The Effects of Property Titling in Langa Township, South Africa

Mercatus Policy Series Policy Comment No. 4

48 Pages Posted: 3 Nov 2007

Date Written: April 2006

Abstract

In Langa Township, South Africa efforts have been underway for well over a decade to provide secure, legal titles to previously disenfranchised citizens. Today, most homes - though not shacks - have titles. Can this policy serve as an example for others to follow? Has this government policy led to economic growth and poverty alleviation for Langa's residents?

Having a secure title to property does create incentives to improve property and build communities. Secure titles also provide home owners with space for business activities - renting shacks in backyards, opening restaurants, or starting other home-based businesses. However, the study suggests that is unrealistic to assume that homeowners in the developing world will take that next crucial step and use their titles as collateral for commercial loans that are the key to promoting economic growth.

Home and business owners pointed to the difficulty of repaying loans, the expense and complexity of formal transfers of property, and regulatory burdens that make it costly to grow and expand small businesses as primary reasons why they viewed using home titles as collateral too risky.

Langa residents say that policy makers can encourage property transfers by making the process easier. The current monopoly on property conveyance must be removed in order to promote more home sales. The government can also encourage entrepreneurial home business owners to grow their businesses in the formal sector by reducing regulatory burdens. Current fee, licensing, and certification systems make it difficult for small business owners to grow and expand in the current business environment.

Formal titling is a step in the right direction toward realizing the benefits of property rights for economic development. However, policymakers need to take these additional steps in property and regulatory reform if South Africa is to realize the full potential for economic growth and poverty alleviation.

Keywords: South Africa, Africa, townships, property rights, titling, access to title

Suggested Citation

Boudreaux, Karol, The Effects of Property Titling in Langa Township, South Africa (April 2006). Mercatus Policy Series Policy Comment No. 4, Available at SSRN: https://ssrn.com/abstract=1027012

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