Determinants of Poverty in Lesotho: a Household Level Analysis

Abstract

This paper uses level data from the 2002/2003 Household Budget Survey to provide a detailed analysis of poverty in Lesotho. Poverty lines are calculated using the Cost-of- Basic-Needs approach and are used to identify the poor and to construct poverty profiles for the Kingdom of Lesotho. The regional poverty profiles indicate that poverty is more pronounced in rural than in urban areas. Around 56.1 percent of the rural households are food poor, and 68.7 percent of them are absolutely poor compared with only 27.7 percent and 40.5 percent of urban households who are food and absolutely poor, respectively. The paper reveals that 38.3 percent of the households in Lesotho are extremely poor (i.e. hard-core poor) and 15.9 percent are moderately poor. At district level, Qacha’s Nek, Botha-Bothe. Berea and Mohale's Hoek appear to be the most impoverished districts, respectively, while Maseru and Thaba-Tseka, on the other hand, are the least poor districts, in that order. This shows that poverty does not only depend on whether the district is mountainous or lowland. The social poverty profiles indicate that poverty is more concentrated among households that are headed by people who are widowed, uneducated or in subsistence agriculture. The paper examines the probable determinants of poverty employing both the binomial and polychotomous probit models. The results show that age, gender, marital status, amount of land owned and distance to the essential public services are not important determinants of poverty. However, educational attainment and household size are shown to be strongly correlated to poverty. In general, the results indicate that education reduces the odds of being poor and secondary education has a significant poverty-reducing effect on urban households but its coefficient has an unexpected wrong (positive) sign in rural areas. Because of the significant negative effect of farming on welfare, the paper recommends the introduction of drip-irrigation farming system and modifications to the current communal grazing system in order to strengthen agricultural sector.