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Abstract
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