Boosting legal homeownership for low-income households in South Africa

March 23, 2023

By Hlazo Mkandawire

Sifunda Amos Nkosi, a 68-year-old resident of iLembe district in South Africa, was among hundreds of thousands of homeowners in the country who lacked a title deed for his property, meaning he couldn’t formally prove ownership of his land or house.

Property is the most significant asset for most low-income households in South Africa. But without a title deed, it’s almost impossible to borrow against the value of the land or house and hampers the ability to participate fully in the formal property market, including selling, tax payments and valuations.

Formal registration in South Africa has long proved challenging. Property is often inherited or acquired through informal agreements—and land registration is both costly and complicated, dissuading many from even trying.

“I couldn’t afford to get a title deed on my own because it is expensive and I didn’t have the knowledge of how it works,” said Nkosi.

Sifunda Amos Nkosi (left) from Sundumbili B was happy to receive his title deeds.
Sifunda Amos Nkosi (left) from iLembe district was happy to receive his title deeds.

In 2022, however, Nkosi, was part of an IFC led pilot program that helped him, and more than 300 other low-income South African seniors, acquire title deeds for their land in the iLembe district.

“This title deed will change my life because I stayed in my house with fear that someone may come and lay claim to it but now that the municipality has given me a title deed it means I have proof of ownership,” said Mr. Nkosi.

“I am delighted to see the people of iLembe district finally receiving their long-awaited title deeds. This means our ratepayers have protection and full ownership of their assets enabling them to live peacefully together with children,” said His Worship the Mayor of Mandeni Local Municipality, Cllr Thabani Mdlalose.

Making it simpler and more affordable to obtain a land or house title

To help reduce the cost and complications associated with obtaining a land or house title, IFC partnered with the Swiss State Secretariat for Economic Affairs (SECO) and the KwaDukuza and Mandeni Municipalities to implement a pilot program through the Vuthela iLembe Local Economic Development Programme.

The innovative program works by leveraging South Africa’s Broad-Based Black Economic Empowerment (B-BBEE) socio-economic development spend—established in 2003 to make participation in South Africa’s economy more open and fair—and by engaging law firms to offer pro-bono property conveyancing services to low-income earners.

In other words, a law firm will pay the title deed conveyancing fees and disbursement costs upfront—and then claim the fees back against their B-BBEE socio-economic development spend.

“This is exciting and innovative because it opens the door for a potential funding stream for low-income households from a large and previously untapped source – corporate B-BBEE spend,” said IFC Senior Operations Officer, Amina El Zayat.

El Zayat said she expects that the pilot will help catalyze policy reforms and cement stronger partnerships between the public and the private sector to address the complex land titling problem, including by attracting large law firms to provide pro-bono and B-BBEE supported services.

Some claimants showing up in Sundumbili Pilot A to process their title deeds.
Some claimants showing up in iLembe district to process their title deeds.

Shannon Moffett, Private Sector Development Expert at the Vuthela iLembe LED programme, said that it is critical for national, provincial, and local government departments responsible for human settlements to use the lessons learned from the pilot to introduce policies to reduce the cost and improve the issuance of title deeds, particularly for low-income households.

The recommendations from the IFC pilot have been included in a toolkit developed for the National Treasury by the Center for Affordable Housing in Africa (CAF) to guide all municipalities in their low-cost housing titling strategies. The findings will be presented to the Presidential Vulendlela working group on property titling for possible adoption.

“Titling is imperative to unlock value for South African homeowners,” said Ambassador Dr. Nicolas Brühl, Ambassador of Switzerland to South Africa. “We believe that the property registration pilot provides an innovative solution for accessing title deeds in iLembe. We are delighted that the pilot can be replicated in other parts of the country that are experiencing backlogs.”

One of the beneficiaries of the pilot project receiving her title deeds during the handover ceremony.
One of the beneficiaries of the pilot project receiving her title deeds during the handover ceremony.

Supporting inclusive and sustainable economic growth in South Africa

The low-cost house titling is part of IFC’s broader investment climate reform program in South Africa, which was launched in 2018 with support from SECO and the UK’s Prosperity Fund to create a favorable business environment, attract investments, create jobs, and boost economic growth in South Africa.

Over the last four years, this wider program has helped strengthen reforms to enhance competitiveness, remove red tape, and create an enabling environment to attract foreign and domestic investment across multiple sectors of South Africa’s economy. The program’s second phase was launched in September 2022.

“IFC is committed to supporting private sector development in South Africa, including through implementing innovative projects that offer solutions aimed at increasing access to and strengthening legal home ownership to drive inclusive economic growth and address South Africa’s large housing deficit,” said Adamou Labara, IFC Country Manager for South Africa.

Published in March 2023