Property rights, institutional change and development in South Africa

Abstract

Orientation: This article examined the link between property rights and development in the context of South Africa. Research purpose: The article sought to unpack the implications of Hernando De Soto’s work and the broader institutional economics literature for the policy challenges that South Africa currently confronts. Motivation for the Study: Hernando De Soto’s call for a property rights system accessible to all has had a limited impact in South Africa even though his arguments linking poverty to limited property rights systems seems highly relevant here. This is a legacy of Apartheid that has not yet been properly tackled. At the same time, South African realities may raise questions about De Soto’s conclusions and his policy recommendations. Research design: The article provided a textual analysis of De Soto’s work and then applied it to an investigation of South African poverty and the policies that have been implemented since 1994. The article also drew on seminal contributions to institutional economics to shed light on the process of institutional change, and then showed how this perspective fits with much of what De Soto has written about transforming property rights systems. Main findings: This article argued that extending property rights to all is vital for development and for overcoming a major legacy of apartheid. However, moving from a restricted to a universal system requires fundamental institutional changes that are difficult to achieve. Contribution: While De Soto has often advocated a top-down, overly simplistic policy approach in the past, this article showed that the necessary changes can only come about via an incremental, bottom-up approach. To this end, it is particularly important to strengthen the accountability and capacity of local government.