Mysteries and Myths: De Soto, Property and Poverty in South Africa

Abstract

"Hernando De Soto’s influential book The Mystery of Capital offers a simple yet beguiling message: capitalism can be made to work for the poor through formalising their property rights in houses, land and small businesses. Yet this paper presents evidence from South Africa to suggest that many of de Soto’s policy prescriptions may be inappropriate for the poorest and most vulnerable, and could have negative impacts on their security and well-being. The authors draw on case studies and the literature to show that: • Titling does not necessarily increase tenure security or certainty; in many cases it does the opposite. • Formalisation of property rights does not promote lending to the poor. Rather than turning their property into ‘capital’, formalisation could increase the rate of homelessness. • Formalisation through registered title deeds creates unaffordable costs for many poor people. • Informal property systems currently support a vibrant rental market; formalisa- tion could undermine this, producing unintended negative consequences for the poor. • ‘The poor’ are not homogeneous and those in the extra-legal sector should be differentiated according to income and vulnerability status. • Such an approach does not mesh with rural common property resources which are never exclusive to one person, and which have fluid boundaries and flexible rules."