Modeling Algoa Bay – A systems dynamics approach to understanding the interactions between user groups deriving value from Algoa Bay

Algoa Bay, Gqeberha in the Eastern Cape Province, has become the central hub for marine research within South Africa on account of both its rich diversity and dynamic oceanographic processes. With research conducted in the bay proving instrumental in national marine conservation and wellbeing, the current study contributes to the growing body of work through estimating the economic value of the ecosystem services rendered by Algoa Bay. The valuation applied a range of methods in conjunction with sourced data, to calculate the ecosystem service values derived by specific beneficiary groups. The valuation forms part of the Modeling Algoa Bay Project, and acts as a vital point in moving towards developing a system dynamics model for the bay.

Approach

The estimation of accurate ecosystem service values revolved around three fundamental factors. These factors included beneficiaries, ecosystem services and valuation methods. Thorough research into the respective factors revealed the presence of three main beneficiary groups deriving value from the services provided by the bay. These groups were defined as the local residents (Nelson Mandela Bay), South African residents and the global citizens. These beneficiary groups proved to derive value from a total of 13 ecosystem services, categorized according to provisioning, regulating, supporting or cultural services. With beneficiary groups and ecosystem services identified and understood, assignment of the most applicable valuation method to each respective service was conducted. These methods included statutory payments, market prices, engineering values, benefit transfer and property values.

The outline of the adopted approach indicates the extensive data requirements of the valuation. In terms of gathering data, two main sources were referenced. The first was desktop review, which included sources such as academic papers, journal articles, government publications and public records, all available online. The second source was soliciting information from stakeholders, entailing correspondence such as emails and phone calls to various parties including local municipalities, private enterprises, and related parties.

Results

Proceeding to the valuation, it is crucial to note that two scenarios were run, namely a conservative and alternative scenario. Not all ecosystem services were valued in our research due to a lack of usable data, as a result making the conservative and alternative scenario results both reflect lower bound estimates. By working with these estimated lower bound unit values, much of the uncertainties are mitigated. The conservative scenario opted for the lower unit value or narrower definition of services throughout.
Application of the stated methods yielded results which have been plotted in the sankey graphs below.

With reference to Figures 1 and 2, it is evident that there exists a significant difference between the monetary values and the relative proportions of services among the various services when comparing the local benefits to that of the national and global benefits.
At a local level (Figure 1) the value of recreation and tourism dominates and is estimated to be more than 78% of the total value derived from Algoa Bay. This is followed by the moderation of extreme events and spiritual and cultural values very far behind at 5.88% and 3.8%, respectively.
At a global level (Figure 2) existence and bequest (38.46%), recreation and tourism (35.51%), and the maintenance and protection of nursery and gene pool and life cycle (18.93%) services are dominant.
In both cases the coastal system offering cultural values dominate, with provisioning services being the lowest contributor to total economic value. This is despite provisioning services being the most noticeable in most, if not all, ecosystems such as in this case, they are not the most significant contributor to total economic value.

Figure 1: Local estimate of the economic value of the ecosystem services rendered by Algoa Bay by Ecosystem: R/year (2019/2020)
Conservative scenario: Value = R9.95 billion

Figure 2: Global estimate of the economic value of the ecosystem services rendered by Algoa Bay: R/year (2019/2020)
Conservative scenario: Value = R30.3 billion

Team

The project has been conducted by a team of three budding economists, Matthew Bentley, Pablo Rees and Twesigye Paul Twekye, along with Rozanne Peacock and PhD candidate, Estee Vermuelen, all led by Professor James Blignaut of Asset Research and Stellenbosch University. Matthew, Pablo and Twesigye are all Stellenbosch University graduates, having completed their Economics honours degrees in 2020. Matthew's honours degree entailed a focus on environmental economics and artificial intelligence, and he is currently looking into furthering his studies within the field of Environmental Management. Pablo focused on environmental economics and the South African power mix in his honours year and is now also completing his MCom Economics dissertation in Machine Learning, Natural Language Processing and Stock Market Prediction through Stellenbosch University. Twesigye’s honours thesis focused on the tipping point(s) of South Africa’s debt-to-GDP ratio. These three young economists have a common love for the environment and its preservation and are therefore motivated to complete this project in a way that yields useful and accurate results. Rozanne completed her masters at the University of Pretoria, which focused on the full cost of siltation in the Ntabelanga Dam. She has experience and skills in system dynamic modelling which is crucial in this project. Also assisting on the project and working closely with the gentlemen to develop the system dynamics model is Estee Vermeulen. Estee is a qualified systems modeler and oceanographer, who recently completed her PhD degree at Nelson Mandela University.  Estee is generally interested in all aspects of environmental management and sustainable development, including ecosystems accounting and valuation frameworks such as the Algoa Bay Ecosystem Service Evaluation currently in progress.