Virtual Water

What is ‘virtual’ water? The concept of virtual water was created by Tony Allan in the 1990s and refers to the volume of water needed to produce an agricultural commodity, measured at the place where the product was produced’, i.e. how much water is required to produce 1 ton of grain (Allan, 2003). This water then becomes embedded in this commodity and the water is traded with it. For example, it takes about 1,000 cubic metres of water to produce just 1 ton of grain, and if that ton of grain is exported to a water-stressed country, that country is then spared the economic and political  stress of using 1,000 cubic metres of water, helping to avoid a potential water deficit and political difficulties.. Therefore virtual water is a very successful way for water-deficit economies to remedy their deficits, and not succumb to food insecurity.

Figure 1 Virtual water balance by country and direction of major flows (1996 – 2005)

Figure 1 shows the virtual water balance per country, and the major flows of virtual water from one country to another. As can be seen, North Africa and parts of Sub-Saharan and South Africa are net importers of water. The inter-dependence between African countries for virtual water is exemplified in figure 2. South Africa to Zimbabwe is the largest link, accounting for roughly 10% of the total internal flow and South Africa exports 31% of total internal African trade. This is to be expected as South Africa receives the highest amount of FDI compared to other African nations, which encourages large-scale agricultural production and better technologies.

It’s important to remember that although globally Africa may not have a large export presence, internally it does. While Africa imports 61.67km³ from the rest of the world (ROW) and exports just 1.18km³, the total volume of water traded internally within Africa is 3.59km³. This is over 3 times what Africa exports to the ROW. It’s well-established that countries close to each other trade more as distances are smaller, which facilitates trade (Konar and Caylor, 2013).

There is a tentative link between trade openness and food security (otherwise defined as the fraction of the population which is undernourished), particularly for African nations (Burgess and Donaldson, 2010). This suggests that virtual water is an effective way for water-deficit countries to combat food insecurity. It also allows countries to utilise their competitive advantage, by specialising in crops that are compatible with their climate which they can export, and import crops which they lack. As countries increase their agricultural production of these crops they become more efficient in the use of factors of production, such as fertiliser, human capital and machinery, which produces a higher yield with the same inputs. A higher yield = more revenue, and therefore should mean more money for the farmer, and for the county.

Figure 2 African virtual water trade network. Trade direction is indicated by the white gap between the trade link and the country of import.

However, countries which have largely externalised their water footprint (water footprint = a countries consumptive use of blue, green and grey water, also includes imported water) using virtual water rely heavily on food imports, and also the freshwater resources of other countries (Hoekestra and Mekonnen, 2012). In 2007 only 30% of African countries had sufficient agricultural export revenues to pay for their food import bills, with the others having to draw from other sources. For countries like Burundi, Djibouti, Eritrea and Gambia their total export revenues for all merchandises (agricultural and non-agricultural) were far short of agricultural import bills, highlighting the problem of food-import dependency in these countries (Rakotoarisoa et al).

This can be exemplified by the drought in East Africa earlier this year which pushed staple foods (maize, sorghum and other cereals) to unusually high levels. This meant that local prices of these foods reached record highs in areas of Ethiopia, Kenya, Somalia, South Sudan and Uganda according to the Food Price Monitoring and Analysis (FPMA). In Somalia more than half the country face acute food insecurity because of this, and goat prices have dropped by 60%, placing a double burden on pastoralists. It therefore seems crazy that all the above countries are net water exporters, i.e. they are exporting more water than they are importing! However international trade in agricultural goods is driven largely by factors other than water, and therefore the import of virtual water in countries is largely unrelated to water scarcity (Yang et al: 2003). A principal cash crop of Ethiopia and Uganda is coffee; Kenya is the world’s 3^rd largest exporter of cut flowers and Somalia relies on bananas for nearly 50% of their exports earnings. These examples show that these countries are dependent on these crops for foreign exchange earnings which is why they are net water exporters.

To conclude, virtual water plays an important role in meeting food and water demand in many African countries, and allows countries to 'save' water and specialise in crop production. However virtual water is not a complete solution, as it can cause an over-reliance on imports, and also an over-reliance on the freshwater resources of other countries, so when food prices rise due to extreme events or shortages, net food importers (as exemplified above) suffer from food insecurity.