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Abstract
Despite the fact that all direct and indirect measures of subsidisation and protection
have been removed, commercial agriculture is still widely considered to be subsidised,
privileged and uncompetitive. This paper shows how the process of deregulation has in
fact changed the situation. The paper reports on the comparative advantage in the
production of wheat in South Africa and reveals the various distortionary effects, if
any, of the policy environment on the production of wheat in the country prior to
1997. The paper concludes that South Africa has a strong comparative advantage in
the production of wheat, especially, in the inland areas. Favourable climatic and soil
factors as well as abundant and relatively cheaper domestic factors of production may
be some of the reasons for this strong comparative advantage. The inland areas have
better RCRs due to higher inland transportation costs. However, wheat production
under irrigation seems to have no comparative advantage. This is mainly due to the
implicit subsidy on irrigation water.