An assessment of the factors influencing asset accumulation of South African rural households

Abstract

Rural areas in South Africa are predominantly characterized by the presence of subsistence farming households, many of which face challenges related to limited asset ownership. While historical poverty reduction efforts have primarily focused on addressing income poverty, this approach overlooks the multifaceted nature of poverty experienced by rural communities. Scholars increasingly argue that poverty should not be solely defined by insufficient income or consumption but should also consider the absence of assets.

This study adopts an asset-centric perspective to investigate the factors influencing asset accumulation among rural households in South Africa. Particularly, it examines how participation in subsistence farming impacts asset accumulation, given the crucial role that asset ownership plays in ensuring a basic standard of living, especially when facing unpredictable fluctuations in income.

To conduct this research, data from South Africa's 2018 General Household Survey (GHS), conducted by Statistics South Africa, was utilized. The study focused on a subset of rural residents within the dataset.

The results of the Multiple Correspondence Analysis (MCA) reveal that the first component accounts for 57.2% of the overall variance, while the second component explains 12.3%. The asset index derived from the eigenvalues of the first component reveals a pattern wherein positive coefficients corresponded with assets associated with higher socio-economic status, such as ownership of computers, vehicles, and telephones. Conversely, negative coefficients were indicative of items reflecting lower living standards.

The research findings highlight the significance of various factors in influencing household asset accumulation. Household engagement in subsistence farming, household size, income levels, the primary source of income, gender dynamics, and the age of the household head emerged as influential determinants. Both ordinary least squares (OLS) and Ordered Multinomial Logit regression models strongly supported these findings, with the latter based on asset wealth quintiles.

The research revealed that asset poverty is more prevalent in female-headed households compared to male-headed ones. In addition, households involved in subsistence farming exhibited higher levels of asset ownership, suggesting that this livelihood strategy has a positive impact on their overall well-being. The study also highlights the crucial role of access to basic services such as transportation, information, and communication in enhancing households' resilience to economic shocks. Assets were identified as essential tools for coping with unforeseen challenges. Consequently, the study recommends the implementation of policies and strategies aimed at improving rural access to basic services, infrastructure, and land markets. Such measures have the potential to mitigate asset poverty and align with the government's rural development objectives.