Determinants of household activity choice, rural income strategies and diversification - Institutional Constraints to Small Farmer Development in Southern Africa - page 64

the official poverty line based on Statistics SA's Income and Expenditure Survey (IES) data
and CPI estimates. The poverty line per person is R388 per month in 2008 constant rand.
Table 3.3 below shows the poverty situation in our study area.

The poverty situation is better in Mlungisi than Ndakana, with a head count ratio of
50% compared to 63% in Ndakana. The poverty situation in Ndakana is higher than the
estimated figure for rural areas of South Africa: 59.3%. Both the poverty gap ratio and
severity of poverty are high in Ndakana than Mlungisi. Mlungisi is located next to the town
and wage employment has emerged as the main sources of income for a greater population
in the same community. Labour employment opportunities in the non-farm sector are
common near town. The main asset owned by most of the households in the study area
is labour. Therefore the level of poverty is seemingly controlled by participation in wage
employment which is mainly accessible to households located next to the town. Overall,
it seems that poverty is more prominent in communities with agriculture as their main
activity. Thus the notion that agriculture is the sole driver of poverty in rural South Africa
should be changed. The desperate poverty situation in South Africa can be reduced by
promoting both farm and non-farm activities.

Table 3.3. Poverty situation in Mlungisi and Ndakana.

Community Mlungisi Ndakana

Incidence of poverty 50% 63%

Poverty gap ratio 23% 31%

Severity of poverty 13% 17%

3.6.4 Income by activity

In order to identify the determinants of income, we regress each of the four sources of
income (own business, own agriculture, wage income and remittances) on the full range of
dependent variables. The results of the model are shown in Table 3.4. The findings point
to the key role played by physical capital, social capital and education in the determination
of almost all the sources of income in the study area. Expectedly, physical capital proved
not to be important in the level of remittances. In all cases, except in the case of the effect
of physical capital on the remittances equation, all the coefficients were positive. With the
exception of wage income, an increase in social capital has statistically significant positive
impact on all the other types of income. These results are not exceptional. Hebinck and Lent
(2007) and Katungi et al. (2007) recognise the importance of social capital in rural South