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 80

causes a reduction in inequality by 20%. We find that agriculture has an equalising effect
in both communities of 18% in Ndakana and 39% in Mlungisi. Own business has the least
inequality reducing effect in both communities. This is mainly because it is in the hands of
a few households capable of investing. Own agriculture and pensions/grants are the major
inequality reducing sources of income in both communities followed by wage labour. These
two sources of income are the major determinants of inequality in the two communities
followed by the latter; any efforts to change income from these sources highly affect income
distribution. Analyses of the share to total income and contribution to total inequality
shows a positive relationship between income share from a particular source and its
contribution to total inequality. The higher the share of income received from a particular
source in a community the higher it contributes to total inequality. This is particularly
true for income from pensions/grants for Ndakana and income from own agriculture for
Mlungisi. High corresponding figures were found for both share of income and elasticity
for these two sources of income (Table 4.2). This probably implies that efforts should
be made to encourage household participation in own agriculture as a way of improving
agriculture's share in total household income thus addressing inequality.
Besides contributing a high share to total income in both communities, wage income
has the highest figure for share to total income inequality in both communities as well
(Ndakana 13%, Mlungisi 23%). Leibbrandt et al. (2000) reported similar results on wage
labour for South Africa. Income received from remittances also brought positive change
towards addressing income inequality in both communities. A 1% increase in income from
remittances accounts for 5% increase in total income inequality and this was the lowest
for all the sources of income of both communities. The results above implies that efforts to
improve income from those sources with both high share in total income and high elasticity
(wage income and own agriculture) will probably positively affect both inequality and
welfare of rural households in the study area.
4.4 Conclusion and policy implications
Increasing income inequality and poverty continue to be the most challenging economic
problem facing most developing countries. In this paper, we used household survey data
collected from two communities, one rural and one peri-urban, to analyze the sources of
income inequality in rural South Africa. The results show that households have diverse
sources of income of both farm and non-farm origin. The analysis shows that the overall
Gini coefficient of income inequality is 0.41 for Ndakana and 0.34 for Mlungisi. All the
sources of income in the study area are unequally distributed. Own agriculture, pensions/
grants followed by wage labour were found to have an income equalizing effect relative to all
the other sources. This implies that public administration that fosters access to income from
these sources of income by the low income sect of the society has the potential to address
inequality. Policies aimed at improving agricultural income either through arranging