Will Formalising Property Rights Reduce Poverty in South Africa's 'second economy'?

Questioning the mythologies of Hernando de Soto

Ben Cousins, Tessa Cousins, Donna Hornby,
Rosalie Kingwill, Lauren Royston and Warren Smit
PLAAS Policy Brief Number 18, October 2005

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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.

However, research from South Africa suggests that many of de Soto's policy prescriptions may be inappropriate for the poor and may in fact have an adverse impact on their security and well-being.

The authors of the study argue that more attention needs to be given to supporting existing social practices that have widespread legitimacy within communities. They argue that features of extra-legal property regimes such as: social embeddedness; the importance of land and housing as assets that help secure livelihoods; the layered and relative nature of property rights; and the flexible character of boundaries need to be built upon.

The authors conclude that the entire legal and social complex around which notions of 'formal' and 'informal' property are constituted needs to be interrogated more rigorously.