5 Ways In Which Stifling Property Issues Keep Africa In Perpetual Poverty : Insights From Hernando D

In his widely acclaimed best-selling book, 'The Mystery Of Capital,' Peruvian born Hernando de Soto stated the reasons for which Third World Countries are poor. Conducting extensive research on 5 Third World Cities-Cairo, Lisa, Manila, Mexico City and Port-au-Prince, he posited that most people in these cities are not desperately impoverished as they are portraye

d as. He noted that their assets are not represented in a way that allows them to produce surplus values. This, he termed 'Dead Capital'.

In this issue, the Kaizen blog brings to you 5 reasons why not getting our Real Estate laws right keeps us perpetually in poverty and impedes capital for rapid development.

1) Lots Of Dead Capital In Untitled Documents : In the opening chapter, de Soto gave the value of dead capital in untitled Real Estate in Haiti to be $5.2 billion. That of Peru amounts to about $74 billion, about $133 for the Philippines and some $240 billion in Egypt. He adds, "By our calculations, the total value of real estate held but not legally owned by the poor of the Third World and former communist nations is at least $9.3 trillion. This is a whole lot of money that could have been used to take on several entrepreneurial initiative being tied down in untitled documents.

2) Lack Of Functioning Institutions That Give Life To Capital : Lack of departments that give capital owners the ability to secure additional value from third parties for their contributions is the main contributor to the huge dead capital in developing countries. Third World Countries have accumulated lot of capital in the form of real estate (buildings) but fail to secure additional values on these properties.

3) Property Holdings Do Not Have Other Forms Of Representation: Another major reason why most African nations are poor is that unlike the formal property system that westerners have that make their real estate holdings to be represented in securities, titles etc., no such system exists among us. By this varied representations, physical assets are able to lead parallel lives as capital thus creating surplus value.

4) Rigid Record Systems : In Nigeria for example, Real Estate cannot be legally registered unless they have been properly surveyed, mapped, and recorded with state-of-the-art geometric information technology. This conceptions invalid as Europeans and Americans managed to record all their real estate assets decades before computers and GIS systems were invented.

5) Extractive Institutions And Needless Bureaucracies: In the Third World, a lot of productive time and money is wasted in trying to get properties and other assets titled. People need to call at the offices many times, bribe or tip an official, pay heavily for the title and wait for a long time before their application is processed. This discourages people and foster the high number of untitled property holders that we now have. Without titled documents, property owners cannot access loans and other credit facilities from banks. This limits the flow of capital.