The Degree of Formalization of Land Rights

Apart from problems that may arise during the transition between customary and modern systems of land rights, a fundamental question is whether full land titling is necessary in order to provide the degree of tenure security necessary to encourage agricultural development. It is an issue that still generates passionate opinions. An example of the controversies generated over this topic has been provided for the case of Russia by Alexander Nikonov, as follows:

The issue of private ownership of land with the right to buy, sell and mortgage arouses a fierce difference of opinion in Russian society. Grant

138. H. Binswanger, K. Deininger and G. Feder, 1995, p. 2725.

ing of land for lifelong possession with the right to inherit was resolved by the Supreme Soviet of the USSR and was accepted by peasants everywhere. But the issue of land buying and selling remains unresolved and arguments continue.141

To analyze the issue dispassionately, it should be recalled that the principal advantages of tenure security are four, as follows: guaranteeing the cultivator's continuing right to work the land (security of possession), encouraging improvements in and conservation of the land, facilitating access to credit, both for the improvements and for purchasing production inputs, and facilitating transfers of land among producers.

The existence of land transfers, i.e. a smoothly functioning land market, sometimes gives rise to concerns about the possibility of rural equity being reduced over time, through an increasing concentration of landholdings. Yet it contributes in an important way to economic efficiency, because it facilitates putting land in the hands of those who are able to make it yield the most (and who are not necessarily the largest-scale farmers), whether the mechanism is rental, pledging or sale-purchase. A land market is deemed efficient if the marginal productivity of different plots of the same soil quality are brought into approximate equality, in part through transactions in land. If their productivities are not equal, then there is scope for intensifying the production of the high-yielding plots, until at the margin their productivity begins to decline, and for increasing the productivity of less efficient plots, perhaps by placing them in the hands of other cultivators. In principle, this is one of the major reasons for promoting a land market, and usually it is considered that a prerequisite is that the rural properties be titled.

On the other hand, it has been observed that customary systems of land tenure can provide tenure security for the cultivator, unless the population pressure on the land becomes too great or dual systems of land rights emerge. It has been noted by Atwood that a good deal of technological improvement to farms has occurred under traditional tenure rights in Africa. Customary systems also can provide a degree of access to credit, through the informal credit market and the practice of 'pledging', although the evidence cited by Feder and others suggests that formal titling increases that access. Traditional systems also have fostered an extensive amount of land transfers, as noted previously.

Thus, in practical terms, a basic question for traditional tenure systems is not whether land transactions occur but rather is the following: 'Are the nature and scope of [land] transactions sufficient to permit more productive land to go to more productive farmers up to the point where marginal productivities are equalized?'.142 Atwood provides a partial answer to his own question:

The work of Collier (1983)143 in Kenya suggests that they are not, although it is unclear if this is an indictment of the indigenous, informal system of land transfers, the formal land registration system itself, or both. ... A view of the problems which indigenous land tenure may pose for land sales is clearly presented by Johnson (1972).144 The problem is not a prohibition of land sales, but certain social conventions which may discourage some efficiency-enhancing land transactions from taking place. . .. There is empirical evidence that Johnson's assertion may be valid in some African situations. Early colonial Uganda and early independent Cote d'lvoire both enacted

141. A. A. Nikonov, Agricultural transition in Russia and the other former states of the USSR', American Journal of Agricultural Economics, 74(5), December 1992, p. 1160.

143. P. Collier, 'Malfunctioning of African rural factor markets: theory and a Kenyan example', Oxford Bulletin of Economics and Statistics, 45(2), May, 1983.

144. O. E. G. Johnson, 'Economic analysis, the legal framework, and land tenure systems', Journal of Law and Economics, 15, 1972.

laws which took substantial tracts of land out of the realm of traditional social authority and made it private property. It appears that in both cases the kinds of risks and transactions costs [arising from social conventions] Johnson discusses declined substantially and resulted in increased transfers, and eventually market sales, to more productive farmers, and a resulting boom in productive agriculture in both places In neither case, however, was a mechanism of land registration the moving force, at least initially. Rather it was the decrees to privatize land. . . .145

These pieces of empirical evidence would appear to suggest that formal titling systems are more likely to promote efficient use of the land than traditional systems are. However, the nature of traditional systems varies widely, and the process of introducing formal titling can be expensive and slow, in addition to introducing the risk that some small farmers may lose their usufruct rights, or herders may lose temporary grazing rights, during the transition process.

Atwood himself is skeptical about the efficiency benefits of widespread land titling per se in the African context:

It is likely that most African farmers are secure in their holding at present. That substantial investment in land improvement and new technology has taken place across a wide variety of African land tenure situations . .. supports this contention. .. . There are many African situations where land titling or registration would not have the intended impact, would not be economically justifiable, or would even be counterproductive.146

Traditional rights of usufruct can provide the degree of tenure security necessary to encourage production and even investment on the land, although they normally do not permit sales of the land nor do they usually guarantee inheritance rights. The main concern about such usufruct rights is their durability in the face of the socioeconomic change which inevitably occurs in the development process. The debate over the benefits of traditional, or customary, systems of land rights, versus systems of formal land ownership titles, has been well summarized by William Kingsmill and Christian Rogg, in a kind of checklist that may be used by policy makers in deciding whether to strengthen or modify traditional tenure regimes:

Customary land tenure arrangements are often characterized as leading to a relatively equitable distribution of land but as being relatively inefficient. However, whether this is indeed the case in practice often depends upon the exact context and the precise nature of governance arrangements, and associated conditions of use:

• How far does population pressure restrict the amount of land available per household?

• How much discretion do traditional authorities have to allocate or withdraw use rights, and how accountable are they to all local people for the way that any discretion is exercised?

• In particular, what criteria are used when making a new allocation or reallocation of land?

• What constraints exist for customary rights to be inherited by the family of the deceased?

• Can women hold land in their own right?

• How far are individuals or households at liberty to delegate use rights through rental or sharecropping arrangements?

The answers to such questions will not only determine the opportunities for the poor to access land, and the security of such access. They will also affect matters such as the incentives for households to invest resources in improving the productivity of their land, and

the incentives for taking action to avoid environmental damage.147

When there are doubts about the durability, efficiency or equity of customary regimes of land rights, the solution may lie in formalizing them and making any necessary modifications during the process of formalization. Alden Wily has noted the growing acceptance and formalization of customary land rights, as opposed to fee-simple titling, in Eastern and Southern Africa:

.. . the most dramatic transformation [in land tenure in the region] is being made in how unregistered, customary rights as a whole are being handled in State law. .. . despite a century of purposeful penetration by non-customary tenure ideology and legal provision, unregistered, customary tenure not only persists but is still by far the majority form of tenure in the region.

Perhaps the most radical shift in tenure reform occurring in sub-Saharan Africa today is that for the first time in one hundred years, States are being forced to recognize African tenure regimes as legal in their own right and equivalent in the eyes of national law to the freehold/leasehold culture.

In Eritrea, majority customary rights have been reconstructed into lifetime usufructs, with guaranteed State protection (1994)148. ... In South Africa, how to clarify the millions of unrecorded rights in homelands and embed them in statute appears to be posing a much greater challenge than the 'simpler' mechanics of restitution and redistribution. However, the clearest lead of all is being given in the new tenure laws of Uganda, Tanzania and Mozambique. In different ways, these simply recognize customarily obtained land as fully legally tenured 'as is', in whichever form and with whatever characteristics they currently possess. In addition they may be made regis-terable entitlements if so desired. Zimbabwe and Malawi policy recommendations suggest these two States could follow suit (1999).

These developments undermine the very principles upon which property relations have been legally constructed over the last century. Previously, recording, registration and entitlement were all geared towards individual ownership; now, the link has been broken. Whilst certification remains indispensable as a founding route to land security, it is no longer necessarily tied to individualization. Accordingly, new tenure laws in South Africa, Mozambique, Uganda and Tanzania make provision for not just individuals but for two or more persons, groups, associations, and communities, to hold land in legal and registerable ways. The certification process itself has to change: it may be verbal, and verbally endorsed (Mozambique). The community itself may conduct the adjudication, recording and titling processes (Tanzania). As a matter of course, the local regimes through which these rights are created and sustained - customary land tenure systems - are being empowered in these ways. . ..

.. . what was yesterday commonage, and with all the ills of open-access implied, is today legally registerable private (group) property. Commonhold itself is emerging as a new form of tenure.149

The international consensus is that the need for land titling is largely a function of the social and economic circumstances of the rural economy. It is a greater priority when doubts begin to arise about whether customary systems can regulate adequately pressures for land transactions, when

147. Reproduced from William Kingsmill and Christian Rogg, 'Making Markets Work Better for the Poor: A Framework Paper', Department for International Development (DFID), London, 2000, Annex 4, with permission of the Department for International Development.

148. However, in Eritrea the legislation has scarcely been implemented, an experience that illustrates the point that successful reform of land tenure requires much more than just passing a law.

149. L. Alden Wily, 2000, pp. 2-3 [emphasis added].

land values increase, and in situations in which more than one tenure regime is applicable to transactions. The circumstances or resources may not always exist for a shift to a full-fledged titling system, as indicated by Alden Wily. In addition, the option of introducing a formal land titling and registration system should be evaluated in terms of whether the efficiency gains offset the costs of implementing the new system.150 According to one viewpoint, the formalization of land rights is essentially a pragmatic issue whose urgency depends in part on the scarcity of cultivable land. Both Platteau and the World Bank have expressed this view:

Formalization of land rights through issuance of titles or other land-register documents is an urgent step to be taken in all the areas where competition for land has become so stiff as to impose high ex ante and ex post transactions costs on the agents.151

More recent analyses have tended to emphasize the advantages as well as weaknesses of traditional tenure systems. In the words of Deininger and Binswanger:

When the community rather than the individual owns the land, whatever market exchanges (sale or rental) exist are normally limited to the community. Individuals have very secure and normally inheritable rights to land even after a period of absence, but they do not have permanent property rights to a specific plot, a limitation that may reduce investment incentives. In some cases, communal systems also permit periodic redistribution of land by the village chief to accommodate population growth.

In the past, communal tenure arrangements were often considered economically inferior and equivalent to collective production. The establishment of freehold title and the subdivi sion of the commons were proposed to prevent the efficiency losses that were assumed to be associated with communal ownership. More intensive study of communal tenure systems in a broader framework and the recognition that these systems perform multiple functions has led to a reassessment of these recommendations, however.

On the one hand, the efficiency losses associated with communal tenure systems may be more modest than generally assumed. . .. With arable land becoming increasingly scarce, many communal tenure systems either recognize a user's property rights if the land has been improved or compensate the user for improvements when the land is redistributed, thus attenuating tenure-related investment disincentives.

... in cases where there is no clear demand for demarcation of individual plots, communal titles that are administered internally in a transparent fashion could provide tenure security at a fraction of the cost of individual titles.152

The new Rural Code of Niger is an example 'which recognizes and empowers customary land tenure practices and institutions It recognizes customary ownership rights and incorporates local land tenure and land management systems'.153

While it can be valuable to reinforce customary systems of land rights, it is important for policy makers to bear in mind that such rights are likely to undergo evolution, to monitor their adequacy, and to be prepared to adapt the tenure regime as needed. Local and community institutions that currently administer, or will administer, tenure regimes require strengthening. Pressure for more secure tenure rights, in whatever form they are provided, is likely to come above all from farmers. Deininger and Binswanger have underscored farmers' concerns in this regard:

152. K. Deininger and H. Binswanger, 1999, pp. 257-258 [emphasis added].

More secure land rights may be highly valued by cultivators even under conditions of relatively low population density. For example, in Zambia (with a population density of 12 people per square kilometer and where 75 percent of the land is suitable for farming), almost 50 percent of farmers feel their land tenure is insecure and would be willing to pay something (US$40 on average) for land titles. . .. Disputes, efficiency losses arising from limiting transfers and barring certain groups from land rights, investment disincentives, and land grabbing in anticipation of future appreciation are all indicators that existing land rights are inadequate. Clarification and formalization of informal property rights in a process that increases the accountability of local leaders, establishes a transparent and implementable legal basis, and provides for adjudication of boundary disputes across communities must precede any effort to award formal titles. Adopting a flexible institutional structure that gives communities freedom of choice in accomplishing these goals is therefore of great importance.154

A policy of fully titling customary and/or State lands carries with it demanding administrative requirements:

Agricultural modernization combined with population pressure will make land titling necessary. Traditional tenure systems need to be codified. . .. The transition to full titling will take time to achieve in most African countries and should be attempted only in response to demand by rural people. Nationally legislated rights are likely to conflict with customary rights. Judicial mechanisms for dealing with disputes between owners claiming traditional versus modern land rights are urgently required. As with other actions needed for agricultural growth, the critical element in any new land policy will be the administrative capability to manage it.155

In regions of the world where customary rights already have been weakened or superseded, and where the State is not the sole owner of agricultural land, the case for accelerated implementation of titling systems is strong. In such circumstances, they provide unambiguously improved security of tenure for the cultivator, facilitate eventual inheritance by his or her descendants, enhance the farmer's capacity to secure financing for production and investment, and convert the land into an economic asset which a farmer can utilize to more readily start life outside the agricultural sector in the event of such a decision. If a farmer does not have the right to sell land, he/she cannot derive benefit from the cumulative investments - use of own savings - made in the farm over time, in the event of a decision to leave the farm.

In practice, the shift to a modern land titling system is a very slow process, and it can be expected that both modern and customary systems will exist side by side for a long time, as illustrated by the experience of Zambia:

Customary tenure is the dominant system governing land administration on 94 percent of the land mass of Zambia. To eradicate rural poverty rural farmers must be transformed into business-oriented farmers. This shift will inevitably result in demands for changes in tenure systems. The land laws must be able to respond positively to these demands. . . .

Despite the strengths and weaknesses of the tenure systems in place, both are so entrenched that substitution of one for the other is not feasible or practical. The two systems are expected to coexist in the foreseeable future. A new land law should serve different interests in different parts of Zambia. It must recognize customary tenure, but the demarcation of the country into

154. K. Deininger and H. Binswanger, 1999, p. 259 [emphasis added].

155. The World Bank, Sub-Saharan Africa: From Crisis to Sustainable Growth, The World Bank, Washington, DC, USA, 1989.

State [leased] land and traditional land is no longer justified. . . .156

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