CGE Analysis of Rural Economic Development through Agriculture Policy in South Africa: A Focus on Poverty, Inequality, and Gender

The South African economy is dualistic in nature, a remnant of historic laws that segregated the country along racial lines, perpetuating poverty, unemployment, and inequality. Levels of all three remain persistently high and are severe among vulnerable groups, including women and people living in rural areas. Though South Africa is one of Africa’s economic giants, the government continues to look for solutions to address these challenges and to adopt inclusive strategies to ensure that the poor and women are not left behind in poverty-reduction efforts. Agriculture and the rural economy have always been considered strategic in creating jobs and reducing poverty and inequality. We assess the economy-wide and distributional effects of government intervention through agriculture-related support, focusing on possible differential impacts for rural and urban people and for working men and women. We simulate reallocation of land from commercial to smallholder farming and of increased agricultural capital. Our results indicate an overall positive impact on consumption and GDP. While gender inequality in the labor market could decline if existing policies continue without modification, poverty will persist and rural households would benefit relatively less than urban ones. As a result, complementary policies are needed to reduce poverty and inequality.