Smallholder agriculture is a livelihood strategy that millions of rural South African households rely on. Accordingly, this study evaluates what determines participation in smallholder agriculture and whether it is an optimal livelihood strategy that improves household welfare among rural households in South Africa. This study uses the waves of the South African National Income Dynamics Survey (NIDS). Using a two time period and two-group quasi-experiment approach permits impact evaluation using the 'nearest neighbor' propensity score matching algorithm and difference-in-differences techniques. This study establishes that race, household composition, culture, and geographic location are associated with participation in smallholder agriculture. However, for rural households, participation in smallholder agricultural production results in an approximately one food group more dietary diverse diet. Additionally, the results suggest that there is no statistically significant impact of agricultural production on other welfare outcomes, namely; consumption per capita, income per capita, and the wealth index. Overall, the results suggest that rural households' participation in agricultural production is less opportunity driven. Instead, participation in agricultural production is more effective as a subsistence strategy. Moreover, these results have important food security implications.