Economic indicators, like GDP per capita, are commonly used as indicators of welfare. However,
they have a very limited and narrow scope, excluding many potentially important welfare
determinants, such as health, relative income and religion – not surprising since they were not
originally designed to fill this role. There is thus growing acceptance, and use of, subjective measure
of wellbeing, (called ‘happiness’ measures) both worldwide and in South Africa. Happiness
economics does not propose to replace income based measure of wellbeing, but rather attempts to
compliment them with broader measures, which can be important in making policy decisions that
optimise societal welfare. This paper tests for differences in subjective wellbeing between race groups
in South Africa, and investigates the determinants of self-rated life satisfaction (happiness) for each
group. Using the 2008 National Income Dynamics Study (NIDS) data, descriptive methods (ANOVA)
and an ordered probit model are applied. Results indicate that reported happiness differs
substantially among race groups, with black South Africans being the least happy group despite
changes since the advent of democracy in 1994. Higher levels of educational attainment increase
satisfaction for the whole sample, and women are generally less happy than men (particularly black
women). As found in many other studies, unemployed people have lower levels of life satisfaction than
the employed, even when controlling for income and relative income. The determinants of happiness
are also different for each race group: While white South Africans attached greater importance to
physical health; employment status and absolute income matter greatly for black people. For coloured
people and black people, positional status (as measured by relative income) is an important
determinant of happiness, with religious involvement significantly contributing to the happiness of
Indian people.