Expenditure elasticities for rural households in the Embo ward, Umbumbulu, KwaZulu-Natal

Household consumption patterns were investigated to determine the impact of an income shock on household expenditure and to establish the potential for demand-led growth in a rural area of KwaZulu-Natal. Household consumption data were collected from sample households in the Embo ward of Umbumbulu, KwaZulu-Natal during October 2004 and March 2005. Budget shares and expenditure elasticities were estimated for household consumption categories for the two study periods, allowing for a comparison of expenditure elasticities between the two seasons. Results suggest that expenditure elasticities for consumer expendables, durables and transport were highly elastic, while expenditure elasticities for the aggregate food category were negative (October) and highly inelastic (March). Analysis of the expenditure categories of tradable and non-tradable goods and services showed expenditure on tradable non-farm goods and services to have the greatest potential for demand-led growth with expenditure elasticities of 2.88 and 2.91, respectively. The category of non-tradable non-farm goods and services was not statistically significant for both periods and the category non-tradable farm goods and services was not statistically significant for October. A seasonal difference in expenditure patterns was apparent, suggesting that responses to income changes vary at different times of the year.