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Environmental Economics

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Table of Contents 1. Introduction 2. Literature Review: Aquaculture in Algoa Bay 3.1. Fish farming 3.2. Algoa Bay 3.3. Economic Methodology: Cost/Benfit analysis 3. Case Study: Algoa Bay fin fish farming project 4. Analysis and Policy Implications 5. Conclusion

1. Introduction
The global level of fish stocks are on an overall decline due to overfishing. Areas within South Africa such as the Eastern Cape Province are considered to be the second greatest producing province of aquaculture commodities. Because of the rich aquaculture within the Eastern Cape, the Departments of Agriculture, Forestry and Fisheries, through various criteria based on a Strategic Environmental Assessment (SEA), have selected Algoa Bay within the Eastern Cape to introduce fin fish farming. The various fin fish that are intended to be farmed in this area are linked fishery exports that contribute approximately R411 million per annum in the Eastern Cape. Thus study intends to investigate the development proposal aimed at increasing the growth of the aquaculture industry within South Africa as well as conducting an investigation into the economic and environmental issues associated with the introduction of aquaculture within areas such as Algoa Bay. The objectives with the introduction of fish farms are to increase job creation within the area and more importantly to manage the dwindling stocks of wild fin fish. A cost and benefit analysis will be applied to the Algoa Bay case study in order to establish the economic costs and benefits, and to establish whether it would be economically profitable to implement fish farms. Also taking into account the advantages and disadvantages of implementing fin fish structures by looking at the impact on the ocean at large. 2. Literature Review: Aquaculture in Algoa Bay

3.1. Fish farms
The aquaculture species that is intended to be farmed are specifically fin fish, the area of Algoa bay has been recognized as a suitable fish farm zone by the Departments of Agriculture and the Department of Fisheries. Would the venture be a sustainable, and what are the advantages and disadvantages of having a Fish farm in Algoa Bay:
* Economic development and job creation for the coastal communities * Promote an increase in the production of seafood production along the coast * Assists in the compensation for wild stocks of seafood that are dwindling * Development of aquaculture within South Africa which is only in its infancy in comparison to the global aquaculture standards.
* The tourism receives about 290 million rand revenue gained from the ocean life, beaches, and the general aesthetics of the area. A fish farm could negatively impact the local economy. * The type of waste produced by the fish farms, include fish food and faeces which will cause extra residue to reside within the ocean floor, that would impact marine life in the area negatively. * The probability of white sharks in the vicinity would also increase as a result of the fish food. * There would also be deoxygenating of water caused by the phytoplankton in the water which will in turn end up killing fish.
A trial was done in the Port Elizabeth in order to establish whether the cages would be able to withstand the oceanic conditions along the coast and it was marked that the cages would not be able to withstand the conditions of the ocean at Algoa Bay. So is the venture economically sustainable for government to undertake? 3.2. Algoa Bay
The coast of Algoa Bay is situated along the east coast stretching approximately 135 km between Cape Padrone and Cape Recife and has a high marine biodiversity and bird population. The studies conducted in the area were through a Strategic Environmental Assessment (SEA) and the system which located the areas suitable for the fish farms was a Geographic Information System GIS system. The important economic issues that surround the water resource at Algoa Bay is the efficient allocation of this water resource (Tietenberg and Lewis, 2012: 209). There are users of the water resource that are for consumptive and non-consumptive purposes such as for agriculture, aquaculture or for swimming, surfing and tourism. Thus marginal net benefit plays an important role in the analysis of the utilisation of Algoa bay for aquaculture because it illustrate whether the project is economically sustainable at the cost of social development. 3.3. Economic Methodology: Cost/Benefit analysis
It is important to weigh the costs of proposed benefits against the benefits because it is better to approve/reject a project such as the finfish farming at Algoa Bay based on economic measures rather than needs or problems (Tietenberg and Lewis, 2012: 46). What need to be taken into consideration are the tangible and non-tangible benefits. Tangible benefits of the Fish farms include the increased revenue as a result of an increase in seafood production within the area, increased creation of low skilled jobs in the area. The intangible benefits include helping to sustain a level of natural finfish regeneration by slowing down overfishing and maintaining a natural capital for future generations. The types of costs involved is the start-up cost which includes facilities to set up the cages, data on suitable areas, compensation for other industries that will be immediately impacted, training of workers, general setting up costs. The recurring costs will be salaries, maintenance costs and ongoing training as well as external costs involved in the compensation of companies negatively impacted by the implementation of fish farms. The benefit/ cost ration states that a ratio of 1/1 or greater is suitable for expenditure, Benefit/Cost is greater than 1 then the project is a good investment and if the Benefit/Cost is less than 1 then the project is not a good investment (Tietenberg and Lewis, 2012: 47). The benefit/cost analysis of the aquaculture must also be considered over time between 2011 and 2030 as the report suggested therefore discounting is important.


1. BLOOM, J. (2012). Baseline Socio-Economic Assessment for the development of Aquaculture Development Zones for Mariculture Fish Farming in Algoa Bay. Umcebisi Business Adviesers (Pty) Ltd, Stellenbosch, South Africa.

2. CLARK, B.M., HUTCHINGS, K., PORTER, S. & SINK, K. (2011). Strategic Environmental Assessment – Identification of potential marine aquaculture development zones for fin fish cage culture. Anchor Environmental, Cape Town, South Africa.

3. CLARK, B.M., HUTCHINGS, K., PORTER, S. & SINK, K. (2012). Baseline Marine Report – Marine aquaculture development zones for fin fish cage culture in the Eastern Cape. Anchor Environmental, Cape Town, South Africa. 4. TIENTENBERG, T and LEWIS, L (2012). Environmental and Natural Resource Economics (9th Edition). Essex, England: Pearson Education Ltd.…...

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