State of the debate around land right formalization in African city
Camille Bourguignon1
(Draft zero)
Africa is urbanizing but overall poverty is not falling. This suggests that we are
witnessing a gradual urbanization of poverty. This is visible in the urban landscape
where the number - and size - of slums and other forms of informal settlements keep
increasing. Today, the widely adopted policy to tackle this crisis in the urban housing
sector consists in creating an ‘enabling environment’ that fosters housing improvements
and construction. With this, greater attention is going towards property rights and the
importance of securing and formalizing them. This paper discusses the state of the
debate around land right formalization in African city.
URBANIZATION, SLUMS AND STATE INTERVENTION
Urbanization and slums
Through the 20th century, the world urban population grew from 220 million to 2.8
billion. Today, an estimated 3.3 billion people, just over 5o percent of the world human
population, live in urban areas. By 2030, 4.9 billion people will be living in cities. The
next few decades will see an unprecedented scale of urban growth in the developing
world in general, but in Asia and Africa, in particular. In these two regions, urban
population will double over this period of time. (State of the World 2007)
In Sub-Saharan African countries, an average of 48 percent of the population lives in
urban areas. This is relatively low compared to other countries where this figure is above
80% (e.g. Brazil). But Africa is progressively and inexorably urbanizing. The problem is
that urbanization in Africa hasn’t been associated with falling overall poverty. (Ravallion
et al. 2007) According to a recent study by UN-Habitat, the urban poor in developing
countries would actually be as badly off if not worse off than their rural relatives. (UNHabitat 2007)
All this suggests that we are witnessing a gradual urbanization of poverty. These new
urban dwellers need a shelter. However, neither the public nor the private sectors are
able to respond to there need for low cost housing. As a result, individuals settle
informally in areas where access to safe water, sanitation and other basic services and
infrastructures is below standards. Slums and other forms of informal settlements are in
the increase. Over the last 20 years the number of slums recorded all over the world has
more than doubled.
Today, about one third of the world urban population – 930 millions people – lives in
slums. In developing-country cities slums are growing by an estimated 120,000 people
per day (Cities Alliance 2007). In sub-Saharan Africa, an estimated 72 percent of the
urban dwellers live in slums. Indeed, slums do not accommodate all of the urban poor,
nor are all slum dwellers are poor. However, poverty incidence is very high in slums. In
Nairobi Kenya 73% slums dwellers are poor.
A century of State interventions
The first slums appeared in Europe and Northern America in the mid-19th century. They
were seen as a ‘disease’, an ‘urban cancer’ caused by the rapid migration of poor people
1
University of Paris 1 Pantheon Sorbonne / The World Bank.
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towards the cities. It was soon understood that slums wouldn’t be ‘eliminated' by private
enterprise alone and that the State needed to intervene.
Slums that were perceived as a menace to the health, safety morals, welfare and comfort
of the society were cleared. Meanwhile a stock of public housing was built. The problem
is that the State could rarely entirely finance the production of the required housing
stock, while individuals could seldom significantly contribute to it. Because of that,
housing projects couldn’t be implemented at scale and tended to benefit those who could
pay; this is to say the middle class rather than the poor.
Many researchers refer to the 1960s as a millstone in evolution of the urban housing
paradigm. All over the world cities were rapidly growing. New York was reaching almost
8 million; Shanghai 6.2, São Paulo 4.6, Bombay 4.1, and Lagos 1.4. With that, the share
of the population living in slums was quickly increasing. It then became obvious that
slum clearance combined with social housing projects would not be a viable solution to
tackle the housing crisis in the developing world. Slums, which had so far been
considered has an urban abnormality started being considered as spontaneous
settlement that could be gradually integrated into the formal city. (Stokes 1962)
During the 1970s, many Governments introduced ‘sites and services’ schemes whereby
beneficiaries were provided with packages of shelter related services, which ranged from
a minimal surveyed plot to an intermediate level of services sites to an upper level of core
housing. The World Bank financed a series these schemes in Africa (i.e. Senegal,
Botswana and Zambia). However, these programs perpetuated some of the problems
inherent in the public housing policies. One the one hand, to reach the poor, these
schemes had to be subsidies. On the other hand, the existence of subsidies both defeats
the objective of self-recovery and prevents large-scale replication of projects. (Mayo et
al. 1987)
By the early 1980s, attempts to contain the expansion of informal settlements had
produced little results and slums were inexorably growing. There were indeed programs
that benefited to targeted communities but the majority of the population was left
behind. For instance, the Senegalese site and services pilot was designed to reach about
15,000 families; a hand full of families compared to the actual needs. Neither site and
services nor public housing schemes could provide decent shelters for the exponentially
growing number of urban dwellers.
Since then, greater attention went towards the creation of a so-called ‘enabling
environment’, that is an overall framework within which individuals have both the
resources and incentives to invest in buildings construction and improvements. Such
strategies include revising the legal definition of formality (e.g. building codes), increase
individuals’ capacity to invest (e.g. access to financial services and subsidies) and create
incentive for people to invest in housing construction and improvements. In this context,
greater attention went towards property rights and the importance of securing and
formalizing them.
WHY FORMALIZING LAND RIGHTS?
Socio-political stability
Accountable and fair land institutions are indispensable for the social and political
stability of a country. In a small and isolated community, if land rights are understood
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and accepted by its members, they may be orally and informally institutionalized.
However, as population growth increases the relative scarcity of land, its access become
more competitive and conflicts over boundaries and rights tend to increase. The need for
formally institutionalizing land rights becomes stronger and inevitably the necessity to
better define and document them emerges. (Boserup 1965)
“An almost universal institution for enforcing land rights is a unified system of land
registration and documentation in which the state provides landowner's with proof of
ownership of well-defined tracts of land.” (Feder 1987) The creation of this institution is
a long process. Western countries have struggled for centuries in building effective land
administration systems. The fact that, today, formal land institutions in African
countries do not recognize the rights to land of the majority raises important issues of
legitimacy and raise important concern about whether this institutions favor the
appropriation of land rights by powerful individuals.
There are ample evidences that the incidence of land disputes and land grabbing by
larger or more powerful individuals increases as the potential return to land rises. (Feder
1987) These unresolved conflicts represent a threat for the social stability of the country
and mechanisms to prevent and resolve these disputes are essential to avoid their
escalation. Throughout History, uncountable popular discontents, ethnic clashes, civil
strives, wars or even revolutions were rooted in disagreements over land issues.
(Binswanger et al. 1992)
Individual investment behavior
The most common argument in favor of the formalization of property right is the impact
it is likely to have on land tenure security. Land tenure security is the right to effective
protection by the State against unlawful evictions. (UN-Habitat) As explained above,
when land pressure is acute, property rights need to be institutionalized otherwise they
tend to be insecure. The problem is that once individuals have in mind that their
property can be seized, they logically start doubting about the value of improvements
made to it and think twice before investing in it.
But informal property rights are not inherently insecure and the formalization of land
rights do not always increases significantly the level of tenure security. In rural Africa, it
was for a long time wrongly assumed that customary land rights were insecure. However,
many studies have demonstrated the opposite. The level of tenure security provided by
customary land rights, even informal, can be quite strong. (Bruce and Migot-Adholla
1988) Actually, the main threat of eviction often comes from the state. Thus, a
commitment by the State not to evict people without fair compensation is likely to have a
significant a positive impact on the level of tenure security.
Formal property rights are not intrinsically secure. In Ethiopia, the State warranties to
every citizen the right to a plot of land. However, the fact that this principle is achieved
through constant land redistribution may conflict with the objective of ensuring land
users’ tenure security. (Ali 2008) In Zimbabwe, during the Fast Track Land Reform, laws
regulating property rights were repetitively amended and not necessarily fully
implemented. Thus, the Government may have successfully fast tracked land
redistribution. At the same time it has also lowered beneficiaries’ confidence in the
actual value of formal rights (Pazvakavambwa 2008) has well as sent shock waves to any
potential investors. (Van den Brink and al. 2006)
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As way of conclusion, the impact of land rights formalization on tenure security depends
as much on the nature of informal land rights targeted as on the nature of formal land
rights allocated and on the capacity and commitment of the state to enforce them. See
box 1 for a discussion on the desirable characteristics of land property rights.
Box 1: Desirable characteristics of land property rights
Property rights are a bundle of rights that define what one can or cannot do with the
property. Property rights are therefore specific to societies and they differ from place to
place and time to time. In Western countries, these rights are often of infinite duration
and fully tradable. However, many other countries have opted for long term leases.
Many African countries recognize long term leases (e.g. Malawi, Botswana and
Zimbabwe). Others, still, have legal provision for so-called ‘alternative’ land rights, less
politically sensitive to allocate as well as less expensive to document and administrate.
These land rights include residential licenses in Tanzanian, starter title in Namibia and
Certificate of Rights in Botswana.
It is impossible to talk about ‘optimal’ land right, but if these rights are to increase the
de-jure tenure security of the occupants they have to comprise basic features such as the
right to ‘fair’ compensation in case of eviction. They should also be allocated for a period
of time long enough to encourage investment in land improvements and, if allocated on a
period-term basis, mechanisms to renew them should be in place.
Access to formal credit
Another very popular argument in favor of land right formalization is the implications
uncertainties in land ownership have for access to credit. In Western countries, land is
commonly used as collateral for loans because land can’t be hidden, can’t be moved and
has a value that rarely depreciates. However, the existence of clear and secured rights is a
precondition for banks to accept land as collateral. For this reason, some argue that the
formalization of property rights in developing countries will result in the development of
the lending industry, which would free up capital and foster development. A famous
proponent of this theory, Hernando de Soto, argues that the extralegal economy has
assets worth trillions of dollars2. (De Soto 2000)
It is true that the use of land as collateral for a loan is a widespread practice in Western
Countries and that the financial system relies heavily and well functioning and formal
land institution. At the same time, in Africa the causal link between formal title and
access to credit is still poorly documented and it is argued that it tends to be repeated
without any acknowledgement of the overwhelming evidence discrediting it. (DurantLasserve 2002) First international acclaimed, the de Soto’s theory of ‘the dead capital’
received severe critics in Africa for being over simplistic and misleading. (Cousin et al.
2006)
The problem is that the poor – who are often presented as the beneficiaries of
formalization programs – can’t bear heavy debts. The poor are sub-prime clients for the
banks because of the high probability that they default. Banks may lend to these clients
but often at higher rates and providing that the loan is secured by real property. This is
In Tanzania only, the Institute of Liberty and Democracy (ILD) claims that individuals
informally own US$29 billion, 10 times the foreign directly investment cumulated since
independence and 4 times the net financial flows form multilateral institutions during the same
period.
2
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called sub-prime lending and in that case, the lender relies on the potential value of the
mortgaged property rather than the capacity of the borrower to pay back. Proponents of
sub-prime lending argue that it extends credit opportunities to the poor. Its opponents
see it as a predatory practice and a perversion of the lending industry that, in the search
for quick profits, encourage irresponsible lending practices. In the view of the current
meltdown of the sub-prime mortgage industry in the United States, the future of this
industry looks uncertain3.
Offering the poor the opportunity to access finance is indeed essential but they are other
ways to do it. Notably, all over the world, micro-credit institutions lend very small loans
to the poor without requiring collateral. This can make a huge difference and has
received international recognition. In 2006, Muhammad Yunus, funder of the Grameen
Bank in Bengladesh, was rewarded by a peace Nobel price There are many other
examples of financial mechanisms that don’t require the use of land as collateral from
the use of pension to financial arrangements shops can offer to their customers. All this
suggest that the impact of large scale land formalization program is likely to have only a
limited impact on access to finance for the poor.
Property tax
Another argument that is sometime advanced in favour of land right formalization is
property taxation. A “property tax” is a tax on the value of the land and the fixed
improvements made on it, a house for instance. Property tax is often administrated by
local governments that use the revenues collected for public services and infrastructures.
In Western countries, these revenues generally represent a significant part of the local
government’s total revenues. But a precondition to implement a land tax is to know who
owns what, which requires complete and reliable land registers.
However in most developing countries, attempts to use property tax as source of public
revenue have been elusive. In Africa, a series of factors works together to difficult the
implementation of property taxation. The lack of capacity to value land and
improvements and the high cost of administering such a tax have made it an institution
particularly difficult to implement. It is indeed highly recommended that a property tax
exempt the poor. Since most city dwellers in the Africa are poor, there are some
uncertainties on how much could actually be collected form such a tax. (Van den Brink et
al. 2008)
CONCLUSION
There is a growing consensus on need for formalizing land rights, but there is still a lot of
confusion among researchers and practitioners. It is evident that there is no such a thing
as a one size fits all solution. Each formalization program has to be tailored taking into
account the targeted beneficiaries and the desired impact. For instance, for the poor,
having their rights properly secured is essential, but being able to use these rights as
collateral may be only secondary – at least on the short term.
A study by the Center for Responsible Lending reveals that at the end of 2006, “2.2 million households in
the sub-prime market either have lost their homes to foreclosure or hold sub-prime mortgages that will fail
over the next several years. These foreclosures will cost homeowners as much as $164 billion, primarily in
lost home equity (CRL 2006).
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Most researchers and policy makers have acknowledged the need for having a set of
options. Some Governments went one step further and actually introduced in there
status book provisions for so called ‘alternative land rights’ (e.g. Botswana, Tanzania and
Namibia). At the same time, while having sound laws is essential, it is not sufficient and
these countries are now facing the difficult challenge of implementing these laws, which
include the actual documentation of these rights.
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