The property rights project

The property rights project

South Africa
Organization type: 
nonprofit/ngo/citizen sector
Budget: 
$50,000 - $100,000
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

To convert all land permanently occupied by black South Africans to full, unambiguous ownership without restrictions on freedom to sell, let, or mortgage (“full freehold”)

To convert all un-owned and untradeable land from Hernando de Soto's “dead capital” to dynamic capital.

About Project

Problem: What problem is this project trying to address?

Land dispossession was a cornerstone of apartheid and colonialism and arguably their single most harmful aspect. It is proving to be one of the most intractable legacies of the past. Sixteen years after transition, most black South Africans continue to live in historically “black group areas” (“townships”, “locations” and “informal settlements”), where they still do not own their land under full and unambiguous title. This means that their most valuable asset cannot be used by them, as it is by white property owners, to trade, let, mortgage, encumber, rezone, subdivide or consolidate. There are many reasons for the tenacity of the apartheid land legacy such as the cost and complexity of conversion to freehold, unpaid rates and rents, administrative inertia, and diverse vested interests. Most sub-Saharan Africans face a similar problem.

Solution: What is the proposed solution? Please be specific!

We found solutions to the obstacles that have prevented full titling. Political buy-in was achieved by showing that this would be a popular and effective act of mass empowerment and economic stimulation. Institutional inertia and adverse vested interests were overcome by assembling a multi-disciplinary team of experts to undertake all technical tasks. A single local government (municipality) was selected as a model to be replicated countrywide. It represents the full range of complexities that need to be addressed in other jurisdictions. (Note: We have avoided unrealistic expectations by disguising the municipality’s name.) "Perryville" municipality has resolved to become the first urban area in South Africa where all land (33,000 plots) is held under full title on the basis of complete equality between whites and blacks. Substantial sums in arrear rents, rates and taxes are owed to the municipality, sometimes far in excess of the value of the land. These sums are reflected as assets. If they are written off to allow for tenure upgrade, the municipality will be technically insolvent and in breach of local government legislation. FMF persuaded “Perryville” municipality to convert land-related debts to civil debts so that “clearance certificates” can be issued. FMF is working with government to exempt conversion of apartheid title to from deeds registry fees; and with local lawyers to reduce their professional fees. Consideration will be given to whether conversion to ownership can realistically be by decree.
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

The lack of property rights for Africans is an ugly legacy of apartheid in South Africa and colonialism in sub-Saharan Africa. The initial pilot project comprises 33,000 low-income black households. This project will transform South Africa by blacks owning their land on the basis of complete equality with whites, and it will end conflict-provoking land redistribution demands. The project envisages community education about the implications of ownership, which includes not only the ability to raise mortgage finance, but that, as owners of a substantial liquid asset, they will be “bankable”, which means they will have access for the first time in their lives to the full range of financial services; bank accounts, credit cards, overdrafts, micro-loans, bursaries and scholarships, administration of estates, insurance, vehicle finance, debit orders, savings accounts, burial services, and so on. Owners will finally have such normal manifestations of wealth as property markets, realtors, bank branches and access to finance. When "Perryville" is applied throughout South Africa, there will be immediate and relatively cost-free benefits on a massive scale. Assuming an average property value of R100,000 ($15,000), "Perryville" will inject R3,3 billion ($495 million) into the local economy and empower and emancipate 33,000 black households. No one knows how many pieces of land are held by black people. Informed estimates are as many as 10 million. At an average of R100,000 ($15,000) each that implies one trillion rand ($150 billion) – the quickest, biggest and cheapest single source of broad-based black economic empowerment imaginable.
About You
Organization:
Free Market Foundation
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Section 1: About You
First Name

Gail

Last Name

Day

Country

, GT

Section 2: About Your Organization
Is your initiative connected to an established organization?

Organization Name

Free Market Foundation

Organization Phone

+27 11 884 0270

Organization Address

PO Box 785121, Sandton 2146

Organization Country

, GT

How long has this organization been operating?

More than 5 years

Your idea
Country your work focuses on

, FS

Innovation
Do you have a patent for this idea?

Impact
Actions

Steps already taken: Documents motivating the project; Meetings with politicians to discuss concept; Meetings with community residents; Tenant interviews; Discussions with lawyers re legal requirements, deeds registry costs; Technical analysis of documents, title deeds, evaluation rolls; Memorandum of Understanding (signed); Dispute Resolution (agreed); Meetings with conveyancers re working at cost; Final agreement with partners (bank, legal and auditing) on their involvement; Dipstick audit of municipality records; Watchlist to anticipate possible problems

Steps still to be taken: Identify sample group of 200 including each type of tenure; Desktop research and field work interviews of sample group; Register and transfer 200 sample group properties (deadline end-February 2011); Produce “how to” manuals for each type of existing tenure; Begin work on balance of 33,000 plots; Start roll out of education by bank and FMF; Arrange and participate in official launch function at which title deeds are distributed; Produce policy recommendations for government; Draft a situation analysis for the country; Roll out countrywide

Results

2010 – Complete and lodge documentation for sample group: 200 households
2011 – Transfer 10,000 households
2012 – Transfer remainder
2013 – Extend nationwide

How many people will your project serve annually?

More than 10,000

What is the average monthly household income in your target community, in US Dollars?

Less than $50

Does your project seek to have an impact on public policy?

Yes

If so, how?

Based on the pilot project, a detailed report with recommendations will be submitted to government on what laws and policies need to be reformed to facilitate replication elsewhere, in such contexts as property development, title registration, town planning, land survey, and local government finance.

Existing conveyancing laws, formalities and costs are substantial. “Rolls-Royce” sophistication previously designed for land belonging to the rich is inappropriate for the low-value (mostly black) land market. Policy recommendations based on extensive practical experience gained in the project will probably include dispensing with or streamlining existing title registry requirements, at least for initial title upgrade. Consideration will also be given to whether conversion to ownership can realistically be by decree, in other words, existing forms of tenure to be deemed full ownership.

Land survey policy typically presupposes development of “raw” land, but where there are pre-existing boundaries, land survey is of minimal value economically or jurisprudentially, and the project might show that it can be dispensed with, saving massive sums of money.

Similar proposals will be considered regarding ways to streamline town planning and property development so as to be consistent with the realities of impoverished communities.

Many or most properties have unpaid imposts of diverse kinds, usually payable to local government or the department of land affairs. The proposal is that these amounts be written off for the purposes of a once-off comprehensive land reform, after which there will be a new start, based on a “clean slate”, once people have proper title.

Sustainability
What stage is your project in?

Operating for 1‐5 years

Does your organization have a board of directors or an advisory board?

Yes

Does your organization have any non monetary partnerships with NGOs?

Yes

Does your organization have any non monetary partnerships with businesses?

Yes

Does your organization have any non monetary partnerships with government?

Yes

Please tell us more about how partnerships could be critical to the success of your innovation.

Whilst the concept of conversion to full ownership is simple and compelling, practical problems tend to be enormous, verging on prohibitive. The partnerships we have forged were carefully crafted and have proven to be essential for converting a simple idea into a living reality.

We would like to learn more about how your initiative is financially supported. Please explain your business plan/revenue model

The FMF's project management and consultancy work is funded by membership fees, donations and consultancy revenue.

The transfer of the first 200 sample group properties is funded in full by the FMF's banking partner.

Subsequent transfers will be funded largely by pro bono services by partners and professionals, and by ad hoc fund raising from local corporations and international funding agencies.

The Story
What was the defining moment that led you to this innovation?

Secure property rights represent one of the most important requirements for the protection of both economic freedom and civil liberties. The Free Market Foundation (FMF) has therefore devoted a great deal of its resources over the years to the task of propagating the importance of statutory protection and government respect for those rights. Some of the many initiatives in support of property rights in which the FMF has been involved are:

- Constitutional protection of property rights in South Africa is a crucial factor in the protection of the rights of individual citizens. FMF directors Leon Louw and Temba Nolutshungu initiated a last-minute intervention by leaders of the private sector to ensure the retention of the Property Rights clause in South Africa’s final Constitution, a role that was recently recalled in a speech by Minister Naledi Pandor.
- The FMF played an important role in persuading the apartheid government to grant secure tenure to black South Africans in so-called “white” areas. The government initially refused to grant freehold title but did provide 99 year and 40 year leases to black households. In the last years of apartheid large numbers of these houses were sold to tenants at their original cost.
- The FMF held meetings in Polokwane, Pretoria, Bloemfontein and Umtata on the first draft Communal Land Rights Bill, which led to its revision to give community members a greater say in communal land rights.
- The annual Intellectual Property Rights Indaba, organised by the FMF has become increasingly important.
- The FMF was one of eleven think tanks that from the outset supported the publication of the Economic Freedom of the World reports in which property rights are one of the important factors.
- The FMF became one of the first partner organisations supporting the International Property Rights Index.

Involvement in the project to upgrade land tenure in the “Perryville” municipality represents the practical application of policies the FMF has been advocating for many years. It is vital for the future of freedom of the citizens of South Africa that this and similar projects for the granting of freehold title to black South Africans should succeed.
The FMF has been committed to secure and freely tradable property rights throughout its 35 year history. Its property rights advocacy has, like its counterparts elsewhere, always entailed presenting the “big picture” as a matter of general principle, accompanied by arguments for the attainable social, political and economic blessings.

The defining moment that led to this innovation was a retired local farmer, Perry Feldman, asking the FMF what he could do to benefit the poor in his community. We suggested a localised practical implementation of the property rights principle to which he responded enthusiastically. He offered to use his influence, energy and contacts to turn his community into a pioneer for the rest of the country and ultimately sub-Saharan Africa. The critical innovation has been to telescope the big idea down to a manageable and achievable reality.

Tell us about the social innovator—the person—behind this idea.

Leon Louw helped found the Free Market Foundation in 1975, and is credited with over 200 pro-market reforms that today positively affect every South African. These range from increased shopping hours to abolished agricultural boards to deregulated transport.

Leon trained initially as an attorney and, apart from possessing a profound grasp of South African jurisprudence, is an outstanding economist of international repute. A sought after speaker at universities, conferences and conventions across the globe, he has over the past 40 years spoken in some 30 countries on nine continents, on occasion sharing the platform with such great economic minds as Friedrich Hayek, Milton Friedman and Walter Williams.

Leon is perhaps best known as co-author with his wife Frances Kendall of South Africa – The Solution and Let The People Govern. He has also authored a study entitled Habits of Highly Effective Countries: Lessons for South Africa.

There can be little doubt that The Solution, and the speeches that Leon gave on the book’s main thrust of a peaceful transition to democracy under a Constitution protecting the rights of all citizens, influenced the thinking of the participants in the negotiation process that ended apartheid. It encouraged the parties to enter into the negotiation process, convinced them that a peaceful solution was possible, and provided direction as to the crucial elements on which agreement was necessary.

Leon made numerous submissions to the negotiating parties at the Council for a Democratic South Africa (CODESA) and the parties took note. They did not accept all his proposals but included enough of them to substantially influence the final Constitution and the checks and balances that protect South Africa’s citizens today.

For their role in the transition to democracy, Leon and Frances were twice nominated for the Nobel Peace Prize.

Leon also played a very significant role in ensuring that South Africa has a property rights clause included in its constitution, a vital element to ensuring a country’s freedom and prosperity. Moreover, Leon has ceaselessly worked to help thousands of black property owners around the country to have their land title upgraded by government from leasehold to freehold.

Leon is married to Frances Kendall, author and artist, and has three daughters, Justine, Camilla and Kate.
He loves classical music, especially Beethoven, travel (including to Vanuatu and Roratonga), nature, jogging and hiking.
He is a storehouse of worthless information, being fascinated by anything curious, wierd or bizarre.
He is a contrarian who loves playing devil's advocate.
He has recently ghost written a novel based in India.

How did you first hear about Changemakers?

Through another organization or company

If through another source, please provide the information.

Approximately 50 words left (400 characters).

Additional
Which (if any) of the following strategies apply to your organization or company (check as many as apply)

Formalizing and documenting property rights (i.e. titling, leasing or certification), Legal education and awareness, Other.

Please explain how your work furthers one or many of the above strategies (if you selected “other”, please explain your strategy)

Think tank work entails research, publications and the dissemination of literature on the virtues of property rights and a market economy. Unlike most think tanks, the FMF also engages in practical activism, which gives it uncommon credibility and know-how. The Foundation works directly with groups and individuals impacted negatively by inadequate property rights and excessive regulation.

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