Expenditure elasticities and growth linkages for rural households in two study areas of KwaZulu-Natal.
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Date
2002
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Abstract
Expenditure patterns were investigated to determine the potential impact of a widespread income
shock on household expenditure and to estimate the potential for growth linkages to spur
agriculture-led growth in two communal areas of KwaZulu-Natal. Expenditure data were
collected from 99 sample households at the rural areas of Swayimana and Umzumbe during
1997. District and wealth group expenditure analyses for commodity groups suggested
expenditure elasticities of close to unity for food. Low expenditure elasticities were found for
staple foods. Expenditure elasticities for meat, meat products, and poultry were close to unity,
while horticultural products showed the greatest potential for demand growth within the food
category. Of the statistically significant commodity categories, expenditure elasticities for
durables, housing, and transport were more than double those estimated for the aggregate food
category. There was little difference in the response of wealthier households (the top
expenditure decile) and that of poorer households. However, wealthier households have a
greater propensity for increased expenditure on transport, while poorer households show a
greater propensity for increased expenditure on housing and durables.
District and wealth group expenditure analyses for tradable versus non-tradable farm and non-farm
goods and services suggest a less than proportional increase in the demand for tradable
farm commodities, and a more than proportional increase in demand for non-tradable farm
commodities, following a one percent increase in household expenditure. Expenditure on non-farm
tradables (imported consumer durables) showed the greatest potential for demand growth,
with expenditure elasticities ranging from 1.75 to 2.59. A one Rand increase in household
income is predicted to add an additional 28 cents (multiplier of 1.28) to the local economy.
However, even relatively weak growth linkages could lead to much needed new income and ,
employment opportunities within the local farm and non-farm sectors if the constraints inhibiting
agriculture, and hence broad-based growth in rural incomes are alleviated. Agriculture-led
growth in South Africa requires public investment in both physical and institutional
infrastructure to reduce transaction costs and risks in all markets, encouraging greater
participation by local entrepreneurs and private sector investors. In addition, the roles,
functions and services offered by extension agents should be extended to promote collective
marketing, facilitate land rental contracts, provide training, and technical and business support
for farm and non-farm entrepreneurs.
Description
Thesis (Ph.D.)-University of Natal, Pietermaritzburg, 2002.
Keywords
Elasticity (Economics), Consumption (Economics)--KwaZulu-Natal., Home economics--Accounting., Households--KwaZulu-Natal., Agriculture--Economic aspects--KwaZulu-Natal., Theses--Agricultural economics.