Turning black markets into new opportunities

A qat market in Yemen ©Jing Zhang-Dreamstime.com

The cultivation of qat, a mild narcotic which is consumed by 70 percent of Yemeni adults, is draining aquifers in a country where three out of four people struggle for access to water. To counter this, Montgomery Simus argues that Yemeni officials could formalise water into rights, licensing the region’s qat producers to own and trade the water they save

From Morocco to Central Asia, observers detect the rise of “a battle for the water supplies that sustain these desert nations”.
Call it the Axis of Aridity. At its fulcrum lies Yemen. “Nature and man are squeezing Yemen,” said former Prime Minister Abdul Kareem Al-Eryani. “And I think this alarm bell should ring in various corners around us and in the United States as well.”
A volatile combination of population growth, misguided agricultural policies, unregulated drilling, unsustainable irrigation, and, most recently, a civil war that has destroyed water pipes, storage tanks and pumping facilities, mean Sana’a, Yemen’s capital, may become the first city in the world to run out of water. The number of Yemenis without access to drinking water has doubled since the civil war began, reports the UN, as three out of four people struggle to drink, cook or bathe.
Yet of all threats to Yemen’s water, none appears more insidious than qat, a leaf which is habitually chewed by men, women and children as a form of relaxant. Roots of this mildly narcotic and thirsty crop run deep in the nation’s political economy and culture. Various reports estimate that two-fifths to half of Yemen’s water, and 90 percent of the nation’s groundwater, irrigates qat. But targeting qat cultivation in terms of water management feels intractable, especially when policemen, soldiers, tribal leaders and businessmen are qat addicts and qat dealers. Besides, qat provides a vital rural livelihood for poor farmers.
Indeed, Ministry of Planning figures show qat production increased 13-fold in recent decades, thanks to a national strategy to reduce poverty. And the World Bank estimates that the qat industry employs one in every seven working Yemenis in production and distribution “making it the largest single source of rural income and the second largest source of employment in the country after the agriculture and herding sector, exceeding even the public sector”.
So as men obliterate fossil groundwater, flouting external regulations or metering, what can be done?
Some argue for a short, sharp shock. Treat qat like the drug it is: target processors with drones, burn crops, confiscate idle wells and lands, and redistribute them among, say, bean growers with subsidised drip irrigation. Yet from Colombia to Afghanistan, a martial response only unites local people, who depend on such crops to earn money for food, education and medicine. Farmers revert to the black market once the drug wars go away.
And that points to an alternative approach. What if officials could make qat irrigation more efficient by legitimising the inputs that go into it? Don’t try to control and confiscate access to water; rather, formalise the qat farmers’ rights to the water. Allow them to own it. If they can lease saved water, incentives reduce demand and boost supply.
For all their perceived sins, qat farmers differ little from deep-well groundwater pumpers and irrigators anywhere. Consider the California almond grower, Castilian cotton exporter, or Karnataka soybean shipper.
Their depletion of water has also been labelled ‘unpatriotic’, ‘greedy’, ‘myopic’, and ‘selfish’. But viewed objectively, these farmers, large and small, are behaving rationally. Their natural self-interest leads them to exploit open-access resources to advance their prosperity and status.
Beyond the symptoms, address the underlying disease behind them: a tragedy of the commons.
Yemenis appreciate that water is no ordinary resource; it is a complex and subtle force to treasure, a liquid matrix of life they must conserve. But they are powerless to do so. You can’t truly save or share something that does not belong to you in the first place; if you don’t consume the last litre, someone else will.

Opiates of the masses

Why do so many poor Yemenis willingly forgo food for qat?
To water professionals, failure to prioritise food and health may seem lunacy. But a look below the surface is revealing. Two decades ago, back when there was still water, Lenard Milich and Mohammed Al-Sabbry wrote a classic article explaining how and why qat–chewed by three quarters of adults for up to five hours each afternoon–had “come to mean everything in Yemeni life”.
Yes, it is a drug with alkaloid stimulants, a social lubricant that is, as one Yemeni writer put it, the “opium of our people”. But above all, qat is an economic driver at personal and national level. Indeed, as Milich and Al-Sabbry showed, “…qat-cultivating households are now better off than when they relied on subsistence or other cash crops.” (Source: The Society of International Development).
But this economic signal can cut both ways. While many households are dependent on qat, many low- and mid-income qat chewers most certainly speed their own impoverishment by spending disproportionate sums of their income on the drug, a water-depleting codependency between producer and consumer.
Qat would seem to defy classical economic theory, if it weren’t for the fact that it mirrors the dynamic of another globally traded, mildly addictive stimulant consumed several hours each day, often by those idle and under-employed poor who can’t afford it. Interestingly, this other water-intensive cash crop was also first cultivated and exported from the Horn of Africa.
This second drug goes by the name of coffee.

Yemenis appreciate that water is no ordinary resource; it is a complex and subtle force to treasure, a liquid matrix of life they must conserve

So instead of trying in vain to cajole, bomb or regulate qat farmers, the Yemeni government might consider empowering them, through markets, to transform their operations into a water-efficient weapon in the nation’s war on drought.
Even a government in disarray can leverage Adam Smith’s logic about our “propensity to truck, barter and exchange” to turn conflict into collaboration. If Yemeni qat farmers and city dwellers held exclusive access rights to water–clearly defined, securely owned, freely exchanged–both would be motivated to innovate, be rewarded for efficiency and restraint, and be able to achieve economic efficiency, social equity, political stability and ecological resilience–voluntarily.
Water would no longer be the government’s political liability, a resource officials struggle and fail to manage. It would become everyone’s asset, and everyone’s responsibility.
True, a market approach to water understandably provokes questions, concerns and opposition.
Access to and control of water is a ferociously political and ideological issue even when one is not staring down the barrel of an AK-47 or living in a war- torn country, with refugees and where more than half the population lives on less than US$2 a day.

Qat Yemen Credit- flat.luxury .
Offering qat producers water rights would help remove the black market for water © flat.luxury

Social activists have spent years mounting protests to and railing in the media against any ‘commodification’ or ‘privatisation’ of water. Interestingly, the Yemeni constitution calls water a natural resource that neither belongs to anyone nor can be bought by the government.

Agricultural wells currently sell water to private companies, operating fleets of water tankers, which then sell it on to thirsty citizens

Yet, despite laws on paper and bloody chaos in the field, water has been and is being traded every hour, every day. These black market mechanisms have been quietly allocating Yemen’s water.
Agricultural wells currently sell water to private companies, operating fleets of water tankers, which then sell it on to thirsty citizens. Recent reports from Reuters show a visible market price signal has already emerged. It not only exists, but has more than tripled since March 2015, reaching 10,000 Yemen rials (US$47) for a four-cubic-metre tank of water, according to Abdulkhaleq Alwan, a senior expert at Yemen’s Water and Environment Ministry.
“Ordinary Yemenis now pay more than 30 percent of their income just to get water in their houses, the highest rate in the world,” Alwan told Reuters over the phone from Sana’a.
Black markets work, but aren’t healthy, equitable, or efficient as they could be. Just as some governments have brought peace and stability by phasing out the drug wars, Yemen could likewise decriminalise, formalise and regulate the black market trade in water.
Fine in theory. But how would this work in practice?
First, officials could enshrine all Yemeni people, including qat growers, with a defined water right they could trade, say 500 litres per person per day. It could distribute this exclusive credit via cellphones. Then society could form institutions to negotiate and seek efficient market outcomes on its own. Across villages, the ‘animal spirits’ would maximise value from their new possession, seeking ways to save and exploit every drop from source to tap and back again.
Priorities change as water becomes an individual endowment or asset. As virtual ‘shareholders’, ownership of water motivates innovators to plug leaks, repair pipes, harvest rain, trap runoff, or transition from qat to another less water- intensive food crop.
Ultimately, Yemenis can turn to a vast and diverse new source of water security: each other.
Qat farmers converting to drip irrigation would recoup their investment by selling water savings; less frugal growers could invest in nearby wells to fuel their production. Negotiation via a tradable water rights market turns the zero-sum game of the commons into a win-win opportunity. The poorest sectors of society could benefit most, both in terms of potential income and opportunities that they did not previously have.

Oman demonstrates the rationale for water exchanges

Water ownership exchanges may seem drastic, but actually have deep roots.
In Chile, Australia and the western United States, governments endowed farmers with ownership rights to private shares of public currents; competing interests traded these rights to secure fresh water for urban and river health.
True, these are relatively affluent, developed and well-governed nation states. Yet Pakistan has also made progress and perhaps the best case for water rights trading is also the oldest. And it comes from one of Yemen’s neighbours on the Arabian Peninsula, in Oman.
Under aflaj, a 4,500-year-old water-rights exchange system, Oman communities secure enough free water to drink or bathe; beyond that, water’s value varies by owner, season or irrigated crop.
Adapting, formalising and replicating these robust mechanisms in Yemen could tip a desperate situation a bit closer towards stability.

Priorities change as water becomes an individual endowment or asset. As virtual ‘shareholders’, ownership of water motivates innovators to plug leaks, repair pipes, harvest rain, trap runoff, or transition from qat to another less water- intensive food crop

As aquifers keep plunging, with prices escalating, the ancient nation has an opportunity to legitimise its black markets for water, and nudge the Axis of Aridity back towards security.
Can the uniquely human propensity to truck, barter and exchange be extended to water rights, making a free resource valuable?
This may be Yemen’s last chance to find out, and set a precedent.

One in seven working Yemenis is employed in the production of qat, which is chewed for up to ve hours a day © Kate Dixon
One in seven working Yemenis is employed in the production of qat, which is chewed for up to ve hours a day © Kate Dixon
When not helping restore Afghanistan’s Kabul River, Montgomery Simus calls water-scarce Las Vegas home, as the founder of Water Politics, a firm dedicated to the analysis of geopolitical water issues. As a 2015- 2016 Senior Advanced Leadership Fellow at Harvard University he explores innovative solutions to the water/energy/food nexus.