This paper employs economy-wide framework to evaluate impacts of water and trade policy reforms in South Africa on virtual water (VW) flows. To pursue this analysis the study derives net VWT flows between SA and its partners to assess implications of recent trade agreements within the South African Development Community (SADC) compared to economic cooperation with other major trading blocks (e.g. European Union, Asia, BRIC). Recent trends in actual trade confirm model predictions that

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... tion of water allocation would switch water from field crops to horticulture and promote growth in non-agricultural exports. The results suggest that it is necessary to introduce policies that enhance likely outcomes of liberalization promoting higher water use efficiency within irrigation agriculture such as increased adoption of more efficient irrigation methods (sprinkler, drip, etc.) as water becomes more expensive under wider open competition. Moreover, investment in higher water use efficiency and improved competitiveness of dryland agriculture therefore represent the sound economic options for strengthening the capacity to achieve food security objectives as the country strives to lower NWE. Finally careful coordination of trade and water policy reforms is another necessary challenge for SA's strive to manage a water stressed economy. JEL: Q 25, Q17, Q53, Q 56