’ and ‘key
public bodies’ and were sub-divided as follows:
60
Classified under ‘residents’ are:
• Recreational and sporting groups
• Harvesters, fishers and subsistence producers
• Educational groups
• Cultural and religious groups
• Property owners
• Low-income residents (to indicate particularly high levels of dependency)
Classified under ‘key commercial groups’ are:
• Tourism and recreation
• Film, advertising and events
• Arts and crafts
• Real estate
• Construction and manufacturing
• Urban agriculture
• Fishing (including shellfish)
Classified under ‘key public bodies’ are:
• Economic development
• Health and welfare
• Disaster management
• Water
• Waste
• Conservation bodies (e.g. SANParks and CapeNature).
This framework has been utilised by a number of other important international studies. For
example, Eftec (2006) differentiates between individual users, commercial entities and
public sector groups. Costanza (2008) classifies 17 ecosystem services based on their
spatial characteristics. Most significantly, however, is that this classification is based on the
user groups identified as aspects being relevant to the City line functions.
3.3 Key considerations in methodology development
The focus of the overall project is to influence budget allocations by developing focused
economic arguments for investing, maintaining and expanding the City’s natural assets. It is
neither practical nor desirable to value all goods and services generated by natural assets
in the City, necessitating a logical and replicable methodology for prioritising natural assets
for valuation. Through the study process and consultations, it became apparent that the
methodology needs to address the following key consideration or needs for it to be
effective:
61
•
There is a clear need for an initial broad scoping and comprehensive listing of
the City’s natural assets and flows from these assets. This means that a
comprehensive understanding of the categories, quantity and quality of (a) natural
assets and (b) ecosystem goods and services flowing from these assets, is gained
before certain EGS flows are prioritised. For example, the value of the natural
environment lies not only in tangibles such as green open spaces and nature
reserves, but also in intangibles such as improved quality of life, enhanced property
values, the value of beautiful streets and the value of certain natural icons.
Furthermore, in a developing country context, the importance of the environment in
meeting certain needs of people who do not receive high levels of utility services or
infrastructure need to be explicitly acknowledged and managed for. Another example
is that the accessibility of existing natural assets and the expansion of green space
for people with low incomes are likely to be important objectives as these areas,
when managed well, provide benefits that can improve wellbeing. The maintenance
of these areas also provides direct employment benefitting many more indirectly.
Overall, such a comprehensive approach would, to some extent, militate against
strategic behaviour to maximise partially focused budgets within City structures and
also leave sufficient scope for changing priorities over time. Therefore, as a first
consideration, the methodology needs to be as comprehensive as possible in
mapping the natural assets and EGS nexus and not be limited by existing structures
and functions within the City.
•
It is equally important to be able to focus on key EGS that are particularly
beneficial and thus worthy of prioritisation. Following a consultative process with a
group of line function managers and senior staff as well as an international literature
review, it is clear that a rich and diverse set of ecosystem goods and services
support the socio-economic wellbeing of City inhabitants, as expected. These goods
and services benefit a large number and a diverse range of beneficiaries. This
information itself can be used to raise awareness and educate people on the wide
range of benefits provided by sufficiently large and well-maintained natural assets. A
key issue for the purpose of this project was where to focus valuation and financial–
economic modelling efforts and to develop an argument based on targeted and
relevant data and information (see UNDP/UNEP 2008). For example, given the focus
on making a business case for environmental management, it is advised to first
focus on the tangible, direct benefits of maintaining and expanding natural assets, as
well as the goods and services that may flow from these assets, before attempting to
value other intangibles and indirect benefits. An example of such intangibles is the
close proximity of a natural and agricultural landscape in Constantia to an urban
centre. These intangible values are likely to be reflected in property prices and in the
willingness of visitors to travel to the area, but would require extensive valuation
work and use techniques that, although correct and credible in the literature,
increases the risk of not being accepted in the development of a higher-level
business case for the environment. This does not mean that no risks should be
62
accepted but raises the issue to search for those assets where highest returns in
terms of focused efforts can be achieved at lowest risks.
•
It is important to differentiate between an economic valuation technique and
an economic valuation methodology. It is well-known that economic valuation
techniques cannot be applied indiscreetly to every situation. Every case would have
a unique problem statement and the methodology need to be broad enough to fit
different types of problems. Some techniques are more suitable for certain goods
and services than others. It is, therefore, crucial that City decision-makers receive
not only a set of valuation techniques but also a complete methodology on how to
approach economic valuation of ecosystem goods and services. A methodology can
best be described as “a system of methods”.
•
The link between specific natural assets and the specific flow of ecosystem
goods and services needs to be defined. According to the OECD (2005), natural
assets consist of biological assets (produced or wild), land and water areas with their
ecosystems, subsoil assets and air. This is, however, not the way cities have
categorised their functions (both organisationally and financially) and, therefore,
natural assets can be – within this context – better categorised in terms of an overlap
with existing organisational structures: natural areas and reserves, parks, sports
grounds, agricultural and vacant land, watercourses, wetlands and dams, the nearshore environment, and the atmosphere. Sub-soil assets are acknowledged as
assets, but the City does not have any direct jurisdiction over these. What is
important is that the flow of EGS from each of these assets is specifically defined to
better facilitate choices on the relative importance of and focus on such assets when
constructing an economic argument for investment in natural assets. It is further
important to recognise that the set of natural assets, individually and jointly, may
form part of an urban ecology of one or more larger ecosystems. A particular natural
asset may for instance be a corridor for species movement between feeding and
breeding habitats.
•
The links between different EGS and beneficiaries need to be clearly defined in
order to understand which EGS are of value to whom. This information can then be
used to prioritise and target EGS for further assessment. The number of
beneficiaries, as well as estimates on the value for each of the ecosystem goods and
services to these beneficiaries, determine what the highest ranked values are likely
to be. For this project, the categorisation of users was informed by consulting line
managers in the City. Although such categories may be updated over time, the
approach provides a robust way of prioritising those specific ecosystem goods and
services that are most likely to be of high value to all or certain inhabitants of and
visitors to the City. Including aspects of value from a local beneficiary perspective is
not always applied. In a high-level case study on the economic value of open spaces
in Durban, users were not explicitly categorised as estimated values of EGS were
63
transferred from other international studies and applied on a per hectare basis
(Mander 2009). In the context of this project where specific arguments on the value
of natural assets to socio-economic wellbeing need to be formulated and used to
support budget applications, an approach that ignores the value that local
beneficiaries attach to ecosystem goods and services is not appropriate.
•
The importance of EGS to socio-economic development needs to be clear.
Budget allocations are informed by the strategic objectives of the City’s Integrated
Development Plan (IDP) which, at this stage, has no specific high-level allocation to
any specific environmental category. EGS need to be ranked according to their
impact on the IDP strategic focus areas. Where key EGS are identified but not
acknowledged in the IDP, a separate argument needs to be developed for the
inclusion of these EGS in further planning updates.
•
In order to better understand the chances of successful interventions, the City’s
ability to influence the value of EGS through management and their environmental
mandate should be key considerations when allocating resources. Some natural
assets and flows may be almost completely under the control of the City, others may
be shared with other institutions and groups, while still others may fall completely
outside the control of the City. The assets and flows completely outside the control of
the City are not important when motivating for an increased allocation of financial
resources. It must be noted that the City may still be responsible for enforcement of
regulations or inputs according to NEMA regulations on natural assets that are not
directly within the City’s control.
•
As ecosystems may or may not be close to thresholds and can be subject to many
different types of natural and anthropogenic pressures, EGS need to be screened
on the basis of ecological and socio-economic risks. Specific attention need to
be paid to expected changes over time the impacts this may have on natural assets
and therefore on the sustained flow of EGS. If a particular flow of EGS benefits a
large proportion of the population and it is at risk of being lost or altered in a
fundamental way in future, it would need to receive urgent attention. Risk
assessment needs to take place in some form or another whether in a very detailed
scientific and/or modelling way or as part of a good governance process. One
example is two case studies in Saldana and Richard’s Bay respectively, which
placed a comparative risk assessment at the heart of its approach (Crafford 2009).
Risk descriptions, together with a systems analysis and complemented by a
quantitative or qualitative analysis of scientific studies elsewhere (but relevant to
these Bays) provided the production functions employed to simulate changes in the
level and quality of EGS. The comparative risk assessment (CRA) discussed in
these case studies is an example of how to prioritise EGS based on the risk of
different types of hazards (e.g. harmful algal blooms, invasive organisms, shock
64
wave effects of blasting, habitat loss due to dredging and land reclamation, oil
pollution, and disposal of saline wastewater) on the continued flow of EGS.
3.4 The six-step valuation methodology
Based on the key considerations discussed in the previous sections, a methodology was
developed according to the following six steps:
Figure 3.1:
Six-step valuation methodology
More detail on each step is provided in the following sections.
65
3.4.1 Assess the relative importance of different natural assets for the
generation of EGS
The natural assets of the City can be divided into a number of different categories which, in
turn, yield different types and levels of EGS. A basic understanding of the relationships
between natural assets and EGS flows is needed in order to appreciate which ones are
important in the generation of different EGS. This information can then be used to assist in
further prioritising EGS for assessment. It can also contribute to making the necessary links
between the management of key assets and EGS outcomes. Table 3.3 outlines the broad
categories of natural assets used to categorise the sources of EGS. The three basic
categories of biota (fauna and flora) and soils, the water environment and the atmosphere
provide the first level of basic categorisation. Biota (fauna and flora) and soils are then
divided into natural areas and reserves, municipal parks, sports grounds, agricultural lands
and vacant land. Within the water environment category it is useful to distinguish between
watercourses, wetlands and dams (aquatic environments), and the near-shore coast
(marine environments).
Table 3.3:
Natural asset categories of ecosystem goods and services
Relative importance of natural assets as sources of EGS
Biota (fauna and flora) and soils
Natural
areas &
reserves
Municipal
parks
Sports
grounds
Water environment
Agricultural
lands
Vacant
land
Water
courses,
wetlands
and dams
Nearshore
coast
Atmosphere
3.4.2 Estimate the importance of EGS to users or beneficiaries
The value of ecosystem goods and services is determined by people’s active and passive
use thereof. It is, therefore, critical to consider who the users or beneficiaries of EGS are,
and the relative importance of these EGS to different users. This is best done using a
matrix of users against EGS categories (as presented in Table 3.4).
66
Table 3.4:
Matrix of beneficiaries plotted against EGS category
Ecosystem goods and services (EGS)
categories
Beneficiaries/ users
Primary local beneficiaries/users and relative
importance of EGS to them
Residents
Key commercial
enterprises
R H, E C P L T F, A R C U F
& F d &
& A & E& A
S &
R
R & C M
S
E
Reg
Nat
Key public bodies
Ec H D W
& M &
W
W
S
&
C
N
Water
Natural hazard
Water and
waste
Erosion
Regulating
Pollination
Disease
Pest
Supporting
services
Photosynthesis
Soil formation
Primary
production
Nutrient cycling
Water cycling
Air quality
Climate
Refugia
Fresh water
Fuel
Building
materials
Wild flowers
Provisioning
Medicine
Ornamental
Fish and marine
Genetic
Urban agric
Recreation and
tourism
Inspirational
Cultural
(information)
Aesthetic
Educational
Heritage
Religious
Media
Key: R&S = Recreational and sporting groups; H,F&S = Harvesters, fishers and subsistence producers; Ed = Educational
groups; C&R = Cultural and religious groups; P = Property owners; L = low income groups; T&R = Tourism & recreation;
F,A&E = Film, advertising and events; A&C = Arts and crafts; RE = Real estate; C&M = Construction and manufacturing;
UA = Urban agriculture; F = Fishing (including shellfish); Ec = Economic development; H&W = Health and welfare; DM =
Disaster management; W&W = Water and Waste; S&CN = SANParks & CapeNature
67
Int
For any given EGS, the number of users and estimates of the value of the EGS to those
users are critical considerations. These will determine the anticipated level of importance of
EGS in absolute terms and relative to other services which, in turn, should guide the focus
of valuation work. Such a process of prioritisation can be run relatively easy on a high level
involving experts, managers and/or beneficiaries from the system. Section 3.6 presents the
result of a workshop held with a group of line function managers and senior staff in this
regard.
It should be kept in mind that different lists of EGS and categorisations of users can be
used. In this case both EGS and user groups were identified by consulting City line
managers and categorised by the project team. Although such lists and categories may be
updated over time, the approach provides a robust way of prioritising those specific
ecosystem goods and services that are most likely to be of high value.
3.4.3 Establish links between EGS and development objectives
Although awareness is growing with regard to the broad links between natural assets and
economic development outcomes, there is a need to better understand and spell out these
links when considering the value of natural assets. In this regard, the Integrated
Development Plan (IDP) is recognised as the key development plan for the City. This plan
can be viewed as a strategic guide with regard to development effort and resource
allocation. According to the City’s latest 5-year IDP, the following eight strategic focus areas
have been identified (City of Cape Town 2009):
1. Shared economic growth and development
2. Sustainable urban infrastructure and services
3. Energy efficiency for a sustainable future
4. Public transport systems
5. Integrated human settlements
6. Safety and security
7. Health, social and human capital development
8. Good governance and regulatory reform
These strategic areas are necessarily broad in order to be comprehensive. From the
perspective of the contribution of EGS to these focus areas, it is likely that the greatest
emphasis will fall on the following: Shared economic growth and development, Sustainable
urban infrastructure and services, Integrated human settlements, and Health, social and
human capital development.
The City faces several specific ecological challenges which have been acknowledged in the
earlier IDP of 2006/7 (see Box 3.1). Within the Environmental Resource Management
Department (ERMD) strategies have been developed or are being developed for the
following:
• Energy and climate change
68
•
•
•
•
•
Biodiversity
Coastal zone management
Environmental education, training and awareness
Air quality management
Integrated waste management
Box 3.1:
Ecological challenges in the City of Cape Town
Cape Town is located in a highly sensitive and vulnerable ecosystem. The environment is one of the
strongest assets driving tourism. Rising levels of pollution threaten the river system and there are high
levels of air pollution. The Cape Floral Kingdom has almost 9 000 different plant species and many animal
species. Cape Town is situated in the heart of the Cape Floral Kingdom (the smallest and richest of the
world’s six plant kingdoms), making Cape Town an area of global importance, otherwise known as a global
“hotspot” of biodiversity. In fact, Cape Town is known internationally as a global biodiversity hotspot
without parallel. More importantly, lots of species occur in Cape Town and nowhere else on earth. Cape
Town has the dubious distinction of also being one of the earth’s mega-disaster areas – those areas that
have already or are on the verge of losing a significant part of their biodiversity. The extinction rates in
Cape Town are the highest for any metropole in the world. Not only is Cape Town rich in plant biodiversity,
but also in animal biodiversity. Added to this, Cape Town is surrounded by a unique and diverse marine
environment, which supports many different marine plants and animals such as abalone, the southern right
whale and great white shark. The link to tourism should be emphasised. However, the point that the
environment is Cape Town’s greatest asset, not just from a tourism perspective, but it is our life support
system, also needs to be made. Balancing this with the social constraints is a huge challenge.
Conservation of the natural environment is not a luxury but a necessity as the natural environment
provides us with basic needs such as food, clean water, storm water and flood attenuation service, and
assists with decreasing air pollution and many other services. Everyone has the basic right to a clean, safe
and healthy environment. It is vital that the City ensures that it is sustainable.
Source: City of Cape Town (2007)
It is proposed that the EGS (as ranked in Table 3.1) are assessed according to their impact
on the IDP strategic focus areas and associated specific objectives as relevant to the
ERMD. Where key EGS are identified that are not acknowledged in the IDP, separate
arguments need to be developed for inclusion in further planning updates. The City is
currently busy with a more specific City Development Strategy (CDS) and the EGS will
need to be assessed according to expected impacts on strategic objectives defined here as
well in future.
3.4.4 Assess the City’s ability to influence the value of EGS through
management
The previous steps in the methodology do not make a distinction between natural assets
and EGS flows on the basis of their ownership status or the level of control that the City has
over the EGS. This is, however, an important factor as some assets and flows may i) be
almost completely under the control of the City, ii) be shared with other institutions and
groups, or iii) fall completely outside of the City’s control. The assets and flows completely
69
outside of the City’s control will generally be less important when motivating for an
increased allocation of financial resources. Ranking or screening EGS according to the the
City’s ability to maintain or expand natural assets and the flow of ecosystem goods and
services is thus an important step before devoting resources to the valuation of EGS or
developing a business case.
The process of ranking can relatively easily be executed with inputs from City line function
managers and senior staff who understand the nature of boundaries and have experience
with regard to levels of control within the given mandates. Legal obligations are also
relevant here. In certain instances, the City’s management of natural assets can be viewed
as a response to its legal obligations. For example, the rehabilitation and management of
wetland areas can be motivated by a desire to avoid liability that may stem from flood
events. This kind of legally-driven motivation generally adds to motivations built on
economic values and other factors. The City has a well-defined mandate on service
delivery, but its’ environmental mandate is still unclear. The City is currently reviewing its
environmental mandate which will most probably have an influence on where funds will be
allocated and what organisations the City will partner with in the fulfillment of their mandate.
3.4.5 Assess the ability of ecosystems to yield a sustainable flow of EGS
and prioritise them according to risks
Experience shows that one cannot necessarily rely on natural assets to provide sustained
flows of EGS and the economic values associated with them. Moreover, certain
environments are likely to be more vulnerable to habitat loss and degradation implying that
they face greater ecological risks. These are the environments where thresholds are
important and exceeding these would have particularly onerous consequences in both
ecological and socio-economic terms. For example, if a river system experiences effective
ecological collapse due to pollution, species can be lost and health hazards can emerge,
with associated ecological and socio-economic costs. The natural assets that could be on
the brink of disaster and those that have a higher impact need to be given priority in
assessment.
Ranking or screening EGS according to the level of ecological and socio-economic risks
they face is, therefore, an important step before devoting resources to valuation. As with the
other steps, the process of assessing which assets may be most vulnerable or scarce can
relatively easily be executed with inputs from City line function managers and senior staff
who understand the ecological functioning of the natural assets within the City.
3.4.6 Apply valuation techniques to selected case studies
Once the key EGS have been prioritised using the preceding steps, further assessment
using economic valuation techniques can be done. Such valuation studies should focus not
only on the benefits of preserving or maintaining natural assets and flows, but also on the
70
reduced costs (or savings) of mitigation flowing from a more pro-active management of the
City’s natural assets and EGS. For example, if a wetland is not properly managed and loses
its functions, the costs of alternative technologies to (partially) substitute such functions can
be substantial. It must further be noted that the opportunity cost of losing natural assets and
flows may appear incrementally small at first, but will generally increase exponentially with
increased scarcity. Although economic valuation techniques have been described and
discussed in detail in Phase one of the project, a brief overview is given in the following
sections focused on appropriate technique choice and application.
3.4.6.1
Techniques commonly used for valuation
Valuation techniques can be divided into demand curve approaches and non-demand curve
approaches (see Figure 3.2). Demand curve approaches are welfare measures in the
sense that the implications of changes in environmental quality or attributes on society can
be assessed. In addition, values are derived rather than prices. Non-demand curve
approaches are easier to estimate than demand curve approaches, and are generally more
appropriate when there are not large disparities between price and value.
Figure 3.2: Monetary valuation techniques and economic welfare
71
3.4.6.2
Practical considerations when choosing a valuation technique
Aside from the restrictions of the available adequate budget, there are two important
considerations when selecting a valuation technique. The first relates to the availability of
data and the selection of an appropriate framework. The second relates to which is the
most appropriate technique considering the data and in a given context. Regarding the first
consideration, a sound approach is to first categorise values based on the nature and
availability of prices (Blignaut & Lumby 2004). The following five categories are
distinguished: market prices, shadow prices, direct proxies, indirect proxies, or no proxies at
all. Figure 3.3 provides a framework for selecting an appropriate valuation technique based
on these categories.
Figure 3.3: Choosing a valuation technique
Source: Based on Blignaut and Lumby (2004).
The options are as follows:
• If efficient market prices are available, change in productivity techniques are
preferable.
• If non-distorted (efficient) market prices are not available, surrogate market
approaches (such as the travel cost and hedonic pricing methods) are used.
72
•
•
•
When market prices are not available but direct (efficient) proxies are, a variety of
assumed preference techniques (such as replacement cost, cost of illness,
opportunity cost or dose response methods) or other benefit transfer methods
(BMTs) are applicable.
When indirect proxies are available, revealed preference methods (such as the travel
cost and hedonic pricing methods) are appropriate.
Finally, if no market prices or proxies are available, non-market methods (such as
contingent valuation or choice modelling approaches) may be used.
It should be noted that it is often necessary to use a combination of valuation techniques
rather than a single technique to value environmental benefits. Some techniques lend
themselves more readily for use in combination with other techniques. Once a technique is
selected based on the availability of data, and issues of compatibility with other techniques
are investigated, a number of failsafe principles need to be applied. Table 3.5 outlines the
common avoidable pitfalls encountered in valuation. For example, a technique may be
compatible with other techniques, but if they value the same thing in different ways issues
such as double counting may be a factor. Furthermore, while a technique might be easy to
apply in practice, the results of certain valuation studies may not be readily transferable to a
local context. The given context of a study is important for all valuation studies. In addition
to these principles, it might also be appropriate, in certain instances, to control for income
differentials between groups. Otherwise it suggests that poorer people value the
environment less, which is clearly not an accurate interpretation.
Table 3.5:
Avoiding common pitfalls in valuation
Use net benefits, not gross Failing to consider the costs involved in using resources (the cost of harvesting
benefits
products, for example, or the cost of piping water from its source to the user)
results in an over-estimate of the value of ecosystem services.
Include opportunity costs
The cost of an action is not limited to the out-of-pocket costs involved in
implementing it. It also includes the opportunity costs resulting from the
foregone benefits of alternative actions (or inaction). Omitting opportunity costs
makes actions seem much more attractive than they really are.
Do not use replacement
costs
… unless you can demonstrate (i) that the replacement service is equivalent in
quality and magnitude to the ecosystem service being valued, (ii) that the
replacement is the least-cost way of replacing the service, and (iii) that people
would actually be willing to pay the replacement cost to obtain the service.
Do not use benefits
transfer
… unless the context of the original valuation is extremely similar to the context
you are interested in. Even then, proceed with caution. However, it is a good
idea to compare the results with those obtained elsewhere.
Do not use value
estimates based on small
changes in service
availability to assess the
consequences of large
changes in service
availability
Economic value estimates are not independent of the scale of the analysis.
Value estimates are almost always made for small (‘marginal’) changes in
service availability and should not be used when contemplating large changes.
73
Be careful about double
counting
Many valuation techniques measure the same thing in different ways. For
example, the value of clean water might be measured by the avoided health
care costs or by a survey of consumer WTP for clean water. But consumer WTP
for clean water is due (at least in part) to their desire not to fall sick, so these two
results should not be added together. If they are, the value of clean water will be
over-estimated.
Do not include global
benefits when the analysis
is from a national
perspective
More specifically, only consider benefits (or costs) that affect the group from
whose perspective the analysis is done. Including benefits which are primarily
global in nature in an analysis undertaken from a national perspective is a
particularly common form for this mistake, and results in an over-estimate of the
benefits to the country.
Adjust for price distortions … when conducting the analysis from the perspective of society as a whole, but
not when conducting the analysis from the perspective of an individual group.
Avoid spurious precision
Most estimates are, by necessity, approximate. Do not simply paste the result in
the spreadsheet, with its three decimal points, into the report: round the result
appropriately. When there is substantial uncertainty, report the results as
ranges.
Submit results to sanity
checks
Are the results consistent with other results? Are they reasonable in light of the
context? Extraordinary results are not necessarily wrong, but must be checked
carefully. Extraordinary results require extraordinary proof.
Source: Pagiola et al. (2004).
3.5 Case study: Zandvlei
The previous sections outlined the theoretical and conceptual aspects of the methodology.
In order to make it more real, we now turn to a hypothetical application of the methodology
using an existing valuation study.
A valuation study done for the Zandvlei area as part of a wider City-funded study on the
value of open space areas (see Turpie et al. 2001) was chosen as the ideal case study.
This case study offers the chance to consider a number of benefit streams from a welldefined natural asset, using a variety of valuation techniques. It also illustrates a number of
the key ways in which City management can and does influence values and the welfare
outcomes associated with these values.
Zandvlei is situated in the south peninsula and is bordered by Lakeside, Muizenberg and
Marina Da Gama. It’s a natural open water wetland used for a number of recreational
activities such as canoeing, sailing and windsurfing. Some of its shores in Lakeside and
Muizenberg are lawned parkland, equipped in places with braai and picnic spots, sports
fields and also a boating clubhouse. The portion of Lakeside/Muizenberg North between the
vlei and the railway line is similar to the portion of Muizenberg that borders it on the south.
Residential housing in both these areas offers easy access to the water and, in some
cases, a view over it. Marina Da Gama on the eastern shores also offers these same
benefits, but is distinct in having been designed as a marina. Properties bordering on the
water have direct private access to it and often feature small jetties.
74
In the sections that follow, Zandvlei is assessed using the six-step methodology outlined in
the previous sections and drawing upon Turpie et al. (2001).
3.5.1 Assess the relative importance of different natural assets for the
generation of EGS
In the case of Zandvlei, consideration of the relative importance of the source
environment(s) is made simpler as the primary natural assets that provides the bulk of EGS
at Zandvlei is the wetland area. However, the site also contains the following areas that
provide important EGS:
• The municipal park with lawns, sport facilities and braai areas provide significant
amenity
• Non-aquatic natural vegetation areas
• Coastal area where the vlei enters the sea at Muizenberg
To understand values at Zandvlei it is thus important to appreciate the different elements
that these areas bring to the whole.
3.5.2 Estimate the importance of EGS to users/beneficiaries
Using the overall list of EGS one can identify important EGS in the area. Note that this
process should include a field trip to areas such as Zandvlei for ground truthing. In the case
of Zandvlei, the focus of overall values falls on regulating and cultural services that are
provided at a local level (see Table 3.6). Although provisioning services are also present in
the form of harvesting of flowers and fishing they are not as prominent by comparison.
Table 3.6:
Ecosystem goods and services provided by Zandvlei
Ecosystem services
Water regulation
Regulating
Natural hazard regulation (floods, etc.)
Water purification and waste treatment, assimilation
Space for biota to live and reproduce (refugia)
Recreation and tourism
Provision of inspirational beauty
Aesthetic values and sense of place
Cultural (information)
Educational issues (e.g. school excursions, scientific research)
Use in cultural and artistic practices and ceremonies
Use in religious practices and ceremonies
Use in productions (film and events), advertising and publications
Wild flowers for harvesting
Provisioning
Provision of materials for craft, fashion (e.g. shells)
Fish and marine resources
75
The key focus regarding beneficiaries falls on benefits to the City of Cape Town’s residents.
Under residents, the following categories are key users of the vlei, in likely order of
importance:
• Recreational and sporting groups
• Property owners
• Educational groups
• Cultural and religious groups
• Harvesters, fishers and subsistence producers
Note that, although the vlei is in a middle- to higher-income area, it is well-used by residents
from nearby lower-income areas who have limited easy access to similar facilities.
Under key commercial groups, the following groups benefit from EGS at the vlei, in likely
order of importance:
• Tourism and recreation with an emphasis on local recreational use (as opposed to
tourism from outside of the City of Cape Town).
• The real estate industry benefits from the enhancement of property values.
• The fishing industry is supported by the nursery function performed by the vlei.
• The film, advertising and events industry benefits from the use of the vlei as a venue.
Key public bodies that benefit include the following:
• Health and welfare benefits from the facilitation and encouragement of a healthy
outdoor lifestyle.
• Disaster management benefits from the maintenance of water flows in order to
minimise floods.
• Water and waste benefits from the water quality control and waste assimilation
function provided by the vlei.
From the above it is clear that the vlei creates a relatively large variety of value streams to
various users. Focusing on these users provides a departure point for the valuation of the
vlei.
3.5.3 Establish links between EGS and development objectives
Regarding the broad guidance provided by the City IDP, one can argue that the EGS
provided at Zandvlei impact most positively on the following IDP focus areas:
• Health, social and human capital development
• Sustainable urban infrastructure and services
Social and human capital development benefits are clearly associated with the various
recreational, sporting, educational and cultural uses of the vlei. The vlei can also be viewed
as ‘ecological infrastructure’ providing virtually free services when functioning properly that
would be costly to provide in its absence.
76
More tenuous, but nevertheless valid, links with the following focus areas can also be
found:
• Shared economic growth and development
• Integrated human settlements
3.5.4 Assess the City’s ability to influence the value of EGS through
management
Zandvlei is already a relatively intensively managed area when compared to other vleis in
and around the City of Cape Town. Lawned areas around the park, sporting areas and
braai/picnic areas particularly are actively managed and relatively well maintained. In
addition, water flows both into the vlei and out of it into the sea have been manipulated and
control is exercised over them. At an overall level, it thus stands to reason that the City has
a relatively high ability to influence the state and value of this area. One caveat in this
regard is that control over flows into the vlei is probably the area where the City has to deal
with the highest levels of unpredictability.
3.5.5 Assess the ability of ecosystems to yield a sustainable flow of EGS
With continued adequate City management, the park, braai and sporting areas should yield
a sustainable flow of EGS. In addition, assistance in management should be forthcoming
from boat clubs and residents with an interest in keeping the area maintained.
With regard to risks, water quality probably presents the most difficulty to City management
as it is not as easy to control by comparison to other EGS flows in the area. Note that the
security risk is currently not particularly high relative to other open space areas in the City.
However, it remains a risk that leads to decreased value flows and presents particularly
difficult management challenges.
3.5.6 Applying valuation techniques
3.5.6.1
Choosing valuation techniques
In order to choose appropriate valuation techniques one can draw up a table that links EGS
flows to appropriate valuation techniques. Table 3.7 presents the results of this exercise for
Zandvlei. It shows that there are a number of valuation possibilities and that prioritisation is
required. The 2001 study of this area came to the conclusion that the replacement cost
technique was best suited for estimating the value of regulating services provided by the
vlei and that the hedonic pricing, travel cost and contingent valuation techniques were best
suited for estimating cultural services values. Provisioning services were not measured
mainly because their magnitude relative to regulating and cultural services was relatively
small. If these were to be estimated, harvesting value could be measured simply by
estimating the market value of harvested goods such as reeds and flowers. Benefits to fish
77
production would probably be more complex as it would require the drawing of clear links
between the functioning of the vlei and fish production.
Table 3.7:
Matching EGS to valuation techniques at Zandvlei
Ecosystem services
Water regulation
Regulating
Natural hazard regulation (floods, etc.)
Water purification and waste treatment, assimilation
Space for biota to live and reproduce (refugia)
Valuation techniques
Replacement cost,
preventative costs,
costs of disaster or
system failure
Recreation and tourism
Provision of inspirational beauty
Aesthetic values and sense of place
Cultural
(information)
Educational issues (e.g. school excursions, scientific
research)
Use in cultural and artistic practices and ceremonies
Travel cost, property
price/hedonics.
contingent valuation
and choice
experiments
Use in religious practices and ceremonies
Use in productions (film and events), advertising and
publications
Wild flowers for harvesting
Provisioning
Provision of materials for craft, fashion (e.g. shells)
Fish and marine resources
Effects on production,
cost of alternative
sources
The following sections provide brief summaries of the valuation application and results
taken from Turpie et al. (2001). All amounts are in the year 2000 rands.
3.5.6.2
Replacement cost technique
Wetlands are widely recognised as particularly important providers of EGS per area and
tend to ‘punch above their size’. Several of these services may save cities significant
amounts in terms of infrastructural costs which they would have had to incur if the natural
systems were not present. In Turpie et al. (2001), three replacement cost estimates were
used for determining the equivalent functional value for selected wetlands, namely:
• Estimation of the cost of constructing an artificial wetland
• Estimation of the cost of providing the same level of water quality enhancement
using a treatment plant
• Estimation of the cost of providing for the identified flood storage capacity only, i.e.
the construction of a detention pond providing flood storage
For Zandvlei the replacement cost of a treatment plant was estimated at R180 million and
the replacement cost of a flood storage capacity at R24 million illustrating the magnitude of
the ‘free’ services provided. No estimate of the cost of constructing an artificial wetland was
provided.
78
3.5.6.3
Hedonic pricing/property value technique
The hedonic case study at Zandvlei differed from the norm in that it used both estate agent
interviews and the more conventional statistical technique to generate value estimates. Its
focus was on the estimation of the effects of the vlei and associated open space on
properties in close proximity. For the statistical analysis, property sales data was sourced
from Cape Property Services (including house prices and characteristics), distance to open
space was measured using municipal maps and regressions were run using house
characteristics and proximity to open space.
The results of the statistical analysis compared well with those of the estate agent
interviews. The former technique yielded total property price premiums associated with the
vlei of R77 million for all houses, while that latter yielded an estimate of R87 million.
3.5.6.4
Travel cost technique
The travel cost survey focused on recreational use value by treating travel cost as a
surrogate for value. As such, the technique is less prone to bias than stated preference
methods because it estimates the value of an amenity on the basis of the actual behaviour
of users. The results of the survey indicated that the consumers' surplus ranged from R1 for
visitors from further afield to R33 for visitors living adjacent to Zandvlei, averaging R15 per
visitor. The estimated total consumers' surplus, and hence total recreational use value
using this measure, was estimated at approximately R700 000 per year. Note that survey
respondents felt that the source of this value was relatively equally spread between the
nature reserve, park areas and open water area.
3.5.6.5
Contingent valuation techniques
In the contingent valuation exercise, visitors were asked if they would pay a fee to make
use of Zandvlei on the condition that they would be able to influence how this money was
spent. Most (85%) respondents were willing to pay an entrance fee. Of those who were not
willing to pay, some respondents voiced concern that payment might be a municipal
proposal (i.e. not so hypothetical). The average willingness-to-pay was R6.40 per entry
suggesting an overall willingness-to-pay, or recreational use value, of approximately R640
000 per year in 2000. This estimate was similar to that estimated using the travel cost
technique. Note, however, that it focuses on recreational use and not other value streams
such as option and existence value.
3.5.6.6
Discussion
The Zandvlei case study shows that, as suspected, the vlei is a source of significant
benefits for a wide variety of users. These values are summarised in Table 3.8. Note, from
a technical perspective, that the property value, travel cost and contingent valuation
techniques had areas of overlap that would need to be accounted for in an overall estimate
of value. Although management issues are not summarised here, it should also be noted
79
that the case study found clear links between values and management, water quality and
security levels.
Table 3.8:
Summary of value estimates for Zandvlei
Valuation technique
Value (2000)
Annual value (2000)
Property value technique
R84 million
+/- R6 million
Travel cost
R10 million
R700 000
Contingent valuation
R9 million
R640 000
Replacement cost
R24 million–R180 million
R2 million–R15 million
3.6 Prioritising EGS in Cape Town using the methodology
Prioritisation of EGS in the City was done during a participatory and facilitated setting with
invited City line function managers and senior staff representing all functions related to
ecosystem goods and services in the City. This included those involved in the management
of environmental resources, parks, tourism, heritage, sports and recreation, wastewater,
stormwater, solid waste and spatial planning; or the following City functions:
• Strategy and Planning
o Environmental Resource Management Department
ƒ Biodiversity Management
ƒ Policy and Strategy
ƒ Heritage
ƒ Environmental Management Systems
o Spatial Planning
• Community Development
o Sports, Recreation and Amenities
o City Parks
• Economic and Social Development
o Tourism
• Utility Services
o Water services
ƒ Wastewater
ƒ Stormwater management
o Solid Waste services
The conservation function was also represented by CapeNature’s business unit manager
for the Cape Metro.
The six-step methodology was formulated to act as a high-level guide to prioritise future
valuation work and business case exercises. With this in mind it was applied in a workshop
with the study team and key City line function managers and senior staff.
80
A participatory rapid appraisal approach was followed. Four focus groups were randomly
identified with 4–6 people in each group. Participants were asked to identify and shortly
motivate what, in their view, the most important linkages are between all identified EGS in
the City and:
• beneficiaries
• the achievement of development objectives
• the City’s environmental mandate and ability to influence and
• ecological and socio-economic risks.
The focus group discussions were limited to 15 minutes per topic after which focus groups
reported back to others. The report back was summarised for the benefit of the entire group
and used as an input to further off-line analysis and ranking. The collation of all inputs and
subsequent discussions resulted in three broad categories of EGS or uses that should be
prioritised and considered further:
1. Water quality and regulation of flows
2. Recreational use
3. Conservation of globally important biodiversity
A more formal evaluation was done after the workshop whereby each group’s discussion
points, as contained in the minutes of the meeting, were used to rank importance within
each of the four discussion focus areas in a spreadsheet matrix. If two separate groups
mentioned the same linkage, the relevant block scores a two, if three groups mention the
same linkage the block scores a three, etc. This analysis did not reveal major differences
with the summary presented at the end of the workshop, but revealed some important
nuances. Table 3.9 contains a summary of EGS ranked according to higher, high, medium,
and low importance relative to each other. The five services that were ranked with highest
relative importance for valuation are the regulation of natural hazards, recreation and
tourism, water purification and waste treatment/assimilation, space for biota, and aesthetic
values and sense of place. Definitions are as follows:
• Natural hazard regulation: Buffering ecosystems (e.g. reefs, kelp can reduce the
impact of storms and large waves)
• Recreation and Tourism: People often choose their sites based on the natural or
cultivated characteristics of an area
• Water purification and waste treatment, assimilation: Ecosystems can cause
impurities but also help filter out and decompose organic wastes
• Space for biota: Regulation of habitat and space
• Aesthetic values and sense of place: Aesthetic values are reflected in support for
parks, scenic drives and housing locations
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Table 3.9:
Relative importance of EGS based on perceptions of City line function
managers and senior staff
Higher
High
Medium
Lower
Natural hazard regulation Water purification and
waste treatment,
assimilation
Climate regulation – local Climate regulation global
(air quality)
Recreation and Tourism
Space for biota
Small scale urban farming Fresh water provision
Aesthetic values and
sense of place
Water regulation
Building materials
provision
Fish and marine
resources
Provision of inspirational
beauty
Educational users
Cultural and artistic
practices
Religious practices
Erosion regulation
Disease regulation
Harvesting
Materials for craft and
fashion
Use in productions,
advertising and
publications
Note: Based on results of workshop with City representatives, 12 March 2009
The regulation of natural hazards and recreation and tourism attracted the highest scores
as based on the workshop discussions. Regulation of natural hazards includes the
importance of the environment to deal with stormwater, flooding and sea storms, and to
buffer against or absorb disasters. Such ecosystem services may reduce risks to and costs
of development. Ecosystem services can provide an important role in disaster risk
management. If this is not managed properly it also poses a major risk to infrastructure and
service delivery.
Recreation and tourism services included comments on the importance of nature reserves,
parks, natural and open spaces, and sport grounds for recreational activities (e.g. braai,
picnic, birding, dog walking, sports, fishing) by City residents, as well as the importance of a
sustained flow of EGS to tourism and recreational fishing as economic sectors in the City.
Recreational services indirectly benefits health as well. Ecological risks include climatic
changes and pollution.
The environment’s purification of water and waste followed closely, as well as space for
biota and aesthetic values/sense of place. It was clearly stated by participants that the
82
water purification function is important for downstream users in terms of recreational
activities (such as wetlands and beaches) and human health. The continuation of the water
purification function is also under severe pressure already due to excessive water pollution
and resulting eutrophication.
According to the workshop participants, the environment provides a further key function by
providing space for biota. Fynbos areas have become very fragmented especially in low
lying areas. Coastal dunes are under pressure. The maintenance of biodiversity can play an
important role in enhancing human settlements and, when properly managed, can enhance
safe public areas. Fire management, for instance, is directly linked to the management of
fuel loads. It was mentioned that educational use of natural biota is an aspect that needs
specific attention.
Aesthetic values are gained through nature reserves and green areas, and are expected to
create tangible amenity values in human settlements. Urban sprawl and coastal
development, however, are major risks.
3.7 Conclusion
A robust and tested methodology to value the natural assets of the City of Cape Town was
developed and presented in this chapter. This methodology is based on a national and
international literature review (as presented in Chapter 1), inputs from local resource
economic experts, two independent external reviews and a participatory process with city
line managers and senior staff (as presented in Chapter 2).
The six generic steps followed to prepare a valuation study on EGS in a city context are:
1. Assess the relative importance of different natural assets for the generation of EGS
2. Estimate the importance of EGS to users/beneficiaries
3. Establish the links between EGS and development objectives
4. Assess the ability of the City to influence the value of EGS through management
5. Assess the ability of ecosystems to yield a sustainable flow of EGS and prioritise
according to risks.
6. Apply valuation techniques to selected case studies
The six-step valuation methodology was first tested against a local case study, before
applying this to select key ecosystem goods and services for the City of Cape Town. City
line managers and senior staff played a prominent role in selecting ecosystem goods and
services for valuation. The five services that were ranked with highest relative importance
for valuation are the regulation of natural hazards, recreation and tourism, water purification
and waste treatment/assimilation, space for biota and aesthetic values and sense of place.
83
Chapter 4: Economic valuation
Lead author:
Hugo van Zyl
Contributing authors:
Martin de Wit
Terence Jayiya
Valerie Goiset
Brian Mahumani
4.1 Introduction
This chapter reports on the valuation case studies carried out for the prioritised EGSs in the
following order:
• Tourism value
• Recreational value
• Value of globally important biodiversity
• Natural hazard regulation of fire, floods and storm surge
• Water purification and waste treatment, assimilation
• Aesthetic and sense of place related values focused on:
o
Enhanced health and wellbeing
o
Contribution to the Cape Town brand and an enhanced business environment
o
Benefits flowing to specific sectors: film and advertising
o
Property value enhancement
Valuation techniques applied and the level of detail possible for each EGS varied. Outlines
of the approaches followed are thus presented in each relevant section. Some services are
relatively well understood and best valued at a city-wide scale. Other services lacked
adequate data for average values across the City but could nevertheless be illustrated
using case studies. Though valuation data is still limited, other valuation and environmental
economic assessments conducted in Cape Town provided material for the valuation
exercise. Appendix 4.1 lists the known valuation studies conducted in the City and provides
summary information for each study on study objectives, natural assets and EGS valued,
beneficiaries considered, references to development objectives and the City of Cape
Town’s mandate, references to the City’s ability to influence value streams, references to
ecological and socio-cultural risks, valuation methods applied, value estimates at the time
of the study, and updated value estimates.
84
4.2 Tourism value of natural assets
The national tourism industry has exceeded the growth of virtually all other sectors in the
economy in the post-apartheid era. International visitor numbers to South Africa increased
tenfold in the ten years post-1994 from 640 000 visitors to 6.5 million visitors in 2003. Most
recent estimates were at 9.6 million international tourist arrivals in 2008 and it is not
inconceivable that arrivals in 2010 will be double the number of ten years earlier in 2000
(Van Schalkwyk 2009).
Its current economic impact and importance in the provincial and local economy have been
extensively studied and monitored. One of the most comprehensive studies on this subject
was the development of a tourism satellite account for the Western Cape in 2005 (see
MPBS 2005). This work allowed for the analysis of the contribution of tourism to the subsectors that are supported by it (i.e. accommodation, restaurants, tours, etc.) and found that
tourism makes up 5.9% of provincial GGP in direct terms and 14% of GGP in direct and
indirect terms. In addition, approximately 150 000 direct jobs are supported by the industry.
The contribution of Cape Town to these provincial averages is substantial given its
prominence in the tourism economy of the Western Cape.
While the current economic benefits from tourism are highly significant, Cape Town holds
the promise and has the capacity to grow its tourism sector far further as global awareness
of what it has to offer increases. However, maintaining gains and building on them into the
future will only be achievable if the City actively invests in the management of tourism
assets. The primary asset in this regard is the City’s unique natural environment. Of course
there are a number of other aspects which contribute to the unique tourism package offered
by Cape Town, but it is widely recognised (and verifiable when one considers tourist
behaviour) that the City’s natural assets are the key attraction of tourists.
4.2.1 Measuring tourism values
The tourism value of natural and other areas is commonly measured using the travel cost
technique which is based on the assumption that the willingness of tourists to spend on
travel to a given place reflects the value that they attached to it (see Chapter 1 for a more
detailed explanation of this technique). This can then be supplemented by considering the
entry fees paid by tourists at natural areas. In order to estimate the value of Cape Town’s
natural assets from a tourism perspective, the following steps were thus followed:
1. Estimate the travel costs associated with all tourist trips that include Cape Town in
their itinerary (i.e. the cost of transport).
2. Isolate the relative prominence or weight of Cape Town in the travel decision of
tourists including Cape Town in their travel itineraries.
3. Isolate the relative prominence or weight of Cape Town’s natural assets in the travel
decision of tourists coming to Cape Town.
4. Add entry fees paid by tourists to access natural areas to their travel costs.
85
The first step sets the travel cost ‘baseline’ for all trips that involved Cape Town. The
second and third steps were then necessary to make the link between all travel costs and
those that one can reasonably attribute to Cape Town and its natural assets in particular.
The wealth of information and data that is kept on tourism made it feasible to generate
relatively robust value estimates without using direct surveys. The nature of the valuation
question and data, however, implies a certain level of uncertainty necessitating the use of a
range of value figures.
In order to estimate total travel costs for all tourist trips including Cape Town on their
itinerary, the latest available visitor numbers for the Western Cape were first sourced and
adjusted for normal tourism growth to generate current estimates for tourist numbers (1.8
million international tourists and 2.6 million domestic tourists). These Western Cape tourist
numbers were then converted into Cape Town only estimates for tourist numbers using the
estimates given in Table 4.1 for regions visited in the Western Cape which are based on the
average results from four separate Cape Town Routes Unlimited (CTRU) visitor surveys in
the 2006 and 2007 (see CTRU 2006; 2006a; 2006b; 2007). These surveys found that 93%
of international visitors to the Western Cape visited Cape Town while 54% of domestic
visitors did so.
Table 4.1:
Western Cape regions visited by tourists
The portion of tourists visiting Cape Town for leisure or holiday purposes was then isolated
as tourist here for business, visiting friends and relatives (VFR), conferences and other
purposes were not directly relevant to the analysis. This was done using the estimates
given in Table 4.2 as a guide which are based on the average results from the same four
CTRU visitor surveys in 2006 and 2007 mentioned above. These surveys found that an
average of 76% of international visitors and 65% of domestic visitors to the Western Cape
and Cape Town cited leisure and holidays as the purpose of their visit. These percentages
were adjusted downward to 70% and 60% respectively in order to better reflect the likely
estimate for Cape Town specifically and in order to ensure conservatism. This totals an
estimate of 2.16 million total annual leisure visitors to Cape Town.
86
Table 4.2:
Tourist visit purposes in Cape Town and the Western Cape
Total international and domestic leisure tourists to Cape Town were then split into their
countries and provinces of origin based on survey data (CTRU 2008 for international
tourists and CTRU 2006; 2006a; 2006b and 2007 for domestic tourists) and multiplied by
their likely travel costs based on current averages (air travel for overseas tourists and air
and land travel averages for southern African and domestic tourists). The results of this
exercise (see Table 4.3) revealed that approximately R12 billion and R800 million was
spent by international and domestic leisure tourists respectively in order to undertake trips
that included Cape Town in their itineraries.
87
Table 4.3:
Travel costs associated with trips including Cape Town in their itineraries
After estimating the baseline of travel costs for trips including Cape Town, it was necessary
to estimate the relative prominence or weight specifically of Cape Town in the travel
decision of tourists including Cape Town in their travel itineraries. This was done in order to
be able to ascribe a portion or percentage of travel costs (and therefore value) to Cape
Town. Generating these percentage estimates was characterised by relatively high levels of
uncertainty given the relatively complex nature of the question. Selected data augmented
by reasoned arguments did, however, allow for a reasonable range of estimates.
88
The substantial power of the Cape Town brand in attracting tourists to South Africa is a key
point of departure. In this regard, Cape Town is widely recognised as a must-see
destination within Africa and one of the world’s must-see cities. This increases the
likelihood of it being a key motivating factor when international tourists consider a trip to
South Africa. Box 4.1 provides a summary of the numerous awards bestowed upon Cape
Town.
Box 4.1:
•
•
•
•
•
•
•
•
Cape Town’s travel awards
Leading Destination in Africa – World Tourism Awards 2005, 2006 & 20081
One of the World's Top 10 Cities – US Travel & Leisure 2005, 2006 & 2007
4th Top City in the World – Conde Nast Readers' Choice 2008
Favourite Foreign City – UK Telegraph 2004 & 2005
Best Travel Destination in Africa and the Middle East – US Travel & Leisure 2005 & 2008
3rd Best City In The World – US Travel And Leisure 2008
Best City in Africa and the Middle East – Conde Nast Readers' Choice 2005 & 2008
One of the "Places Of A Lifetime" – National Geographic Traveller, July 2008
With regard to the average number of attractions or areas that generally form part of a
tourists’ motivation to visit South Africa there is no set rule as tastes and the decisionmaking processes of individuals differ. However, the average number of provinces visited
by all international leisure tourists to South Africa was 1.83 in 2007 and this can act as a
guide (SA Tourism 2008). Taking a relatively high average, every international visitor to
Cape Town and the Western Cape will thus generally visit one other province in South
Africa. Intuitively this makes it likely that most international tourists that include Cape Town
in their itinerary would focus on a maximum of four key attractions (including Cape Town)
as motivating factors to undertake their trips.
Taking all of the above factors into account, it seems reasonable to ascribe to Cape Town
between 15% and 35% (with a medium scenario of 25%) of the overall attraction package
that motivates international tourist trips. In other words, the attraction of Cape Town makes
up roughly a quarter of the reason behind undertaking the average trip that includes the
City in its overall itinerary. Of course there will be a range of figures that will make up this
average. For example, some tourists that come to Cape Town will spend almost all of their
time in Cape Town while others will undertake their trip primarily in order to visits a game
park and will place Cape Town further down on their ranking of motivating factors. For
domestic tourists, these percentages have been assumed to be higher at between 40% and
60% primarily because domestic tourists have a significantly lower tendency to undertake
the kinds of multi-destination trips that international tourists often undertake. This increases
the likely prominence of Cape Town in their travel decisions.
Table 4.4 presents the result of applying the above ranges to the total travel costs and
shows that travel costs that can be ascribed to Cape Town will range from R2.2 billion to
R4.7 billion with an average of R3.4 billion.
89
Table 4.4:
Travel costs that can be associated with Cape Town
4.2.2 The role of Cape Town’s natural assets in tourism
The final step in the travel cost valuation was to isolate the relative prominence or weight of
Cape Town’s natural assets in the travel decision of tourists coming to Cape Town. The
CTRU visitor surveys conducted in 2006 and 2007 (see CTRU 2006; 2006a; 2006b and
2007) included questions relating to tourists’ relative preferences for different activities and
attractions of Cape Town and the Western Cape (i.e. the natural environment, cultural
experiences, shopping, etc.). The results of the surveys can be used to infer a likely range
of tourism values that can be reasonably associated with the City’s natural assets. With
regard to actual behaviour, the surveys asked tourists about which activities they
participated in while in Cape Town and the Western Cape. 1 Results showed that Eco and
Nature was the most preferred activity theme out of the six options presented to tourists
(i.e. Eco and Nature, Cultural and Heritage, Outdoor Active, Cosmopolitan Vibe, Gourmet
Delights, and Body, Mind and Spirit). The smoothed averages per activity types presented
in Figure 4.1 indicate that Eco and Nature activities had a relative importance of 44% for all
the surveys.
1
The question asked was “Please indicate the activities you have participated in/will participate in during this
trip/visit to the province?”
90
Figure 4.1: Relative importance of activities
Source: adapted from CTRU 2006, 2006a, 2006b and 2007
The CTRU surveys also asked tourists to indicate which types of scenery they preferred
from a list of 7 possible scenery types. 2 The smoothed averages per scenery type
presented in Figure 4.2 shows the clear emphasis placed by tourists on areas such as
beaches and mountains which together make up 63% of scenery type preferences and
broadly indicates the preference among tourists for natural areas and experiences. These
can be contrasted with the relatively low popularity of non-natural areas. Cape Town is
extremely fortunate in that it can offer a big city experience in tandem with top class natural
areas such as its mountains, beaches and other natural areas. This is what sets it apart
from most other cities on a global scale and it is these assets that need to be protected and
well managed if Cape Town is to continue to grow tourism.
2
The question asked was “What type of scenery do you prefer?”
91
Figure 4.2: Preferred scenery types
Source: adapted from CTRU 2006 and 2006a
In the June/July 2006, CTRU surveys asked people to name the top highlight of their trip to
Cape Town and the Western Cape. 3 The results of this survey, as shown in Figure 4.3,
show that 36% of tourists named a natural attraction as the top highlight of their trip.
3
Tourists were asked, “Of all the places you have visited, which two do you consider to be the absolute
highlights of your trip to the Western Cape? (places only: e.g. Gazi’s restaurant, Mountain Dew Apple Farm,
Sipho’s craft market, a town or city, etc.)”
92
Figure 4.3: Tourist highlights
Source: adapted from CTRU, 2006a
Based on the survey results above and discussions with tourism authorities it seems
reasonable to conclude that Cape Town’s natural assets make up 40%–60% of the
package of attractions that draw tourists and their spending to the City. The value of this
can be measured by applying these percentages to travel costs attributable to Cape Town,
which provides estimates of between R850 million and R2.8 billion (Table 4.5). One then
needs to add entry fees paid by tourists at key natural attractions (i.e. Table Mountain
National Park sites such as Cape Point, Boulders, Silvermine, Tokai and the Cable Way as
well as Kirstenbosch) which amounts to approximately R132 million in 2008 based on a
Table Mountain National Park (TMNP) visitor survey by Donaldson (2009) (see Appendix
4.2 for detailed calculations). Total tourism values associated with natural assets then fall in
the range of R965 million to R2.95 billion per annum.
93
Table 4.5:
Travel costs associated with natural assets in Cape Town
It needs to be recognised that the survey results discussed above do not provide the
perfect tool for the derivation of the relative importance of the City’s natural assets in
attracting tourists. This is primarily because they do not directly ask tourists to rate the
relative importance of the City’s natural assets in motivating them to visit Cape Town. In the
absence of such data, however, they provide a good proxy and may even be somewhat
more reliable as they deal with actual behaviour as opposed to hypothetical importance
ratings. In addition, discussions with City tourism authorities were used to confirm that
results (and the assumptions on which they were based) were reasonable and erring on the
side of conservatism, if anything. The surveys above all asked tourists about their
experiences and activities in the Western Cape including Cape Town. Given that Cape
Town makes up a relatively large portion of tourism in the Western Cape, particularly for
international tourists, it is likely that tourist responses for the Western Cape including Cape
Town will largely mirror those for Cape Town only.
4.3 Recreational value to local residents
One of the most prominent values associated with natural environments in Cape Town are
the many and varied recreational opportunities offered by them. The City’s parks, nature
reserves, beaches and other open spaces allow residents to engage in a number of
activities from walking and braais to canoeing and surfing, etc. The activities play a crucial
role in promoting wellbeing. These recreational facilities are a necessary public good
requiring the active intervention of the City in their establishment and ongoing management.
The economic value of recreational services offered by natural assets is well understood
throughout the world and relatively extensive literature exists on the subject (see for
example RFF 2005 for a review). In addition to international experience, which shows that
the recreational values associated with open space are often highly significant, research on
these values in Cape Town can also be drawn on to understand recreational values. Turpie
94
et al. (2001) estimated the recreation dominated value of all local green open spaces (i.e.
parks, natural areas including City nature reserves, sports fields, vacant land and
agricultural areas) in the Metro South (i.e. Constantia, Lakeside, Fish Hoek, Retreat, etc.)
and the Metro South East (i.e. Khayelitsha, Grassy Park, Mitchell’s Plain, etc.) using a
Contingent Valuation survey. 4 These estimates focused on local open spaces and therefore
did not consider the recreational value that Table Mountain National Park (TMNP) sites,
Kirstenbosch or any of Cape Town’s many beaches offer to residents. Fortunately the value
of Cape Town’s most popular beaches was assessed by Balance et al. (2000) using the
travel cost technique. A comprehensive visitors survey conducted for all TMNP sites in
2008 (Donaldson 2009) also provided adequate data to estimate the recreational value of
TMNP to Capetonians and tourists based on travel costs and entry fees paid. In order to
estimate the current recreational value of all natural assets in Cape Town, the three
sources mentioned above were used with extrapolations and updates where necessary,
primarily taking population growth and increased travel costs into account.
4.3.1 The value of local green open spaces
Using a Contingent Valuation survey, Turpie et al. (2001) found that the average
willingness-to-pay (WTP) among locals for keeping all open spaces in their areas was
approximately R186/yr per household. This study generated data for the Metro South (a
middle to high income area) as well as the Metro South East (a predominantly low income
area with pockets of middle to high income residents) making its results a suitable average
for Cape Town as a whole. In order to update the results of this study, household numbers
were updated to 2009 levels and WTP estimates were inflated at the general inflation rate
over the period 2001 to 2009. The results of this exercise reveal a conservative average
value of local green open spaces of approximately R270 million per annum (see Table 4.6).
Table 4.6:
Value of local green open spaces in Cape Town
4.3.2 The value of Table Mountain National Park sites and Kirstenbosch
In order to estimate the recreational value of Table Mountain National Park to Capetonians,
the results of a 2008 visitor survey (Donaldson 2009) provided adequate data to generate
value estimates based on travel costs and entry fees paid. This was supplemented by
visitor data for Kirstenbosch Botanical Gardens where usage patterns were assumed to be
4
Note that City of Cape Town owned nature reserves attracted approximately 108 000 visitor from July 2008
to June 2009 generating roughly R555 000 in income from the City.
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similar to high use areas in TMNP (i.e. Cape Point, Table Mountain Cable Way and
Boulders) except for an increased proportion of Capetonian visitors relative to foreigners.
The visitor survey provided data on visitor numbers, visitors origins, visitors profiles (e.g. %
of visitors who were children), mode of transport, average distance of travel. This
information was supplemented by gate fee data in order to estimate total travel and entry
costs at all TMNP sites and Kirstenbosch of approximately R75 million per annum (Table
4.7; see also Appendix 4.2 for detailed calculations).
Table 4.7:
Local recreational value of TMNP sites and Kirstenbosch
Source: based primarily on 2008 TMNP visitor survey (Donaldson 2009)
4.3.3 The value of Cape Town’s beaches
Balance et al. (2000) applied the travel cost technique to estimate the recreational value of
beaches to locals. First, the number of beach visits was estimated for residents from
different parts of Cape Town which were then multiplied by average trip costs from these
areas. Updating these visits to reflect increased populations and updating travel costs
resulted in a current recreational value for the selected beaches at approximately R58
million per annum (see Table 4.8). While the list of beaches used in Balance et al.’s (2000)
study is relatively comprehensive it is not complete and excludes a number of beaches
including Strand, Gordons Bay, Glen Cairn, Sea Forth, Scarborough, Kommetjie,
Noordhoek, Hout Bay and Melkbos. After considering likely usage levels at these beaches
relative to those included in the Balance et al. (2002) study it seemed reasonable to
increase the likely recreational value of the beaches included in the study by 20% to R70
million in order to better reflect the value of all beaches in Cape Town. This is probably a
particularly conservative estimate when one considers that a number of the key beaches
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have since been enhanced to the point where six of them now have Blue Flag status (see
Box 4.2) thereby adding to their likely values.
Table 4.8:
Local recreational value of Cape Town’s beaches
Box 4.2:
Blue Flag beaches – benefits and risks of a loss of status
Blue Flag is an international accreditation programme for beaches and marinas with 39 participating
countries. It has become a highly marketable symbol of quality recognised by tourists and others and is
awarded to beaches that meet a specific set of criteria concerning environmental information & education,
water quality, safety & services, and environmental management. Cape Town has six Blue Flag beaches
distributed across all incomes areas, namely, Bikini, Mnandi, Strandfontein, Muizenberg, Camps Bay, and
Clifton 4th beach.
The key benefit of Blue Flag is that it brings a reliable guarantee to tourists and local residents regarding
the environmental quality of beaches. Furthermore, it has served to encourage local authorities and other
tourism stakeholders to constantly enhance the environmental quality of their beaches and their
destinations as a whole. Benefits can be better understood by looking at the consequences of their loss
elsewhere. In early 2008, four of Durban’s major bathing beaches were stripped of their Blue Flag status
for cleanliness, infrastructure and water quality reasons. Although misunderstandings and personality
clashes were probably partially to blame, the loss of Blue Flag status has drawn highly significant media
attention with reports of tourists coming to Durban but only venturing as far as their hotel swimming pools.
This has resulted in a loss of confidence in the standards of Durban’s beaches among tourists and locals
alike and decreases in their perceived value. Instead of a significant positive signal, a major negative
signal is being sent to tourists and residents that environmental standards either don’t matter enough or
that they can’t be maintained.
4.3.4 The combined recreational value of Cape Town’s natural assets
Table 4.9 combines the local recreational values for local green open spaces (including City
nature reserves), TMNP, Kirstenbosch and local beaches to arrive at a total local
recreational value of natural assets in Cape Town of between R407 million and R494
million per annum. Values generated for local green open spaces and beaches were
viewed as a probable minimum (low scenario) value primarily as they do not take into
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account increased incomes over the period since 2001. Incomes have increased beyond
population growth over the period and should be associated with higher relative values for
recreation and natural assets given the link between high incomes and greater demand for
recreation and nature-based activities. Medium estimates of values for local green open
spaces and beaches have thus been assumed to be 10% higher and high estimates a
further 10 % higher. For TMNP sites and Kirstenbosch, the medium scenario was based on
survey results and high and low scenarios were estimated using a 10% increase and
decrease respectively.
Table 4.9:
Total recreational value of Cape Town’s natural assets
4.3.5 Future recreational value opportunities
It is important to appreciate that the recreational value estimates above are based on
current recreational opportunities – i.e. they relate to (1) the way these facilities and areas
are managed and perceived and (2) the availability of facilities and areas for recreation.
Significant additional value creation opportunities are to be found when considering these
factors as discussed below.
4.3.5.1
The impact of management on values
The establishment of recreational areas is an obvious pre-requisite for the creation of
recreational value. Important to sustaining value, however, is also how these areas are
managed once established. Values primarily take their lead from adequate facilities (e.g.
maintained trails, benches, toilets, play parks, etc.), cleanliness (including litter and other
noticeable effects such as poor water quality) and security. For example, Turpie et al.
(2001) found that the majority of respondents to the contingent valuation survey covering
the Metro South and Metro South East said that their perceptions of, or values for, open
space were negatively affected by crime. They classified their local park or the one they
used most often as having a medium to high risk of crime. In addition, 39% and 51% of
Metro South and Metro South East respondents, respectively, considered their local park to
be somewhat or very dirty. Respondents also indicated that if crime and cleanliness were
both improved to a high standard, the value of parks (as indicated by visitation rates) would
increase by 17.5% for both areas combined. It was also clear that some Metro South East
residents perceived that higher income areas have safe open space areas while their areas
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are neglected and unsafe, and consequently of little or even negative value to them. Turpie
et al. (2001) also made site-specific comparisons using the contrast between Zandvlei and
Zeekoevlei to assess how safety and cleanliness had an impact on people's choice of
recreational area. Survey results indicate that Zandvlei was perceived to be a generally low
risk area, while Zeekoevlei was perceived to hold a high to medium risk. Zeekoevlei was
also perceived to have significantly worse water quality than Zandvlei along with lower
levels of cleanliness and aesthetic appeal.
Van Zyl (2007) also found that values in Cape Town can be enhanced by well-managed,
secure wetlands and open spaces. Effectively it was found that values were largely driven
by the quality of management and the public’s perception of the relationship between these
areas and their role in social issues such as crime. In one case study it was found that
values created by the rehabilitation of a section of the Kuils River (including green areas
and a walking trail along the river banks) had fallen away. The area in question had become
overgrown, trails were no longer neatly demarcated and the majority of the trees planted
near the river had died. This led to the re-emergence of the negative perceptions and
values attached to the area before it was rehabilitated.
4.3.5.2
Availability of facilities and areas for recreation
Particularly in lower income areas, the availability of facilities and areas for the recreational
use of natural assets and local green open spaces are still severely limited resulting in
artificially low current values. However, with additional facilities and management, values in
these areas and others stand to increase significantly. These option values are best
illustrated through examples of areas where investment continues to yield significant values
including the park and natural areas at Zandvlei and the Lower Silvermine River wetland
(see Box 4.3).
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Box 4.3:
Value creation at Zandvlei and the Lower Silvermine River
Section 4.3.5.1 outlined the substantial recreational and aesthetic value associated with Zandvlei in
Muizenberg as estimated by Turpie et al. (2001). In a general sense the vlei area and surrounding park is
well managed and well used by both residents in the surrounding suburbs as well as people from further
afield. The hedonic case study at Zandvlei focused on the estimation of the effects of the vlei and
associated open space on properties in close proximity. It found that total property price premiums
associated with the vlei were between R77 million and R87 million in 2001. In addition, the travel cost
survey provided estimates of total recreational use value at about R700 000 per year. A contingent
valuation exercise in which visitors were asked if they would pay a fee to make use of Zandvlei also
provided further confirmation of significant recreational use value.
In 1999 the City undertook the upgrade and rehabilitation of the Lower Silvermine River in Fish Hoek. The
project fulfilled its brief through a combination of engineering and ‘indigenous’ landscaping solutions.
Flood control measures included the excavation of a flood plain and the use of excavated material to fill
adjacent properties in order to raise them above the 1 in 50 year flood line. Bird perches and small islands
were included in the wetland, attracting birds to the area and the recreational potential of the site was
further realised through the establishment of trails, a wooden bridge over the wetland area, information
boards, benches and a parking lot. The area has become extremely popular with locals. Van Zyl et al.
(2004) estimated that the recreational and aesthetic benefits of the project reflected in property value
increases amounted to roughly R45 million whereas its costs were roughly R11 million yielding a
significantly positive net present values (NPV) in the order of R34 million and a benefit:cost ratio slightly
above 4:1. The central message of the case study is that the overall benefit:cost ratio of the project would
have been very low or even negative if a narrow ‘engineering only’ approach had been followed providing
clear guidance for the maximisation of benefits in future projects.
The case of the False Bay Ecology Park (FBEP) provides key lessons with regard to taking
a strategic view on future value potential. The vision for the False Bay Ecology Park is to
become one of the leading conservation, environmental education, recreation and
ecotourism centres in the country, and to provide environmental, tourism, social and
economic opportunities and benefits for Capetonians, especially those in nearby
disadvantaged areas. It covers 1 200 ha and includes the six key areas of Rondevlei and
Zeekoevlei Nature Reserves, an adjacent coastal strip, the Cape Flats Waste Water
Treatment Works, the Coastal Park Landfill Site and the CAFDA Stables Craft and Culture
Centre. The Rondevlei and Zeekoevlei Nature Reserves support examples of Cape Town’s
threatened vegetation types as well as wetland and open water habitats. A family of
hippopotamus is present in Rondevlei and Zeekoevlei is used for water sports such as
sailing and rowing. Contiguous to the nature reserves, the waste water treatment works
(also known as Strandfontein) is one of South Africa’s “Important Birding Areas” where up
to 20 000 birds gather, representing a remarkable diversity of species including nine Red
Data species. The Cape Town Environmental Education Trust runs two overnight facilities
with a focus on high quality, low cost outdoor education. Together these can accommodate
160 learners and educators (CCT 2008).
The FBEC area is certainly used at present and value is derived from this use. However,
current values represent only a fraction of what values could be when one makes
comparisons to areas such as Zandvlei that have better facilities, higher environmental
quality and less security issues (see Section 4.6 for a discussion of water quality issues that
constrain value in the area). Areas such as the FBEP are thus best viewed as places with
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highly significant option values that need to be protected and well managed in order for the
highest possible value of these areas to be realised in the future. This will require political
will and investments as the FBEP faces many challenges, including encroaching urban
developments, security, illegal dumping, littering and water pollution. While values are
necessarily driven by City interventions which is to be expected given their public good
nature, the activities of community-based initiatives such as Cape Flats Nature are also
critical (see Box 4.4).
Box 4.4:
The role of community support and partnership in creating value
The role of local communities partnering with the City and other relevant agencies in helping to generate
and secure recreational and other environmental values should not be underestimated. The involvement
of local community groups and other partners in the planning stages of new projects such as parks is
clearly important. However, they can also provide a significant boost to City investments with their own
investments of time and resources thereby reducing the need for the City to go it alone with funding and
increasing the chances of success.
In the case of the Lower Silvermine River upgrade, during rehabilitation, the Friends of Silvermine River
participated in ensuring that environmental goals were met. After rehabilitation, the group still plays an
important role in ensuring the continued conservation and sound management of the area including
activities such as alien hacking, rubbish removal, monitoring public behaviour, educational projects, the
raising of funds for maintenance and the promotion of the area (Van Zyl et al. 2004). There are a number
of other ‘Friends’ groups throughout the City that do similar work and nearly every nature reserve
managed by the City has a dedicated volunteer community group supporting the Biodiversity
Management Branch’s work in many ways. In addition, local communities participate in the advisory
committees of the reserves (CCT 2008).
Cape Flats Nature also offers an example of what is possible in partnership with communities in lower
income areas. This project is essentially a catalytic stewardship project that involves citizens and
communities taking responsibility for management of biodiversity in partnership with City nature
conservation officials. It was founded in 2002 as a partnership project of the City of Cape Town, the South
African National Biodiversity Institute, the Table Mountain Fund (WWF-SA) and the Botanical Society of
South Africa.
4.4 Values associated with globally significant biodiversity
It is difficult to overestimate the importance of Cape Town from a biodiversity value
perspective. The Cape Floral Region (CFR) with Cape Town at its heart has almost 9 000
different plant species 70% of which are endemic (i.e. confined) to the region. The CFR is
also easily the smallest of six globally recognised floral kingdoms and is the only one
located within a single country’s borders. Although comprising only 4% of South Africa’s
land surface, it encompasses half of the country’s plant species, 40% of the national
vegetation types and a highly disproportionate 20 out of 21 “critically endangered” national
vegetation types (CCT 2008). All these factors have contributed to the CFR’s status as one
of only 34 global “biodiversity hotspots” (defined as a region rich in endemic plant species
that has lost 70% of its habitat and is threatened with further destruction). Within the CFR
hotspot, Cape Town has an extremely important place as a key centre of endemism
harbouring very high concentrations of biodiversity. If one considers the biodiversity within
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the City’s boundaries it can convincingly be argued that it is the most important city in the
world from a biodiversity conservation perspective.
While faunal diversity cannot compare with that of the flora, the perception that fynbos has
a low faunal species diversity is not accurate. Much of the fauna, however, is
inconspicuous, nocturnal and occurs at low densities. The CCT is blessed with 18 terrestrial
vegetation types, numerous wetlands, an extensive coastline as well as great topographical
variation. This diversity of habitat provides numerous niches that allow a large suite of
faunal species to exist (CCT 2008). Added to this, Cape Town is surrounded by a unique
and diverse marine environment.
While foreign donor funding of conservation does not provide a reliable estimate of the
value of biodiversity, it does provides an indication of the importance of the biodiversity of
the CFR at a global scale. In recent times this funding has been substantial and has
primarily flowed through the Cape Action for People and the Environment (C.A.P.E.)
Programme. C.A.P.E. is a partnership of roughly 23 government and civil society
institutions aimed at conserving and restoring the biodiversity of the CFR and the adjacent
marine environment, while delivering significant benefits to the people of the region. In
2004, the C.A.P.E. programme received two Global Environment Facility grants totalling
US$14 million in addition to a Critical Ecosystem Partnership Fund five-year grant of US$6
million to the (CFR) from 2002 to 2006. This funding equates to approximately R225 million
in current values – a highly significant recognition of the international importance of the
biodiversity contained in the Cape Floristic Region.
Going beyond foreign funding indications and attaching a quantitative value to biodiversity
per se is generally recognised as a difficult and potentially highly misleading exercise. This
is primarily because, while extremely important, it is very difficult to isolate or adequately
‘compartmentalise’ biodiversity in a conventional valuation exercise. It is thus best to
understand the conservation of biodiversity as an important pre-requisite for ecosystem
services to exist and flourish thereby giving rise to value streams. Biodiversity needs to be
recognised and valued as a critical ‘umbrella’ service without which most other valuable
ecosystems services would be diminished or may even become unavailable. To name a
few examples, tourism flows are enhanced by biodiversity, the sense of place associated
with Cape Town is intricately linked to the uniqueness of the biodiversity in the City,
biodiverse systems increase resilience to change and provide services to agriculture such
as pollination and pest control. Natural areas also facilitate significant educational benefits
(see Box 4.5)
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Box 4.5:
Educational values associated with the City’s natural assets
Cape Town’s various natural assets provide for more fulfilling and varied educational experiences among
learners. They provide a huge open-air classroom for environmental education and extensive education
programme are associated with them with the most prominent ones being run by the City, TMNP and
SANBI. During the year July 2008 to June 2009, a total of 23 781 learners (equivalent to 59 708 days of
education) from roughly 500 schools attended environmental education programmes on City reserves.
With regard to Table Mountain National Park, the primary thrust of the programme is the training of
teachers at previously disadvantaged schools that can then educate the children in their classrooms and
take them on field trips to the Park. Transport is provided free of charge using busses and an average of
180 teachers are trained per year. The current average number of learners visiting the Park on field trips
was 12 000 children per year up from 10 000 in 2004 (Standish et al. 2004). The Park has seven
permanent staff members working on education and part-time volunteers also provide assistance.
The Kirstenbosch Environmental Education Programme started in 1996 and has a number of different
focus areas. The Garden-based School Programme offers lessons to learners from Grade R to Grade 12
in the Kirstenbosch Gardens. A team of education officers facilitate these lessons engaging learners with
the range of topics. Approximately 14 000 learners per year benefit from this experience and the
Kirstenbosch Outreach Bus provides free transport for learners from disadvantaged areas. Schools and
pre-schools also organise their own 'self-guided' education programmes in the Garden. The Outreach
Greening Programme works with schools and communities to establish indigenous water-wise gardens.
Teacher Professional Development is also a major focus area along with learning resource materials
development.
4.4.1 Threats to biodiversity values
While current values associated with biodiversity in Cape Town are highly significant they
are far from secure (CCT 2008). The City is recognised as an area that has already, or is
on the verge of, losing a significant portion of its biodiversity assets. While biodiversity in
the sandstone and upper mountain habitats of the city remains relatively intact in areas
such as the Table Mountain National Park, the situation in flatter areas is critical. The
extremely poor conservation status of the majority of the vegetation types within the City
relates to the large-scale land transformation that has taken place in the lowlands for
agriculture and urban development. Currently there is an intensifying biodiversity
conservation crisis in the Cape Town lowlands (a large part of which is known as the “Cape
Flats”), with only extremely small areas of lowland vegetation formally conserved. Of the
450 Red Data listed species found in Cape Town, 318 are threatened with extinction of
which 203 are on the Cape Flats (CCT 2008).
Invasive alien plants also continue to have a disastrous impact on species. They often have
better adaptive capacity allowing them to successfully compete with indigenous species
and ecosystems. They highjack water resources from indigenous species and because of
their density and height, can capture the light to the detriment of smaller indigenous
species. Finally, alien seeds can resist extreme soil temperatures a lot better than those of
some fynbos species making fire their ally in further spread.
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The City (and South Africa in general) are at the forefront of biodiversity conservation
planning and has produced a Biodiversity Network plan and map that shows the minimum
amounts of remnant land parcels requiring conservation if biodiversity is to be maintained.
Information on what is needed is therefore available but accelerated implementation is
required to avoid irreversible losses.
4.5 Natural hazard regulation
Natural hazards including fires, flooding and storm surges have significant negative impacts
on the safety and wellbeing of Capetonians, their property and other assets. Ecosystems,
however, naturally act as barriers, or buffers, against natural hazards, thus mitigating their
negative impacts (see Figure 4.4). However, the more ecosystems are weakened, due to
human activities, or lack of adequate management and restoration, the lower their
performance as natural barriers and buffers against natural hazards, leaving the people of
Cape Town more vulnerable. When assessing the natural hazard regulation function of the
City’s natural assets/capital, it is therefore important to pay attention to all that threatens
these assets’ role in hazard regulation and understand where changes for the better are
possible and costs can be saved.
Natural Hazards
• Fires
• Flooding
• Storm surge &
Sea-level rise
E
C
O
S
Y
S
T
E
M
S
Reduced
Consequences
• Damages
• Management costs
• People at risk
Figure 4.4: Natural hazard buffering by ecosystems
The value of buffering and mitigation services generally goes unnoticed until disaster strikes
and often significant, yet avoidable, damage is done. The magnitude of these damages and
their probability of occurrence when ecosystems are weakened can thus be used to attach
indicative values to the natural hazard regulation function of the City’s natural
assets/capital. Aside from this measure, the costs associated with additional preventative
management measures that are necessitated by the weakened buffering capacity of
ecosystems can also give an indication of value.
In what follows, the natural hazard regulation functions of the City’s natural assets are
assessed with regard to fires, floods and storm surges. Values are attached to these
functions where possible. The focus falls on:
• The nature of the hazards and their consequences (incl. frequency, damages,
vulnerability, etc.)
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•
The role and value of natural assets in hazard regulation
4.5.1 Wildfire prevention and mitigation
The summer months in Cape Town are prevailingly dry, hot and windy and as a result the
area is highly vulnerable to wildfires. These fires are associated with injury, loss of life,
community dislocation, damage to property and ecological damage. In addition, disaster
management expenditure on controlling fires and cleaning up after them is significant. In
Cape Town the consequences of fires are easily exacerbated as homes are located in, or
adjacent to fire-prone areas of vegetation. This increases risks to property and/or life and
may also force fire fighters to shift their attention towards structure protection instead of
focusing their efforts on controlling fires.
4.5.1.1
Fire damage costs
The total annual economic cost of destructive wildfires in South Africa has been estimated
by the CSIR at R743 million per year in 2006. For the Western Cape, the damages to land
values have been estimated at around R15 million per year, but could be as high as R30
million when figures are proportionally adjusted for anecdotal evidence supporting national
estimates (DEA&DP 2007). These are probably conservative estimates when one
considers the R30 million to R40 million in damages attributable to the March 2009 fires in
Somerset West (R25 to R30 million in damages for Lourensford wine estate and R5 million
to R10 million for Vergelegen wine estate (Nombembe & Davids 2009)).
Aside from damages to property and other assets, fires are also associated with morbidity
and mortality impacts that tend to effect the most vulnerable in society. Although deaths are
relatively rare they do occur and as a rule they affect the most vulnerable sectors of society
who often live in fire-prone informal settlements. Fire smoke can also be associated with
health impacts. For example, in the 2008/2009 fire season, a thick pall of smoke often hung
over the city as fires swept outlying areas for a total of 16 days. This smoke was associated
with a range of health problems such as asthma, irritation of the eyes, throat, and lungs,
which could lead to respiratory or heart problems particularly among the young and the
elderly.
4.5.1.2
Fire management costs
Fire fighting costs can vary widely depending on risk. According to Kruger et al. (2004) (as
quoted in CSIR 2006), the baseline cost of a Fire Protection Organisation (FPO) in an area
with an extreme or high-risk rating is R375 000 per annum, compared to R130 000 in a
moderate risk area. Because wildfires break out seasonally in the City, it needs to have
adequate equipment and a trained service to fight fire which comes at a significant cost. For
example, it costs close to R23 000/hour to keep a Working on Fire helicopter in the air in
addition to the annual standing fee of R1 million per helicopter (DEA&DP 2007). With
regard to recorded costs, direct costs of fire fighting associated with the January 2000 fire
105
on the Cape Peninsula amounted to $500 000 or R6.4 million in current terms (Kruger et al.
2000).
4.5.1.3
The role of Invasive Alien Plants in fire
For the natural fynbos ecosystems in the City, fires need not be a cause for concern as
these systems are ‘fire driven’ and rely on fire for renewal. However, this only holds for fires
with a natural frequency (the mean natural fire period in the Western Cape is about 15
years, with intervals between fires ranging between 4 and 40 years (Midgley et al. 2005)),
intensity, extent, type and seasonality that are fuelled by natural vegetation (i.e. fynbos).
Fires that do not meet these criteria can have significant and avoidable negative socioeconomic consequences that impose high costs on the City and its residents.
The presence of Invasive Alien Plants (IAPs) in Cape Town remains a serious cause for
concern with regard to fire mitigation. On the whole these plants remain relatively
widespread and are a major aggravating factor with respect to wildfire frequency, extent
and intensity while posing a key threat to local biodiversity and being associated with
increased security and water supply risks. The fire-related impacts from IAPs include the
following:
• Increased fire intensity due to greater fuel loads. IAPs are generally associated with
significantly greater biomass when compared to natural vegetation which leads to
larger more intense fires. Fuel loads can exceed those for fynbos by up to tenfold
(Versfeld & Van Wilgen 1986; Van Wilgen & Richardson 1985).
• Denser stands make fires more difficult to fight on the ground (hamper access for fire
fighting and sight lines).
• Increased erosion potential and soil loss after fires as the increased intensity of alien
fuelled fires burns the soil at a higher temperature thereby damaging it and making it
significantly less stable. Studies have demonstrated that soil loss increases 20 to 60fold after fire in grassland and fynbos catchments afforested with pines (Scott & Van
Wyk 1990)
These impacts lead to higher damage costs, higher firefighting costs and avoidable cleanup costs. The magnitude of these direct and indirect damages and costs are difficult to
model and foresee given uncertainties. However, previous experience as follows indicates
that they are significant:
• In January 2000, two wildfires burnt 8 000 ha on the Cape Peninsula resulting in
insurance claims of approximately $5.7 million or R73 million in current terms
(Kruger et al. 2000), and it appeared that most houses and structures that were
damaged were in areas invaded by alien plants, where fire intensities were much
higher than in adjacent un-invaded areas. Furthermore, after the 2000 fires, an
average of 147 tons/ha of soil was lost from alien invaded areas compared with
negligible losses from areas with natural vegetation (Euston-Brown 2000).
• In March 1999 a wildfire on the Cape Peninsula created water-repellent conditions in
an invaded area which formerly had no overland flow (Scott 1999). A month later,
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•
heavy rains were followed by floods with clean-up costs amounting to over $150 000
in addition to flood damage to 30 dwellings which probably also totalled at least
$150 000 (Van Wilgen et al. 2001). Importantly, these impacts and costs totalling
R3.8 million in current terms did not occur to adjacent areas that were not invaded by
alien species.
With regards to increased costs of fire management, De Wit et al. (2001) estimated
an incremental costs increase of 5% in fire management due to the presence of
invasive black wattle. This was based on the understanding that black wattle
increases fire hazard in extreme weather conditions (Van Wilgen & Richardson
1985).
4.5.1.4
Status of IAPs and clearing costs
Current expenditure on alien clearing has achieved significant risk reductions. However,
serious risks remain particularly on land that forms part of the City’s Biodiversity Network
and therefore has a high biodiversity value. Inaction or even a business as usual approach
will only result in exponentially increased costs over the longer term. This is because
clearing and ongoing control costs for areas that are lightly infested by IAPs are
substantially lower than these costs for denser more mature stands that have been left to
grow. Hence, there is a strong argument for the early detection, prevention and rapid
response, if at all possible.
The continued presence of IAPs also results in a vicious cycle linked to further increased
fire frequency. Many IAPs are adapted to fire and spread more readily and faster when fires
become more frequent (particularly species such as the Australian acacias). Fires,
enhanced by the presence of IAPs to start with, can thus further enhance the spread of
alien invasives. According to Forsyth et al. (2004), CapeNature estimated that the additional
costs necessary to control post-fire flushes of IAP seedlings to prevent them becoming
dominant over the next few years amounted to R17.5 million following fires on 40 000 ha in
2006. Alternately, if funds or capacity do not allow for immediate follow-up, the costs of
control rise as the plants grow. If the infestations were to be left for 10 years, CapeNature
estimates that control costs would rise almost four-fold to R65 million on the same 40 000
ha.
4.5.1.5
The role of natural assets in managing risks
The damages, management costs, disruption and other social costs associated with fires in
Cape Town are highly significant particularly for those most vulnerable. The presence of
invasive alien species and their influence over fire intensity in particular, exacerbates costs
and results in a vicious cycle that feeds the further spread of alien invasives adding further
to costs. The continued presence of IAPs thus represents a situation in which inadequate
management of the natural environment leads to the amplification of costs associated with
fires.
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Damage and management cost estimates described above are for the status quo and have
been used as guides to generate likely low, medium and high total cost scenarios as given
in Table 4.10. Note that in the absence of reliable data, management costs have been
assumed to roughly equal damage costs (this reflects the likelihood that management effort
is equal to potential damages at a minimum). The key question with respect to the value of
enhanced management of the natural environment is what level of damages and
management costs could be avoided through IAP clearing and control? Unfortunately, a
lack of quantitative data on the relationship between IAPs and damages and management
makes this question difficult to answer with confidence and is, therefore, best dealt with
using likely scenarios (low, medium and high) based on the current understanding of links
outlined above. Based on this understanding, it seems reasonable to assume that between
5% and 10% of current damages and management costs can be avoided with optimal
management of natural assets (i.e. strictly applying the City’s targets with respect to IAP
clearing and control as per the City’s Integrated Metropolitan Environmental Policy (IMEP
2009)). Optimal use would thus translate into natural asset values between R1.5 million and
R5 million per annum in terms of current costs avoided (Table 4.10).
Table 4.10: Value of damages and management costs that could be avoided through IAP
clearing and control
Looking to the future, climate change will most likely play a key role in intensifying
challenges associated with IAPs and fires. According to Midgley et al. (2005), the frequency
of intense wildfires will most likely increase substantially, and high fire risk conditions are
projected to almost triple in the western parts of the Western Cape including Cape Town.
Indicatively, if the fire risk ratings of all municipalities were adjusted just one rating upwards,
the additional costs for fire protection organisations could amount to R7.5 million per annum
across the Western Cape.
The assessment above focuses on the role of IAPs in exacerbating fire. It needs to be
borne in mind, however, that IAPs pose other threats to society as, or more, important than
those associated with fires (see Box 4.6).
108
Box 4.6:
Non-fire impacts associated with invasive alien plants
Invasive alien plants are one of the key threats to indigenous biodiversity (see section 4.4.1) and
highjack a significant part of the already scarce water resources of the area hence the need for the
Working for Water Programme. In the mid-nineties, the first studies quantifying the impacts of IAPs on
water resources (Van Wilgen et al. 1992; Le Maitre et al. 1996; Van Wilgen et al. 1996) were released,
drawing attention to the seriousness of the problem. A further study by Versfeld et al. (1998) suggested
that invasive alien plants could be using as much as almost 7% of the country’s runoff with higher
reductions in the Western Cape reaching of up to 15.8% (Enright 1999).
In addition to these impacts, IAPs introduce significant social costs. Especially in an urban setting such
as Cape Town, dense stands of alien bushes and trees provide criminals with a base from where they
can launch crimes as well as commit them while remaining unseen and these often become no-go zones
for local communities. The security risks associated with dense stands of vegetation (often IAP stands)
are also known to be reflected in reduced property values. Van Zyl et al. (2004) and Turpie et al. (2001)
found that security-related decreases of between 2% and 10% were relatively common for properties
that bordered on densely vegetated areas seen as security risks.
With regard to overall value impacts of IAPs, Higgins et al. (1997) calculated the value of a hypothetical
4 000 ha mountain fynbos ecosystem at between US$3 million with no management of alien plants, and
US$50 million with effective management of alien plants. This was based on six value components:
water production, wildflower harvest, hiker visitation, ecotourism visitation, endemic species and genetic
storage. Given that there are over 1 million ha of protected fynbos areas in South Africa, the potential
reduction in value due to invasion could amount to over US$11.75 billion (Van Wilgen et al. 2001).
Summary points: wildfire prevention and mitigation
•
•
•
•
The January 2000 wildfires on the Cape Peninsula resulted in insurance claims of
approximately R73 million in current terms, and it appeared that most houses and
structures that were damaged were in areas invaded by alien plants.
Average damages associated with wildfires in Cape Town have been estimated at
between R15 million and R25 million per annum while management costs are
probably of a similar magnitude.
The continued presence of alien invasive plants and their influence over fire intensity
in particular, exacerbates costs and results in a vicious cycle that feeds the further
spread of aliens. Damage and management costs avoided as a result of the
optimisation of natural assets functions though alien clearing would range from
R1.5 million to R5 million per annum in Cape Town.
Aside from their influence on fire risk, invasive alien plants are one of the key threats
to indigenous biodiversity and highjack a significant part of the already scarce water
resources of the area. In addition to these impacts, IAPs can introduce significant
social costs where dense stands are used as hiding places for criminals.
4.5.2 Flood attenuation
Amongst natural threats, floods are one of the most destructive often targeting the most
vulnerable. The impacts of flooding events, especially in densely developed and populated
urban areas, are thus of growing concern. Flooding affects thousands of Capetonians each
year, putting their property and belongings, businesses, safety, health and sometimes even
109
their lives at risk. The consequences of flooding can be grouped into those that relate to
damage to property and those associated with poor living conditions that arise from
flooding.
Damage to property, infrastructure and other facilities. Floods are a destructive force
and are associated with damages to property, infrastructure (such as roads and bridges)
and other facilities (such as electrical sub-stations). Even when entire structures are not
swept away or undermined, damages to the contents of properties such as flooring,
furniture and other belongings can be significant. Aside from residential property and
infrastructure, businesses and smaller businesses in particular are often vulnerable to
damage to premises, stock losses, disruption and reneging on deliveries.
Impacts on the living conditions and health of flood victims. When floods occur,
thousands of people (10 000 people in 2007, 30 000 in 2008) are directly affected and must
be helped with food, warmth and temporary shelter. Solidarity networks, churches, NGOs
and other community groups provide as much relief as possible but are most often
overwhelmed. These problems are particularly acute in informal settlements that are often
on low lying lands prone to flooding. The social disruptions associated with floods can also
have knock-on effects. For example, flood victims are generally not allowed to bring any of
their belongings with them to community halls due to space restrictions. This compels many
household heads to leave dependents at the community halls before returning themselves
to their shacks in order to protect their belongings from potential looters. Trust is therefore
at its minimum level and tensions arise quickly. From a health perspective flooding is often
accompanied by post-flood stagnant water, which increases the risks of disease outbreaks.
Poor living conditions including lack of warm clothes, food, poor hygienic conditions and
toilet facilities, and often difficult access to saturated medical support, increases this risk.
Children, elderly and fragile people are most likely to be affected.
4.5.2.1
Flood damage costs
At a provincial scale, flood damages regularly amount to hundreds of millions of rands. In
2006, the cost to repair the damage caused by the floods to the Southern Cape area
amounted to R600 million. In 2007, this figure was exceeded when floods were experienced
again. In Cape Town, winter is synonymous with some level of flooding each year
particularly in the lower lying areas of the Cape Flats. In the July 2008 floods, approximately
30 000 people were affected and 7 500 structures damaged (see Table 4.11).
110
Table 4.11:
Impacts of the July 2008 floods in Cape Town
Informal settlements affected
Damaged structures
People directly affected
People housed at emergency shelters in community halls
People displaced in safety zones
Number of meals served twice a day
Number of blankets distributed
70
7 500
30 000
3 000
2 480
22 000
13 000
Source: City of Cape Town, media release No 330/2008, 10 July 2008.
In August 2004, direct losses incurred as a result of flooding in the city exceeded
R6.5 million, including relief provided to affected households and damages suffered by the
private and public sectors. Indicatively, after the 2004 floods, R4.3 million in insurance
payouts were made to cover hundreds of claims.
In order to estimate likely total property damage costs that would be associated with
flooding, data from the City of Cape Town GIS database was used to estimate the total
number of properties within the 1 in 100 year flood line per property type (e.g. residential,
business, schools, etc.). Potential damages to each structure was then estimated and a
total potential damage cost estimate of R454 million spread over 100 years was generated
(see Table 4.12). This estimate was based only on the roughly 80% of the City mapping of
the 1 in 100 year flood line completed to date and was consequently increased by 20% to
R545 million to account for as yet unmapped areas. This translates into roughly
R5.45million per annum. To this property damage figure one needs to add costs broadly
associated with disruptions (i.e. transport delays, lost time at work, etc.), health costs and
any other social costs. These costs are likely to be significant although their quantification
was not possible here.
111
Table 4.12: Potential damage costs from flooding in the City of Cape Town over 100 years
4.5.2.2
Flood management costs
In addition to the damages estimated above, floods result in the City incurring management
costs for containment, relief, provision of basic supplies, etc. Usable estimates for these
costs were not available. They have consequently been assumed to roughly equal damage
costs given the likelihood that management effort is equal to potential damages at a
minimum.
4.5.2.3
The role of natural assets in managing risks
Flood risks arise from a combination of natural factors such as rainfall that cannot be
controlled or influenced as well as other factors that can be managed to a large extent.
Given what is physically possible in addition to limited resources, it is not possible to
completely eliminate flood risks particularly in the case of flood-prone areas, such as Cape
Flats. Risks can, however, be managed to acceptable levels through appropriate
112
stormwater infrastructure, disaster management as well as land use planning and
environmental management.
Limiting the development of natural areas is known to play a key role in mitigating floods as
it is one of the only ways to limit the imperviousness (i.e. not able to absorb and slow water
flows down) of areas. Urbanisation inevitably leads to an increase of the extent of
impervious ground cover, which, in turn, results in a limited capacity of water infiltration and
increases in peak storm discharge and total runoff volume and velocity. Urban development
typically entails changes in land use, switching from natural ground covers to buildings and
infrastructure such as roads, parking lots, driveways, sidewalks, etc. As a rough indication,
most developed land uses exceed the threshold of 10-15% impervious cover, which defines
a healthy watershed or stream system, and impervious surface cover (ISC) in downtown
areas can exceed 95% (Marsalek 2007). High levels of impervious ground cover have
predictable global impacts on the nature of flooding events. For instance, in a study by
Arnold and Gibbons (1996), it appeared that since stormwater runs off impervious surfaces,
and not through them, the runoff volume typically increases twofold as the percent
catchments imperviousness increases to 10–20%, threefold with an impervious surface
cover of 35–40%, and more than fivefold with an impervious surface cover of 75–100%
compared to a forested catchment (Sheng 2006). Thus, typically, the runoff coefficients of
fully built-up areas range between 0.85 and 0.9 (meaning that most rainfall will run off
directly with an infiltration level close to nil) while the same coefficients for parks and
forested areas range between 0.3 and 0.35. The implication of these altered relationships in
the water balance equation is that runoff in a built-up area becomes ‘peaked’ and ‘flashy’ in
nature. Studies also indicate that the size of one-hundred-year floods can potentially double
in watersheds with impervious cover levels greater than 20–30% (DSGCP 2005).
Recognising the strong links between excessive imperviousness as well as inappropriate
building and flood risk, the City’s Roads and Stormwater Department recently released a
Floodplain Management Policy which recognised the role of the City’s natural assets and is
consistent with national and provincial legislative and planning contexts. The key concept
supporting this policy is that water courses and wetlands, whether natural or constructed,
form an integral component of stormwater management systems, and can become a
valuable asset when well managed (CCT 2009). Its main objectives are to reduce the
impact of flooding on community livelihoods and regional economies and to safeguard
human health, protect natural aquatic environments and improve and maintain recreational
water quality. The policy provides strong support for the idea that it is far more cost
effective, in the long-term, to favour development in areas where flood risk and flood
severity are minimal, as opposed to the implementation of costly flood mitigation works, or
the bearing of damage costs resulting from failure of infrastructure. Moreover, where
development has occurred, or shall occur in the future, despite an existing flood risk, land
use, development, activities and buildings need to be appropriate to the anticipated degree
of flood risk (CCT 2009).
113
Damage and management cost estimates described above are for the status quo and have
been used as a guide to generate likely low, medium and high total cost scenarios as given
in Table 4.13. The key question with respect to the buffering value of the natural
environment is what level of damages and management can be avoided if natural assets
are allowed to fulfil their role as buffers? Unfortunately a lack of data on the relationship
between buffers and damages makes this question very difficult to answer with confidence
and best dealt with using likely scenarios (low, medium and high) based on the current
understanding of links outlined above. Based on this understanding, it seems reasonable to
assume that between 5% and 40% of damages and associated management costs can be
avoided in the future with optimal use of natural assets (i.e. strictly applying the City’s
Floodplain Management Policy thereby limiting inappropriate building and excessive
imperviousness). The relatively high degree of success in avoiding future costs in the high
scenario was primarily informed by the steep rises in flood risk with increased
imperviousness. Optimal use would translate into natural asset values between R463 000
and R5 million per annum (Table 4.13). Note that this is an estimate of potential future costs
avoided with concerted action and does not imply that current costs will decrease.
Table 4.13: Value of flood buffering by natural assets
Summary points: flood attenuation
•
•
•
Property damage induced by floods in Cape Town have been estimated at
approximately R5.45 million per annum while management costs and relief costs are
probably of a similar magnitude at a minimum.
Storm water runs off of impervious surfaces and is not absorbed, hence, the runoff
volume typically increases twofold as the percent catchments imperviousness
increases to 10–20%, threefold with an impervious surface cover of 35–40%, and
more than fivefold with an impervious surface cover of 75–100% compared to
catchments with natural vegetation cover.
City policy recognises that water courses and wetlands, whether natural or
constructed, form an integral component of stormwater management systems, and
can become a valuable asset when well managed. The strong links between
excessive imperviousness as well as inappropriate building in flood prone areas and
flood risk cannot be ignored.
114
•
Damage and management costs avoided as a result of the optimisation of natural
assets functions would range from R463 000 and R5 million per annum.
4.5.3 Storm surge attenuation
One of the anticipated consequences of global climate change is a rise of observed sea
level; which is a function of mean sea level, tidal influences and meteorological forcing of
sea level. When it comes to mean sea level, changes normally occur on a centennial scale.
However, this scale is likely to become abbreviated for two reasons: the thermal expansion
of the top 3 000 meters of the ocean, which absorb 80% of the energy added to the global
climate system by global warming, and the glacial melt of ice sheets. In the past century,
thermal expansion has accounted for roughly two-thirds of the sea level rise (Cartwright
2008). Melting ice accounts for the remaining third of historical increases, but is noticeably
increasing at a quicker rate than thermal expansion.
Although climate induced changes to mean sea level are not the same in all regions of the
world, available evidence suggests that the mean sea level around Cape Town increases
accordingly to the mean global rate, which was approximately 2 cm per decade (Searson &
Bundritt 1995). Some of the most damaging sea level rise events in the recent past,
including the 2007 storm surge in KwaZulu-Natal, have involved a tidal and meteorological
influence. The erosion damages following these storm surges were highly significant, and in
similar circumstances, the most exposed sections of the Cape Town coastline could endure
similar damages.
Cape Town’s 308 km long coastline shelters a wide range of species and ecosystems, and
provides numerous ecological services, as well as a range of economic and social
opportunities such as recreational and amenity areas. These assets have motivated high
levels of development, despite the vulnerability of the land adjacent to the coast to storm
surges. In the current context of climate change and sea level rise, this development
appears to have been somewhat imprudent, and faces potential devastation. Current
understanding is that global climate change, in conjunction with increased intensity and
abbreviated return times of storms will give rise to periods (of about 1–4 hours) during
which the “observed” sea level could be 1 to 15 meters higher than the current mean sea
level leading to floods and significant socio-economic damages (Cartwright 2008).
4.5.3.1
Costs associated with storm surges
The increased risks of storm surges and their associated costs in Cape Town have been
assessed recently in terms of (Cartwright 2008):
• Loss of real estate value
• Damage to infrastructure
• Foregone tourism revenue
115
The loss of real estate value. Over the past 15 years, coastal areas such as Blaauwberg,
Llandudno, Hout bay, Kommetjie, Glen Cairn and Strand have attracted important real
estate investments. As the coastline becomes increasingly exposed to storm surges,
existing properties will grow more vulnerable, and could suffer considerable damage, while
vacant land may be regarded as uninsurable and undesirable for development. The total
value of the real estate at risk in Cape Town over the next 25 years has been estimated at
R3.23 billion for a 2.5 meter sea level rise event, R19.46 billion for a 4.5 meter sea level
rise event and R44.46 billion for a 6.5 meter sea level rise event (Table 4.14)
Table 4.14: Scenarios of the loss of real estate value along the Cape Town coast
Scenario
Scenario 1
Km2 affected
Scenario 3
25
61
95
7%
11%
18%
1860
2900
2600
R3.255 billion
R19.459 billion
R 44.46 billion
% of affected land that is
private property
Weighted average value of
affected property (R/m2)
Total value of loss of real
estate
Scenario 2
Scenario 1 involves a 2.5 meters sea level rise event, scenario 2 involves a 4.5m rise, and scenario 3 a 6.5m
rise.
Source: Adapted from Cartwright (2008)
Foregone tourism revenue. The coastline and beaches of Cape Town make a significant
contribution to the City’s tourism appeal. Sea level rise and storm surges affect coastal
landscapes and amenities such as beaches as well as access infrastructure. Boulders
beach, for example, may become inaccessible for large parts of the daily tide cycle under
certain scenarios, while beaches like Camps Bay and Llandudno could grow rockier as
wave erosion intensifies. The overall allure of Cape Town’s beaches could be diminished
making the City less appealing to both foreign and domestic tourists and inducing a loss of
tourist income. Cartwright (2008) estimates 3%, 6% and 15% total tourist revenue losses
over a one-year period depending on the sea-level rise scenario.
Damage to infrastructure. Sea level rise events would also damage infrastructure on
which the city depends, such as stormwater infrastructures, electricity distribution
infrastructure and municipal transport lines. This will not only necessitate costly repairs but
would impact negatively on quality of life, business activities and the appeal of Cape Town
as an investment destination to the point where it may affect the overall development
trajectory of the City.
Potential total values at risk from storm surges are summarised in Table 4.15 using
scenarios related to surge severity. The final column in Table 4.15 reports on the overall
value of risks in the City by multiplying probabilities of occurrence with total potential losses
to arrive at risk values of between R4.4 billion and R10.5 billion spread over roughly 25
116
years (or between R176 million and R420 million per year). These figures are certainly
highly significant but also open to misinterpretation. It is highly unlikely that the city should
be confronted with the full extent of these costs in a single sea level rise event, as that
would require a simultaneous and homogeneous rise of the sea at all points of the coastline
and we know that storm surges tend to be localised. Consequently, these figures should
rather be regarded as representing the cumulative total value at risk, over a period of 25
years, at all points of the coast. They also assume the total destruction of the real estate
and infrastructure in question as opposed to partial damages. Total destruction of all
structures seems highly unlikely given experiences with flooding in Cape Town which
results in similar outcomes associated with inundation. Following a more realistic approach
we assumed that, on average, actual damages would amount to 15% of values associated
with total destruction. 5 This would result in likely damages of between R26.4 million and
R63 million per annum.
Table 4.15: Summary of the value of total risks over 25 years associated with increased
storm surges in Cape Town
Assumed
probability
of
occurrence
in the next
25 years
Value of public infrastructure at
Value of
Value of
risk
tourism
real estate
revenue
at risk
at risk
Stormwater Roads Electricity
Scenario 1 0.95
R3.255
billion
R260
million
Scenario 2 0.85
R19.459
billion
Scenario 3 0.20
R44.46
billion
R167.3
million
Probability
adjusted
value of
the risk to
the city
R900
million
R94.8
million
R4.44
billion
R505
million
R408.25 R2.197
million billion
R230.2
million
R19.38
billion
R1.25
billion
R635.80 R5.702
million billion
R358.6
million
R10.5
billion
Source: Adapted from Cartwright (2008)
Scenario 1involves a 2.5 meters sea level rise event, scenario 2 involves a 4.5m rise, and scenario 3 a 6.5m
rise.
Value of tourism revenue at risk has be adjusted downward by 65% from Cartwright (2008)
as this study used Western Cape spend instead of Cape Town spend and included
business tourists as well as those visiting family.
4.5.3.2
Storm surge management costs
In addition to the damages estimated above, storm surge events result in the City incurring
management costs for containment, relief, provision of basic supplies, etc. No estimates of
5
Note that applying a 15% discount factor was also necessary for tourism loss estimates as these were based
on losses in total tourist expenditure and not revealed values making them a likely substantial overestimate of
lost value.
117
these costs were available and, as with flood management, they have consequently been
assumed to roughly equal damage costs reflecting the likelihood that management effort is
equal to potential damages at a minimum.
4.5.3.3
The role of natural assets in managing risks
Having outlined potential risks and costs above, the key question is how they can be
feasibly minimised? In this regard, ‘physical’ or ‘hard’ engineering solutions, natural
solutions and institutional solutions make up the available options. From a hard engineering
perspective, erecting sea walls is one available option. This can be effective, but also has
its downsides. In particular, because of the constant maintenance that they require, sea
walls often translate into an economic burden over the longer term. Natural solutions
include ensuring that the remaining natural parts of the coastline which act as buffers are
not lost primarily through the development of the coastline. Not only does development take
away buffering capacity it also places more structures and people in harm’s way. In
addition, more development of the coastline generally detracts from its natural beauty
thereby reducing aesthetic, recreational and tourism values. Other natural interventions to
increase buffering include creating kelp beds, rockier beaches and sand dunes that will
increase the absorption capacity of the coastline.
High levels of uncertainty exist regarding the most appropriate solutions to risk minimisation
given uncertainty with regard to their efficacy. It stands to reason, however, that natural
solutions will have to at least form part of the set of interventions required. The natural
approach offers sustainability advantages and is more likely to allow for the realisation of
multiple benefits with minimal knock-on effects. Cartwright (2008) suggests options
available for Cape Town that can be best classified as “least regrets” options (i.e. options
likely to entail lower opportunity costs) (see Figure 4.5), and “additional” options (see
Appendix 4.3) probably involving higher levels of costs including opportunity costs.
118
• Do not reclaim further land
• Do not further degrade wetlands and estuaries
• Do not further degrade dunes cordons
• Maintain drains and stormwater systems
No regrets
approach
• Integrate sea level rise scenarios in future planning
decisions
• Incorporate sea level rise risk in disaster management
strategies
• Decentralise strategic infrastructures
• Alleviate poverty and improve living conditions
Figure 4.5: Responses to storm surge risks likely to entail least regrets
Source: Adapted from Cartwright (2008)
From a natural asset valuation perspective it is difficult to quantify the link between natural
solutions and reduced risks and damage costs. The probability does, however, seem high
that it would be optimal to treat any further development on the few intact stretches of the
Cape Town coastline (including estuaries and wetlands) with circumspection if we are to
allow these stretches to continue to act as buffers.
Damage and management cost estimates described above are for the status quo and have
been used as guides to generate likely low, medium and high total cost scenarios as given
in Table 4.16. The key question with respect to the buffering value of the natural
environment is what level of damages can be avoided if natural assets are allowed to fulfil
their role as buffers? Unfortunately, a lack of data on the relationship between buffers and
damages makes this question very difficult to answer with confidence and it is best dealt
with using likely scenarios (low, medium and high) based on the current understanding of
links as outlined above. Given the similarities between the buffering of storm surges and the
buffering of floods, it seems reasonable to assume that a similar portion of damages
(between 5% and 40%) could be avoided with optimal use of natural assets (i.e.
implementing the “least regrets” storm surge management options as outlined by Cartwright
(2008)). Optimal use would translate into natural asset values between R2.6 million and
R50.4 million per annum (see Table 4.16). Note that this is an estimate of potential future
costs avoided with concerted action.
119
Table 4.16: Value of storm surge buffering by natural assets
Summary points: storm surge mitigation
•
•
•
•
Current understanding is that global warming, in conjunction with increased intensity
and abbreviated return times of storms will give rise to periods (of about 1–4 hours)
during which the “observed sea level” could be 1 to 15 meters higher than the
current mean sea level leading to extensive flooding (Cartwright 2008).
The likely damage costs associated with storm surges in Cape Town have been
assessed at between R26.4 million and R63 million per year in terms of loss of real
estate value, damage to infrastructure and foregone tourism revenue.
High levels of uncertainty exist regarding the most appropriate solutions to risk
minimisation. However, natural solutions and the use of existing natural assets offer
sustainability advantages and are more likely to allow for the realisation of multiple
benefits with “least regrets” when compared to engineering solutions.
Damage and management costs avoided as a result of the optimisation of natural
asset functions would range from R2.6 million to R50.4 million per annum.
4.5.4 Combined values associated with natural hazard regulation
When combining the value of natural assets in natural hazard regulation for all three natural
hazards (i.e. fire, floods and storm surges), total values of between R4.6 million and
R60.4 million seem reasonable (see Table 4.17). Note that relatively high levels of
uncertainty exist with regard to these predicted values and that more research is needed on
the links between ecosystems and natural hazard regulation. However, enough is known
about the links between the conservation and proper management of natural assets to
make it clear that investment in these assets needs to be an integral part of disaster
management.
120
Table 4.17: Consolidated value of natural assets in natural hazard regulation
4.6 Water purification and waste treatment, assimilation 6
Natural assets have significant value as purifiers and assimilators of waste, essentially
acting as natural versions of built infrastructure such as ‘sewage outfalls’ and ‘water
treatment plants’. As with built infrastructure, however, the natural environment can only
cope with a certain maximum amount of waste or pollution before it becomes inefficient. At
best, absorptive capacity will be impaired in these situations, but outright ecological
infrastructure failure also becomes a distinct possibility. The services provided by the
natural environment before maximum absorptive capacity is reached are essentially seen
as free services. However, this is only a partial understanding of the situation. The natural
environment needs to be properly managed and maintained (much like built infrastructure)
in order for the services that flow from it to be optimised and to remain free. If this is not
done, mini disasters or ecological infrastructure breakdowns become highly likely resulting
in clean-up costs associated with repairing the ecological infrastructure. These costs are
often substantially higher than the costs of proactive management. Aside from direct
financial costs, these situations tend to introduce reputational and legal risks as the
responsible authorities run the risk of being seen as derelict in their legal obligations and
duties to their constituents.
4.6.1
Urban lakes: Multiple use amenities or malfunctioning waste
dumps?
In the Cape Town context, the situation with regard to urban lakes provides a clear
illustration of the risks and false economies associated with allowing degradation to take
hold. The metropolitan area encompasses a suite of urban lakes. These lakes, as distinct
from wetlands, are considered to be bodies of water that have their water levels regulated
or controlled by weirs. Many of these water bodies were previously shallow seasonal vleis
or wetlands that have since been impounded for various reasons (generally recreation
and/or hydraulic buffering), and which have become integral components of the urban
catchment drainage system.
6
We acknowledge extensive inputs from Dr Bill Harding in writing this section.
121
In Cape Town, lakes such as Zeekoevlei, Princess Vlei, Paardevlei, Little Princess Vlei and
Langvlei can all best be described as urban lakes. After several decades of regulation, the
catchment areas of these lakes have developed substantially in line with urbanisation and
population growth trends, resulting in ever-increasing loads of urban runoff being conveyed
to them. Their impoundment, although creating a perennial water surface (lake), has
resulted in substantially increased retention times and negligible flushing of accumulated
sediments and pollutants. They now act as very effective waste and sediment traps and,
over the years, have silted up and become increasingly eutrophic and are characterised by
noxious, sometimes toxic algal blooms and a stunted biota (with significant foodweb
destructuring and disturbance caused by pollution-tolerant species of biota such as
common carp). In the case of Zeekoevlei, deliberate, ill-advised interventions such as the
use of herbicides to remove submerged, rooted macrophytes, as a concession to
recreational demands, accelerated the change in state from clear water to ‘pea-soup’ algal
domination. In addition to impaired ecosystem health and reduced capacity to absorb
additional wastes, dangerously low water quality constrains recreational uses and devalues
lakeside properties. It is certainly a risk that will need to be dealt with if the False Bay
Ecology Park, which would encompass Zeekoevlei, is to reach its potential (see section
4.3.5.2 for a discussion of this potential).
Zandvlei, while also regulated, has largely escaped the problems faced by areas like
Zeekoevlei. Zandvlei is an estuary for which the ecological value of maintaining tidal
exchange and salinity has long been recognised and maintained by the City. Additionally,
the ecological role and importance of retaining and maintaining the rooted macrophytes
(pondweed) has been understood thereby supporting a suite of beneficial ecosystem
services. The Zandvlei system, with its public awareness body, the Zandvlei Trust, was one
of the first examples of integrated catchment management in the City. Cape Town also has
two unregulated systems, these being Rietvlei and Wildevoëlvlei. Rietvlei is a large
expanse of true wetland, albeit increasingly threatened by polluted flows from the Diep
River and from surrounding urban development. Its downstream estuary, the Milnerton
Lagoon, is negatively impacted by both the quality of the Diep River and wastewater
effluent from the nearby Potsdam treatment works. Rietvlei, a naturally saline system with
plant communities structured along gradients of soil salinity, is becoming increasingly
fresher – with increased encroachment of weedy reed types such as Typha. Wildevoëlvlei,
although without a weir, is effectively regulated and rendered aseasonal by the constant
inflow (12–14 Ml per day) of highly-enriched wastewater effluent – such that the vlei is
rendered little more than an extension of the maturation ponds of the adjacent treatment
plant.
4.6.2
Towards value creation and cost minimisation
The cause and effect pathways resulting in the present condition of Cape Town’s urban
lakes have been clearly understood for many years, as have the solutions. Regrettably, this
understanding has not been widely translated into the remediation of these waters. For
example, the need to dredge Zeekoevlei (Cape Town’s largest open water expanse) has
122
been identified as a vital and necessary intervention, but still remains to be undertaken.
Current estimates indicate that the necessary dredging of the vlei would cost R60 million–
R70 million. This amount essentially represents the minimum clean-up costs that would be
required to allow the vlei to function normally (i.e. provide for a balance between waste
assimilation, ecosystem functioning and aesthetic and recreational benefits) and covert is
from a liability that is probably dangerously close to its threshold. Once this clean-up is
completed, significantly more cost-effective pro-active upstream catchment management
can be applied to avoid a renewed build-up of waste that could once again impose further
costs on society (i.e. loss of ecological, recreational, aesthetic and property values and,
quite possibly, the costs of further rounds of dredging). Zeekoevlei provides a clear
example of what mistakes to avoid if overall benefits are to be maximised at the lowest
possible costs.
An analysis of values at Zeekoevlei provides further support for action in the area. Jansen
and Schulz (in prep.) have demonstrated that there is a significant willingness-to-pay
among the residents of the low-income suburbs that surround the vlei for improved
environmental quality. Aggregating over all households in these suburbs they found a
willingness-to-pay of R4.9 million per annum for the clean-up of Zeekoevlei. It is important
to stress that this result is based on local households only and is therefore conservative as
it excludes visitors to the yacht club or potential tourists to the area. Jansen and Schulz (in
prep.) point out that the outcomes of the study are not only optimistic in terms of support for
an improved environment at Zeekoevlei, but also in terms of general support for
improvements in low-income areas.
By contrast with Zeekoevlei, Langvlei, which by the end of the 1980s was completely siltedup and overgrown with reeds, was dredged and restored to its present condition, but
without the creation of an upstream silt interceptor. Paardevlei, similar in size to Princess
Vlei and part of an industrial complex for roughly a century, was cleared of alien fish
species and dredged of sediment in 2005/6 – a quick and relatively inexpensive exercise
that has created a “clean slate” for the rehabilitated lake.
Box 4.7 outlines the salient features of the City’s Policy for the Management of the Impacts
of Urban Stormwater aimed at providing proactive, long-term, cost-effective solutions to the
accumulation of wastes. Essentially, remediation of the existing conditions requires a
combination of the following interventions:
• Attenuate nutrient and pollutant loading to levels that are assimilable within the lake
system. This requires both external (catchment) and in-lake sediment treatment or
removal – and is often seen as a seemingly insurmountable and costly task – which,
in fact, it is not. It simply requires a structured, informed approach. Firstly, the bulk of
nutrient loads, from urban catchments, are borne by the silt conveyed to the vlei.
Effective silt trapping en route to the lakes can negate as much as 80% of the
pollutant loads. In cases where the loading originates from wastewater, such as for
Wildevoëlvlei, the pollutant loads are largely dissolved and must be addressed by
enhanced wastewater treatment. The balance needs to be addressed via catchment123
•
•
•
•
level management practices – not always easy but the product of many small gains
can produce surprisingly positive reductions.
Once the silt loading has been addressed, then the lake can be desludged, removing
the internal nutrient loading problems, turbidity and loss of volume issues. With the
silt now being trapped upstream of the lake, the lake’s lifespan – in terms of silt
accretion – is now indefinitely extended. Seen against this timespan, the (amortized)
costs of dredging, for example, pale into insignificance.
Alleviate the hydrophysical constraints on the lake by allowing increased water
exchange (flushing) during winter. This has been partially undertaken for Zeekoevlei
but, in the absence of addressing other significant problems, has provided limited
benefit.
Restructure the biotic composition through deliberate removal of problem species,
re-stocking where necessary and allowing highly desirable plant stabilisation to reestablish. The latter implies the growth of submerged pondweeds that are anathema
to the yachting fraternity. However, as at Zandvlei, there is a management action
that must be accepted and applied, namely the routine harvesting of aquatic plant
stands so that they do not conflict with recreational activities.
Adopt a future management programme based on applied limnology (informed lake
management). The relationships between nutrient loading, lake hydrodynamics, lake
biota and lake response need to be understood and adhered to for each particular
lake.
Box 4.7:
City of Cape Town Management of Urban Stormwater Impacts Policy
The central idea supporting this policy is that urban water bodies are valuable natural assets that rapidly
deteriorate under the impacts of urbanisation (CCT 2009a). This results in myriad losses including lost
aquatic ecosystems integrity and function, decreased biodiversity, reduced amenity value, the
introduction of significant health risks, reduced water quality, diminished groundwater recharge and
quality, degradation of stream channels, increased over bank flooding, and floodplain extension. These
water bodies therefore require appropriate management, protection and enhancement. The policy aims
to achieve this through:
• improving and controlling the quality and rate of stormwater runoff,
• minimising the impacts of stormwater from new developments on receiving waters,
• preventing the further degradation of receiving waters by stormwater draining from existing
developments, and
• encouraging natural groundwater recharge.
The policy recommends a “treatment train” approach – i.e. a combination of different methods
implemented sequentially or concurrently. One of its fundamental principles is that the person or
institution that initiates a development should ensure that it does not adversely impact on, and thereby
decrease the value of, natural ecosystems. Specific measures aimed at ensuring the internalisation of
environmental externalities at source are therefore introduced.
4.6.3
Knock-on effects of poor stormwater management
Aside from the costs associated with poor stormwater management at the vleis outlined
above, knock-on effects can extend to the sea although they are not as widely recognised.
124
The failure of Fish Hoek beach to attain Blue Flag status is a case in point. This beach has
been a pilot Blue Flag beach for the past two Blue Flag seasons (2007/08 and 2008/09).
The major challenge, however, is that there are three stormwater outlets within the
designated swimming area and about four other outlets at locations around, and adjacent
to, the swimming area. This situation has resulted in the swimming area being vulnerable to
bathing water contamination caused by outflows of faecal and other pollution material into
the swimming area. It has forced the City to abandon all plans to pursue Blue Flag
accreditation for Fish Hoek beach and embark on a project to explore end-of-pipe treatment
of water flowing out of stormwater pipes. This is an unfortunate and frustrating reality from
the viewpoint of the Fish Hoek community as a whole and its tourism sector in particular, as
they were looking forward to their beach attaining Blue Flag status.
Summary points: waste treatment and assimilation
•
•
•
Natural assets like urban lakes and wetlands are part of the City’s ‘ecological
infrastructure’ and need to be properly managed (much like built infrastructure) in
order to optimise the valuable services that flow from them including waste
treatment, absorption and others. If this is not done, ecological infrastructure
breakdowns become highly likely resulting in clean-up and repair costs that are often
substantially higher than the costs of proactive management.
Zeekoevlei, for example, has been abused to the point where it can be argued that it
is currently more of a liability than an asset requiring a clean-up costing between
R60 million and R70 million for it to again function normally (i.e. provide for a balance
between waste assimilation, ecosystem functioning, and aesthetic and recreational
benefits). Once this clean-up is completed, significantly more cost-effective proactive upstream catchment management can be applied to avoid a renewed build-up
of waste that could once again impose further costs on society.
Clear lessons emerge when Zeekoevlei, and other degraded vleis generally
associated with low functionality and high costs, are compared to well-managed vleis
such as Zandvlei and Langevlei where proactive on-going management has kept
costs to a minimum and created significant value.
4.7 Aesthetic values and sense of place
Certain elements of natural landscapes, such as the presence of water, topographic
variation and vegetation have repeatedly been associated with a high landscape preference
and good scenic (aesthetic) value while built features and degraded landscapes have
consistently been associated with low preferences (Low et al. 2007). Researchers also
believe that there is a direct relationship between the ecological diversity and functioning of
the landscape and perceived scenic beauty (Leopold 1949; Gobster, 1999).
There can be little doubt that Cape Town possesses spectacular aesthetic features linked
to its natural assets and that these features contribute to the unique sense of place in Cape
125
Town and the image of the City creating multiple significant value streams. At the risk of
oversimplifying, these values primarily flow from their power (1) to attract people and
businesses to Cape Town and (2) to enhance the people’s wellbeing while in Cape Town.
This section focuses on the following key value streams that flow from aesthetic and sense
of place values associated with Cape Town’s natural assets:
• Enhanced health and wellbeing
• Contribution to the Cape Town brand and an enhanced business environment
• Benefits flowing to specific sectors: film and advertising
• Property value enhancement
4.7.1
Enhanced health and wellbeing
Most urban dwellers would agree that they enjoy experiencing the natural world, even if this
simply means walking in a local park or driving to the coast on weekends. Even in the heart
of the busiest city, this desire to connect with nature seems to be strong, as witnessed by
the demand for green open spaces. A large body of research exploring people’s
preferences for different types of landscape has consistently demonstrated that most
people – people of different ages, socio-economic class, education, and cultural
backgrounds – prefer natural environments to built urban environments (Zube 1983). This
suggests at the very least that occurrence of natural assets in cities and suburbs can
increase their aesthetic appeal and provide diversity of experiences in people’s everyday
life.
There is more than aesthetic enjoyment at stake: having contact with nature in a city has
been shown to help us to live longer and in better health. Growing evidence suggests that
woodlands, trees and natural and green spaces can play an important role in improving
people's health and wellbeing (see O’Brien 2004 and Low et al. 2007). The evidence relates
not only to people's physical use of woodlands and natural areas, but also to the emotional
and psychological benefits that they derive from exploring and viewing these areas. For
example, research by Berman et al. (2008) has shown that natural environments can
restore people from mental fatigue and help children with attention deficit disorder. This
work compared the restorative effects on cognitive functioning of interactions with natural
versus urban environments and found that interactions with nature improved functioning.
Field experiments have also shown the restorative effects of viewing natural and forest
landscapes as opposed to urban landscapes. Viewing the former had significantly more
positive impacts as measured in (1) salivary cortisol concentration (an index of stress
response), (2) diastolic 7 blood pressure, and (3) pulse rate. Furthermore, participants felt
more comfortable, soothed and refreshed when viewing a natural landscape (Lee et al.
2009). Other studies have shown that natural areas in close proximity to one’s home can
result in lower levels of stress. Having views of natural vegetation – compared to having
views dominated by buildings – has been associated with significantly increased
neighbourhood satisfaction and wellbeing (Kaplan 1983).
7
The phase of the heartbeat when the heart relaxes and allows the chambers to fill with blood.
126
Although considered significant, the economic value of improved wellbeing in the City could
not be established with current available sources of information.
4.7.2
Contribution to the Cape Town brand and an enhanced
business environment
Natural assets can make a significant contribution to urban quality of life which allows cities
to attract skilled entrepreneurs and others that help to drive economic development. Cities
such as Cape Town, with prominent natural features and amenities, can be branded as
being more desirable than other less appealing cities that have been subjected to greater
degradation.
According to CRE (2009), a supportive entrepreneurial environment includes quality of life
consideration. The simple point is made that entrepreneurship is about people and
entrepreneurs choose to locate their businesses in places where they wish to live
particularly within the context of higher rates of mobility. Communities that invest in quality
of life infrastructure are thus more likely to attract entrepreneurs from outside the
community and keep those who are home grown. Entrepreneur (2008) also affirms that
research has proven that a higher quality of life plays a significant role in a city's ability to
attract businesses and knowledgeable workers in search of a high quality of life.
Earlier this year, Accelerate Cape Town facilitated a visioning process among local
business leaders called Vision 2030. 8 Several hundred business, political, labour and other
leaders were canvassed for their views on how the next 20 years should develop
economically and on what a potential vision should be. The vision statement for the
exercise was, “Africa’s Global City, a city of inspiration and innovation”. This recognises
both Cape Town’s African identity as well as its global standing and according to Accelerate
Cape Town’s CEO, Mr Lundy, “it suggests that we should be using our natural and human
diversity, which inspires so many people, to develop and attract the world’s most creative
thinkers and get them to develop global innovations from here” (CBN 2009). This suggests
that the link between natural assets and the attraction of key human capital needed to drive
economic development is well-recognised in the Cape Town business community.
Recently it was also recognised by the City’s mayor that, “We must position Cape Town as
the most innovative and committed city anywhere in addressing this long-term
(environmental) challenge of critical global importance – possibly the most important single
challenge facing our generation of citizens of the earth. And we do this not because it is a
‘nice to have’ or because it is currently fashionable. We have to do it because it is essential
for our positioning as a great and prosperous city into the future. We have to do it because
we are a caring, compassionate and responsible city that has a long-term vision for itself
8
Accelerate Cape Town is a business-led initiative aimed at bringing together stakeholders in the Cape Town
region to develop and implement a long-term vision for sustainable, inclusive economic growth.
127
and acknowledges its global responsibilities and its obligations to future generations” (Zille
2007).
Cape Town’s efforts towards creating a winning brand strongly linked to its environmental
assets and the management of the environment have borne initial fruit in the form of awards
that help to further reinforce its brand and attract more opportunities (see Box 4.8).
However, much work and commitment is still needed if Cape Town is to truly capitalise on
its natural assets in support of its brand. Gains have been made, but the City’s natural
environment continues to come under increasing pressure as development accelerates and
increasingly difficult trade-offs are required. There are many examples of risks for the brand
such as those associated with being know for significant losses of globally important
biodiversity (see section 4.4). This risk has the potential to make Cape Town better know
for species losses than for being a biodiversity hotspot.
Box 4.8:
Awards bestowed on Cape Town for its quality of life
The Mercer Quality of Living Survey 2008 voted Cape Town the ‘Best City To Live In for Africa & Middle
East’. The Ethisphere Institute voted it ‘One of the World's Most Sustainable Cities’ in 2008 and it was
given the ‘Cleanest City in South Africa’ award at the DEAT Annual Cleanest Metro Awards in 2007. At a
more micro-scale, but nevertheless illustrative of quality of life in Cape Town, Boulder's Beach was voted
the ‘World's Best Family Beach’ by the UK Telegraph in 2007.
4.7.3
Benefits flowing to specific sectors: the film and advertising
industry
The City of Cape Town has seen extraordinary growth in its film and advertising industry
since the advent of democracy in South Africa. This growth continues with Cape Town
already established as a top national and international film destination. According to the
City’s film policy document, Cape Town offers key natural advantages to the film industry
including (CCT 2004):
• A vast diversity of natural and other locations within a small geographic area
encompassing the natural and heritage beauty of the region.
• Long daylight hours in summer, which is during the northern hemisphere winter, and
in the same time zone as Europe.
In addition, Cape Town offers first-world infrastructure, filming facilities and skills to
complement its natural advantages. On the technology front, there are numerous worldclass media services groups offering comprehensive facilities and services to meet the preproduction, production and post-production needs of both domestic and international
producers. The Cape Town film and advertising industry consists of the following areas of
activity:
• Still photography shoots
• Commercial video shoots
• Feature films
128
•
•
Television productions
Video shoots (incl. documentary and direct-to-video productions)
4.7.3.1
Economic value of the film and advertising industry
In 2007 the Cape Film Commission commissioned a strategic economic analysis of the
Cape Town and Western Cape film industry (Standish & Boting 2007). Using data from the
financial year July 2005 to June 2006, this analysis estimated the value of the film industry
based on direct expenditure. It indicates that total expenditure in the Western Cape
amounted to a significant R2.6 billion from roughly 2 730 productions of varying sizes. Cape
Town expenditure was estimated at R2 billion or 77% of Western Cape expenditure.
Table 4.18: Number of productions and expenditure in the Cape Town and Western Cape
film industry (2005/2006)
Number of
productions
Average expenditure Total
per production (Rm expenditure
2006)
(Rm 2006)
Long form (features)
30
37.2
1 115.6
Local Commercials
142
0.9
162.5
Service Commercials
400
1.8
631.8
International Commercials
58
2.6
77.9
Stills
2 100
0.3
659.8
Provincial Total
2 730
Cape Town Total
2 647.6
2 027.0
Source: Standish & Boting (2007)
4.7.3.2
Filming and natural assets
Discussions with key role players in the local industry provided confirmation that Cape
Town’s many and varied natural assets provide extensive opportunities to the film and
advertising industry. The city’s natural landscapes and features offer exceptional choices
for easy and convenient film shoots. These scenic backdrops are enhanced by the
moderate climate where long summer days and relatively mild winters offer extended
shooting hours. Focusing on still productions, over the last ten years, Cape Town has grown
to become one of the most popular global destinations. Cape Town’s summers have
become synonymous with the remarkable number of international photographic shoots
being conducted in the City. According to the South African Association of Stills Producers
(SAASP), the success of Cape Town as a stills production destination can partly be
attributes to its natural attributes including:
• Locations: Alpine-like mountains and lakes, top-quality beaches or rugged rocky
coastlines, fynbos, rolling wheatfields, vineyards and forests.
129
• Quality of the light: The sun shines fourteen hours a day at a time when it’s the
middle of winter in the Northern Hemisphere. Many artists who have worked here
have commented on the extremely high quality of the light in Cape Town.
The other film industry sectors (i.e. feature films, television, video and commercials) also
use natural assets as important locations for filming although in a less focused way.
Based on discussions with film and advertising industry role players (those in the industry
and the authorities that regulate it), a range of estimates were generated for how much
natural assets contribute to the package of advantages that draw productions and their
associated spending to Cape Town. Based on these, it seems reasonable to conclude that
5% to 15% of total production expenditure can be linked to Cape Town’s natural assets
(see Table 4.19). Taken together these percentages multiplied by current total expenditure
(inflated to 2009 values from Standish and Boting (2007)) results in total values associated
with natural assets of between R133 million and R398 million (see Table 4.19).
Table 4.19: Value of natural assets in the film and advertising industry
4.7.4
Property value enhancement
Cape Town boasts some of the most sought after property in the world. This largely relates
directly to the amenity values associated with the City’s natural assets which are reflected
in property prices. This mainly includes aesthetic or sense of place values primarily in the
form of views and recreational values (e.g. easy access to world-class beaches and green
open spaces).
Although natural assets create value for all properties in Cape Town, they are generally
better understood with local case studies. These include the significant values property
value premiums created at Zandvlei and the Lower Silvermine River and discussed in
section 4.3. To these one can add the values created by the rehabilitation of the Westlake
River in Kirstenhof in which the landscaping of the area was improved, paths were laid,
bridges and benches installed along with a play park for children. The river, the wetlands
along its course and associated green belt areas dominate Kirstenhof due to the suburb’s
small size and their position at the centre of the suburb. Van Zyl et al. (2004) estimated that
130
the recreational and aesthetic benefits of the project reflected in property value increases
amounted to roughly R10.3 million whereas its costs were roughly R4.8 million yielding a
significantly positive net present value (NPV) in the order of R5.5 million and an average
benefit:cost ratio of 2.1:1.
At a far broader scale, in their assessment of the economic contribution of Table Mountain
National Park, Standish et al. (2004) investigated the impact of the Park on property values.
They found that the Park has a profound influence on the overall property market and that it
would be hard to hypothesise what the market would be like without it. It forms an intrinsic
part of the balance between natural and developed area that Cape Town properties offer
buyers. A Park view was cited as an undoubted value creator by all valuers and estate
agents interviewed for the study. It was noted that the areas in the suburbs with the best
views of the Park, and, to a somewhat lesser degree access to it, were the highest value
areas. Agents also noted that for plots with good Park views it was almost impossible to
over-capitalise on the building of a house whereas for plots with no or limited views overcapitalisation was something to be cautious of. While Standish et al. (2004) did not attempt
to accurately estimate the impact of the Park on property values, they did provide some
‘back of the envelope’ estimates. First, they estimated a minimum total value of R100 billion
for all residential property within, say, six kilometres of the Park. They then hypothesised
that if one attributes only 5% of the total value of this property to the Park it would translate
into a value of R5 billion. Of course this is a highly hypothetical scenario but it does
illustrate the order of magnitude of the figures likely to be associated with this value stream.
As discussed above and in section 4.3.5.1, the quality of management of natural areas is a
major driver of values. Values primarily take their lead from the active management of
aesthetic appeal, adequate facilities, cleanliness and security and if these factors are
ignored, value destructions usually manifest.
4.8 Conclusion
The valuation estimates in this chapter show that Cape Town’s natural assets provide
highly significant flows of value as summarised in Table 4.20. These flows are critical to the
success of key economic sectors in Cape Town, such as the tourism and film sectors, and
give the City a strategic advantage by helping it to attract skilled entrepreneurs and others
that drive economic development. They also provide residents and the municipality with
recreational opportunities, health benefits, natural hazard regulation and other ecosystem
services such as water purification and waste absorption all supported by a biodiversity
‘umbrella’ without parallel in any other city around the globe.
Based on these prioritised services, total quantified values associated with natural assets in
Cape Town were found to be between R1.5 billion and R3.9 billion per annum with a
medium value of R2.6 billion per annum. This range of estimates should be treated as
conservative given the number of important values that could be quantified in monetary
131
terms. In addition, most value streams have significant room for improvement. For instance,
the availability of areas for the recreational use of natural assets are still severely limited
particularly in lower income areas resulting in artificially low values at present.
Natural assets form a key part of the Cape Town brand and are increasingly recognised as
such. However, values are under threat from various sources such as encroaching
developments, illegal dumping, littering and water pollution, the spread of invasive alien
plants, etc. Increased management resources and effort will be crucial to value
maintenance and, preferably, value enhancement. The state of urban lakes in the city
provides clear lessons in this regard. Zeekoevlei, for example, has been degraded to the
point where it can be argued that it is currently more of a liability than an asset requiring a
costly clean-up for it to again function normally (i.e. provide for a balance between waste
assimilation, ecosystem functioning, and aesthetic and recreational benefits). Once this
clean-up is completed, and a costly lesson is learnt in the process, significantly more costeffective pro-active upstream catchment management can be applied.
Aside from the generation of value estimates, the valuation exercise itself provided a
number of key pointers. Primary among these is that, understanding the economic benefits
of ecosystem services and attaching values to them requires sufficient knowledge of
ecological systems in the first instance. Particularly when attaching values to natural hazard
regulation and waste absorption functions, it became clear that more work is needed on
understanding and quantifying the nature of the links between natural assets and benefits.
Enhanced understanding of socio-economic systems and people’s preferences are also
required if valuation accuracy and usefulness is to improve. It is especially difficult to judge
whether responses to willingness-to-pay questions for specific outcomes (such as the
improved quality of the natural environment) are reasonable without a comprehensive
understanding of people’s willingness-to-pay for other alternative outcomes or resource
uses (e.g. improved health care, education, etc.).
132
Travel cost and entry fees
paid at city-wide scale.
Travel cost, entry fees paid
and contingent valuation at
city-wide scale.
Emphasise support for other
EGS values, convey global
importance using indicators.
Linked buffering capacity of
natural assets to reduced
costs associated with natural
hazards.
Clean-up costs, damage
costs avoided using selected
wetlands as case studies.
Tourism
Recreation
Globally
important
biodiversity
Natural
hazard
regulation of
fire, floods
and storm
surge
Water
purification
and waste
treatment,
assimilation
Environment Valuation
al Goods and techniques/approach used
Services
and scale of application
categories
-
-
-
-
-
-
-
-
-
The natural environment needs to be properly managed and maintained (much like built
infrastructure) in order for the purification and absorption services that flow from it to be optimised
and to remain ‘free’.
E.g. the need to dredge Zeekoevlei for R60–R70 million represents the minimum clean-up costs
needed to allow the vlei to function normally (i.e. balance waste assimilation, ecosystem
functioning, aesthetics and recreation). Once this clean-up is completed, significantly more costeffective pro-active upstream catchment management can be applied.
Natural hazards are associated with significant damage and management costs some of which
could be avoided with the optimal management of natural assets as buffers.
Combined total values of between R4.6 million and R60.4 million per annum for natural assets in
natural hazard regulation for all three natural hazards (i.e. wildfires, floods and storm surge).
Biodiversity needs to be recognised and valued as a critical ‘umbrella’ service without which most
other valuable ecosystems services would be diminished or may even become unavailable. Donor
funding of R225 million has flowed to the region in recognition of the international importance of its
biodiversity.
If one considers the biodiversity within the City’s boundaries it can convincingly be argued that
Cape Town is the most important city in the world from a biodiversity conservation perspective.
However, threats are highly significant.
Local recreational values for local green open spaces (incl. City nature reserves), Table Mountain
National Park, Kirstenbosch and local beaches: R407 million and R494 million per annum.
Significant additional value creation possible when considering the limited availability areas for
recreation (particularly in lower income areas) and current resources for management.
Natural assets are Cape Town’s key offering that attracts tourists.
Total tourism value associated with natural assets: R965 million to R2.95 billion per annum.
Estimated value and other indicators of value
Table 4.20: Summary of values associated with natural assets in Cape Town
133
Aesthetic and
sense of place
related values
:
Enhanced
health and
wellbeing
Contribution
to the Cape
Town brand
and
business
environment
Benefits
flowing to
specific
sectors: film
and
advertising
Property
value
enhanceme
nt
-
-
-
-
Reference to empirical
research on the natural
environment and health
Outline links between
natural branding and
business advantages
Apportion economic
benefits of the film
industry to natural
attractions.
Hedonic valuations used
to highlights links
between natural assets
and property values.
-
-
-
-
-
Growing empirical evidence shows that natural and green spaces play an important role in
improving health and wellbeing in cities.
Key leaders in Cape Town recognise that the City’s natural assets give it a strategic advantage
and help it to attract skilled entrepreneurs and others that drive economic development.
Cape Town’s efforts towards creating a winning brand strongly linked to its natural assets and
environment custodianship have borne initial fruit in the form of awards that help to attract more
opportunities. Risks to this brand, however, remain.
Cape Town’s many and varied natural assets provide extensive opportunities to the film and
advertising industry and are one of its key drivers valued at between R133 million and R398
million per annum.
Cape Town boasts some of the most sought after property on a global scale largely because of its
natural assets. At a site specific scale, rehabilitation and restoration projects have created
significant values with benefits exceeding costs by a factor of four in some cases.
134
How much is 1996
a clean beach
worth? The
impact of litter
on beach
users in the
Cape
Peninsula
asset and EGS beneficiaries
flows that
of flows that
were valued were
included
any
any
valuation
reference to reference to method(s)
development risks
applied
objectives
(ecological
and city's
as well as
mandate and socioability to
cultural)
influence
addressed
and
managed
Ballance A, To estimate the
Recreational Residents,
In 1994 four Risks to
Travel cost
Ryan PG and deterrent effect of use value for domestic and of the ten
tourism
method
Turpie JK
litter on Cape
the following
foreign
dirtiest
numbers and
Town beaches
beaches:
tourists
beaches were revenues as a
Blouberg and
in the City of result of
Milnerton, Sea
Cape Town unhygienic
Point, Clifton,
area.
beaches
Camps Bay,
Llandudno,
Fish Hoek,
Muizenberg,
Monwabisi and
Strandfontein
objectives of
study
8.6
17.30
Values results
at time (2008 R
of study million)
(R
million)
Summary information on valuation studies conducted in Cape Town
name of the year of authors of
study
values study
Appendix 4.1:
135
Annual value. The
annualised value for all
beaches in the Cape
Peninsula was
conservatively estimated
at R18 million. However,
a sensivity analysis was
adopted by the author
as a result of the
assumptions inherent in
the travel cost method,
and because not all data
was available or
accurate. This resulted
in a range of annualised
values for the Cape
Peninsula of between 9
and 50 million (1996
prices).
comments
Multi-criteria
decisionmaking for
water
resource
management
in the berg
water
management
area
Multi-criteria
decisionmaking for
water
resource
management
in the berg
water
management
area
Environment,
urban
development
& crime establishing
the value of a
freshwater
lake in an
urban setting:
the case of
Zeekoevlei
?? Year Jansen A &
of
Schulz C-E
househo
ld
census
values2001
De Lange, W To provide a
platform on which
decision-makers
involved in
management
around WSM can
base decisions
2005
Water supply
options
Residential
water users in
CCT, and
parts of West
Coast, Boland
and Overberg
municipalities
Impacts on
river flow,
waste disposal
and dilution
effect, ground
water recharge,
flood and
erosion control,
loss in
biodiversity
aims to show that Willingness to Residents in City's
public
pay for
suburbs
budgetary
environmental
improvements surrounding process
goods are
in
the vlei (Lotus discussed.
beneficial to
environmental River, Grassy
society andshould quality at
Park, Pelican
receive due
Zeekoevlei,
Park,
consideration in
Cape Flats
Peninsula,
the spending
Zeekoevlei)
activities of local
governments
De Lange, W Determine public
preferences for
future expansion
of water
management
strategies
2005
Crime,
pollution,
migration
Contingent
valuation
modified
delphi
technique
applied on
panel of
experts
Conjoint
analysis
7.00
??
136
Annual value (excludes
Peninsula surburb).
Own extrapolation.
Values probably wrong
due to differences
between dates for
census values and
(unknown) date of
valuation work.
Does not quantify
environmental values in
monetary terms
Does not quantify
environmental values in
monetary terms
A Status Quo, 2002
Vulnerability
and
Adaptation
Assessment
of the
Physical and
Socioeconomic
Effects of
Climate
Change in the
Western
Cape
Valuing the 2007
Provisioning
Services of
Wetlands:
Contrasting A
Rural Wetland
In Lesotho
With A PeriUrban
Wetland In
Cape Town.
To compare
livestock, crops Local users of
wetland uses in a
Mfuleni
diverse range of
Wetland
geographic, socioeconomic and
landuse settings.
To assess the
relative
dependency of
communities living
around these
wetlands on the
wetland
provisioning
services to
subsidise their
livelihoods.
Midgley, G.F.,
Domestic fuel Greater City
Chapman,
burning,
of Cape Town
R.A.,
vehicles,
residents
Hewitson, B.,
industry and
Johnston, P.,
commercial,
de Wit, M.,
power
Ziervogel, G.,
generation
Mukheibir, P.,
van Niekerk,
L., Tadross,
M., van
Wilgen, B.W.,
Kgope, B.,
Morant, P.D.,
Theron, A.,
Scholes, R.J.,
Forsyth, G.G.
Lannas, K.
3.83
Climate risks Cost of illness 928.90
such as
method
beach erosion
and flood
risks,
investment
decisions,
health risks,
fishing time
impacts
Direct use
1317.66
4.06
Annual value
137
Pierre
an overarching
Mukheibir and framework for a
Gina
City-wide
Ziervogel
consolidated and
(ERC, UCT) coordinated
approach to
reducing
vulnerability to
climate impacts.
Pierre
an overarching
Mukheibir and framework for a
Gina
City-wide
Ziervogel
consolidated and
(ERC, UCT) coordinated
approach to
reducing
vulnerability to
climate impacts.
Framework 2001
for Adaptation
to Climate
Change in the
City of Cape
Town
Framework 2001
for Adaptation
to Climate
Change in the
City of Cape
Town
Damage to
Muizenberg,
False Bay
following a 1 m
sea level rise
Damage to
Woodbridge
Island,
Milnerton
following a 1 m
sea level rise
Residential
Describes list
property in
of legislation
Muizenberg, relevant and
estimated at international
40 properties obligations to
being affected Framework
at an average
of R500,000
per house
Residential
Describes list
property in
of legislation
Woodbridge relevant and
Island,
international
estimated at obligations to
between half Framework
and all the
350
residential
properties
being affected
at an average
of R750,000
per house
Current and
future climate
risks
discussed.
Infrastructure
for monitoring
disaster risks
also
highlighted.
Mitigation
measures,
paticularly in
relation to
floods and
fires
discussed.
Current and
future climate
risks
discussed.
Infrastructure
for monitoring
disaster risks
also
highlighted.
Mitigation
measures,
paticularly in
relation to
floods and
fires
discussed.
Replacement 20.00
cost
Replacement 131 cost
263
30.07
197-395
Property value
Property value
138
Operational
costs and
project costs
to test and apply Parks,
the tools of
sportsfields,
environmental and natural
resource
vegetation,
economics to
vacant lands,
derive local values wetlands,
for open space
agricultural
goods and
fields
services in
selected study
areas
Turpie J and To estimate the
Class of 1998 existence value
and willingness to
pay to prevent
overdevelopment
of the Cape
Penninsula
National park
A Preliminary 1998
economic
assessment
of the Cape
Peninsula
National Park:
Use, values,
public
preferences &
financing
Valuation of 2001
Open Space
in the Cape
Metropolitan
Area. A.
Valuation of
open space in
the Cape
Metropolitan
Area.
Turpie J,
Joubert A,
van Zyl H,
Harding B,
Leiman A.
Standish B, To estimate the
Boting A, van economic
Zyl H, Leiman contribution of
A, and Turpie Table Mountain
J
National park
The
2004
Economic
Contribution
of Table
Mountain
National Park
Metro South Tradeoffs
(whole area) between
conservation
and
development
discussed on
the basis of
possible
impact of
economic
valuation on
the budgetary
process
Contingent
valuation
Direct
expenditure
Effect of crime Contingent
and
valuation
cleanliness on
park values
assessed
City of Cape Security or
Town
fire risk for
historically
properties
one of the
bordering the
major funders park
of the Park
with its
contribution
accounting for
22% of all
income
between 1999
and 2003.
Population of Serves to
Cape
justify
Peninsula
government
expenditure in
maintenance
of park
National
economy
(GDP)
7.96
115.00
61.10
11.97
205.95
57.00
Annual value
139
Annual value. Far in
excess of the R35
million pa required to
manage the park.
Hedonic pricing study
and recreational
demand study using
travel cost method also
included.
2008 value as projected
by study
Turpie J,
Joubert A,
van Zyl H,
Harding B,
Leiman A.
Turpie J,
Joubert A,
van Zyl H,
Harding B,
Leiman A.
Turpie J,
Joubert A,
van Zyl H,
Harding B,
Leiman A.
Valuation of 2001
Open Space
in the Cape
Metropolitan
Area. A.
Valuation of
open space in
the Cape
Metropolitan
Area.
Valuation of 2001
Open Space
in the Cape
Metropolitan
Area. A.
Valuation of
open space in
the Cape
Metropolitan
Area.
Valuation of 2001
Open Space
in the Cape
Metropolitan
Area. A.
Valuation of
open space in
the Cape
Metropolitan
Area.
to test and apply Wetland
the tools of
(Zandvlei)
environmental and
resource
economics to
derive local values
for open space
goods and
services in
selected study
areas
to test and apply Wetland
the tools of
(Zandvlei)
environmental and
resource
economics to
derive local values
for open space
goods and
services in
selected study
areas
to test and apply Parks,
the tools of
sportsfields,
environmental and natural
resource
vegetation,
economics to
vacant lands,
derive local values wetlands,
for open space
agricultural
goods and
fields
services in
selected study
areas
Local users
Local users
Metro South
East (whole
area)
Tradeoffs
between
conservation
and
development
discussed on
the basis of
possible
impact of
economic
valuation on
the budgetary
process
Tradeoffs
between
conservation
and
development
discussed on
the basis of
possible
impact of
economic
valuation on
the budgetary
process
Tradeoffs
between
conservation
and
development
discussed on
the basis of
possible
impact of
economic
valuation on
the budgetary
process
Effect of crime Travel cost
and
method
cleanliness on
park values
assessed
Effect of crime Contingent
and
valuation
cleanliness on
park values
assessed
Effect of crime Contingent
and
valuation
cleanliness on
park values
assessed
0.70
0.64
15.81
1.05
0.96
23.77
Annual value
Annual value
Annual value
140
Turpie J,
Joubert A,
van Zyl H,
Harding B,
Leiman A.
Turpie J,
Joubert A,
van Zyl H,
Harding B,
Leiman A.
Turpie J,
Joubert A,
van Zyl H,
Harding B,
Leiman A.
Valuation of 2001
Open Space
in the Cape
Metropolitan
Area. A.
Valuation of
open space in
the Cape
Metropolitan
Area.
Valuation of 2001
Open Space
in the Cape
Metropolitan
Area. A.
Valuation of
open space in
the Cape
Metropolitan
Area.
Valuation of 2000
Open Space
in the Cape
Metropolitan
Area. A.
Valuation of
open space in
the Cape
Metropolitan
Area.
Local users
Tradeoffs
between
conservation
and
development
discussed on
the basis of
possible
impact of
economic
valuation on
the budgetary
process
to test and apply Wetland (river) Residents in Tradeoffs
the tools of
neighbouring between
environmental and
areas (3.3 ha) conservation
resource
and
economics to
development
derive local values
discussed on
for open space
the basis of
goods and
possible
services in
impact of
selected study
economic
areas
valuation on
the budgetary
process
to test and apply Park
Residents in Tradeoffs
the tools of
neighbouring between
environmental and
areas (1.3ha) conservation
resource
and
economics to
development
derive local values
discussed on
for open space
the basis of
goods and
possible
services in
impact of
selected study
economic
areas
valuation on
the budgetary
process
to test and apply Wetland
the tools of
(Zandvlei)
environmental and
resource
economics to
derive local values
for open space
goods and
services in
selected study
areas
Effect of crime Hedonic
and
pricing
cleanliness on
park values
assessed
Effect of crime Hedonic
and
pricing
cleanliness on
park values
assessed
Effect of crime Hedonic
and
pricing
cleanliness on
park values
assessed
0.98
1.35
84.25
1.56
2.03
126.68
141
Property value (PV)
Property value (PV)
Property value (PV)
Turpie J,
Joubert A,
van Zyl H,
Harding B,
Leiman A.
Turpie J,
Joubert A,
van Zyl H,
Harding B,
Leiman A.
Turpie J,
Joubert A,
van Zyl H,
Harding B,
Leiman A.
Valuation of 2000
Open Space
in the Cape
Metropolitan
Area. A.
Valuation of
open space in
the Cape
Metropolitan
Area.
Valuation of 2000
Open Space
in the Cape
Metropolitan
Area. A.
Valuation of
open space in
the Cape
Metropolitan
Area.
Valuation of 2000
Open Space
in the Cape
Metropolitan
Area. A.
Valuation of
open space in
the Cape
Metropolitan
Area.
to test and apply Wetland
the tools of
(whole)
environmental and
resource
economics to
derive local values
for open space
goods and
services in
selected study
areas
to test and apply Vacant land
the tools of
environmental and
resource
economics to
derive local values
for open space
goods and
services in
selected study
areas
to test and apply Sportsfield
the tools of
environmental and
resource
economics to
derive local values
for open space
goods and
services in
selected study
areas
Residents in Tradeoffs
neighbouring between
areas (8.3 ha) conservation
and
development
discussed on
the basis of
possible
impact of
economic
valuation on
the budgetary
process
Residents in Tradeoffs
neighbouring between
areas (43.2 conservation
ha)
and
development
discussed on
the basis of
possible
impact of
economic
valuation on
the budgetary
process
Metro South Tradeoffs
(whole area) between
conservation
and
development
discussed on
the basis of
possible
impact of
economic
valuation on
the budgetary
process
-1.90
1.17
Effect of crime Replacement 136.80
and
cost
cleanliness on
park values
assessed
Effect of crime Hedonic
and
pricing
cleanliness on
park values
assessed
Effect of crime Hedonic
and
pricing
cleanliness on
park values
assessed
218.04
-3.03
1.86
Capital value
142
Property value (PV)
Property value (PV)
Turpie J,
Joubert A,
van Zyl H,
Harding B,
Leiman A.
Turpie J,
Joubert A,
van Zyl H,
Harding B,
Leiman A.
Turpie J,
Joubert A,
van Zyl H,
Harding B,
Leiman A.
Valuation of 2000
Open Space
in the Cape
Metropolitan
Area. A.
Valuation of
open space in
the Cape
Metropolitan
Area.
Valuation of 2000
Open Space
in the Cape
Metropolitan
Area. A.
Valuation of
open space in
the Cape
Metropolitan
Area.
Valuation of 2000
Open Space
in the Cape
Metropolitan
Area. A.
Valuation of
open space in
the Cape
Metropolitan
Area.
to test and apply Wetland (water Metro South Tradeoffs
Effect of crime Replacement 481.00
the tools of
storage and
(whole area) between
and
cost
environmental and purification
conservation cleanliness on
resource
functions)
and
park values
economics to
development assessed
derive local values
discussed on
for open space
the basis of
goods and
possible
services in
impact of
selected study
economic
areas
valuation on
the budgetary
process
to test and apply Wetland
Metro South Tradeoffs
Effect of crime Replacement 102.00
the tools of
(whole)
East (whole between
and
cost
environmental and
area)
conservation cleanliness on
resource
and
park values
economics to
development assessed
derive local values
discussed on
for open space
the basis of
goods and
possible
services in
impact of
selected study
economic
areas
valuation on
the budgetary
process
to test and apply Wetland (water Metro South Tradeoffs
Effect of crime Replacement 12.00
the tools of
storage and
East (whole between
and
cost
environmental and purification
area)
conservation cleanliness on
resource
functions)
and
park values
economics to
development assessed
derive local values
discussed on
for open space
the basis of
goods and
possible
services in
impact of
selected study
economic
areas
valuation on
the budgetary
process
19.13
162.57
766.64
Capital value
Capital value
Capital value
143
van Zyl, H.
van Zyl, H.
van Zyl, H.
Property Price 2004
Approaches
to the
Valuation of
Urban
Wetlands:
Theoretical
Consideration
s and Policy
Implications.
Property Price 2004
Approaches
to the
Valuation of
Urban
Wetlands:
Theoretical
Consideration
s and Policy
Implications.
Property Price 2004
Approaches
to the
Valuation of
Urban
Wetlands:
Theoretical
Consideration
s and Policy
Implications.
Property values of Aesthetic and
Westlake river
recreational
rehabilitation in
benefits
Kirstenhof
Residents
To determine the Aethetic,recreat Residents
value of properties ional benefits
had the Kuils river and flood
remained
control benefits
rehabilitated
To estimate the
Aethetic,recreat Residents
impact of
ional benefits
rehabilitation of the and flood
lower silvermine control benefits
river
Risks of fires Hedonic
and security pricing
(mainly alien
vegetation),
risk of river
flooding
although
wetlands can
mitigate.
Human health
risks of
degraded
wetlands
Municipality Risks of fires Hedonic
legally
and security pricing
required to
(mainly alien
reduce flood vegetation),
risk
risk of river
flooding
although
wetlands can
mitigate.
Human health
risks of
degraded
wetlands
Municipality Risks of fires Hedonic
legally
and security pricing
required to
(mainly alien
reduce flood vegetation),
risk
risk of river
flooding
although
wetlands can
mitigate.
Human health
risks of
degraded
wetlands
Municipality
legally
required to
reduce flood
risk
10.30
2.90
45.40
13.00
3.66
57.32
144
Present value of benefit
(6 percent discount rate)
Present value of benefit
(6 percent discount rate)
Present value of benefit
(6 percent discount rate)
Water
2007
services
development
plan for the
City of Cape
Town 2008/09
- 2012/13
Water and
Financial
Water supply Water users
sanitation
sustainability of
infrastructure in City of
department of the service;
(dams &
Cape Town
CCT and
ensuring full cost catchments,
Amanzi Obom recovery and debt treatment
Consulting
management at a works, water
CC
fair tariff, and
reticulation,
financing of capital water pump
investment; fulfill stations,
key policy and
reservoirs,
legislative
depots);
requirements
Wastewater
infrastructure
(WW treatment
works, sewer
reticulation,
sewer pump
stations,
depots)
"The problem Safety,
Replacement 22132.0 23459.92 Capital value
in the city is occupational cost
0
not the
health (e.g.
absence of
HIV/AIDS/ TB/
economic
EAP
growth, but
programmes),
the failure to risk of
harmonize
pollution to
economic and stormwater
social
system,
development capital
objectives, to investment to
ensure the
reduce supply
benefits of
risk
economic
progress
reach the
population as
a whole, and
to ensure the
benefits of
economic
progress
reach the
population as
a whole."
145
Study to
Examine the
Potential
SocioEconomic
Impact of
Measures to
Reduce Air
Pollution from
Combustion
2002
Yvonne
Scorgie,
Gillian
Paterson,
Lucian
Burger,
Harold
Annegarn,
Melanie
Kneen
To investigate the
social and
economic
implications of the
phasing out of
'dirty fuels' within
South Africa.
Source group: City of Cape
Domestic fuel Town
burning (Coal residents
burning, Wood
burning, Other
fuel), Vehicles
(Petrol, Diesel),
Industry &
commercial,
Power
generation
Over 90
Cost of illness 928.90
percent of
method (total
health cost
cost of
relate to the respiratory
cost of
conditions, of
respiratory
non-fatal
conditions,
paraffin
with the
poisonings, of
majority
burns, total
(80%) of
cancer costs)
respiratory
ailments
resulting in
increased
hospitalisation
due to
domestic
wood burning.
1317.66
146
journey
in
3.50
25
R3
R12
72%
23%
5%
100%
40%
2%
16%
42%
100%
66%
9%
25%
100%
650 000
R32
R10
83%
17%
Entry fees paid per group per yr
Capetonians
R 7 347 600
Western Cape
R 367 380
Rest of SA
R 2 939 040
International
R 7 714 980
Group size car
Group size bus
Cost/km car
Cost/km bus
Transport mode
Car
Bus
Walk and other
Visitor origin
Capetonians
Western Cape
Rest of SA
International
Return
km
15
30
50
Total visitors per yr
Adult entry
Child entry
Adults
Children
R 11 638 568
R 862 116
R 6 896 929
R 23 708 195
72%
23%
5%
100%
27%
2%
16%
55%
100%
66%
9%
25%
100%
837 006
R60
R10
83%
17%
R 22 272 775
R 2 024 798
R 23 285 174
R 53 657 141
84%
6%
10%
100%
22%
2%
23%
53%
100%
64%
20%
16%
100%
759 660
R145
R76
83%
17%
Kirstenbosc Cape of Good
Cable way
h
Hope
R 5 582 176
R 310 121
R 1 705 665
R 7 908 083
84%
6%
10%
100%
36%
2%
11%
51%
100%
80%
6%
14%
100%
582 934
R30
R10
83%
17%
Boulders
Based on data from 2007/2008 visitor survey - SANParks
(2008)
R 540 583
R 13 026
R 32 565
R 65 131
84%
6%
10%
100%
83%
2%
5%
10%
100%
82%
7%
11%
100%
125 251
R5
R5
87%
13%
Tokai
R 678 145
R 16 341
R 40 852
R 81 704
84%
6%
10%
100%
83%
2%
5%
10%
100%
82%
7%
11%
100%
58 780
R15
R5
87%
13%
R 33 557
R809
R 2 022
R 4 043
84%
6%
10%
100%
83%
2%
5%
10%
100%
82%
7%
11%
100%
7 775
R5
R5
87%
13%
R 75 198
R 1 812
R 4 530
R 9 060
84%
6%
10%
100%
83%
2%
5%
10%
100%
82%
7%
11%
100%
6 518
R15
R5
87%
13%
Silvermine Perdekloof Oudekraal
R 51 491
R 1 241
R 3 102
R 6 204
84%
6%
10%
100%
83%
2%
5%
10%
100%
82%
7%
11%
100%
6 496
R10
R5
87%
13%
Newlands
R0
R0
R0
R0
84%
6%
10%
100%
83%
2%
5%
10%
100%
82%
7%
11%
100%
R0
R0
R0
R0
81%
2%
17%
100%
78%
2%
4%
16%
100%
85%
7%
8%
100%
R0
R0
R0
R0
78%
4%
18%
100%
95%
3%
1%
1%
100%
86%
7%
7%
100%
147
R 48 220 094
R 3 597 643
R 34 909 879
R 93 154 540
Other
Other High
Other Low use
Medium use
TOTAL
Use sites
sites
sites
818 920
256 281
132 789
4 242 410
R0
R0
R0
R0
R0
R0
87%
90%
84%
13%
10%
16%
Appendix 4.2: Detailed Calculation of travel and entry costs for TMNP sites and Kirstenbosch
R 10 756 786
R 516 326
R 11 273 111
R 2 480 084
R 225 462
R 2 592 816
R 5 974 749
R 11 273 111
Travel costs per origin group:
Capetonians
R 4 076 699 R 3 543 461
Western Cape
R 203 835
R 262 479
Rest of SA
R 1 630 680 R 2 099 829
International
R 4 280 534 R 7 218 161
TOTAL
R 10 191 747 R 13 123 929
182 318
1 823
R 2 744 718
R 152 484
R 838 664
R 3 888 351
R 7 624 217
R 7 275 016
R 349 201
R 7 624 217
139 904
1 399
R 101 239 888 R 15 506 044
R 8 390 571 R 10 804 552
R 1 801 176 R 2 319 377
R 10 191 747 R 13 123 929
Total travel costs
car
bus
TOTAL
172 184
7 700
R 18 369 000 R 43 105 809
Number of vehicles per year
car
133 714
bus
5 980
TOTAL
14 107
141
1 866
19
R 817 042 R 40 430
R 1 300 843
R 31 346
R 78 364
R 156 728
R 1 567 281
R 610 483
R 14 710
R 36 776
R 73 552
R 735 521
R 80 750
R 1 946
R 4 864
R 9 729
R 97 290
R 1 495 497 R 701 833 R 92 834
R 71 784
R 33 688 R 4 456
R 1 567 281 R 735 521 R 97 290
30 060
301
R 651 305
R 67 695
R 1 631
R 4 078
R 8 156
R 81 561
R 77 825
R 3 736
R 81 561
1 564
16
R 90 600
R 67 467
R 1 626
R 4 064
R 8 129
R 81 285
R 77 562
R 3 723
R 81 285
1 559
16
R 62 037
59 311
205
R0
29 593
212
R0
R 8 505 213
R 204 945
R 512 362
R 1 024 724
R 10 247 244
R 2 216 288
R 56 828
R 113 656
R 454 623
R 2 841 396
R 1 345 050
R 42 475
R 14 158
R 14 158
R 1 415 842
R 9 777 905 R 2 795 019 R 1 368 675
R 469 339
R 46 377
R 47 167
R 10 247 244 R 2 841 396 R 1 415 842
196 541
1 965
R0
148
R 27 038 751
R 1 199 767
R 7 930 311
R 23 111 594
R 59 280 424
R 53 614 075
R 5 666 349
R 59 280 424
962 722
19 777
R 179 882 156
Appendix 4.3: Additional options to respond to sea level rise in the City
of Cape Town
Additional
options
Physical
options
• Beach nourishment
• Sea walls
• Groynes
• Barrages and barriers
• Raising infrastructures level
• Revetment, rock armour, dolosse
and gabions
• Off-shore reef
• Water pumps
• Beach drainage
Biological
options
• Dunes cordons
• Estuaries and wetlands rehabilitation
• Kelp beds
Institutional
responses
• Vulnerability mapping
• Risk communication
• Apply legislation
• Apply a coastal buffer zone
• Prevent sand mining
• Favour research and monitoring
• Early warning systems
• Insurance market correction
Source: Cartwright (2008)
149
Chapter 5: An analysis of expenditure patterns related to
the environment for the City of Cape Town
Lead author:
Doug Crookes
with contributions from
Martin de Wit
5.1 Introduction
This chapter reports on an analysis of the City of Cape Town’s expenditure on natural
assets and operations, both from a historical perspective (budget versus actual expenditure
for the 2004/5 to 2008/9 budget years) as well as forward projections of expenditure (until
2011/12).
The total city budget is classified in terms of the International Monetary Fund’s (IMF)
Government Finance Statistics (GFS) Code, wherein departmental line functions are also
allocated (for a detailed classification of functions in terms of GFS Code, see Appendix 5.1).
In order to understand which departments are expending money on natural assets within
the City of Cape Town, the following line functions were identified:
•
Community Development (City Parks, Sports and Recreation)
•
Economic and Social Development (Tourism Development)
•
City Health (Environmental Health)
•
Strategy and Planning, specifically:
o Spatial Planning and Urban Design
o Planning and Building Development Management (formerly town
planning)
•
Transport, Roads and Stormwater:
o Roads and Stormwater (includes Catchment Management)
o Transport
•
Utility Services:
o Electricity Services
o Solid Waste Services
o Water Services
In addition to this, expenditure in the Environmental Management department and its three
cost centres (Environment and heritage management, Environmental head office and
Nature conservation) were also included.
150
In addition to the broadly defined Sectors with Environmental Expenditure (SEE), the
project adopts a definition of the environment within these sectors based on realistic
environmental expenditure (REE). Percentages used are as follows: GFS 03 (12.5%); GFS
05 (2.5%); GFS 08 (25%); GFS 09 (100%); GFS 10 (solid waste: 2.5%; waste water
management 5%); GFS 11 (1%); GFS 12 (2.5%); GFS 13 (1%); GFS 14 (10%).
The Access database we were provided with contained 173 344 records, which included
both income and expenditure items. In order to analyse the data we extracted all the items
with an I-E code of E (expenditure), and further sorted the data by two digit GFS code and
then by line function. In some cases there were large negative expenditure items in the
dataset, for example interaccount transfers. We report the figures as we find them without
making allowance for these negative values. The result is that some GFS sub-functions
report negative totals (see, for example, operational expenditure related to water and also
electricity).
We compared the Access data (approved budget) with the provisional budget for 2009/10
as reported in the City News. The Access database was approximately 22 percent higher
than the budget tabled in the City News. The total capital expenditure figures were also
slightly higher than those reported in the City News (R6.2 billion in 2009/10 budget
compared with R5.5 billion). According to City officials the difference is due to the inclusion
of so-called secondary price elements in the Access database (internal charges). While it is
possible to exclude these figures from the analysis we include them as we were advised
that they provide a more accurate picture of the City’s expenditure patterns.
151
5.2 Capital expenditure (CAPEX)
5.2.1 Capital expenditure in absolute values (R million)
5.2.1.1
GFS 09 – Environmental protection
The bulk of the capital expenditure in the pollution control function is on air pollution
monitoring (2005/6 budget year) and pollution control equipment (2006/7, 2008/9, 2009/10
budget years). The capital expenditure in the biodiversity and landscape function is largely
expenditure on activities related to the maintenance, upgrade and operation of city nature
reserves. Capital expenditure on environmental protection was just under R5 million in the
2007/8 budget year.
Capital expenditure (R million)
GFS 09: Environmental protection
2004/5
0.7
2005/6
2.8
2006/7
3.0
2007/8
4.6
Overall capital expenditure for environmental protection is expected to peak at just under
R10 million in the 2008/9 budget year.
152
5.2.1.2
Other SEE capital expenditure
5.2.1.2.1
GFS 03 – Planning and development
The capital expenditure on sectors with environmental expenditure within the planning and
development function is relatively low. Within this function only three departments are
regarded as having environmental expenditure, namely: Spatial Planning and Urban
Design, Planning and Building Development Management, and Environmental Resource
Management. Actual expenditure remains constant at around R30 million, although
budgeted expenditure is much higher than this.
153
5.2.1.2.2
GFS 05 – Community and social services
Capital expenditure on parks includes GFS 0504 (cemeteries and crematoriums) and GFS
0507 (other community). Sport, recreation and amenities within this function includes GFS
0501 (libraries and archives), GFS 0502 (museums and art galleries), GFS 0503
(community halls and facilities), and GFS 0508 (other social).
154
5.2.1.2.3
GFS 08 – Sport and recreation
SEE expenditure on sport and recreation (which includes community parks (incl. nurseries),
sports grounds and stadiums (excl. expenditure related to the soccer world cup), swimming
pools, beaches, lakes, dams and jetties for recreation, camping sites, etc.) has remained
fairly constant at levels around R100 million.
155
5.2.1.2.4
GFS 10 – Solid waste management
Actual capital expenditure on solid waste management has more than doubled since
2005/6, from just under R40 million in 2004/5 to over R110 million in 2007/8.
Solid waste services are expected to receive a significant capital injection in the 2009/10
budget and the 2011/12 budget. Capital expenditure is expected to range from R350 to
R450 million over this period.
156
5.2.1.2.5
GFS 10 – Waste water management
Capital expenditure on water services, which include GFS 1001 (sewerage) and GFS 1004
(no split total), is the dominant capital expenditure item within this function. Roads and
Stormwater (GFS 1002) and Sport, Recreation and Amenities (GFS 1003 – public toilets)
are almost negligible.
SEE Capital expenditure (R million) 2004/5
GFS 10: Waste water management
73.9
2005/6
107.6
2006/7
145.8
2007/8
271.5
Budgeted capital expenditure for water services increased by more than five time from an
average of approximately R100 million in 2004/5 to peaking at over R550 million in the
2009/10 budget period. The main expense involve the development of landfill infrastructure
at an average capital expenditure of between R278 and R300 million per annum over three
years.
157
5.2.1.2.6
GFS 11 – Road transport
Road transport includes GFS 1101 and 1106 (roads and stormwater), GFS 1101 and 1106
(transport) and GFS 1106 (TRS corporate). Actual expenditure on road transport reached a
high of just under R360 million in 2007/8.
SEE Capital expenditure (R million) 2004/5
GFS 11: Road transport
205.6
2005/6
292.7
2006/7
255.5
2007/8
359.7
Roads and stormwater is expected to receive a significant capital investment of between
R915 and over R1 300 million between 2009/10 and 2011/12.
158
5.2.1.2.7
GFS 12 – Water
Water services comprise GFS 1201 (water distribution), GFS 1202 (water storage) and an
unallocated portion (GFS 1204). The latter has decreased notably since 2005/6.
SEE Capital expenditure (R million) 2004/5
GFS 12: Water utilities
90.8
2005/6
263.5
2006/7
184.6
2007/8
210.3
The main reason for the almost threefold increase in the water services capital budget
between 2010/11 and 2011/12 is the proposed development of additional water storage
infrastructure which involves a capital cost of R351.5 million in 2010/11 and R409 million in
2011/12.
159
5.2.1.2.8
GFS 13 – Electricity
Electricity services comprise GFS 1301 (distribution), GFS 1302 (generation), GFS 1303
(street lighting) and GFS 1305 (unallocated). Capital expenditure on distribution costs are
the major cost item in this function.
SEE Capital expenditure (R million) 2004/5
GFS 13: Electricity
168.1
2005/6
271.0
2006/7
327.5
2007/8
539.0
160
5.2.1.2.9
GFS 14 – Tourism development
The budgeted tourism capital expenditure peaked in the 2004/5 budget year at R6 million,
although actual expenditure was much lower (around R 2.6 million), with 2006/7
expenditure a mere R200 000.
161
5.2.1.3
Total capital expenditure
Actual capital expenditure related to Sectors with Environmental Expenditure (SEE)
exceeds CAPEX on non-SEE sectors. Total SEE expenditure was R1.67 billion in the
2007/8 budget period.
The total capital budget is expected to increase steadily between 2007/8 and 2009/10,
thereafter levelling off at around R4 billion in the 2010/11 and 2011/12 financial year.
162
5.2.2 Capital expenditure as percentage of total budget
5.2.2.1
2004/5 Budget
Road transport received the bulk of the capital expenditure in environment related
departments in 2004/5 (more than 25% of budget summing across all sub-functions)
followed by electricity with around 15%.
5.2.2.2
2005/6 Budget
Non-environmental capital expenditure was originally budgeted to be almost 50% of the
total budget in the 2005/6 financial year. However, actual expenditure was much lower
(approximately 25% of the budget).
163
5.2.2.3
2006/7 Budget
In this budget, non-SEE expenditure increased sharply, mostly related to expenditure on
the 2010 Soccer World Cup. Road transport and sport and recreation were under budget.
5.2.2.4
2007/8 Budget
The non-SEE component has now risen to 45% of the budget, of which 30% is attributable
to the 2010 Soccer World Cup.
164
5.2.2.5
2008/9 Budget
Capital expenditure on the 2010 Soccer World Cup is expected to peak in this financial
year, with non-SEE expenditure at more than 50% of the total budget. Waste management
and electricity services are expected to receive less than originally budgeted, along with
water storage and spatial planning and urban development.
5.2.2.6
Budget forecast: 2009/10–2011/12
Road transport (roads and stormwater) and electricity distribution is expected to have an
increasing share of the total budget over the next three years. Capital expenditure related to
environmental protection (health services as well as environmental resource management)
is expected to be almost negligible.
165
5.2.3 Capital expenditure as a percentage of city line function
5.2.3.1
GFS 09 – Environmental Protection
The Environmental Resource Management (ERM) department utilised the bulk (between
60% and 95%) of the capital allocation to environmental protection, mainly for activities
related to the protection of biodiversity and landscapes (GFS 0902). The share of city
health (GFS 0901 – pollution control), however, has declined.
The proportion of the approved capital budget allocated to ERM in 2010/11 and 2011/12 is
slightly down compared with the 2009/10 year.
166
5.2.3.2
Other SEE capital expenditure
5.2.3.2.1
GFS 03 – Planning and development
The share of planning and building development management to total capital expenditure in
GFS 03 has fallen from just over 30% to approximately 10% between 2004/5 and 2007/8.
ERM on the other hand has grown from a low base. The non-SEE component has
fluctuated, peaking in 2005/6 at 50% of the budget in this line function.
Capital expenditure in the spatial planning and urban design sub-function makes up the
highest contribution to the line function (between approximately 20% and 55%). Its relative
contribution has and is expected to continue to increase over time.
167
5.2.3.2.2
GFS 05 – Community and social services
Park expenditure receives the highest injection of capital in the community and social
services function. Non-SEE expenditure in GFS 05 exceeded the parks budget in 2005/6.
Sport and recreation is expected to receive solid capital investment in the run-up to the
2010 Soccer World Cup.
168
5.2.3.2.3
GFS 08 – Sport and recreation
The non-SEE component of the sports and recreational line function (GFS 08) dominates
capital expenditure from the 2006/7 budget until the end of 2011/12.
5.2.3.2.4
GFS 10 – Solid waste management
This is not applicable since there is only one sub-function/department present in this GFS
code.
169
5.2.3.2.5
GFS 10 – Waste water management
Capital expenditure related to water services (GFS 1001 – sewage and GFS 1004 – other
unallocated) received the bulk (over 90%) of the actual and budgetary allocation to this
function.
170
5.2.3.2.6
GFS 11 – Road transport
In the road transport function (GFS 11), roads and stormwater is expected to command an
increasing share of the budget, with the relative share of the transport sub-function
declining.
171
5.2.3.2.7
GFS 12 – Water
In the 2004/5 budget, capital expenditure related to water distribution dominated the water
services budget. However, for 2010/11 and 2011/12 this trend is expected to be reversed,
with water storage expenditure comprising more than 65% of the budget in these years.
172
5.2.3.2.8
GFS 13 – Electricity
Capital expenditure related to electricity distribution is highest, although one should not
conclude that this has increased over time because the unallocated proportion has
declined.
173
5.2.3.2.9
GFS 14 – Other
Tourism development is the overarching capital expenditure item in this function with
economic and human development making up an almost negligible component (<1.0%).
174
5.3 Operational expenditure (OPEX)
5.3.1 Operational expenditure in absolute values (R million)
5.3.1.1
GFS 09 – Environmental protection
Operational expenditure on pollution control and biodiversity and landscape protection both
show increasing trends, but the overall budget is low compared with many other
environmental line functions.
175
5.3.1.2
Other SEE operational expenditure
5.3.1.2.1
GFS 03 – Planning and development
Planning and building development management dominates the SEE component of GFS
03.
Some increases are expected for the ERM operational budget in the 2008/9–2011/12
budget years.
176
5.3.1.2.2
GFS 05 – Community and social services
Sport and recreation (GFS 0502 – museums and art galleries, GFS 0503 – community halls
and facilities, GFS 0507 – other community, and GFS 0508 – other social) makes a
significantly lower contribution to operational expenditure compared to the parks budget
(GFS 0504 – cemeteries and crematoriums, and the parks component of GFS 0507 – other
community).
177
5.3.1.2.3
GFS 08 – Sport and recreation
In the sport and recreation function, the parks budget is almost negligible with actual
expenditure of more than R300 million in 2007/8.
Interestingly, in contrast to the capital budget, operational expenditure on Sport, Recreation
and Amenities is expected to increase after 2010.
178
5.3.1.2.4
GFS 10 – Solid waste management
Operational expenditure on solid waste management services has steadily increased over
the period, with the budget for the 2011/12 year at almost R2 billion. Actual expenditure,
however, has fluctuated between approximately R800 million and R1 200 million.
179
5.3.1.2.5
GFS 10 – Waste water management
Operational expenditure on sewerage services forms the bulk of the waste water
management line function. Overall budgets are similar to the solid waste management
services’ budget.
180
5.3.1.2.6
GFS 11 – Road transport
Operational expenditure on roads forms the largest component of the allocated budget for
this line function, although there is a large and increasing unallocated component which
masks true trends.
181
5.3.1.2.7
GFS 12 – Water
Water distribution is the largest component in the water services budget, with actual
expenditure peaking at just over R1.4 billion in 2005/6.
Water storage expenditure is budgeted at roughly half of the water distribution budget. The
unallocated component is quite significant from the 2007/8 budget until the 2011/12 budget.
182
5.3.1.2.8
GFS 13 – Electricity
Electricity distribution costs form the bulk of actual expenditure, with electricity generation
costs almost negligible. Expenditure on street lighting only features in 2008/9 so far.
Electricity distribution costs are expected to increase significantly from 2009/10 to 2011/12.
183
5.3.1.2.9
GFS 14 – Other
We have included abattoir services under environmental expenditure, although this peters
out in the 2005/6 budget. Overall tourism expenditure is surprisingly low at less than R80
million across all the periods examined.
184
5.3.1.3
Total operational expenditure
The operational expenditure in Sectors with Environmental Expenditure (SEE) has
exceeded the non-SEE sectors in terms of historical spending. Actual expenditure in SEE
peaked in 2007/8 at just under R10 billion.
SEE are expected to increase markedly from the 2009/10 budget to the 2011/12 budget.
Non-environmental expenditure, however, is expected to remain fairly constant over this
period.
185
5.3.2 Operational expenditure as percentage of total budget
5.3.2.1
2004/5 Budget
Electricity distribution has the highest share of the environmental component of the
operational budget, at just below 20% of the total budget allocation. This is followed by
water distribution, solid waste and sewage at between 5 and 10 percent of budget.
5.3.2.2
2005/6 Budget
Actual expenditure on water distribution peaked at above 10% of budget during this
financial year.
186
5.3.2.3
2006/7 Budget
The non-environment component of the budget has increased to almost 40% compared to
the previous two budget years, with actual expenditure higher than the approved budget.
5.3.2.4
2007/8 Budget
In most cases actual expenditure matches or is less than the current/final budget, with the
exception of solid waste services (and non-environmental), although differences are on the
whole small.
187
5.3.2.5
2008/9 Budget
Operational expenditure on environmental protection services is an almost insignificant
component of the total budget (less than 1%).
5.3.2.6
Budget forecast: 2009/10–2011/12
The budget forecast from 2009/10 to 2011/12 shows that electricity distribution costs are
expected to command an increasing share of the budget, while non-SEE expenditure is
expected to decrease. Electricity distribution costs alone are expected to be almost
equivalent to the total non-SEE budget, while the remaining SEE budget (excluding
electricity distribution) is expected to make up just less than half of the total budget.
188
5.3.3 Operational expenditure as percentage of city line function
5.3.3.1
GFS 09 – Environmental protection
Biodiversity and landscape has received an increasing share of the budget allocated to
environmental protection, standing at just below 40% in the most recently available years.
This budget allocation is expected to remain constant in the forecast budget period (from
2009/10 to 2011/12).
189
5.3.3.2
Other SEE sector expenditure
5.3.3.2.1
GFS 03 – Planning and development
Planning and building development management has by far the highest SEE expenditure
allocated in the GFS 03 function. The non-SEE component has remained stable at
approximately 40% of total line function.
The non-SEE share of GFS 03 is expected to decline from the 2009/10 budget through to
the 2011/12 budget relative to the 2008/9 period.
190
5.3.3.2.2
GFS 05 – Community and social services
Operational expenditure on parks (GFS 0504 – cemeteries and crematoriums, and GFS
0507 – other community) has remained fairly constant with more than 50% of the budget
allocated to the community and social services function.
Parks expenditure is expected to decline as overall share of the budget allocated to GFS
05, with the non-SEE component increasing.
191
5.3.3.2.3
GFS 08 – Sport and recreation
The parks component of the sports and recreation function is almost negligible. Sizeable
negative OPEX transfers were recorded in the non-SEE component related to 2010 Soccer
World Cup activities.
5.3.3.2.4
GFS 10 – Solid waste management
This is not applicable since only one sub-function/department is present in this GFS code.
192
5.3.3.2.5
GFS 10 – Waste water management
Sewerage services stand at well over 80% of the operational budget allocated to the waste
water management function.
This allocation has also remained fairly stable over time.
193
5.3.3.2.6
GFS 11 – Road transport
The unallocated component of the budget within this function is high, standing at over 60%
of the budget for most years and peaking at well over 80% for the 2009/10 budget period.
194
5.3.3.2.7
GFS 12 – Water
Budget allocations have remained fairly consistent in this function, with water distribution a
dominant but somewhat fluctuating percentage of the budget.
195
5.3.3.2.8
GFS 13 – Electricity
Although overall budget allocations to the electricity services function have increased over
time (see section 5.3.1.2.8), the budget allocations within this function have remained fairly
consistent over time.
196
5.3.3.2.9
GFS 14 – Other
Abattoir costs peaked in the 2004/5 budget year at more than 40% of the budget, but are
now no longer part of the activities of this function.
197
5.3.3.3
Total operational expenditure
Total operational expenditure on SEE has remained fairly constant at just over 60% of the
total budget between 2004/5 and 2008/9.
Between 2009/10 and 2011/12 the SEE share is expected to increase slightly, to just over
70% in 2012.
198
5.4 Realistic environmental expenditure (REE)
5.4.1 Capital expenditure
5.4.1.1
GFS 09 – Environmental protection
The share of environmental protection to total capital budget increased significantly
between 2005 and 2006, but has remained fairly stable since then.
199
5.4.1.2
Other REE sector expenditure
5.4.1.2.1
GFS 03 – Planning and development
The share of REE in GFS 03 has declined over time, from 0.42% to 0.16%.
5.4.1.2.2
GFS 05 – Community and social services
In absolute value terms, REE expenditure on community and social services has grown, but
as a percentage of the budget this has remained stable or even declined.
200
5.4.1.2.3
GFS 08 – Sport and recreation
The share of sport and recreation REE as a percentage of the total capital budget has also
declined over time.
5.4.1.2.4
GFS 10 – Solid waste management
In absolute terms, capital expenditure on solid waste management has grown in a
somewhat erratic manner.
201
5.4.1.2.5
GFS 10 – Waste water management
REE capital expenditure on waste water management has grown, with marginal growth in
percentage terms as well.
5.4.1.2.6
GFS 11 – Road transport
In percentage terms, road transport has declined from 0.22% of the budget in 2005 to
0.12% in 2008, with some expectation of an increase in 2009.
202
5.4.1.2.7
GFS 12 – Water
Water services capital expenditure reached a peak in absolute terms in 2006, with REE at
R6.6 million or 0.43% of the budget.
5.4.1.2.8
GFS 13 – Electricity
Electricity REE has remained fairly stable as a share of the total budget at between 0.17%
and 0.18%.
203
5.4.1.2.9
GFS 14 – Other
Tourism capital expenditure is a low and declining share of the total budget for the ensuing
periods.
5.4.1.3
Total capital expenditure
While total REE capital expenditure has increased, the share of the total budget has
declined from 3.24% to 2.1% between 2005 and 2008.
204
Non-REE capital expenditure, however, has increased both numerically as well as in
percentage terms.
5.4.2 Operational expenditure
5.4.2.1
GFS 09 – Environmental protection
Operational expenditure on environmental protection is expected to grow from 0.42% of the
budget to 0.61% of the budget between 2005 and 2009.
205
5.4.2.2
Other REE sector expenditure
5.4.2.2.1
GFS 03 – Planning and development
The REE operational component of GFS 03 has increased gradually in rand terms.
However, as percentage of budget it has fluctuated between 0.16% and 0.19%.
5.4.2.2.2
GFS 05 – Community and social services
REE in GFS 05 has remained fairly stable in both rand terms as well as a percentage of the
total budget.
206
5.4.2.2.3
GFS 08 – Sport and recreation
REE in sport and recreation has grown steadily from 0.42% to 0.54% of the total budget.
5.4.2.2.4
GFS 10 – Solid waste management
Solid waste management environmental expenditure has fluctuated between R20 million
and R30 million over the period.
207
5.4.2.2.5
GFS 10 – Waste water management
Waste water management REE has remained fairly constant. In percentage terms it peaked
in 2005 at 0.35%.
5.4.2.2.6
GFS 11 – Road transport
The scale of the graph hides the fact that road transport environmental expenditure is fairly
stable at low levels of between 0.05% and 0.06%.
208
5.4.2.2.7
GFS 12 – Water
REE in the water sector has fluctuated, both in absolute terms as well as a percentage of
the budget. Expenditure peaked at R54.5 million in 2007/8.
5.4.2.2.8
GFS 13 – Electricity
Electricity REE as a percentage of the total budget reached its lowest levels in 2007/8, with
a recovery expected for 2008/9.
209
5.4.2.2.9
GFS 14 – Other
Tourism operation expenditure on the environment peaked in 2004/5 at R8.3 million and
0.08% of the budget.
5.4.2.3
Total operational expenditure
Total REE operational expenditure has climbed steadily to 2.44% of the budget in 2007/8,
and is expected to continue to grow in 2009. The exception was 2006 where a decline was
experienced.
210
Non-REE operational expenditure as a percentage of the budget has declined steadily
since 2006. This is despite some positive growth in absolute terms.
5.5 Operational
Management
expenditure:
Environmental
Resource
Financial information on ERM was extracted from the City of Cape Town’s SAP database
by City Officials. We attempted a reconciliation of these figures with the Access database
previously reported on but were not able to. For example, according to the SAP dataset the
total expenditure in the ERM department in 2009/10 is expected to be at R90.4 million. The
Access dataset we were provided with (which may well also come from SAP) gave a total of
R150.3 million (across GFS codes 0301 and 0902). We attempted to clarify this with the
City of Cape Town’s finance representative but he was unable to assist us as he did not
extract the ERM data. For the sake of completeness, therefore, we report both sets of
figures.
211
5.5.1 Departmental expenditure
5.1.1 Environment and heritage management
The environment and heritage management department is expected to increase its share of
the operational budget from 15% to 22% over the reported forecast period.
5.5.1.2
Environmental head office
The share of the budget allocated to the environmental head office is expected to decrease,
although in absolute terms the rand value will increase.
212
5.5.1.3
Nature conservation
Absolute expenditure in the nature conservation department is expected to increase from
R32 million to R66 million, although its share of the budget will remain largely unchanged.
5.5.2 Operational expenditure: total for ERM
The expenditure budget for ERM is expected to almost double, from R90 million in the
2009/10 budget year to R160 million in the 2010/11 budget year.
213
5.6 Trend analysis
5.6.1 Capital expenditure
5.6.1.1
Absolute differences (R million)
5.6.1.1.1
Sectors with Environmental Expenditure (SEE)
The majority of SEE has experienced relatively low net changes in capital expenditure.
There were five sectors with net changes of more than R100 million, namely: water utilities
in 2005/6 (R173 million change), electricity in 2005/6 and 2007/8 (net changes of R103
million and R212 million respectively) waste water management (R126 million in 2007/8)
and road transport (R104 million in 2007/8).
214
5.6.1.1.2
Non-SEE
In the non-SEE, the majority of changes in capital expenditure have all been well below the
R100 million mark. The only exception has been the FIFA component of sport and
recreation that experienced absolute changes of R665 million in 2007/8.
215
5.6.1.2
Percentage change
5.6.1.2.1
SEE
The percentage changes in CAPEX in the SEE have been the highest for tourism
development (627% in 2007/8) although this is off a low base. Environmental protection
(281%), water utilities (190%) and solid waste management (139%) have also experienced
notable increases in CAPEX investment between 2004 and 2008.
216
5.6.1.2.2
Non-SEE
Sport and recreation (394% and 139% respectively) have experienced the highest
percentage change in capital expenditure over the period, followed by executive and
council (GFS 01) (229% in 2005/6 and 199% in 2006/7). Planning and development (GFS
03) also experienced positive changes (206%) in expenditure in 2005/6.
217
5.6.2 Operational expenditure
5.6.2.1
Absolute differences (R million)
5.6.2.1.1
SEE
In contrast to the capital budget, there were more sectors that changed by large amounts.
In the SEE functions four expenditure items changed by more than R250 million year-onyear. These were water utilities (R436 million in 2005/6 and R387 million in 2007/8 and a
decline of R260 million in 2008/9), and electricity (increasing by R301 million in 2007/8).
218
5.6.2.1.2
Non-SEE
In non-SEE, only finance and administration (GFS 02) experienced expenditure changes in
its operational budget of more than R250 million in any given year. Two expenditure items
exceeded this amount. In 2005/6, expenditure changes were the highest in this function at
R893 million. In the 2008/9 budget year, absolute differences declined by R468 million in
the first ten months.
219
5.6.2.2
Percentage change
5.6.2.2.1
SEE
In terms of percentage change in SEE operational expenditure, large changes were in
general fewer than for the capital expenditure. Only three expenditure items had changes of
more than 30% year-on-year (i.e. water utilities at 30% in 2005/6, tourism development with
a decline of 35% in 2006/7, and community and social services at 32% in 2007/8).
220
5.6.2.2.2
Non-SEE
By contrast, there were six expenditure items in the non-SEE budget that increased by
more than 30% (i.e. Finance and admin in 2005/6, Planning and development and housing
in that same year, sport and recreation in 2006/7 and 2008/9 and housing again in 2007/8).
221
5.6.3 REE Capital expenditure
Comparisons between percentage changes in the REE capital budget and non-REE budget
indicates that REE expenditure had little positive impact on the budget. Most of the impacts
were negative. This suggests that changes in REE expenditure has not contributed
significantly to the overall CAPEX.
5.6.4 REE Operational expenditure
Although the REE operational budget has shown some positive impact on the OPEX
budget between 2006/7 and 2008/9, the overall average change in REE expenditure has
only been 1.7%.
222
5.7 Discussion
Total expenditure on Sectors with Environmental Elements (SEE) = development (capital)
expenditure + recurring (operational) expenditure.
Development expenditure has increased from R688 million in 2004/5 to R1 668 million in
2007/8, an annual increase of just below 34%. By contrast the non-SEE has grown by an
average of 76% per annum over the same period.
Comparing SEE and non-SEE recurring expenditure shows a much slower average annual
growth. SEE expenditure grew by an average of 6.5% between 2004/5 and 2007/8. NonSEE expenditure, however, grew by 10.2% over the same period.
The SEE offer a very broad approach to identifying environmental expenditure. Many of the
expenditure items within each of these GFS codes would not constitute direct expenditure
on environmental assets or goods and services. However, how does one determine which
of these relate to environmental expenditure, and which do not? In the absence of
alternatives, this study adopts expert opinion to derive sectors with realistic environmental
expenditure (REE). An analysis of changes in environmental expenditure with overall
changes in budget indicates that spurts of environmental expenditure has not had a
significant impact overall on the City’s budget. This would suggest that, on the whole,
environmental feedbacks have not worked through the budgetary system yet.
5.8 Conclusion
We analysed City of Cape Town’s capital and operational (CAPEX and OPEX) expenditure
from the 2004/5 to 2011/2 budget periods. The study focused on sectors with environmental
expenditure (SEE) and a more narrowly defined definition of environmental expenditure
based on realistic environmental expenditure (REE). The definition of these SEE is broad,
accounting for over 60% of the total City of Cape Town budget. REE on the other hand was
between 2 and 2.5% of total budget in 2007/8.
Not surprisingly, expenditure on utilities, waste and capital expenditure related to the 2010
Soccer World Cup featured strongly. Somewhat more surprisingly though, is the low capital
or operational expenditure on more traditional environmental functions such as
environmental protection.
In an analysis of the trends in REE expenditure, the study concludes that there is no
indication of bursts in environmental expenditure when compared to the total budget. The
study recommends the development of a more robust definition of environmental
expenditure within the City’s budgetary process.
223
1
Executive and
Council
3
4
Planning and
Development
Health
Finance and Admin 2
Function
Code
Function
203
204
205
206
Information
Technology
Property
Services
Other Admin
No Split Total
401
402
403
404
Clinics
Ambulance
Other
No Split Total
301
202
Human
Resources
Not Required
201
101
Finance
Not Required
Sub-function Sub-function
Code
Used if systems will not allow the function to be split into the required subfunctions. Mechanisms should be put in place to improve systems.
Including Health Inspection
Includes: Economic Planning and Development, Town Planning, Corporate Wide
Strategic Planning (IDPs LEDs, etc.), Building Regulations and Enforcement, City
Engineer (from a town planning perspective), etc.
Used if systems will not allow the function to be split into the required subfunctions. Mechanisms should be put in place to improve systems
Security services, legal services, fleet management, asset management,
procurement (orders, tenders, contract management, etc.), general risk
management (incl. Insurance), marketing publicity & media coordination (other
than tourism)
Municipality owned and operated & leased properties including building operation
and maintenance, administration, etc.
All activities relating to IT services
All activities related to the human resources function such as selection and
recruitment, induction, career development, counselling, payroll,
occupational health and safety, etc.
All activities relates to the finance function such as financial statements, budgets,
management reporting, revenue collection (credit control), financial asset and
liability management (treasury & cash management), rates, RSC levies, audit,
creditors, etc.
All costs for Mayoral, Councillor and committee expenses
Municipal Manager, Town Secretary and Chief Executive costs
Including the costs of providing physical amenities for these activities
Further Description of Activities
Appendix 5.1: International standards (GFS functions and sub-functions) used
224
5
6
7
8
9
Community and
Social Services
Housing
Public Safety
Sport and
Recreation
Environmental
Protection
507
508
509
Other
Community
Other Social
No Split Total
703
704
705
Civil Defence
Other
No Split Total
Pollution
Control
901
801
702
Fire
Not Required
701
Police
601
506
Aged Care
Not Required
505
Child Care
Cemeteries
504
and
Crematoriums
Ambient air and climate protection, soil and groundwater protection, noise and
vibration abatement, protection against radiation, etc.
Includes community parks (incl. nurseries), sports grounds and stadiums,
swimming pools, beaches, lakes, dams and jetties for recreation, camping sites,
etc.
Used if systems will not allow the function to be split into the required subfunctions. Mechanisms should be put in place to improve systems
Includes licensing and control of animals and control of public nuisances, disaster
management (not civil defence)
Includes municipal commandos, etc. – not policing
Fire fighting and protection
Includes police forces and traffic and street parking control
All activities associated with the provision of housing
Used if systems will not allow the function to be split into the required subfunctions. Mechanisms should be put in place to improve systems
Including literacy programmes, etc.
(e.g. Theatres, Zoos, etc. – provide notes on significant activities)
Including old aged homes, home help, transport facilities, etc.
Including crèches, etc.
Exhibition halls and places for community gatherings
Community
halls and
Facilities
503
Including monuments and historic houses and sites
501
Museums and 502
Art Galleries,
etc.
Libraries and
Archives
225
10
10
11
12
Solid Waste
Management
Waste Water
Management
Road Transport
Water
904
No Split Total
Used if systems will not allow the function to be split into the required subfunctions. Mechanisms should be put in place to improve systems
1204
No Split Total
Including bulk purchases and distribution infrastructure, etc.
Including storage infrastructure such as dams and reservoirs as well as activities
to prepare the water for use such as purification
1201
Water Storage 1202
Water
Distribution
1106
No Split Total
Used if systems will not allow the function to be split into the required subfunctions. Mechanisms should be put in place to improve systems
Includes activities associated with taxi ranks, etc.
1105
Other
All activities associated with off street parking garages
Vehicle licensing, etc. as an agent for the province
1103
Parking
Garages
All activities relating to the provision of public bus services
Operating, maintenance and capital expenditure on the major infrastructure
category of roads
Used if systems will not allow the function to be split into the required subfunctions. Mechanisms should be put in place to improve systems
This includes construction, maintenance, operating, etc.
This does not include water purification for human consumption
Includes refuse removal, solid waste disposal (landfill sites), street cleaning,
recycling, etc.
Used if systems will not allow the function to be split into the required subfunctions. Mechanisms should be put in place to improve systems
Includes coastal protection, etc.
Includes activities relating to the protection of flora and fauna species, the
protection of habitats and the protection of landscapes for their aesthetic values
(e.g. rehabilitation of abandoned mines and quarry sites)
Vehicle
1104
Licensing and
Testing
1102
1004
No Split Total
Public Buses
1003
Public Toilets
1101
1002
Storm Water
Management
Roads
1001
Sewerage
1011
903
Other
Solid Waste
902
Biodiversity
and
Landscape
226
13
14
Electricity
Other
1405
Markets
Operation of markets – fresh produce, etc.
All activities associated with the forestry industry
Please specify if any one function is greater than 20% of the Other category
This encompasses any activities not covered above. Specifying significant
activities will assist to ensure that classification takes place where required.
1404
Forestry
Tourism promotion and development
Other
1403
Tourism
Operation of abattoirs
Includes licensing of food and liquor sales to the public and licensing of street
traders (hawkers control) and business. Does not include building or planning
regulation or vehicle licensing.
1402
Abattoirs
Licensing and 1406
Regulation
1401
Air Transport
Municipal airports
Used if systems will not allow the function to be split into the required subfunctions. Mechanisms should be put in place to improve systems
1305
No split total
Gas not included here and must be included under other
Operating, maintenance and capital expenditure on the infrastructure category
Street lighting
1302
Electricity
Generation
Including bulk purchases and distribution infrastructure, etc.
Street Lighting 1303
1301
Electricity
Distribution
227
Chapter 6: A financial-economic evaluation model for
the City of Cape Town’s natural capital
Lead author:
James Blignaut
with inputs from:
Martin de Wit
Hugo van Zyl
Doug Crookes
6.1 Introduction
The task here is to compare the value derived from the ecosystem services to the City of
Cape Town with the annual expenditure on the natural environment. This includes all
sectors within the municipality that can be broadly defined as “environment sectors”.
Subsequent to this mapping, the task is to determine some key quantitative indicators as to
the level and priorities of investment in the environmental sector. These indicators, which
could be considered as a financial-economic model for investing in the City of Cape Town’s
natural capital when they are combined, will then be used within the context of developing a
business case for investing in natural capital.
It has been shown in Chapter 4 that the City benefits greatly from a range of ecosystem
services. It has also been indicated that there are considerable gaps, despite a
comparatively rich database in ecosystem valuation studies over a long period of time, and
that the quantification of the benefits humans derive from these services can, at best, only
be partially quantified. Based on four prioritised services (as discussed in Chapter 3),
namely nature-based tourism by non-residents, recreation benefits for residents, buffering
against natural hazards, and the aesthetic appreciation of the area as expressed through
the size of the film and production industry, the benefits are valued between R2 billion and
R6 billion per year as depicted in Table 6.1 for three scenarios. In this valuation provision is
made for other services based on a factor of the aforementioned four services.
228
Table 6.1: The value of ecosystem services to the City of Cape Town: 2008: R million: A
partial analysis
Low
Medium
High
Tourism
965
1 829
2 948
Recreation
408
449
494
Natural hazard regulation 5
18
60
Film industry
133
265
398
Other
453
1 024
1 950
Total
1 963
3 586
5 850
The expenditure of the City of Cape Town by GFS code, extracting the data pertaining to
the environmental sector, was presented in Chapter 5 (see Table 6.2). While it is unclear
what amount has been invested in natural assets or has a direct bearing on the delivery of
ecosystem services, a decision was taken to assume percentage expenditure, by sector,
going towards or advancing the delivery of ecosystem services, as indicated by the
percentages provided in Table 6.2.
The evaluation that follows is based on the results provided in Table 6.1 and Table 6.2. The
GFS expenditure sectors have also been weighed in terms of its contribution to ecosystem
delivery. Each GFS sector has been scored for its perceived contribution to 17 different
ecosystem services (as listed in Chapter 4). These services have, on its own accord, been
weighed in terms of its priority as per the outcome of discussions with municipal linemanagers. The scoring of the GFS sector was done according to the scoring system
indicated below. The detailed results of the scoring are provided in Appendix 6.1 and a
summery is given in Table 6.3. The scoring system that was used is as follows:
-1
GFS expenditure negatively affects provision of service, or the current
management of this GFS sector adversely affects EGS
0
GFS expenditure has no contribution to service
1
GFS expenditure has minor positive impact on service
2
GFS expenditure contribute positive to service
4
GFS expenditure advances the delivery of service significantly
229
Capital budget
12.5%
2.5%
25.0%
100.0%
2.50%
5.00%
1%
2.50%
1%
10%
GFS 03:
GFS 05:
GFS 08:
GFS 09:
GFS 10: Solid GFS 10:
GFS 11:
GFS 12:
GFS 13:
GFS 14:
Total env
Total non-env
Total
Planning and Communic Sport and Environmental waste
Waste water Road
Water
Electricity Tourism
sector
sector
expenditure
development ation and recreation protection
management management transport utilities
development
social
services
19 832 781 8 306 670 45 581 804
45 875 013 19 956 211 38 064 628 6 516 572 36 138 687 27 670 012
8 309 764 256 252 142 10 578 696 065 10 834 948 207
21 184 078 8 428 409 58 541 619
49 105 204 24 194 291 34 893 274 7 263 549 47 033 264 29 799 724
6 263 102 286 706 512 12 632 408 546 12 919 115 058
23 487 487 8 037 888 64 436 323
63 731 111 23 288 206 38 971 922 7 474 394 44 830 890 30 656 183
4 086 506 309 000 910 12 781 827 004 13 090 827 914
25 714 571 10 595 165 76 411 184
81 052 396 29 512 123 44 450 232 9 187 158 54 494 928 33 665 566
4 505 358 369 588 681 14 803 894 461 15 173 483 142
27 938 872 10 019 918 78 161 013
88 435 116 25 497 714 44 867 483 7 662 556 47 999 596 36 114 111
4 654 699 371 351 079 14 238 134 974 14 609 486 052
230
% env
expenditure
12.5%
2.5%
25.0%
100.0%
2.50%
5.00%
1%
2.50%
1%
10%
Functions
GFS 03:
GFS 05:
GFS 08:
GFS 09:
GFS 10: Solid GFS 10:
GFS 11:
GFS 12:
GFS 13:
GFS 14:
Total env
Total non-env
Total
Planning and Communica Sport and Environmental waste
Waste water Road
Water
Electricity Tourism
sector
sector
expenditure
development tion and
recreation protection
management management transport
utilities
development
social
services
2004/5
3 969 510
435 121 14 755 320
736 358
953 375
3 693 309 2 056 103 2 270 296 1 681 086
257 991 30 808 469
30 808 469
951 452 721
2005/6
4 204 646
458 663 23 995 486
2 803 686
962 663
5 379 932 2 926 754 6 586 732 2 709 501
233 305 50 261 375
50 261 375 1 520 642 489
2006/7
3 477 344
652 331 24 918 781
3 008 920
2 297 053
7 291 032 2 555 332 4 616 078 3 275 496
15 048 52 107 414
52 107 414 1 953 422 014
2007/8
4 183 096 1 012 156 24 227 839
4 592 994
2 765 442 13 573 908 3 596 971 5 256 463 5 390 446
109 393 64 708 708
64 708 708 3 102 330 243
2008/9
8 248 353 1 473 264 42 880 400
9 264 315
4 144 550 23 992 844 7 831 739 6 375 898 5 486 377
163 050 109 860 791
109 860 791 5 224 063 258
2004/5
2005/6
2006/7
2007/8
2008/9
% env
expenditure
Operational budget
Table 6.2: Actual expenditure by sector: The City of Cape Town
Normalised weight
Relative (to average)
weight
Weight
10%
1.02
1.4
13%
1.33
1.8
12%
1.16
1.5
26%
2.56
3.4
9%
0.89
1.2
GFS 03: Planning GFS 05:
GFS 08: Sport GFS 09:
GFS 10: Solid
and development Communication
and recreation Environmental waste
and social services
protection
management
Table 6.3: Contribution of GFS expenditure sector to ecosystem service delivery
15%
1.47
2.0
3%
0.25
0.3
GFS 10: Waste GFS 11:
water
Road
management
transport
0.7
5%
0.50
GFS 12:
Water
utilities
0.1
1%
0.10
GFS 13:
Electricity
231
7%
0.72
1.0
GFS 14:
Tourism
development
6.2 Expenditure on ecosystem services in the City of Cape
Town: An assessment
6.2.1 The value of the capital asset
In economic theory, when it is not possible to determine the market value of any particular
capital stock, the value of that stock is provided by the net present value of the sum of the
value of the flows derived from that stock. Like any other capital, natural capital has a stock
value that produces flows, namely ecosystem services. The net present value method is
considered to be a lower bound estimate of the capital value of an asset since i) it is not
always possible to include all flows, and ii) the synergy among the flows often implies that
the capital stock value is more than just the mere aggregation of the present value of a set
of services. Within this limitation, we provide a range of such capital values based on four
different discount rates (see Table 6.4). We assume a 15-year time period, and the real
growth in each sector as indicated, based on the medium range of values as per Table 6.1.
It has been argued that the use of a negative discount rate is needed to reflect the
increasing scarcity of natural assets (Blignaut & Aronson 2008) and, hence, we include it in
this analysis. However, it is accepted practice that, within the context of financial flows,
positive discount rates are used to reflect society’s time preference for money today rather
than tomorrow.
Table 6.4: Capital value of the nature-based asset: R million: 2008
Growth rate
3.0%
5.0%
3.0%
4.0%
3.0%
Discount
rate
Tourism
Recreation
Natural
hazard
regulation
Film
industry
Other
Total
-2%
40 577
11 644
400
6 362
22 732
81 715
2%
28 819
8 154
284
4 487
16 145
57 889
4%
24 672
6 932
243
3 828
13 822
49 497
6%
21 330
5 952
210
3 298
11 949
42 740
It is estimated that the value of the City of Cape Town’s stock of natural capital is in the
range of R43–R82 billion, depending on the discount rate used.
6.2.2 Leveraging value
Seeing that capital expenditure (see Table 6.2) and the asset value (see Table 6.4) are
known, it is possible to derive a relationship between the value of the asset and the
expenditure linked to deriving such value. This is provided in Table 6.5.
232
In a conventional sense any form of a capital investment project has a large upfront capital
component with ongoing operating and maintenance cost. By comparing the return to the
investment over time with the upfront investment, it is possible to determine a return on
investment. In the case of managing natural capital, we do not have a once-off capital
investment, but an ongoing process of restoration, conservation, expansion, management
and maintenance of the natural asset base. It is, therefore, not possible to calculate a
conventional return on investment figure, but it is indeed possible to derive a relationship in
similar fashion to that of a return on investment to indicate the asset value that the related
expenditure is generating. To do so we have assumed a realistic real growth rate in the
expenditure over 15 years at 8%. We conduct this comparison by only comparing the asset
value to the capital expenditure, and also with capital plus operational expenditure. The
value generated by these expenditures varies between 500% and 4 000% of the
expenditure.
Table 6.5: Return on capital investment
Discount
rate
Value of
capital asset:
R million
NPV of capex
investment: R
million
Leverage %
NPV of capex +
opex
investment
Leverage %
-2%
81 715
2 116
3762%
14 200
475%
2%
57 889
1 453
3884%
9 753
494%
4%
49 497
1 223
3946%
8 211
503%
6%
42 740
1 040
4008%
6 982
512%
It is difficult to put these results in perspective without calculating the leverage achieved on
other asset categories for the municipality. This information was not available. As an
indicator of comparative leverage it is possible to express and compare the relationship
between municipal expenditure and the general value added in the economy with the
expenditure on the environmental sector and the value of the ecosystem services delivered
(see Table 6.6). The former is provided by the ratio of the City’s GDP to the City budget,
which is declining from 9.6 in 2005/6 to below 6.8 in 2009/10. The latter ratio is provided by
the value of the ecosystem services to the City budget on environment services, which is
between 4.5 and 13.5, depending on the scenario. Based on the medium scenario it is
approximately 8.3. This implies that the leverage of municipal expenditure on the
environmental sector is considerably higher, i.e. between 1.21 and 1.97 times, than that of
municipal expenditure on the City economy.
233
Table 6.6: Relationship between public value generation and public expenditure
GDP: CT
CT budget: Total
Ratio: GDP:Budget
400 4/5
113 000
11 786
9.59
334 1/6
124 000
14 440
8.59
286 4/7
128 960
15 044
8.57
250 7/8
132 829
18 276
7.27
223 1/9
136 814
19 834
6.83
Value of EGS: 2008
Env budget: Total: 2008
Ratio: EGS:Budget
Low
1 963
434
4.52
Medium
3 586
434
8.26
High
5 850
434
13.47
Ratio: City-wide
Ratio: EGS
Ratio: EGS:City
2008/9: Medium 6.83
8.26
1.21
2008: High
13.47
1.97
6.83
6.2.3 Unit reference value
A common metric used to compare the return of different water augmentation schemes is
the unit reference value (URV). The URV gives the cost to produce R1’s worth of benefits.
A URV>1 implies the cost exceeds the benefits, and vice versa. The common range for
URVs in the water sector is between 2 and 5 (Blignaut et al. 2008; Marais & Wanneburgh
2008; Blignaut et al. in press), implying that it costs between R2 and R5 to sell raw water
valued at R1. These ranges for water augmentation schemes are typical for the
construction of dams. When considering desalination plants the URVs tend to be even
higher. The URV of the natural capital stock is provided in Table 6.7. It is conventional to
include both the capital and the operational costs when determining this indicator.
According to this, R1 benefit costs approximately 16c to deliver.
Table 6.7: Unit reference value of the natural capital stock of the City of Cape Town
Discount rate Value of capital NPV of capex + URV
asset: R million
opex
-2%
81 715
14 200
0.174
2%
57 889
9 753
0.168
4%
49 497
8 211
0.166
6%
42 740
6 982
0.163
234
6.2.4 Distribution patterns of capital and operational expenditure
between the environmental and non-environmental sectors
Given that the City’s expenditure has been disaggregated between expenditure towards the
environmental sector and expenditure towards the non-environmental sector, it is possible
to compare the ratio of the capital expenditure to operational expenditure in these two
sectors. The distinction used here in terms of what is considered to be included under the
terms “environmental” and “non-environmental” sectors are discussed in detail in Chapter 5.
Broadly speaking, the environmental sector comprises expenditures by the City on the GFS
sectors as highlighted in Table 6.2, and in accordance to the percentages provided therein.
The balance is considered to be the non-environmental sector.
The comparison between the expenditure for the environmental and non-environmental
sectors is provided in Table 6.8. To prevent skewing the data concerning the preparation for
the FIFA 2010 Soccer World Cup, these infrastructure developments have been considered
non-environmental (see Table 6.9, GFS 08).
Table 6.8: Ratio: Capex to Opex: Summary
R million
Ratio
Env
opex
Non-env
opex
Env
capex
Non-env
capex
Env capex: Non-env
opex
capex:
opex
Env.inv:
Nonenv.inv
2004/5
256
10 579
31
921
0.12
0.09
1.38
2005/6
287
12 632
50
1 470
0.18
0.12
1.51
2006/7
309
12 782
52
1 901
0.17
0.15
1.13
2007/8
370
14 804
65
3 038
0.18
0.21
0.85
2008/9
371
14 238
110
5 114
0.30
0.36
0.82
Table 6.9: Ratio: Capex to Opex: By GFS sector
GFS
03
GFS GFS GFS
05
08
09
GFS 10 GFS
GFS
(solid
10
11
waste) (waste
water)
GFS
12
GFS GFS Env
13
14
Sector
Non- Total
env
sector
2004/5 20%
5%
32% 2%
5%
10%
32%
6%
6%
3%
12%
9%
9%
2005/6 20%
5%
41% 6%
4%
15%
40%
14%
9%
4%
18%
12%
12%
2006/7 15%
8%
39% 5%
10%
19%
34%
10%
11% 0%
17%
15%
15%
2007/8 16%
10% 32% 6%
9%
31%
39%
10%
16% 2%
18%
21%
20%
2008/9 30%
15% 55% 10%
16%
53%
102% 13%
15% 4%
30%
36%
36%
235
Another way is to compare the expenditure on the environmental sector to that of the nonenvironmental sector (see Table 6.10). This indicates that environmental operational and
capital expenditure is only between 2.1% and 3.4% of expenditure on items considered not
to be related to the environmental sector.
Table 6.10: Comparison of environmental to non-environmental expenditure
R million
Env
Nonopex
env.opex
2004/5
2005/6
2006/7
2007/8
2008/9
256
287
309
370
371
10 579
12 632
12 782
14 804
14 238
Env
capex
31
50
52
65
110
Nonenv.capex
921
1 470
1 901
3 038
5 114
Percentage
Env.opex as
% of Nonenv.opex
2.4%
2.3%
2.4%
2.5%
2.6%
Env.capex
as % of Nonenv.capex
3.3%
3.4%
2.7%
2.1%
2.1%
6.3 Conclusion
We analysed, in a symbiotic way, the value (albeit only partial) of the ecosystem services
produced by the City of Cape Town linked to the public expenditure (by the City metro)
aimed towards ecosystem service delivery. It has been shown that:
• expenditure on environmental protection is the lowest,
• expenditure on the environmental sector is only about 2–2.5% of the nonenvironmental expenditure,
• the cost of producing R1 of benefit or value is approximately 16c, and
• the ratio indicating the relationship between the public value generation and public
expenditure for the environment sector exceeds that of the general economy by
between 1.2 and 2 times.
Overall, these financial indicators provide evidence for ecosystem goods and services as a
high-performing growth supporting sector.
236
2.5
0.5
0.3
1.0
0.5
1.3
1.0
1.0
2.0
0.8
1.3
1.8
2.5
1.3
0.5
0.3
0.0
0.0
0.3
0.0
1.0
1.8
0.0
1.0
70.6
1.4
Total score
Weight (out of 4)
58.7
1.8
1.3
1.0
1.0
1.3
1.0
2.3
82.9
1.5
3.0
2.3
1.3
0.8
0.5
3.0
1.0
0.0
1.3
0.3
0.8
1.0
2.0
3.5
4.0
Natural hazard regulation 5.00
Tourism
5.00
Recreation
5.00
Water purification & waste
assim.
3.75
Space for biota
3.75
Aesthetic value & sense of
place
3.75
Local air quality
2.50
Urban farming
2.50
Water regulation
2.50
Fish and marine resources 2.50
Global climate regulation 1.00
Fresh water provision
1.00
Build. materials, resource
harvest. & materials for
arts & crafts
1.00
Inspirational beauty, educ.,
cultural & religious value 1.00
Erosion control
1.00
Disease regulation
1.00
Use in film and production
industry
1.00
148.0
3.4
3.0
4.0
3.5
2.3
1.0
4.0
3.5
0.5
3.3
2.3
3.5
2.0
4.0
4.0
4.0
4.0
4.0
GFS 08: GFS 09:
Sport &
Env.
recreation protec.
GFS 03: GFS 05:
Planning Comm. &
&
social
developm. services
3.5
1.3
2.0
1.5
2.5
2.5
Weight
43.3
1.2
0.3
0.3
0.0
1.8
0.3
2.3
0.0
0.3
1.0
0.0
0.5
0.3
3.0
0.3
73.8
2.0
0.3
0.8
0.3
2.3
0.0
1.8
0.5
0.3
2.8
2.0
0.3
1.3
4.0
0.3
14.6
0.3
1.3
-0.3
-0.5
0.0
0.0
-0.8
-0.3
0.5
-0.5
0.0
-0.3
0.3
-0.3
-0.8
GFS 10: GFS 10: GFS 11:
Solid
Waste
Road
waste
water
transport
managem. managem.
1.0
3.3
-0.3
1.5
1.8
2.3
0.8
1.5
2.3
38.4
0.7
0.5
0.0
0.8
0.3
0.0
0.5
0.0
0.3
2.3
0.3
-0.3
4.0
1.3
0.3
1.0
1.3
1.5
GFS 12:
Water
utilities
12.3
0.1
0.5
-0.3
0.0
0.0
0.0
-0.5
-0.5
0.5
-0.3
-0.3
-0.5
-0.3
0.0
0.3
0.3
1.5
1.3
GFS 13:
Elect.
50.3
1.0
2.0
1.3
0.3
0.3
1.0
1.8
0.3
0.5
0.3
0.8
0.3
0.3
0.0
0.8
-0.3
4.0
2.5
237
GFS 14:
Tourism
dev.
Appendix 6.1: Details of weighing the GFS sector expenditure on ecosystem service
delivery
Chapter 7: Developing effective arguments for investing
in the natural environment
Lead author:
Martin de Wit
with contributions from:
Valerie Goiset
7.1 Introduction
It cannot be assumed that a more rigorous valuation of ecosystem goods and services and
model results justifying increased investment will automatically lead to improved decisions.
There are at least three main reasons for this.
First, the diffusion of scientific knowledge into decision-making is surprisingly non-linear (De
Wit 2004; Keeley & Scones 2003; De Greene 1993). Any inputs into the decision-making
process, let alone rigorous analytical economic valuation, do not filter into a predictable and
incremental process and can, therefore, not easily be controlled and corrected.
Second, policy- and decision-making are processes which include several steps. The
utilisation of increased knowledge would have to go through several phases before making
an impact. Knott and Wildavsky (1980) argued that the following phases are included (see
also Susskind et al. 2001; Schryer-Roy 2005):
• Transmission: results are transmitted to practitioners and professionals
• Cognition: findings are read and understood
• Reference: findings cited as a reference by stakeholders
• Effort: efforts made to adopt results
• Influence: results influences choices and decisions
• Application: search led to applications by stakeholders
Third, analysts and decision-makers often have divergent objectives, values and cultures.
What is also referred to as the “two communities theory” (Caplan 1979) states that
“substantial cultural differences impede interactions between analysts and decision makers
and can often cause decision makers to ignore policy study results” (Webber 1992 as
quoted in Susskind et al. 2001:12; Glover 1993).
This study developed a scientific-economic case to invest in the natural environment.
Analytical methods were used supported through participation by more senior-ranking
officials in the City of Cape Town. It is well-known that analytical arguments can have large
impacts on policy and practice, but on their own these arguments have very little chance of
making an impact. There are barriers to the utilisation of such knowledge that need to be
238
acknowledged and planned for in an effective communication and decision-making process.
The diffusion of rigorous knowledge into any decision-making context needs to be
supported properly.
Following a classification of Nutley et al. (2003), as adapted from Weiss (1979), on the
different types of research utilisation, this study certainly attempts to make a contribution to
changing decision-makers’ understanding of the importance of natural assets (i.e.
conceptual utilisation). However, it is not expected that the research will feed directly into
decision-making (i.e. instrumental utilisation). The research may be used as an instrument
of persuasion (i.e. mobilisation of support) to invest in natural assets, and it is hoped that in
the medium- to longer-term it has a wider influence on policy paradigms and beliefs. The
focus of this study, and the focus of this chapter, is thus deliberately on the argument itself,
as well as the transmission and cognition of the argument.
Some aspects of this diffusion of knowledge are within the control of the research team and
the client, and some are not. The objective of this chapter is to enhance the effectiveness of
the argument to invest in the natural environment as far as possible within the scope of this
project. This will be done by focusing on the elements of an effective argument (section
7.2), a characterisation of the receptor (section 7.3) as well as advice on the transmission
and communication of the argument to the receptor (section 7.4). The learning will then be
applied to the case of municipality of the City of Cape Town (section 7.5).
7.2 How arguments bring change
To make a more effective case a recent UNDP/UNEP (2008) study argued that good data
and evidence will have little impact or influence over decision-makers unless packaged
carefully and communicated effectively (see Figure 7.1). The key points that should be
borne in mind when making a case for environmental investment is that data should be
packaged and presented in such a way that it is targeted, clear, relevant and credible. It is
important to be clear on the reasons for environmental investments, and have a target
audience who is willing and able to affect change. The main lines of reasoning, the key
messages, the steps in the argument, and the supporting data and evidence also need to
be very clear. Only relevant information needs to be presented, focused on the needs of a
specific audience. Furthermore, the evidence must be credible, based on data from the
area or sector the audience represents. The messenger also needs to be credible and
could include a champion other than the researchers themselves.
239
PACKAGING THE DATA
COMMUNICATING THE EVIDENCE
Ensuring the evidence is meaningful to decision makers
concerns, interests and mandates
Targeted
Clear
Relevant
Credible
Ensuring that your recommendation are heard,
understood and acted on effectively
Verbal and
written
Succinct, concise and
well illustrated
Opportunities for
follow up
Figure 7.1: Making the case
Source: UNDP/UNEP (2008)
One can have a well-packaged argument, but this will have little impact if not heard,
understood and acted upon. The package should ideally be a mix of verbal and written
materials. Presentations need to be succinct, concise and well illustrated. Technical reports
are not effective in getting messages across and need to be supported with shorter
summaries such as a 2–3 page brief, clearly outlining key messages and
recommendations. Opportunities for follow-up need to be given through alternative means
of accessing the information and proactive management of further interaction.
Even when the argument is packaged effectively and a communication strategy is
designed, it is not guaranteed that economic arguments to invest in natural capital will be
successful, but it certainly raises the chances of broader acceptance. The UNDP/UNEP
(2008:39) concludes that:
“Making the economic case is therefore rarely sufficient, alone, to influence decisionmaking in favour of the environment. It does, however, present a series of arguments
which are based around indicators and policy goals which have resonance with
decision-makers in finance ministries, treasuries, sectoral line agencies and local
authorities. It also permits the environment to be considered on a more equal basis
with other sectors when policies are formulated, land and resource choices made,
investments planned and budgets allocated.”
In addition to having an effective and well-packaged argument and a well-designed
communication strategy, it would help to better understand the context wherein the receptor
operates. It will also be insightful to understand whether this context has some level of
emerging simplicity, and maybe even some level of predictability, that may help to focus
both the argument and communication.
240
7.3 Understanding the receptor: The municipality and the
budgeting process
7.3.1 Complexity and human behaviour
Cities can be characterised as complex, dynamic systems (Batty 2008; Forrester 1969;
Jacobs 1961). Municipalities, the management of the city, play an important role in such a
system. Budgeting processes are important subsystems of the broader municipal system.
In such systems, a healthy respect for uncertainty and surprise is appropriate. Attributing to
social complexity is the individual decisions made by the millions of people living in the City,
decisions which are not based on perfect information and are not motivated by economic
rationale only (Beinhocker 2008). Complexity also emerges within less complex systems
than cities, such as a municipality which consists out of several different line functions,
physical offices, budgets, individuals and cultures to name a few, all of which interact and
may lead to complex outcomes. The key driver of these outcomes is human behaviour.
Human behaviour is mostly treated as exogenous to policy design or when included, it is
assumed that humans will act according to certain theoretical constructs such as the
rational maximisation of profits or an altruistic morality of saving the planet. Human
behaviour is far more complex than this. Simple heuristic rules followed by individual agents
can create very complex outcomes (Beinhocker 2008; De Wit 2008).
Even within budgeting processes complexity emerges. This is evident from surprising
bursts of spending and cutting which is the norm rather than the exception, leading to
outcomes which cannot be predicted using a linear, incremental allocation rule. Without
presenting a comprehensive argument for complexity in municipalities, any argument made
within a complex, dynamic environment needs to be flexible, adaptable, open to often
rapidly amplifying opportunities, and cautious about initially small, but possibly rapidly
emerging risks to the argument.
The idea that budgets change incrementally from one year to the next is firmly entrenched.
It is often assumed that annual budgets tend to drift rather than shift abruptly (Lindblom
1959; Wildavsky 1964), implying that budgets should be based on the previous allocations
and that increments need to be shared fairly across different categories or functions.
As obvious as this argument may sound, no concrete evidence for such budgeting
behaviour exists. To the contrary, empirical work on budget increases in the United States
and elsewhere (incl. France, UK, Canada, Denmark, Germany, and Belgium) indicates that
the percentage change in budgets show a high concentration of small changes around the
mean, with fat tails or big changes on both ends (leptokurtic distribution). One can,
therefore, expect a large number of small, incremental changes in budgets from year to
year, followed by sudden rapid changes (Jones et al. 2009; Jones & Baumgarter 2005).
241
It is argued that underlying to this behaviour is an attention-driven decision-making model.
Budget choices are not made based on perfectly rational, weighted indices, but rather
driven by certain heuristic rules influenced by the positions of party leaders, by interest
groups or by an emphasis on single-focus issues. In such a decision-making context errors
of underestimation accumulate over time and lead to sudden rapid adjustments in
budgeting when thresholds are exceeded. In this case, internal cognitive, organisational or
institutional friction is overcome. Friction is expected to increase with coalition governments,
low party discipline and where agreement among multiple governments is needed for single
policy decisions. Better incremental budgeting can be expected if cognitive and
organisational capacity is increased and institutional impediments to reactive policy-making
are reduced (Jones et al. 2009; Jones & Baumgarter 2005).
7.3.2 Decision-making processes
Decision-making processes are not nearly as linear as one might expect. The linear
process of policy-making (March & Simon 1958; Simon 1977) can only take place on the
basis that sufficient agreement exists on the criteria for choosing among different
alternatives. Decision-makers themselves do not follow a perfectly rational approach
towards applying normative criteria to alternative choices, and in the process a varied and
complex decision-making process unfolds. The realities of the decision-making process
itself need to be explicitly included when considering proposals for policy-making (Lindblom
1959; Thomas & Grindle 1990; De Greene 1993). These realities include understanding the
interaction of networks and relationships, agency and practice – that is why certain subjects
and alternatives are considered for the policy agenda while others are not – as well as
knowledge and power dynamics in particular contexts (Keeley & Scoones 2003). This is
also the case for the budgeting process. Although more predictable outcomes can be
expected in administrative processes than within political processes, complex outcomes still
emerge from such processes as well.
7.4 Understanding the transmission from argument to receptor
The receptor cannot be viewed as a homogeneous, economically rational entity that will
soak up any scientific research outputs that are pushed in its direction. Being aware of
emerging complexity and the realities of the decision-making process adds to the
importance of having an effective transmission mechanism. In this section attention is paid
to two related issues: natural divergence between analysts and decision-makers, and the
communication strategy to a complex and changing receptor.
7.4.1 Divergence
It is well recognised that analysts and decision-makers generally have difficulty
communicating effectively with each other (De Wit 2004; Glover 1993). Where analysts are
intrinsically focused on searching some measure of the truth through rational science, or
242
what Lomas (1997) refers to as “enchantment with rationality”, decision-makers are more
focused on finding a compromise by using an intuitive model (Choi et al. 2005). Decisionmakers are looking for policies that satisfy an electorate or accommodate certain pressure
groups. The divergence theory has been criticised for attributing too much weight to the role
of individual decision-makers and too little weight to the importance of the flow and
dissemination of policy-relevant information (Susskind et al. 2006). This recognition of
bigger forces at work than the mere relationships between analysts and decision-makers
certainly has its appeal, but research on the barriers to the utilisation of research shows that
personal relationships and trust between researchers and policy-makers continue to be
important facilitators of the use of research evidence in policy-making (see Table 7.1)
(Innvaer et al. 2002; IDRC/SDC 2008).
Other factors that facilitate utilisation of research include the following:
• the timeliness and relevance of the research
• a summary with clear recommendations is included in the research
• the research is of good quality
• the research confirms current policies or endorses self-interest
• there is sufficient pressure or demand for the research
Barriers to research utilisation are the following:
• the research challenges decision-makers’ values, ideas and ethics
• power and budget struggles are evident
• during political instability, high turn-over of staff or a lack of political will
• researchers are politically naive or policy-makers are scientifically naive
Some of these factors are clearly outside the control of the project team as illustrated in
Table 7.1.
243
Table 7.1:
Mapping facilitators and barriers to research utilisation
Inside control
Outside control
Argument
- Timeliness and relevance of research
(+)
- Summary with clear recommendations
(+)
- Good quality research (+)
- Include effectiveness data (+)
- High credibility of research team (+)
- Political naivety of researchers (-)
-
Transmission
- Personal contact with (senior) policy- - Personal contact with (very senior) policymakers (+)
makers (+)
- Briefly and clearly communicated (+)
Receptor
Community pressure for research (+)
Client demand for research (+)
Research confirming current policies (+)
Research endorsing self-interest (+)
Research challenging decision-makers’
values, ideas and ethics (-)
- Scientific/Economic naivety of policymakers (-)
- Power and budget struggles (-)
- Political instability (-)
- High turn-over policy-making staff (-)
- Lack of political will (-)
Source: Based on IDRC/SDC (2008) and Innvaer et al. (2002). Categorisation across
Argument, Transmission and Receptor based on own analysis.
7.4.2 Communication
Given the complex and changing receiving environment and an inherent divergence
between analysts and decision-makers, a well thought through communication strategy
becomes increasingly important. This is not only the case in the private sector, but also in
the non-profit world (Hershey 2005). Communications is not merely a set of tools that are
used if and when required, but it is essential to achieving core goals (IDRC/SDC 2008).
According to Harold Lasswell (1948), a communications theorist and political scientist,
communication theory is, in essence, the following:
• Who
• Says What
• In Which Channel
• To Whom
• With What Effect?
According to Lasswell (1948):
“Scholars who study the ‘who’, the communicator, look into the factors that initiate and
guide the act of communication. We call this subdivision of the field of research control
analysis. Specialists who focus upon the ‘says what’ engage in content analysis.
Those who look primarily at the radio, press, film, and other channels of
communication are doing media analysis. When the principal concern is with the
244
persons reached by the media, we speak of audience analysis. If the question is the
impact upon audiences, the problem is effect analysis.”
The IDRC/SRC (2008) produced a helpful template to assist in with the development of a
communication strategy. It raises important issues beyond what is immediately evident in
the Laswell definition. The overall core purpose of communication needs to be clarified
before populating which communication approaches or tools one will follow, a review of
past communication efforts is handy, and the resources and timing of communication are
made explicit. The template, however, was not explicit on who the communicator should be
and one additional question was added (see Table 7.2).
Table 7.2:
Essentials of communications
1. Review:
How have we been communicating in the past?
2. Objectives:
What do we want our communications to achieve?
Are our objectives SMART?
3. Communicator
Who is doing to communicating?
4. Audience:
Who is our audience?
What information do they need to act upon our work?
5. Message:
What is our message?
Do we have one message for multiple audiences or multiple messages for multiple
audiences?
6. Basket:
What kinds of communication “product” will best capture and deliver our
messages?
7. Channels:
How will we promote and disseminate our products?
What channels will we use?
8. Resources:
What kind of budget do we have for this?
Will this change in the future?
What communications hardware and skills do we have?
9. Timing:
What is our timeline?
Would a staged strategy be the most appropriate?
What special events or opportunities might arise?
Does the work of like-minded organisations present possible opportunities?
10. Brand:
Are all of our communications products “on brand”?
How can we ensure that we are broadcasting the right message?
11. Feedback:
Did our communications influence our audiences?
How can we assess whether we used the right tools, were on budget and on time,
and had any influence?
Source: Adapted from IDRC/SDC 2008
245
7.5 Case study: Cape Town Municipality
7.5.1 Argument
The argument in itself is contained in the first six chapters of this report and will not be
repeated here. Proposed core messages are contained in Box 7.1.
Box 7.1: Proposed core messages
For: City of Cape Town leadership
•
•
•
•
•
Who wants to fulfill their mandate of service delivery in a financially sustainable manner, grow
the economy and create jobs,
our offering is a logical and tested argument to invest in and maintain natural resources such as
waterbodies, rivers, clean air, parks, reserves and the coast,
that provides a larger leverage on economic values derived from investment in natural assets
than what overall municipal expenditure can achieve in the broader economy,
unlike more traditional arguments for environmental funding that are not successful in raising
awareness on the socio-economic importance of the natural environment,
our argument proves that well-maintained natural assets provide a range of services to the
residents of and visitors to Cape Town and are important enablers of economic development
and the creation of employment.
For: Directors of line departments
•
•
•
•
•
Who need to motivate for additional investment in natural resources such as waterbodies, rivers,
clean air, parks, reserves and the coast,
our argument will assist in preparing well-motivated cases for additional investment
that provides you with the financial information needed to explain that investment in natural
assets have a larger leverage on economic values derived from investment in natural assets
than what overall municipal expenditure can achieve in the broader economy,
unlike more traditional arguments that fails to highlight the financial rationale for investing in and
maintaining natural assets
our argument proves that well-maintained natural assets provide a range of services to the
residents of and visitors to Cape Town and are important enablers of economic development
and the creation of employment.
What is important is how the argument of increased environmental investment is pursued
for different kinds of environmental investments. Certain changes in environmental policy,
and thus environmental investments that are likely to follow such policies, are more
sensitive to certain variables than others. Although such a study was not available for Cape
Town, a study on 69 big cities in the United States argued that a city’s embrace of
environmental protection and natural resource conservation policies is largely a function of
four variables namely socioeconomic status, partisanship, population change, and the
state’s green policy context (Bowman 2006:6). In the case of Cape Town, socioeconomic
inequalities and population growth specifically are both very pertinent variables and can be
expected to have a significant effect on the adoption of environmental policies and, thus,
environmental investments. For example, awareness of a programme to clear waterways of
246
alien vegetation is strongly positively related to socioeconomic status (Anderson et al.
2007).
An explanation for environmental policy adoption was also presented in Bowman (2006):
• A state green policy context, population change as well as mayoral power mostly
explain pro-green land-use policies.
• Socioeconomic status best explains pollution prevention, energy and natural
resource conservation, and the creation of official sustainability structures.
• Green demand also explains energy and natural resource conservation.
• Green outreach programmes are explained by cities with better air quality, a green
state policy context and a Democratic electorate.
• Race, density and coastal location have negligible explanatory power in the adoption
of any environmental policy.
Although not conclusive for a developing City such as Cape Town, it does provide areas of
likely influence. It has been pointed out, for example, that people living in Cape Town are
better resource conservers than elsewhere in the country (Van Heerden 2009). Whether
pro-green land-use policies are correlated to population change, a green policy context
from national government and mayoral power in the case of Cape Town is not clear. To
further refine the argument on where to invest would require more specific analysis across
different environmental policies and expected change.
7.5.2 Receptor
7.5.2.1
Budget adjustments and attention to environmental signals
It seems as if environmental signals have not yet translated into rapid budgetary changes in
the City. Based on an analysis of City budgets from 2006–2009, these environmental
signals have not led to convincing bursts of urgent budget adjustments. Year-on-year
change in environmental OPEX was on average only 1.8% higher than the change in
overall OPEX (not really evident of urgency), and environmental CAPEX was 14% lower
than the change in overall CAPEX (see also Chapter 6). Overall budgets did increase
rapidly over the last few years, suggesting bursts of spending, but no disproportionate
bursts of environmental expenditure are evident.
What is the source of friction and when will thresholds be reached? The cost of friction
mechanisms in the budgetary processes is hard to quantify. If the environmental signal is
strong enough and institutional friction pervasive over time, the benefits of responding will
eventually outweigh the costs.
With no convincing evidence of budget adjustments to invest in natural assets, the focus
changes to a discussion on environmental signals in the system. For the City, there are
some indications that benefits of responding to environmental signals are accumulating in
the municipal system. For example, stated goals and targets such as those contained in the
247
Integrated Metropolitan Environmental Policy (IMEP 2008) are not indicators of outcome,
but do provide an indicator of increased pressure and potential policy action. It has taken
the City a long time to develop this environmental base. Earlier work indicates that not all
departments bought into the overall concept of a cross-sectoral team of the IMEP due to
the frequent change of political and management in the City (Pieterse 2002). Some of the
City’s leadership have included explicit reference to the importance of the environment in
their recent speeches.
Noting that there are environmental signals, an important question in focusing arguments is
what these signals are emphasising. Based on an analysis of search terms in all media
releases, speeches and documents housed on the City of Cape Town’s website from 2001
onwards, environmental signals are strongest on the natural assets ‘water’, ‘river’,
‘mountain’, ‘garden’ and ‘beach’ and weakest for terms such as ‘open space’, ‘fynbos’ and
‘wetlands’ (see Table 7.3). Ecosystems goods and services related to the terms ‘tourism’,
‘fire’, ‘waste’, ‘stormwater’, ‘recreation’, and ‘conservation’ were mentioned most. The least
attention went to terms such as ‘sense of place’, ‘air quality’, ‘drought’ and ‘alien’.
Although this is not conclusive evidence of relative importance of environmental issues in
the City, it does give an indication of where the relatively higher and lower signals are. This
information is important in the development of a more focused argument and
communication strategy. Higher signals reflect current policy choices, and are more prone
to making effective arguments.
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Table 7.3:
Number
of hits
Environmental signals based on terms used in media releases, speeches and
documents by the City of Cape Town
Natural Assets
EGS
Sustainability
Development
>1001
Business
Infrastructure
Education
501-1000 Water
Community
Road
251-500
Fire
Waste
Stormwater
Recreation
Sustainable
Green
Environment
Housing
School
Public transport
Economic development
Tourism
Health
Police
Sport
100-250
River
Mountain
Garden
Beach
Conservation
Amenities
Sanitation
Clean
Parks
Refuse
Nature
Natural
Environmental Resource
Land Use
Industry
Economic growth
Soccer
Energy
Poverty
Money
Food
HIV
Job creation
51-100
Tree
Plants
Coast
Table Mountain
Nature reserves
Water quality
Fish
Pollution
Biodiversity
Sewage
Flood
Climate change
Urban planning
Sustainability
Climate
Informal settlement
University
Urban renewal
Drug
Employment
Waterfront
Cricket
<50
Open space
Wetland
Fynbos
Kirstenbosch
Air quality
Alien
Drought
Sense of place
Urban design
Spatial planning
Bus rapid transit
Urban edge
Rugby
Energy efficiency
Film
Sea wall
Note: Analysis done on 27 June 2009
A measurement of the demand for issues related to the environment was done by using
trends derived from search volumes on the internet. Based on analysis using Google
Trends, the environmental signal by internet users within the Western Cape is
predominantly focused on natural assets such as ‘water’, ‘beach’, ‘fish’, ‘river’ and
‘mountain’ and on ecosystems services such as ‘tourism’ (see Table 7.4).
249
Almost no attention is paid to issues containing search words such as ‘stormwater’,
‘recreation’, ‘water quality’ and ‘biodiversity’ and very little attention is paid to issues
containing words such as ‘alien’, ‘waste’ and ‘conservation’. Higher signals would better
reflect the public’s attention, and support a broader acceptance of arguments.
Table 7.4:
Cape
Environmental signals based on search volume on the internet in the Western
Search term
Google score
Search term
Google score
Cape Town
15.2
Money
1
Music
5.55
Coast
0.86
Hotel
4.6
Fire
0.74
Weather
3.9
Nature
0.64
Jobs
3.9
Parks
0.3
Water
2.24
Shark
0.24
Rugby
2.1
Table Mountain
0.18
Stellenbosch
1.88
Nature reserve
0.14
Beach
1.44
Kirstenbosch
0.14
Tourism
1.42
Conservation
0.1
Fish
1.2
Waste
0.08
River
1.18
Alien
0.04
Mountain
1
Stormwater, Recreation, Water
quality, Biodiversity
0
Note: Search volume relative to the word ‘money’. Analysis done on 27 June 2009.
It can be concluded that natural assets and ecosystem services related to the terms ‘water’,
‘beach’, ‘river’, ‘mountain’ and ‘tourism’ provide the strongest combined environmental
signals.
Internet users are mainly higher income households and their views are, therefore, not
representative of the total population. There is some evidence that lower income groups
indicate a strong preference for environmental services such as a clean and natural
environment as well as recreation, but more immediate issues such as jobs, housing,
education and income dominate perceptions of what a “good life” entails. In a survey done
in the Wallacedene reported by Clark (2002) aspects of a good life were ranked. Aspects
such as ‘good area to live’ and ‘recreation’ were ranked 18th and 27th out of a total of 30
options. In total, 68% of respondents indicated that ‘Living in a clean natural environment’ is
essential. In another social survey in Khayelitsha (QSJ Consultants & University of
Stellenbosch c2007), 64% of respondents were dissatisfied with the cleanliness of the area
250
and 72% ranked recreational facilities as being least accessible. A total of 18% of
respondents had problems with flooding.
A comprehensive baseline study on social and environmental preferences is, as far as the
authors know, not available for Cape Town. What can be argued at this stage is that stark
differences exist across socioeconomic groupings, but all have some level of environmental
preference. Whether these environmental preferences are accumulating to such an extent
that sudden budget adjustments are likely to follow, cannot be stated conclusively yet. It
can be concluded that there are strong enough environmental signals both from within the
municipality and from user groups in the City to conclude that attention to environmental
issues is prevalent.
7.5.2.2
Budget process
Apart from the complexity of budget allocations, and accumulating attention to
environmental preferences from the municipality and people living in the City, it would be
well worth understanding how the budgeting process works.
The budgeting process followed by the City of Cape Town is described in Table 7.5. Usually
the process starts in August/September when additional expenditure requirements are
listed. (In 2009/10 the process already started in July.) These requirements are evaluated in
October through a diverse set of hearings. During this time, politicians also add additional
requests or support requests from the different departments. During November/December a
3-year expenditure and revenue framework is presented to the Mayoral Committee or the
City’s leadership.
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Table 7.5:
Budget process, City of Cape Town
Time
Description of current situation
Key bodies/players
August/September
Financial manager of each department consults with Financial Managers in each
Directors, who in turn consult with their Managers on Department
additional expenditure needs. Every department lists
additional requirements. At this stage this is not
informed by one overall strategy or sectoral plans.
In practice it is to be seen how much IDPs determine
these additional requirements.
At this stage no specific allocation to the “Environment”
October
Requirements are directed to Budget Committee via Budget Committee
Budget
Department
who
evaluates
additional Budget Department
requirements through a diverse series of hearings.
At this stage politicians also join the process with
additional requests or supporting requests from
departments.
A Budget Committee evaluates commitments in terms
of strategy, priority, affordability, social compacts,
sustainability, etc.
November/begin
December
Budget Committee recommends a sustainable and Budget Committee
affordable multi-year MTREF to Mayoral Committee for
adoption
Begin December
Report to Mayoral Committee with recommendations on Mayoral Committee
the MTREF which indicates the boundaries for the
budgeting process and assures sustainability and
viability of the City.
The report contains details on expenditure growth and
curtailment and ad hoc allocations to specific
programmes.
February/March
Mayoral Committee takes budget to MFA
Mayoral Committee
From a theoretical perspective the budgetary process would follow on a well-defined City
strategy. This strategy is further worked out in specific sector plans and specific functions
that support such plans. Within such a context the strategy provides a framework that is
reviewed every number of years. IDP, for example is reviewed every five years, whereas
the financial budgets are prepared in detail for a period of three years.
In practice, this neat construction of a strategy–planning–budget process does not always
hold. Strategy, for example, is continually evolving. At this stage the City is still developing a
City Development Strategy (CDS), expected to start providing direction from 2010/11
252
onwards. Specifically, this will succeed the earlier Metropolitan Spatial Development
Framework.
There are also several unknowns that influence the budgeting process itself. Issues such as
the curtailment of revenue sources, inflationary pressures, etc. have implications for City
budgets as well. These issues place a lot of pressure on the financial viability of the City
and often increase pressure for cost-cutting measures.
On the revenue side, a policy of infrastructure-investment led growth for the City has led to
substantial increases in rates and tariffs in most recent years. Allocations from the national
government are also based on a set of decision rules mainly influenced by statistics on and
definitions of indigent population. Such definitions drive the allocation of unconditional
grants. The disadvantage for Cape Town is that such allocation rules are currently based
on 2001 Census figures. The City of Cape Town particularly is negatively influenced, as inmigration of mainly indigent people to the City has been relatively high since 2001.
Conditional grants are linked to specific purposes and have seen robust increases in recent
years, but this cannot be sustained. Metros will have to become less reliant on grants to be
more sustainable in the longer-term (Swilling & De Wit 2008).
The Total Municipal Account that will be paid by consumers is foremost in the minds of
those who are drafting the budget. The model that supports the Medium Term Revenue
Framework has a very extensive revenue part. However, with recent and projected largely
unknown double-digit tariff increases in electricity, the TMA has become less predictable.
The focus is shifting to a TMA, excluding electricity price impacts, for the simple reason that
such electricity tariff increases are entirely beyond the control of the City.
On the expenditure side, massive ad hoc expenditures have been included such as the
2010 World Cup and the Bus Rapid Transfer System. Some strategic focus areas, such as
the focus on energy efficiency, are politically-influenced choices for which IDP Strategic
Focus Areas were specifically created. Political champions could exercise a great influence
on the inclusion of certain items in the budgets.
Balanced budgets are required by law. Some exceptional items from a legislative/audit
imperative are rolled-over such as provisions for retirement and medical funds.
Given the way the budgeting process works, as described above, specific rather than
general arguments for investment in natural assets have a greater chance of being
accepted. It is easier to motivate for a specific function (e.g. Parks), than to motivate for an
issue that impacts on several sectors or departments. Real, larger-scale changes in
allocations from one department to another is uncommon in public sector organisations.
Environmental issues, however, are often cross-cutting, and will, for a large part, resort
under “Strategy & Planning”, where at least 30% of the budget in that department is
discretionary.
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7.5.3 Transmission and communication
The communications template was populated specifically for communicating a business
case for investing in natural assets in the City of Cape Town (see Box 7.2). Although most
of the decisions on communications need to be taken beyond the project team, we have
given an interpretation and advice based upon our best knowledge as developed
throughout the study.
Box 7.2:
Investing in natural assets: Communications template
1. Review: How have we been communicating in the past?
•
It is the first time that a comprehensive economic argument for investing in natural assets is made.
•
Earlier communications to the City were restricted to specific valuation case studies with limited
reach and influence. The focus of these studies was also mainly academic and helped to create a
baseline from which a broader argument could be constructed.
2. Objectives: What do we want our communications to achieve? Are our objectives SMART?
•
Communications need to support the objective of the overall project which is to make an
economically rational case for investing in natural assets in the City.
•
Communications also need to remind, educate and sensitise politicians and city leadership that
specific Council resolutions have already been made committing the City to investment in natural
assets such as the conservation of the remaining biodiversity, etc.
•
Communications need to clarify that there is a responsibility to ensure that responsible City line
functions are capacitated to achieve objectives of conserving, maintaining and enhancing natural
assets.
•
Investment in natural assets supports value creation in the broader economy and adds value to rich
and poor, residents and visitors, the country as a whole and even to international beneficiaries.
•
The tremendous loss of natural assets, especially natural biota, instills a sense of urgency to
increase investments to counter this value destruction not only in the City economy.
•
The municipality, with the mandate of service delivery, needs to take the lead in investing in natural
assets under its control.
3. Communicator: Who is doing the communicating?
•
Communication should be done by someone who has credibility and respect with the City’s
leadership, someone who can easily convey key messages, and someone who cognitively
understands what the argument is all about.
4. Audience: Who is our audience? What information do they need to act upon our work?
•
Our audience is first the City’s leadership who has to influence policy choices.
•
Secondly our audiences are those who have the power to influence budget allocations once policy
choices have been made.
•
Possible forums for presentation are the following:
•
Executive Management Team committee (EMT)
•
Service Co-ordination Subcommittee (SECOS)
•
Strategy and Integrated Development Plan Subcommittee (STRIDE).
5. Message: What is our message? Do we have one message for multiple audiences or multiple
messages for multiple audiences?
•
The key message is that, from an economic point of view, there is convincing evidence to invest in
natural assets.
•
This message has been presented in financial terms.
•
In a nutshell this message will not change, but needs to be packaged differently for different
audiences.
•
Our message needs to be presented in a way that opens up an agenda: in any case we should
communicate in a way that allows implementation; which means that in all presentations, and
although we are not mandated to make strategic choices to allocate budget to such or such specific
project, we need to make it clear what it is we want to achieve, and the money we need to achieve it.
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Box 7.2:
Investing in natural assets: Communications template (cont.)
6. Basket: What kinds of communications “products” will best capture and deliver our messages?
•
Options include, but are not limited to:
•
A 250-page technical report
•
A 10–15-page summary for decision makers
•
A 2–3-page document with key arguments and recommendations
•
One paragraph on the core message that can be used in various communications
•
Core messages: the idea is to have a speech prepared in order to make an impression in
just 30 seconds or so, should an opportunity present itself
•
Information session to line departments
•
Presentation to key City committees (many of the City’s key thinkers sit in these committees,
which provides us with a chance to address our argument to the right people)
•
Other options that can be explored include using the internet, a popular document for the
public, a roller banner and color brochures.
7. Channels: How will we promote and disseminate our products? What channels will we use?
•
Presentation to key committees of the City
•
Specific interactions with Mayco members
•
General feedback session to interested line managers and senior staff
8.Resources: What kind of budget do we have for this? Will this change in the future? What
communications hardware and skills do we have?
•
The project budget allows for technical reports and summaries. Anything beyond that would have to
be done from separate budgets.
9.Timing: What is our timeline? Would a staged strategy be the most appropriate? What special events or
opportunities might arise? Does the work of like-minded organisations present possible opportunities?
•
In one sense the timelines are very short. The budgetary process has already started and additional
requirements need to be listed by departments soon.
•
In another sense, the argument to invest in natural assets is timeless under situations of increased
scarcity of natural assets and high quality ecosystem goods and services.
•
The message needs to be repeated often over a longer period and focused on multiple audiences.
•
The short-term objective is to increase budget allocation towards the environment; the longer-term
objective to convey the argument.
•
Rushing the communication process can be a mistake and only focusing on achieving the short-term
objectives might deprive us from the full benefit of the argument in the long run. Time gives chance
to consolidate and convey the argument.
10. Brand: Are all of our communications products “on brand”? How can we ensure that we are
broadcasting the right message?
•
It is important to brand the message as either internally-generated and falling under the Cape Town
brand, or as external advice provided by a group of consultants.
•
The Cape Town brand might require additional document editing and layout which is beyond the
project team’s budget, but may add to the acceptance within the City. This is done by Corporate
Communications in line with rules for City branding.
11.Feedback: Did our communications influence our audiences? How can we assess whether we used the
right tools, were on budget and on time, and had any influence?
•
This is beyond the scope of the research project, but essential to be explicitly tied into the
communication strategies of the departments investing in natural assets.
Source: Developed with Project Steering Committee 24 July 2009.
255
7.6 Conclusion
The effectiveness of the argument to invest in natural assets is not only dependent on the
argument itself, but also on the receptor as well as the transmission and communication.
Arguments and the data on which it is based should be packaged and presented in such a
way that it is targeted, clear, relevant and credible.
The receptor, or the municipality, does not operate in a mechanistic way and emerging
complexity in the system is often based on very simple heuristic rules followed by decisionmakers in the municipality. This is also the case for budgeting processes. There is empirical
evidence that budget allocations are non-incremental and often include sudden bursts of
spending and cutting. The main reasons for this emerging complexity are the attentiondriven choices and friction in adjusting allocations. Errors of under-adjustment accumulate
up to a point where cognitive, organisational or institutional friction is overcome. In the case
of the Cape Town municipality, although broader budgetary allocations did go through a
period of sudden spending, there is no conclusive evidence of any disproportionate sudden
bursts of environmental expenditure. There are adequate, strong environmental signals
both from within the municipality and from user groups in the City to conclude that attention
to environmental issues is prevalent. Natural assets and ecosystems services related to the
terms ‘water’, ‘beach’, ‘river’, ‘mountain’ and ‘tourism’ provide the strongest combined
environmental signals.
Decision-making processes themselves also contribute to these emerging complexities.
These processes are not linear, and are influenced by different realities of the political
process, such as policy networks, the disproportionate influence of certain policy choices on
the municipalities’ agenda through policy champions and the influence of knowledge in
power dynamics. The budgetary process for the City of Cape Town follows an orderly
process, but there are sufficient opportunities for politicians to include certain items on the
budget or influence departmental allocations.
In the transmission of the argument to the receptor two main issues have been identified
namely, the divergence between the culture of analysts and decision-makers, and the need
for an effective communications strategy. Analysts and decision-makers have different
objectives which have to be acknowledged and planned for in the transmission of the
argument. Important facilitators of research utilisation remain personal contact and trust
between decision-makers and researchers, and together with the quality and relevance of
the argument, these remain the factors that are under the control of a project team
advancing an argument. In this project, lots of resources and time was invested in building
relationships with City senior staff and line managers through one-to-one meetings as well
as broader workshops.
256
A communication strategy starts with Lasswell’s maxim: Who Says What In Which Channel
To Whom With What Effect? A communication strategy is essential in achieving the core
goal of the project, namely to motivate for investment in natural assets. A template for
effective communication was presented to assist in the development of a communications
strategy for the argument presented by this project.
257
Discussion and conclusion
Natural assets, such as waterbodies, rivers, clean air, parks, reserves and the coast,
generate a flow of services that have considerable value to people living in and visiting the
City of Cape Town. These values are generally not well understood and have as yet not
influenced policy choices and budget allocations to invest in natural assets. The main
argument presented in this report is that there is an economic rationale for investing in and
maintaining natural assets in the City. To reinvest some of the proceeds of growth into
underlying natural assets is not only a sound financial management principle, but there are
also indications are that it can leverage relatively high economic value in the broader City
economy. In addition, the ‘free services’ produced by natural assets also provide a saving
to the municipality’s cost of service delivery. This is in stark contrast to more traditional
arguments for increased budget allocations to the environment which did not succeed in
raising awareness on the socioeconomic value of a clean and healthy natural environment.
In this report it is argued that well-maintained natural assets provide a range of services to
the residents of and visitors to the City of Cape Town and these assets are important
enablers of economic development.
Based on an economic valuation methodology that was presented to and tested by City
senior staff, it is conservatively estimated that the City’s natural assets yield a flow of
services valued at R4 billion per annum, within a range of between R2 billion and R6 billion
per annum. These values flow to a wide range of beneficiaries including tourists and
residents visiting natural recreational areas such as parks, lakes and beaches, people living
in areas prone to flooding, fire and coastal storm surges, as well as entrepreneurs and
business owners involved in economic activities such as film-making and advertising. Many
other groups were identified, but in consultation with the City we focused on those who are
perceived to be the main beneficiaries.
The flow of these values needs to be protected and enhanced to create additional value to
the economy and employment. Current expenditure on the environment by the municipality
is estimated at R370 million per annum on operations and R110 million per annum on
capital investments. This falls within a range of between 2 and 2.5% of total expenditure.
The value leveraged by this expenditure is higher than what is achieved by total municipal
expenditure. For every R1 spent by the municipality in 2008/9 approximately R7.30 of value
added was generated in the City economy. For every R1 of expenditure on the environment
by the municipality almost R8.30 of ecosystem goods and services were generated when a
flow of R4 billion per annum is used. This is a conservative estimate and the ratio can be as
high as R13.50 when a flow of R6 billion per annum is used. This means that the leverage
of municipal expenditure on the environmental sector is considerably higher, i.e. between
1.2 and 2 times, than that of municipal expenditure on the City economy.
It cannot be expected that investment by the municipality in nature’s services needs to pay
for itself immediately and revenue streams will have to be identified to achieve a balanced
258
budget. There is a case to be made that the general public and visitors benefit from a
sustained flow of ecosystem goods and services. The fact that the City of Cape Town is in
the middle of an internationally acclaimed biodiversity hotspot suggests that benefits are
enjoyed far wider. This adds up to an argument to generate revenue from various sources
namely the general public, visitors to the City, national and provincial intergovernmental
fiscal transfers and international donors. If such services benefit the private sector as well,
partnerships to share costs are also an option. In the further development of specific
programmes and projects to invest and maintain natural assets by the municipality,
infrastructural costs, revenue sources, partnerships, etc. need to be specified as clearly as
possible.
Cape Town is positioning itself as a global player. International tourism and global trade
remains essential features of the City’s well-diversified economy. The business community
aspires to a city of inspiration and innovation. One of the aspirations is that the City needs
to be green and beautiful. The City’s leadership is focused on providing an enabling
environment for growth and development through, for instance, effective service delivery.
The Mayor is on record stating that he wants to see an increase in the rate of capital
investment in the City. Some refer to an infrastructure-led economic growth. None of these
visions and objectives is competing with investments in the City’s natural environment. On
the contrary, investing and maintaining the City’s natural assets or ‘ecological
infrastructure’, yields highly valuable services which provide the backbone for value addition
and employment in City’s economy. Investment projects that achieve the most efficient and
effective levels of service delivery and returns to the City economy will need to be defined.
There is a risk that these value streams will continue drying up if the degradation and
neglect of natural assets is not reversed. As an entity focused on service provision and as
an enabler of economic growth and development, the municipality has the mandate and
opportunity to invest adequately in natural assets to maintain a healthy flow of services to
the benefit of people living in and visiting Cape Town.
259
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