This article uses case study evidence from Makua and Manganeng, two rural villages in the Capricorn region, to investigate the effects of private and social costs, such as land degradation, on rural livelihoods in the area. Information is derived from household surveys, key informant interviews, participatory appraisal techniques, and a detailed ecological baseline study of the area. Livelihood activities such as agricultural practices (crop and livestock production), and wood and edible product gathering are included. This article attempts to synthesise the information gathered and lessons learnt from these studies, quantifies the contribution of these livelihood activities in monetary terms, and considers the implications for sustainable livelihood practices. The study finds that non-cash earnings contribute an important component of overall household income - between 40 and 50 per cent before social and opportunity costs are deducted. However, external costs significantly undermine overall earnings from natural resource-based products.