Working Paper

2017-06-06

University of Cape Town

Unlike some other countries, there is no legislated poverty line for South Africa. Various absolute poverty lines exist, but there has been little analysis of the methodological decisions underpinning each line. There is no consensus as to which line is best. This paper critically reviews existing South African poverty lines and introduces two new money-metric thresholds. These poverty lines are created according to Ravallion’s (1994) Cost of Basic Needs method and use a combination of household survey data, caloric information for various foods, and price data. Our methodology is described in depth, and the implications of unavoidable methodological decisions are discussed. The theoretical foundations of the method are also examined, and it is argued that the lower-bound poverty line is not conceptually coherent and is not appropriate for poverty measurement. The upper-bound and food poverty lines remain worthwhile, however. The implications of these lines for rudimentary estimates of poverty are then examined, using the 2010/2011 Income and Expenditure Survey.

The authors acknowledge and appreciate the extensive support received from Statistics South Africa. Without the agency’s support this paper would likely not have been possible, and we therefore view it as somewhat of a collaborative effort. In this regard we are particularly grateful to Sandile Simelane and Marietjie Bennett. We also thank Morne Oosthuizen from the Development Policy Research Unit, who provided invaluable advice regarding the conversion of food expenditures into calories.