K. Ludi: consumption behaviour in Zambia
1. Introduction
In order to be able to suggest viable solutions to the overwhelming problem of poverty on
the African continent, it is first necessary to know exactly what is causing that poverty.
The question then arises: does one estimate a poverty function, including the possible
determinants of poverty, or does one estimate a consumption function, since poverty is
after all the inability to consume? Appleton (2001) found that the results from poverty
functions and consumption functions were overwhelmingly similar, despite the vast
differences in their approaches. It is the intention of this paper to measure welfare in
Zambia, via an estimated consumption function, which is “arguably the single most
comprehensive indicator of ability to meet wants” (Appleton 2001: 435), and then to
compare this estimated consumption to the levels of poverty, or subsistence level
consumption expenditure, in Zambia. If the case were that the impoverished behave
differently in their consumption decisions to the non-poor, it would be ideal to model the
actual poverty gap (the difference between a subsistence level of consumption and actual
consumption). However, given the fact that the majority of the Zambian population is
either poverty-stricken or ‘non-rich’, it is assumed in this instance that every individual
makes consumption decisions similarly. The objective of this paper is to understand the
underlying determinants and depth of poverty in Zambia, by analysing the root of the
problem - why people can’t afford to consume.
Zambia has had one of the most rapidly declining economies in sub-Saharan Africa. A
real GDP per capita growth rate of -3.9 per cent in 1998 has improved to a rate of 1.35
per cent in 2002. However, a poverty rate of 73 per cent,3 of which 58 per cent are
extremely poor,4 and of which over 70 per cent live in rural areas, cannot be masked by
positive GDP per capita growth rates (Kapungwe 2004: 487). Section 2 presents an
analysis of private consumption behaviour in Zambia over the past three decades,
followed by a review of the data and model methodology in section 3. The modelling
procedure and estimation results are discussed in section 4. The analysis of the results
73 per cent of all Zambians live below the poverty line.
‘Extremely poor’ refers to individuals living in households with a monthly adult equivalent
expenditure of less than 64 475 Kwachas (at 2001 levels), which is equivalent to US$16.83.