How handing out titles to the poor can make the rich richer. By Howard Stein, Ann Arbor, Faustin Maganga, Rie Odgaard and Kelly Askew.
There was a time when land reform, the world over, focused on redistribution to the poor and dispossessed often from large scale and wealthy landowners. Today reform in Africa focuses more on formalising property rights by demarcating boundaries, allocating individual plot titles and expanding legal institutions to adjudicate in land disputes. None of this helps people in need but plenty of it helps those with plenty.
Why and how has this come about? Who are the key players? What has been the impact? What role has mainstream neoclassical economics played in this focus on reform? What are the vested interests that gain from focusing on land reform in this manner? What are the alternatives that could help improve life for poor farmers?
Proponents of formalisation argue that:
- owners of plots that are surveyed to establish fully their legal status and financial value are able to access the full benefits of land sales and rental markets;
- formalisation, ups efficiency by cutting transaction costs and boosting rental and land markets;
- greater security of entitlement that arises from formalisation will increase the incentive to invest and generate higher productivity and incomes for poor people; and
- titles will provide collateral to access loans, secure land rights for marginalized sectors of society such as women and livestock farmers and reduce land conflicts.
They argue also that formalisation will enable poor people to lift themselves out of poverty.
The premise of this argument is that the poor often hold significant assets such as land that are not formally recognized. And with proper legal titles poor people will be able to liquidate their assets readily to raise cash, start up new business with the money or use the titles to borrow funds to invest in land and raise productivity leading to higher incomes.
These claims have led NGOs, governments and bilateral and multilateral aid agencies to buttress the formalisation agenda with a confluence of resources, reports and organizational efforts. They pick and choose from a menu of purported benefits.
For example, the NGO, Irish Concern Tanzania, reported that between 2009 and 2011, it constructed 35 village land registry buildings and covered the expenses to generate Certificates of Customary Rights of Occupancy (CCROs ) or titles to 5,404 villagers and 1,080 individual plots (Concern, 2011). This was part of the “rights based livelihood programme” launched in 2005 where titles are seen as the way to protect the rights of the poor and their ability to access credit which were being neglected.
On launching the programme, Concern said: “Poor and vulnerable subsistence farmers are reliant upon land as one of their major assets. Although the Land Act 1999 (Act No. 4 of 1999) and the Village Land Act 1999 (Act No. 5 of 1999) and its accompanying Land Policy of 1995, provide clear guidelines for people to register and get title deeds for the land they occupy, people are however not aware of these guidelines. None of the surveyed and mapped villages in the three divisions have land registration certificates. As a result, village governments as well as the individual farmers do not have legal right on their land. This fact limits the people’s ability to use the land as [a] collateral asset to obtain loans from credit facilities.”
Later Concern justified its focus on formal titling as the best way to protect the right of women. In 2014 it said “customary law and traditional practice prevent the realisation of equal rights for women”.
However customary rights to land are in fact formally recognised by the Land Acts of 1999 (URT, 1999a) and are considered to be on an equal footing with statutory rights. The Village Land Act of 1999 (Part IV) (URT, 1999b) also specifies that the land rights of women are equal to the land rights of men, and any rule and practice which discriminate against women, children, and the disabled in relation to land rights are illegal.
Other NGOs focused on different explanations for their support of titling. Oxfam, a British NGO, focused on poverty reduction. It had a land rights programme in Tanzania that has included an individual titling project in the Morogoro region. Oxfam said in 2012 that its emphasis was to increase the number of women holding title to land either solely or jointly. Even World Vision – a Christian organization focusing on child welfare – in 2016 got into the business of supporting individual titling in rural Tanzania.
The G8 in 2012 pushed an agenda to increase foreign direct investment in agriculture to expand productivity as part of the Africa-focused New Alliance for Food Security and Nutrition.
Inadequate land tenure law was seen as a “fundamental impediment” to agricultural investment. In 2013, the G8 went a step further and declared that strengthening property rights was the best way to prevent land grabbing and opaque deals and helps ensure “responsible investment”. (G8, 2013)
The G8 launched new partnerships with Burkina Faso (US), South Sudan (EU), Namibia (Germany), Nigeria (UK), Niger (EU), Senegal (France) and Tanzania (UK) to improve land governance. In Tanzania, DFID in cooperation with Sweden and Denmark generated a three-year, US$15.2 million land transparency partnership. More than half of the budget is allocated to a pilot project aimed at formalising village level property rights including individual private property right deeds or CCROs (Maganga et al, 2016).
Neoclassical economics and formalisation
Neoclassical economics thinkers are the general inspiration behind the literature on the economic advantages of private property rights. Neoclassical writing on property rights emerged in the 1960s from Alchian (1965) and Demsetz (1964) among others. They viewed private property rights as a centre of economic progress with rights to use, sell and transform property at the core of a prosperous system.
In the neoclassical economic atomistic world, the right to decide how, what and when to produce should be vested in individual production choices made through rational, unfettered self-seeking decision making. The same goes for land and decision making in agriculture.
Demsetz (1967) stresses the importance of exclusion inherent in individual private property rights. This permits owners to realise the full gains on investing in land and in husbanding, hence providing the incentive to make decisions that “maximise its present value” leading to improvements in the fertility of land.
At the same time the community’s recognition of the right of owners to exclude others leads to the internalisation of “many of the external costs associated with communal ownership” with associated efficiency gains. The cost of policing that exclusion was also viewed as important (Alchian and Demsetz, 1973).
A central focus is also the role of state guarantees for attracting foreign direct investment. Bronfenbrenner (1955) pointed to the incentives of developing country governments “in the form of future foreign loans and investments” and “future aid” to guarantee the property rights of foreign owners.
Similar arguments can be found in more updated neoclassical economic writers including Besley and Ghatak 2009 and Acemoglu et al. 2005 and have been used to justify the DFID G8 project.
For example: Locke wrote in 2013: “The economic case for secure property rights is that growth depends on investment; however, investors do not invest if there is a risk of government or private expropriation. In this context, property rights are equated with private property rights whereby property owners can legally exclude others from using a good or asset (Locke, 2013, p.8).”
Formalisation in practice: Tanzania
Since 2008, our team has been investigating the impact of land formalisation in five regions of Tanzania. We have undertaken more than 2,000 structured household surveys in 40 villages along with hundreds of interviews with key players in villages, districts, regions, at the national level and among donors and NGOs.
All land in Tanzania falls into three categories: village land, reserve land (national parks and conservation areas), and general land (urban areas as well as land allocated for investment). The president has the ultimate authority over land and serves as its trustee for the country. Land is available for investment purposes through leases of up to 99 years. However, villagers control village land in perpetuity. While the government claims that 70% of land is village land, 2% is general land and 28% is reserve land, there is strong evidence that general and reserve land is already much higher. Moreover, the government has stated that it plans to increase the category of land available to investors to 15-20% of the total with clear implications for land under village jurisdiction (Maganga et al, 2016, Bluwstein et al, 2017).
Following the Village Land Act of 1999, the government began a pilot programme of formalisation in Mbozi District in the southwest of Tanzania. Since then we have documented at least ten different programmes in both overlapping and separate regions and villages involving at least ten government agencies, seven NGOs and eight multilateral and bilateral donors involved in titling projects. Each has its own technologies, methodologies, rationales and funding sources. This patchwork has created chaos, partly due to the parallel and often contradictory processing systems and uneven training of staff involved with implementation.
The stated motivations of actors and programmes for pursuing land titling programmes are varied. This has contributed to the chaos and vulnerability of the villagers, due partly to the multiple explanations given to villagers (Owens et al, 2017).
So far, the many promises of formalisation have not been realised. For example, access to credit that was supposed to follow the issue of CCROs to villagers has failed to materialise. And other shortfalls have been predicted and realised (see box).
CCROs were heralded as a mechanism for overcoming the formal divide between the informal agricultural sector and the formal financial sector. However, it is evident that CCROs do not solve the underlying institutional failures and poorly operating markets that continue to block access to credit for rural households.
New institutions and programmes should be created by the state including:
- incentives and subsidies to banks to provide loans to farmers;
- organising a state-sponsored national agricultural bank to provide direct credit to small-scale farmers; and
- generating a centralised credit bureau to determine credit ratings.
Storage facilities could be built in villages to introduce warehouse credit systems where loans are allocated to farmers based on future receipts from deposited produce. For crops sold to marketing boards, banks with guarantees from the state could provide loans in return for future deposits from the boards after crops are sold.
So far, the many promises of formalisation have not been realised.
A key to success will be in stabilising rural farm income through mechanisms like state-run insurance schemes, that help protect farmers against volatility from prices and weather patterns. State marketing boards could be expanded to be in competition with exploitative middlemen (Stein et al, 2016).
The costs of titling have been enormous. We estimate based on information we have obtained for 20 titling projects, that US$158 million was spent since 2002 in Tanzania, which comes out to more than US$500 for each title issued. Contrast that to an estimated expenditure of US$12 a person spent by the government in agriculture in 2013. Imagine what else could have been done in building irrigation systems or providing mechanization or in setting up the kinds of state supports for credit system mentioned above (Owens et al., 2017).
Why is titling is being encouraged at such great expense now? There has been a growing interest in investing in land in Africa from domestic and foreign sources. Formalisation has been used to carve off land from villages while protecting the private property of large-scale farmers outside villages. Some African governments have become willing partners, lured by the fanciful promises of titling or the real gains that can be made by well-connected political actors. The big losers are the poor farmers and livestock keepers who are increasingly dispossessed and marginalised by these actions.