The purpose of this paper is to report on a disaggregate model of freight transport demand that was developed to forecast the impacts of freight transport regulatory policy options in South Africa. Two aspects of the methodology are emphasized: the compilation and tabulations of a disaggregate data base, and the policy option impacts predicted during application of the model. South Africa is currently undergoing a transition from a highly regulated to a deregulated freight transport industry. During the investigation leading up to this position, the data tabulations were used to illustrate to policymakers how regulation had created major distortions in the freight transport market. The predicted impacts of relaxing regulatory restrictions that were generated by the model helped to persuade these same policymakers to Implement a more market-oriented freight transport policy for the country.

The major part of this paper focuses on the evaluation of options for a new freight transport regulatory policy in South Africa. To provide a perspective on that discussion, the background on the current regulatory situation is first summarized. The freight transport industry in South Africa has historically operated within a strict regulatory environment. First, the central government controls the only railroad operation. The government has used this control to intervene significantly into the business matters of the railroad to promote the country's social and economic goals. This intervention has imposed a substantial cost burden on the railroad and has necessitated an extensive system of internal cross-subsidization, which has in tum led to tariff distortions in all transport modes. To protect the economic health of the railroad as it performs its overall social and economic functions, the government has further intervened by regulating the other modes of transport in markets where the potential for competition with rail exists. Thus, for example, the road transport industry, composed primarily of private sector operators, is extensively regulated through a system of permits, licenses, and authorities. In particular, there are strict entry controls into the long-distance road transport market on a commodity basis for the private sector road operators.