Property title as means of empowerment a double-edged sword

08-06-2005

On a recent visit to South Africa, international expert on poverty alleviation Hernando de Soto made headlines with his comment that the “absence of legal title in Africa has stunted development”. He advised that property ownership spearheaded development and described it as the “staircase to social growth” for the disempowered poor.

While supporting De Soto’s emphasis that there is no way to deconcentrate wealth through redistribution, property economist Erwin Rode warns that there are dangers in over-simplifying the empowerment potential of property ownership.

“It is nice to have an asset as a back-up when you want capital for a viable business venture, but the principle of giving people homes so they can borrow against them to improve their financial situations, can be a double-edged sword.”

Rode points out that people stand to lose their assets if they do not have a way of creating a steady income stream in order to pay back even relatively small amounts of money borrowed, as has increasingly been happening in South Africa.

Rode concludes that acquiring knowledge and skills is the first step to help people improve their financial situation. “There is no short-cut to enabling disadvantaged people to access opportunities to create regular income. Even if they can borrow capital, they still have to gain the necessary skills and experience to either run their own businesses or to fulfil the requirements of jobs available in the economy.”