Will formalising property rights reduce poverty in South Africa's 'second economy'?: Questioning the mythologies of Hernando de Soto | Land Portal

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Date of publication: 
January 2005
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Does providing increased access to secure property rights have a positive impact on people's livelihoods? This policy brief questions Hernando de Soto's contention that capitalism can be made to work for the poor, through formalising their property rights in houses, land and small businesses. The authors argue that, in the case of South Africa, many of de Soto's policy prescriptions may be inappropriate for the poorest and most vulnerable, and have negative rather than positive impacts on their security and well-being.The paper provides a critique of de Soto's argument, both in a general context and more specifically in regard of two South African case studies. It outlines the nature and impact of post-apartheid policies related to land reform and ownership rights.The authors' conclusions include:formalisation of property rights through titling does not necessarily promote increased tenure security or certainty and in many cases does the oppositeformalisation of property rights does not promote access to credit amongst the poorrather than giving their property the character of 'capital', formalisation could expose the poor to the risk of homelessness - through the use of assets as collateralthe urban and rural poor already have some access to credit, through informal mechanisms such as loans from family members - they try to avoid creating a long-term debt burden, and are averse to forms of borrowing that might lead to loss of important assetsthe costs of formalisation through registered title deeds are simply unaffordable for many poor peopleinformal property systems currently support a robust rental market that is well-suited to the needs of the poor - a more sophisticated approach would undermine this important marketsecuritisation of property through title deeds may not accurately reflect reality - rural land registers, for example, are quickly outdatedthe poor are not homogenous - formalisation via title deeds may be affordable and appropriate for some but can have negative impacts on the security and well-being of the unemployed and other marginalised groupings.The paper ends with some proposed alternatives to the type of land reform advaocated by de Soto. It closes with the suggestion that policy-makers must resist the temptation to seek simplistic solutions to poverty.

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Author(s), editor(s), contributor(s): 

B. Cousins

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