Rural income dynamics in post-apartheid South Africa: implications for reduction of poverty and income inequality - Institutional Constraints to Small Farmer Development in Southern Africa - page 72

rural livelihoods in Africa, Asia, and Latin America, show that rural households derive a
significant proportion of their livelihoods from a mix of activities (Adams, 1999; Barrett
et al., 2001; Escobal, 2001; Fraser et al., 2003). Attempts have been made by researchers to
classify rural populations' sources of income. In South Africa, Perret et al. (2005) and Fraser
et al. (2003) came up with five sources of income, namely own business, own agriculture,
wage income, remittances and pensions/grants in the former homeland areas of Limpopo,
North West Provinces and Eastern Cape. Income generating activities in these Provinces
manifest themselves in the form of either farm or non-farm activities. Maldistributions
of income from different sources among households affect overall income distribution at
community level. This according to Leibbrandt et al. (2000) explains why household income
varies internationally, nationally and even among neighbouring households. Despite efforts
to address unequal distribution of income in both rural and urban South Africa, there
is no agreement on which income-generating activities should be promoted and/or how
development agencies should allocate available limited resources to reduce inequality. The
government of South Africa has established numerous programmes in the post-apartheid
era to address inequality e.g. Black Economic Empowerment (BEE), but the picture of
rural impoverishment and unequal distribution of income persists. With the information
available, it is possible to conclude that only a tiny minority have seen phenomenal increases
in personal wealth from these programmes.
In view of the bleak economic picture of growing poverty and inequality in South Africa,
this paper presents an inventory of rural income levels and levels inequality in two
communities of South Africa. It intends to examine the nature and dimensions of income
inequality through disintegrating it by both source and community of origin. Specifically,
this objective will be achieved by:
a. identifying and cataloguing the various sources of income in the study area;
b. determine the level of income inequality in the study area;
c. determine the contribution of each income source to overall income inequality.
The paper is set out as follows, the next section discusses the study site followed by data and
model structure (Gini decomposition technique); thereafter we look at the distribution
of income in the study area and then we apply the above-mentioned methodology to
calculate income distribution by source. As conclusion, the paper provide comments about
underlying trends ascertainable from these estimates and what these imply for the income
distribution of both communities.
4.2 Study area
The study area, Stutterheim, is situated in the Eastern Cape province of South Africa,
located along the N6 road to East London (see Figure 3.1). Approximately sixty kilometres
from King Williams Town, the area was formerly part of the Ciskei Bantustan under the