Think-tank the Free Market Foundation’s (FMF’s) Khaya Lam land reform project last month handed over the latest batch of title deeds to residents in the town of Grabouw, in the Western Cape, thereby taking the project’s total title deed handover tally to 1 360.
Khaya Lam project manager Perry Feldman says the project aims to convert municipal properties in townships into private properties by granting title deeds to residents of these formal settlements. Title deeds can only be registered where general town plans exist, which therefore excludes informal settlements.
He tells Engineering News that the issue of land reform in South Africa has long been a personal concern for him as a farmer based in Parys, in the Free State, and needs to be addressed in a sustainable and constructive manner. Through his long association with the FMF, Feldman managed to get the foundation on board to help drive such an initiative.
The FMF’s initiative is based on Peruvian economist Hernando de Soto’s so-called ‘dead-capital theory’, which refers to property which is informally held but not legally recognised. According to the theory, the uncertainty of ownership decreases the value of the asset and/or the ability to lend or borrow against it. These lost forms of value are dead capital. However, De Soto argues that, if these assets in the informal sector were recognised and brought into the mainstream market economy, they could become the key to fostering development.
Khaya Lam was launched in 2008 and the first pilot project took place in the Ngwathe local municipality, in the Free State, in 2012, with the first tranche of deeds having been handed over in 2013.
Feldman says that very few black and coloured South Africans own the title deeds to the properties on which they live, owing largely to the legacy of colonial and apartheid practices that prevented these groups from owning land.
Therefore, the ultimate goal of Khaya Lam is to have all municipal council-owned properties in South Africa (which the FMF estimates to be between five-million and seven-million properties) upgraded to full freehold titles at no cost to lawful residents. The FMF is also developing a programme to convert land owned by tribal authorities into privately owned properties.
Further, Feldman elaborates that, with the FMF having “considerably simplified” the process of converting ownership from council to legal resident, it has also managed to significantly reduce the cost for each transfer to R2 100 from its average cost of between R6 000 and R8 000 using small local conveyancing firms that are willing to offer their services at a significantly reduced rate.
The first 100 title deeds that were handed over to residents in Ngwathe were sponsored by South African banking firm First National Bank (FNB). Khaya Lam has since received the support of various high-profile businesspeople and private companies, including retail tycoon Christo Wiese, home shopping retailer HomeChoice CEO Rick Garratt, nonprofit organisation the Reinet Foundation, real estate company Growthpoint Properties, banking groups Standard Bank and Capitec, building materials retailer Cashbuild, as well as furniture and household goods manufacturer and retailer Steinhoff International. It has also received support from ordinary individuals, estate agents, farmers and trade unions.
Feldman notes that one of the major challenges the FMF faced was gaining the trust of local councils who were unsure of the project’s motives. Once this had been achieved, offices were established in the local communities where administrators receive and process the title applications.
The project has to date raised enough funds, about R11-million, to process 6 700 title deeds, including those that have been transferred. Other recipients to date include residents from Graaff-Reinet, in the Eastern Cape; and Cape Town and Stellenbosch, in the Western Cape. Khaya Lam will also begin a project in the Umfolozi region of KwaZulu-Natal.
Issuing tenants with full freehold titles allows for a better quality of life, as this enables them to upgrade, mortgage, lease or even sell their properties, Feldman states.
“Lease holders are, therefore, empowered to take advantage of jobs and other opportunities offered away from where they reside without the fear of losing their home, as they now have ownership over it. They also can leave the properties in their will to their loved ones, which also provides peace of mind.”
Ownership also enables residents to use them as collateral for loans from financial institutions to help finance, for example, business ventures, home improvements and cover tuition fees.
In response to the criticism of some commentators that converting municipal leasehold properties into privately owned properties could result in people – out of ignorance and/or necessity – selling their properties and eventually being worse off, Feldman says that the titleholders must be allowed to make their own decisions.
The rights and obligations are explained to all titleholders, with these property owners also receiving a booklet outlining these issues. “We cannot treat people like children – they are adults who must be allowed to make their own choices,” he concludes.