Residential Transformation in South Africa—Reopening the ‘Dead’ Capital Debate

Abstract

Since de Soto introduced the dead capital concept in 1989, he remained a controversial figure. There are those who find his ideas fascinating. They see the transformation of housing and business regimes in developing countries from informal to formal as a potentially powerful mechanism to turn large amounts of latent capital into live, working capital. Others are sceptical, questioning his premises on practical and ideological grounds. Studies have shown that the legalisation of properties in developing countries is no silver bullet solution to future economic development. Outcomes have often fallen short of claims made in the de Soto hypothesis. This paper attempts to demonstrate how the same arguments are being repeated in these debates while potentially controversial issues have managed to remain under the radar of commentators on both sides of the divide. The paper then highlights the vitality of market forces in informal and mixed formal–informal markets in cities in South Africa. Referring to different forms of transformation in the residential sector in cities in South Africa, the study indicates that some forms of informal urban development do indeed represent dead capital while others, which should be regarded as dead capital in terms of the de Soto hypothesis, are very much alive. The underlying thesis of the paper is that the vibrancy of current irregular market activities in disadvantaged communities is indicative of the potential strength of market forces there.