AFRA,+Letter+to+the+Witness,+reply+to+Sparks,+de+Soto

Association for Rural Advancement (AFRA)

 * Pietermaritzburg**


 * 1 June 2005**


 * Dear Editor,**

If registration of property is “the heart of the matter”, I hope for Allister Sparks’ sake that he has access to an excellent surgeon and a back-up heart.

Sparks argues, following economist Hernando de Soto, that the solution to development in South Africa is very simple – give people who have houses the titles to those properties and in their droves they will queue at the banks for loans to start businesses using their properties as mortgage. Unemployment will disappear. People will grow richer. And South Africa will join the prosperous first world.

I am also a sucker for simple solutions. With a bit of luck, our President isn’t and won’t pay Sparks any attention. Because, if Sparks took a moment to look around, he’d realise that De Soto’s analysis doesn’t always hold up either in its own terms or in terms of the reality around us.

De Soto is indeed a big hit, especially with the World Bank guys who are enchanted by a third worlder arguing that capitalism is the solution to the world’s problems. That’s understandable given the threats to capitalism from Muslim countries and China’s heaving on the other side of the world. However, De Soto critics will point out that De Soto’s own real-life projects have all failed. The people living in those shack settlements have not miraculously spun out of poverty because De Soto managed to organise them titles. De Soto, one notices, doesn’t talk a lot about his practical failures when writing his development world best-sellers. But that’s also understandable.

So is there any merit in De Soto’s argument? I’d say yes, in a general way. He points out two things. The poor do have assets (houses, shops, livestock, social networks) and the property systems of the world find it very difficult to accommodate the needs of the poor. So he does help to remind policy makers that interventions should protect and build the assets of the poor. And he alerts policy makers to the fact that current property systems don’t work for the developing world.

His mistake is to think that because legal or formal systems can’t support the property needs of the poor that the poor are unable to use their assets effectively. He calls it dead capital because its value can’t be realised for other purposes. However, the assets of the poor, both urban and rural, are not simply commodities to be traded for money. They are also bases for multiple strategies that enable the poor to survive. A house in a shack settlement is cheap access to city employment opportunities. When the opportunities move, the person will move with them, not the house. It also provides a place in the city where the rural family can consolidate its urban survival strategies. And in rural areas, land is the basis of access to a social network that provides support in times of crisis, that provides regularity and order where the state has disappeared and a basis for some food provision. Are these the assets Sparks is urging the President to risk as collateral for businesses that might fail?

This is not to say that none of the urban or rural poor wants to engage with the land market and improve their access to credit in order to reinvest capital. They do, and there is a thriving informal market where people are buying and selling property without registering it at the Deeds Office. It was even thriving under apartheid when owners of properties registered in the Deeds Office found that adaptations of the old African ways of transacting land were cheaper, quicker and more effective.

As for the credit argument, De Soto’s on very weak ground there. In his backyard in Peru in a city called Lima, a detailed study has shown conclusively that registration is not a condition for access to credit. Indeed, mean analysts of that study might actually conclude the opposite since the study found that people without registered title had more access to credit than people with registered properties. And that seems an obvious conclusion. Banks and finance institutions don’t lend to the poor, even if they do own property with registered title. Such institutions don’t even like to lend into areas where most people are poor even if the client is perfectly respectable.

And finally, the argument that people need registered title to invest in their properties has systematically collapsed under the weight of evidence, including research undertaken by the World Bank. The condition for investment is not title but security of tenure and title does not secure the tenure of the poor. Indeed, Latin American studies (other than De Soto’s) are now talking about urban evictions. They don’t mean the actions of greedy landlords. They’re referring to the millions of poor urban people who cannot afford the costs of living in what city planners approve as reasonable living conditions, even though they have titles. “Distress sales” are not choices to engage on the open market when the owner can’t afford not to sell and the state has no alternatives for housing the poor.

So what is to be done? Unfortunately, this is where De Soto has the upper hand. All the proposals other than De Soto’s suggest careful, considered approaches that are widely consultative. They seldom have the De Sotian blue-prints that so tempt Sparks. One thinker, the product of our own country who works for the United Nations, Clarissa Fourie, has argued that Africa must find its own innovative solutions. These need to include decentralised processes that include communities and civil society in developing ways of simultaneously improving poor people’s access to development and securing their tenure.

Contrary to Spark’s view that registration will solve all, one can assert categorically that widescale registration would suck up the country’s money in a whirlpool without exit. The only solution is to acknowledge that there isn’t one waiting out there for someone to pluck, plunder and pretend is a solution. We have to create our own.


 * Donna Hornby

(AFRA Project Manager)**