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Deregulation and liberalization were a fact of life in the agricultural sector of South Africa during the 1980s. The process was characterized by change within an existing institutional structure, as the main role players involved in the sector remained in place despite the general relaxation in State intervention. This changed with the election of the government of national unity 1994, although in agriculture at least some direct policy changes had to wait until 1996, i.e. until after the withdrawal of the National Party from the GNU. The most important policy initiatives taken subsequent to this time included land reform, institutional restructuring in the public sector, the promulgation of new legislation, including the Marketing of Agricultural Products Act and the Water Act, trade policy and labour market policy reform. These policies are discussed below. The purpose of these policy reforms was to correct the injustices of past policy, principally through land reform, to get the agricultural sector on a less capital-intensive growth path and to enhance the international competitiveness of the sector. The impact of the reforms is discussed in terms of these goals in the subsequent parts of the article.

This paper attempts to estimate the production, price, welfare and employment effects of some of the changes in the agricultural marketing system on the Western Cape Province of South Africa, utilizing a regional linear programming model of the agricultural sector of the region. The model includes supply, demand and production risk, and simulates the present agricultural production structure well. Market and trade liberalization have major impacts on the structure of Western Cape agriculture, particularly the grain and livestock sub-sectors, with only marginal and mostly insignificant effects on horticultural products. © 1998 John Wiley & Sons, Ltd.