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Abstract
Between 1993 and 1996, a concerted effort was made to stimulate a rental market for arable land in the Upper Tugela Catchment region of the former KwaZulu homeland. Small, incremental changes were made to customary institutions in order to reduce risks and other transaction costs constraining the rental market. The number of transactions increased with associated equity and efficiency gains. This study explores changes in variable transaction costs by examining changes in the type of rental contracts observed over time. A census survey of 39 households participating in a total of 73 rental transactions was undertaken in the original study area during November 2000. The data revealed growth in the variety and length of rental contracts, supporting other evidence of declining transaction costs. In particular, a linear regression model estimated to quantify the partial contribution of factors affecting contract length shows that the introduction of witnessed written lease agreements has facilitated longer-term rentals for a wide range of contract types, even in cases where the lesson and lessee are strangers. The evidence suggests that government extension staff could playa key role in sustaining rental markets for cropland in communal areas by absorbing sonic transaction costs, training tribal councillors and disseminating information.