Chapter 2: Key concepts of the study
5.2. Lessons learnt from the Onbekend land redistribution project
5.2.4 Security of tenure and investment incentives: puzzling evidence from Onbekend
5.2.4 Security of tenure and investment incentives: puzzling evidence
increasing its expected return. Thirdly, is the" collateralization effect", which is when the land acquires a "collateral value". This is very important, especially for formal lending sources, which often have imperfect information about the borrower.
Braselle et al work has some relevance to this debate in that these are some of the factors that can be useful in explaining the sudden reasoning behind the decision by the Onbekend community to start undertaking their own capital investment. Because they know that they now have the assurance factor, which is in a form of a title deed, which legally protects them from any form of victimization or eviction. The second and third factors, which are realizibility effect, and Collateralization effect,are the one's missing on the OCPA farm. It is because of the absence of these two factors that the Association has not been able to access credit.
At the time when this research was undertaken, it was observed that there has not been much investment undertaken on the farm. It is because of the lack of such investment that the farm has not yet reached the realizibility and the collateralization effect. This makes financial institutions reluctant to lend the Association money, because they are not confident whether the Association would be able to service its debt. Furthermore, they realise that, even if they transfer the land to liquid assets through sale, chances of them regaining their investment are nil because no major investment has been undertaking on the farm. This could explain the reason why most of the Association's projects have not yet taken off.
The conclusion that can be reached from the above, is that,land titling does not necessarily translate into credit accessibility. However due to the assurance effect offered by the title deed, individual households can undertake capital investment so as to improve their lives. What one needs to note is that, in dealing with the issue of investment, the researcher has made a distinction between
with the issue of investment, the researcher has made a distinction between formal credit sources from financial institutions and investment that can be undertaken by an individual or a household so as to improve its living conditions.
The Onbekend research findings confirm that the two are not dialectically linked.
However, it will be absurd to conclude that titling does not translate into investment at all, because, research conducted in other countries, confirms that the two are positively related. According to Midhola et al (1994a), in Ghana, it was concluded that titling clearly has a positive impact on investment. Feder (1987) also confirms the same view as Midhola, when he conducted a research in Thailand, and concluded that land titling has a decisive influence on investment behavior of both the financial institutions and individuals. These are just but few of the many research undertaken which showed that secure tenure in the form of land titling and registration has a significant and positive effect on long-term on farm investment. It is because of such findings by other scholars, that, this dissertation does not want to completely discard the likely possibility that the two could be positively related.
Platteau (1996) confirms that a series of research undertaken by World Bank, suggested that there is no significant relationship between percentage household receiving formal credit or any other credit and the proportion of land held with complete rights. This comment corresponds with the research findings. As earlier alluded to, the OCPA has not been able to access funding even though they have formal ownership of the land on which they reside. The White Paper on South African land policy says that," it is important that the redistribution program is designed in a way that will allow it to respond to different needs and circumstances in appropriate ways so that it contributes to the alleviation of poverty and economic growth", (1997:28). If this objective is anything to go by, then the Onbekend land redistribution program has not yet lived up to this expectation.
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The reason why this requires special attention is because it is one of the few ways in which the OCPA and its members could improve their lives.The failure of the Onbekend land redistribution project to fully exploit the economic opportunities presented by the project,stem from many things. Amongst these is the inaccessibility of formal credit. This therefore translates to a situation where the projects that have been planned by the Association, get stalled, because to get them off the ground, they need financialinjection. The research findings have shown us that, most of the households still belong to the indigent category, because their average household monthly income is below the prescribed minimum of R1500, 00.
The Onbekend community members however stated that, compared to the previous land holding system, "PTO", they are able to make a little extra cash for themselves by doing other kinds of work when they are not at their permanent place of employment. This should not be misinterpreted to mean major economic improvement, because their response is a comparative response, as it compares the situation then and now. But it does not really suggest that they are entirely pleased with their economic situation. So,the bottom line is,the lack of financial assistance and other enabling measures to date has hindered the progress and success of the Onbekend land redistribution project.
The lack of funding defeats one of the important objectives of undertaking land redistribution, which is poverty alleviation. Poverty alleviation can be achieved through monetary gains amongst other things, and the Onbekend land redistribution project has so far not yielded any major financial gains for its beneficiaries. It is on such grounds that the researcher refutes the claims made by Cousins (2000), who suggests that the provisional appraisal of potential economic benefits suggests that land reform as a whole is well worth undertaking. In fact,one will tend to agree with Van Zyl et al (1996) who contend that for land reform to be deemed successful, it must focus on income earning opportunities of vulnerable people by helping them to become financially viable.
The Onbekend research findings contradict the views of highly idealistic writers like De Soto (2000) who claimed that the poor are not as poor as thought of, but their poverty stems from the fact that they do not have formal ownership of their property. He suggests that, by simply giving the poor formal ownership, you would have contributed towards changing their fortunes for the better. The Onbekend research findings have shown that his view has no basis. He believes that a title deed alone will go a long way towards alleviating poverty, because that will allow formal business transactions to be carried out by those in dire need and those who own the means of production.This view is fundamentally flawed and the Onbekend research findings justify this comment.
5.2.5 Bridging the gap between small and large-scale farmers: a