Briefing Paper

Will Formalising Property Rights Reduce Poverty in South Africa’s ‘Second Economy’? Questioning the Mythologies of Hernando de Soto

“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. This approach resonates strongly in
the South African context, where private property works well for those who inhabit the so-called ‘first economy’. Evidence
from South Africa, however, suggests that many of de Soto’s policy prescriptions may be inappropriate for the poorest and
most vulnerable in our society, and have negative impacts on their security and well-being. More attention should be paid to
supporting existing social practices that have widespread legitimacy. Features of ‘extra-legal’ property regimes provide a key to the solutions: their social embeddedness; the importance of land and housing as assets that help to secure livelihoods; the layered and relative nature of rights; and the flexible character of boundaries. The entire legal and social complex around which notions of ‘formal’ and ‘informal’ property are constituted needs to be interrogated more rigorously.”