Water resources in many catchments in South Africa (SA) are over committed and water is projected to become scarcer. The impacts of plantation forestry on water resources in SA are well known and legislation limits further afforestation. Nevertheless demands for wood continue to grow. A challenge therefore is to increase the production of forest products within water constraints. This paper presents research into the economic and biophysical efficiencies with which indigenous and introduced tree-production systems in SA use water to produce harvestable biomass. Its purpose is to better inform resource allocations. Key findings are that: introduced plantations are more efficient at using water to produce harvestable biomass than indigenous species; the lower water-use efficiencies of indigenous species are due to slow growth rates and not high water-use rates; and the performance of indigenous forests improves when using the economic return per unit of water used - using the residual imputation approach to value the water - because of their lower production costs and higher product prices. Introduced plantations make up the majority of afforested land and total outputs in SA, however, therefore innovative mechanisms are needed to overcome barriers preventing the financing of indigenous forests. Possible financing mechanisms include the UN CDM and REDD programmes and tax breaks for superannuation funds.
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