Celebrated Peruvian economist Hernando de Soto boldly claims that Third World poverty can be eradicated by transforming “extra-legal” property ownership into legal ownership, with the Deeds Registry proposed as the vehicle.
In response, the South African Communist Party’s Jeremy Cronin writes that De Soto’s recipe for promoting people’s capitalism “is a naÃ¯ve, even dangerous, mirage” (May 28). Responding to Cronin, Paul Malherbe (Letters, June 4) adds his signature to the millions of De Soto’s “true believers” throughout the world.
De Soto’s ideas about “the magic of title deed” have been embraced by donors and government-sponsored think tanks seeking ways to create a secondary housing market in South Africa’s townships. However, research by Shikasa Development Management Services for Finmark Trust, Ford Foundation, USAid and the South African government, in which I participated, raised troubling questions about township housing markets.
The research indicates numerous financial, legal, social and cultural obstacles to a viable township market, and that most owners of old township stock and Reconstruction and Development Programme (RDP) houses are reluctant to sell their homes for economic, social and cultural reasons.
Owners of old township stock and RDP houses are unlikely to find buyers with access to cash or bonds, and even if they could, would struggle to find another affordable home. The lengthy struggle of many township residents for urban rights and access to a house means that, even if they have title deeds, they are unlikely to want to sell. Houses are often part of a family’s social and political biography.
Also, township houses are often a family asset rather than individually owned. To unilaterally sell such an important social asset could unleash serious family conflict. In addition, township houses are often part of “stretched households” that straddle urban and rural areas and have a role in multi-sited livelihood strategies.
Finally, selling a township or RDP house can be risky because sellers and buyers could be caught in a debt trap when they buy a replacement.
Clearly, title deed and home- ownership is more complicated than De Soto and market fundamentalists assume.
Title deeds can also provide collateral for loans. Yet, as millions of unemployed and workers know, having title deeds in a redlined urban township can be meaningless as collateral.
Malherbe is, therefore, disingenuous in pointing to Albert Luthuli as a cane farmer unable to use title to secure an advance payment on his crop. Millions of destitute urban poor and communal farmers stand to gain little from titling processes, because banks and building societies are not particularly interested in doing business with poor people.
De Soto’s argument is seductive in its simplicity and millenarian promise to eradicate global poverty. It claims legal reform can magically solve Third World deprivation with minimal disruption or cost to the owners of global capital. Not surprisingly, many government officials, planners, academics and NGOs desperate for instant solutions to grinding poverty and massive unemployment have fallen under his spell.
But critics like Alan Gilbert and Peer Smets remain deeply sceptical of the sweeping claims, providing compelling counter-evidence from developing countries that little formal finance is forthcoming after legalisation.
Latin American governments have given out hundreds of thousands of land titles, but this has not necessarily improved security of tenure, facilitated access to formal credit or stimulated the emergence of vibrant secondary land and housing markets.
Also, the housing needs of the poorest in developing countries are generally not addressed by formal market mechanisms — housing is usually self-supplied. And residents of slums and informal settlements are generally priced out of the formal housing market. These obstacles are evident in South Africa’s informal settlements and townships.
But legal recognition of the houses and shacks of the poor can, in certain circumstances, provide secure tenure. The return of District Six residents to their homes in recent weeks shows title deeds can provide security for citizens dispossessed under apartheid. What is needed is a realistic assessment of the transforming power of legal title in a situation where millions of South Africans are jobless and chronically poor.
Title is a necessary but insufficient condition for the creation of new economic opportunities and a vibrant secondary housing market in townships and communal areas.
But for township residents and communal farmers to take advantage of title and benefit from trading and accumulating assets, measures are needed to facilitate easier access to credit, information about markets and a sufficient supply of marketable and affordable housing.
UnlessÂ such measures are put in place, a viableÂ secondary housing market is unlikely to emergeÂ in South Africa’s townships. And despite De Soto’s sweeping claims about the magic of title, similar constraints confront current rural land reform initiatives.
Steven Robins is associate professor of sociology at Stellenbosch University