Are Hernando de Soto's views appropriate to South Africa?

Lauren Royston
against de Soto’s bridge-building hypothesis (Royston 2006). I will briefly recall the
main arguments here.
Upon examination, linking title to access to credit and the maintenance of formal
property ownership by the poor turn out to be faulty assumptions. And even if they
stood on firmer ground, legal integration is a complex task that will take considerable
time to achieve, as de Soto himself acknowledges.
The housing subsidy
and the provision of
free basic services
are South African
examples of the
asset protection or
safety net approach
There is great deal more myth than mystery in the access-to-credit claim. Lenders
don’t lend to the poor; if they did, it would be risky for the poor; and in cases where
credit is extended to the poor, formal title does not appear to be a precondition.
Access to credit alone is not enough to elevate the poor out of poverty, and is
not sustainable on its own because there are factors other than the lack of title
that prevent the poor from entering the market in the first place. Unfortunately,
poverty is more complex than the lack of formal title. I have argued that de Soto’s
analysis lacks the political-economic consideration of whose interests are served by
maintaining the status quo, which makes the prospect of successfully introducing the
legal reforms required for a more appropriate, accessible and sustainable property
system highly unlikely. There is little recognition of the realities of power relations
and political imperatives; and if these aspects are not successfully dealt with, the
chances of formalising the property rights for the poor – a seemingly simple and
standardised solution – are exceedingly slim. In addition, sustainining access to title
and capital is at least as important as gaining it in the first place – and what often
happens in practice is that as soon as formal systems are applied to informal and
especially communal areas, they break down (Leap 2004).
These two points – about the risks associated with using property as collateral, and
the reality of reversion – call into question the bridge-building hypothesis. The
poor are not a homogenous group in possession of assets that can uniformly be
described as ‘dead capital’. Land functions in various ways, which the notions of use
and exchange value denote, and the concept of dead capital is of limited value in
more informal contexts.
The trampoline
The metaphor of the trampoline comes from ‘third way’ thinking about the failures
of the welfare state to combat poverty and reduce income inequality, as espoused
by Anthony Giddens in his book with the same name (The Third Way, 2002) and
embraced by the former British prime minister Tony Blair. In short, the hypothesis
is that by removing the safety net (the welfare state) and bringing in the trampoline
(the third way), the poor can ‘bounce’ themselves out of poverty. The link with de
Soto, AsgiSA, and the housing policy discourse in South Africa lies in the treatment
of assets.
A welfare approach emphasises asset protection (‘the net’), and risk prevention and
mitigation in order to protect the poor and vulnerable against factors threatening
the erosion of their assets. The ‘third way’ approach emphasises asset accumulation
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