Environmental economist: nature’s ‘invisible’ role in supporting household income

When government ministers consider the contribution of small rural economies to the national GDP, they usually only perceive economic activity that is measured through the narrow lens of goods or activities that are bought and sold on the formal market. Or if they look at poverty levels, they might only take note of income that is expressed in monetary terms.

But these figures won’t capture the ‘full income’, including the environmental income that many rural households get by exploiting - usually through subsistence, rather than sale - goods and services from the natural world.

Rural households still often depend heavily on the natural environment for their day-to-day survival. Natural resources include wild-found foods such as honey, vegetables and fruits, and game; fire wood or animal dung for cooking or heating their homes; fibre and timber for construction; and drinking water. They also rely on ecosystem services such as wetland systems which keep water flowing in rivers, or the processes that allow for healthy soils in which people can grow food.

‘Nature contributes to the welfare of rural communities in ways that national statistics don’t fully pick up, because many environmental goods and services that people take from nature don’t pass through the market,’ said Prof Edwin Muchapondwa, a natural resource economist at the University of Cape Town’s Environmental Policy Research Unit (EPRU) in the School of Economics.

Most of the natural resources or ecosystem services are not monetised. Even though they contribute to livelihoods and provide a form of ‘value’ that households would have otherwise had to pay for in a formal market. Because this ‘value' isn’t recorded in national statistics, authorities might not realise the full importance of the natural environment as a buffer against poverty, and might not prioritise the conservation or restoration of natural landscapes.   

‘In a number of studies, including some which we have done at EPRU, we've shown that poor households in southern Africa depend heavily on environmental resources. Between 15 to 50 per cent of households’ full income comes from nature,’ he said.

‘If you take away the environmental resources that people exploit for subsistence and instead give them money to subsist to the same extent, that’s the minimum value you would impute for environmental resources. Nature makes a huge contribution to households’ full income, some of which goes unquantified.’

While relatively wealthier rural households might take more from nature, in total value, than their poorer counterparts, poorer households derive a larger proportion of their full income from nature, making them more dependent on a healthy natural environment.

‘If the natural environment around these households is not intact, they will lose between 15 and 50 per cent of their full income. These unreported contributions from nature show how important it is for governments to invest in nature and the environment.’

Economists can tell a more complete story

If a finance minister has to prioritise a country’s budgets, and has to choose between funding a poverty reduction programme targeting the youth, or a wildlife conservation effort that will create watering holes for elephants in a game park, the minister is most likely going to allocate the money to the youth education programme.

‘But what if this didn’t tell the full picture?’ said Muchapondwa. ‘What if the youth programme was to support a dozen teenagers in a wealthy suburban school? And what if the watering hole programme was aimed at stopping elephants from straying out of the park and into nearby farmland, where they might trample or eat crops of a thousand farmers? If the programme were to succeed, it would prevent human-wildlife, by protecting the livelihoods and resources of a large community of farmers.’

This was another story which Muchapondwa used to demonstrate the importance of his discipline in the field of economics.

Environment resource economists can help give authorities a more comprehensive story about the role of nature that can better inform state budget allocations when they are considering how this will contribute towards poverty reduction, relieving inequality, and boosting GDP.

News | 19 February 2020