Explaining variation in the economic value of irrigation water using psychological capital: a case study from Ndumo B and Makhathini, KwaZulu-Natal, South Africa

Abstract

This study investigates the economic value of irrigation water using data collected from 200 smallholder producers in Makhathini and Ndumo areas, KwaZulu-Natal. The study accounts for psychological capital (individual mind-set and attitude affecting motivation to take initiatives) as an important aspect of farm management. This concept focuses more on the ‘soft’ aspects of farm management, which have not been adequately studied in the context of smallholder farming. A sustainable livelihoods framework is employed as a conceptual framework and the role of psychological capital is integrated to explain the variation in water values. The study employs the residual valuation method to estimate water values, principal component analysis to generate an index for psychological capital, and the general linear model to explain variation in water values. The findings suggest that variation in water values was mainly influenced by the location of the farmer, farmer type, physical capital, social capital, land size, farming experience, crop type and psychological capital.

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