Water is a complex economic good and requires optimal management to control its rising scarcity and competition for use. South Africa is in the process of implementing market based water policy reforms to attain equity, efficiency, and sustainability. However, these reforms have not been entirely successful and water allocation problems persist. This could be due the associated transaction costs arising from the transition of the policy process among other factors. Previous research lacks to explain the complete interplay of issues. Transaction costs constitute a large component of total policy costs yet remain generally unmeasured. This study identifies and quantifies transaction costs incurred by various stakeholders in the Olifants basin. Further, determinants of irrigation farmers’ transaction costs are assessed using regression methods. Results from this study feed back into the water policy process through allowing comparisons between policy alternatives ex ante and evaluation of existing policies ex post for improvement purposes


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