Are the views of Hernando De Soto applicable in South Africa

Masotja, Evelyn
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Developing countries have struggled to identify the sources of economic growth for many years. Hernando de Soto has identified the legal system as key to unlocking the potential of economies and making markets inclusive for the poor. He argues that developing countries must establish representational systems that will transform assets into capital and he demonstrates the importance and role of property rights in creating wealth for economic development. These rights facilitate economic exchange, access to credit, transfer of resources and meaningful economic activities. The thesis seeks to determine if the views of De Soto are applicable to South Africa. It argues that traders in Pretoria lack secure and strong property rights. De Soto claims that developing countries have assets and resources and only lack an inclusive legal system. The lessons from De Soto are applied to the situation of street traders in Pretoria. The thesis focuses on traders in Pretoria in areas that include Sunnyside, Marabastad, Hatfield and various streets in the Pretoria central business district (CBD). In 2014, the traders participated in violent protests due to police harassment and confiscations of their stock. There were tensions and hostility between the traders, the metro police and the municipality. The argument here is that the situation of the traders in Pretoria, the capital city of South Africa, is under-researched and has similar dynamics to those of street traders in Peru, as depicted in the somewhat neglected first book of Hernando De Soto, The Other Path, which was written in the 1980s. My study finds that the conditions of traders in Pretoria have improved since late 2014. Traders in Pretoria experience less harassment and crime, and appear to have more rights than the study anticipated based on the reports of the situation in 2014. What the research in this thesis points to is the role that informal traders' associations can play to strengthen property rights. Associations play a crucial role in countries such as Egypt and India by negotiating property rights for traders. The views of De Soto are applicable to South Africa as far as the importance of securing suitable property rights for the traders is concerned, and especially in his earlier book, The Other Path, he sheds light on the role that traders can play to strengthen their rights vis a vis the state. Establishing secure, individualised property rights without compromising existing rights is a difficult and lengthy process. The thesis therefore proposes a systematic, gradualist approach to addressing the property rights of traders in the economy. The approach includes identifying ways to bring traders into the economy, gradually and in a sustainable manner. The efforts and success of the Tshwane Barekisi Forum must be strengthened and built on for more conducive and workable engagements between the traders and the Pretoria metro. In South Africa, the informal sector at least provides some opportunities to move out of unemployment and poverty. Research shows that informal trader associations have played a positive role in improving the position of street traders in Pretoria. However, if this is to be more than a temporary improvement, numerous issues that continue to weaken the property rights of traders have to be addressed over time.
Thesis presented in fulfillment of the requirements for the degree Doctor of Philosophy at the University of the Witwatersrand, Johannesburg, South Africa, 2018
Masotja, Evelyn Shandokane, (2018) Are the views of Hernando De Soto applicable in South Africa?, University of the Witwatersrand, Johannesburg,