The Shackled Continent

by Robert Guest

  Tied to the land

  Informal ownership hurts rural folk, too. Take Nashon Zimba, a twenty-five-year-old peasant I met in Chiponde, a small village in Kasungu district, north-west of Lilongwe. Zimba is poor even by Malawian standards. He grows corn, beans, cassava, and tobacco on a couple of hectares which he inherited from his parents. He rarely has much left over to sell: he told me that his cash income in 2000 was $40. He lives with his wife and baby daughter in a tiny mud shack with plastic bags for window panes.

  We sat on a reed mat under the shade of a mango tree. It was midday and too hot to work, so Zimba was happy to talk. He was barefoot, and his T-shirt was streaked with soil stains. He cradled his baby daughter, who was chewing on a bicycle spoke.

  “I’ve got enough land,” said Zimba, “but I can’t afford enough seeds or fertilizer to make good use of it.” Borrowing, he lamented, was out of the question. Loan sharks – “caterpillars,” as they are known in Malawi – charge impossible rates of interest. A few farmers in Zimba’s village raise small loans from a donor-supported microlender called the Malawi Rural Finance Corporation, but only those who are organized into groups to cross-guarantee each other’s borrowings are eligible. Such groups are exclusive: the most productive farmers do not want less able neighbors to spoil their collective credit history. “I wanted to join one of those groups,” said Zimba, “but it was full.” One of his neighbors told me that the village elite did not think Zimba quite made the grade.

  For those who cannot join credit circles, there is charity. The government hands out free “starter packs” of seeds and fertilizer, intended for the poorest farmers. Only thirty-two such packs arrived in Zimba’s village the previous year, for a population of about 900. They were not sent directly to the intended recipients; the poor do not have addresses. Instead, the chief doled them out as he saw fit. Zimba did not receive one.

  Almost 90 percent of Malawi’s 11 million people live off the land. Their average plot size is tiny: less than a hectare. Productivity is woeful. The population is expected to double by 2020. Unless a lot of people move to the cities, plots will continue to be sliced ever smaller. Smaller plots mean smaller harvests for each family, which is one reason why Malawi suffered deadly food shortages in 2002.

  Zimba sensed that there was little future in farming. His ambition, he said, was to be a hawker. He envisaged buying soap and paraffin in the nearest town and selling it in the village. It would be wonderful, he supposed, if he could one day earn enough to buy a bicycle. But, he said: “I haven’t got the money to get started.”

  Some people in Zimba’s position move to the city, find jobs, and save to start a small business. But this is hard. A Malawian peasant cannot usually sell his land without agreement from his family and the village chief. If he leaves his property unattended, there is a danger that the chief will give his land to someone else or that a sibling will grab it.

  When he arrives in the city, there will be no cheap shelter. Without mortgage lending, there are never enough houses in shanty towns. A landlord in Mtandire cannot borrow money to build and then recoup it from rental income. He has to pay cash in advance and then try to get it back. So a typical slum rent is much higher, relative to the value of the house, than it would be in a more affluent area where landlords have title deeds. In Mtandire, ten months’ rent will buy you the house.

  Capitalism needs rules

  The advantages of sound property rights are so taken for granted in the West that it is worth spelling them out. First, secure title makes assets fungible. In a country with good property laws, almost anyone can use a house or a piece of land as collateral to raise a loan. It is also easy to divide assets between multiple owners. Ownership of a factory, for example, can be shared out among hundreds of people, any of whom can sell all or part of his share without the need to take the factory physically apart. If a French farmer dies, his children can sell the farm, or retain equal shares in it, or the more agriculturally inclined sibling can buy the others out. The possibilities are legion. African smallholders, by contrast, have much less flexibility: plots tend to be divided into ever-smaller parcels with each generation.

  A uniform property system is also a way of sharing knowledge. When information about the ownership and value of houses, companies, and other assets is centrally recorded and freely available, it makes it easier for people to see economic opportunities outside their own neighborhood. In other words, formal property law enables people to do business with strangers. Those who are part of the formal property system have addresses, credit records, and identifiable assets. A Westerner who does not honor his debts is blacklisted. The debt collectors know where to find him and what to seize. So he has a powerful incentive to play by the rules. Millions of Third-World squatters, by contrast, cannot obtain telephone or electricity lines because no one trusts them to pay their bills.

  Western property laws protect not merely ownership but transactions, too. People in poor countries can usually prevent their assets from being stolen by forming self-defense groups or hiring the protection of local mobsters. But they cannot confidently buy anything they cannot see. Poor people carry their pigs and tobacco bales physically to market. The prohibitive cost of carrying them back means that they have to sell them right away, whether prices are good or not. American farmers sell paper representations of their crops, which is easier. To smooth their cash flow, they can sell the rights to purchase crops which have not yet been sown. If a Malawian farmer wants cash in advance, he must grow marijuana.

  The house that Nashon built

  When you cannot do business with strangers, you have to do everything yourself. This is inefficient. Imagine building your own house. Some Westerners do, of course, build their own houses, but not in the way rural Africans do. An American who wants to do it himself buys industrially produced bricks, cement, glass, nails, screws, drills, pipes, window frames, and so on. All these parts have been made cheaply and well by a company that specializes in making them and that has in turn bought its machine tools and accounting services from other specialists.

  Compare this with Nashon Zimba’s experiences. He digs up mud, shapes it into cuboids, and dries it in the sun to make bricks. He mixes his own cement, also from mud. He cuts branches to make beams and thatches the roof with sisal or grass. His only industrial input is the metal blade on his axe. Working on his own while at the same time growing food for his family, Zimba has erected a house that is dark, cramped, cold in winter, and steamy in summer and that has running water only when tropical storms come through the roof. He kindly invited me in, and I found that I could not stand up straight inside it. He told me that it would probably fall down within five years.

  I thought of my own home, with its sturdy walls and modern kitchen. Zimba is a skilled builder; I barely know which way is up on a brick. Yet he lives in a hovel, while I, like most Westerners, live in a relative palace, built by a network of millions of people I have never met. In all my travels, I have never seen a more poignant illustration of why the world’s poor people need capitalism.

  How to be formal

  Since the demise of the Soviet Union, few people still argue that property is theft. It is a rare despot – Robert Mugabe springs to mind – who openly urges his followers to grab other people’s land. In theory, property rights are available to all in most poor countries. But in practice, most poor people do not take advantage of these rights.

  It is often assumed that informal homes and businesses stay that way because their owners do not wish to pay taxes. This is doubtful. Taxes are of course burdensome, but the costs of extra-legality are often more so. The informal entrepreneur pays gangsters for protection and bribes officials to ignore him. His operations are often geographically dispersed to hide them from the authorities, which stops him from achieving economies of scale. He cannot declare limited liability or obtain insurance or cheap credit. In short, informality is uncomfortable.

  The reason that extra-legal businesses and la
ndowners in poor countries do not become legal is that it is absurdly hard to do so. In some parts of Africa, such as Ethiopia and Mozambique, freehold land ownership is simply not allowed. In others, bureaucracy blocks the way to formal ownership. In Egypt, to obtain permission to build a house on land zoned for agriculture takes six to eleven years. If you build first and then try to become legal, you risk having your home demolished and spending up to ten years in jail. In Angola, the deeds registry is so chaotic that even tower blocks in the capital city are sometimes subject to overlapping claims. You can rent an apartment from one ministry and be evicted the next month by another.

  In Malawi, the bureaucracy that administers property law is, in the words of an official commission of inquiry into the subject, “riddled with jurisdictional overlaps and internal conflicts” and “often the cause of delays, errors of judgement, lack of coordination, rampant corruption and dereliction of duty.”3

  Such obstacles are not a purely African problem. In Peru, Hernando de Soto’s researchers set up a one-man garment workshop and tried to register it. The team worked for six hours a day, filling out forms, traveling by bus into central Lima, and standing in line in front of the relevant bureaucratic desks. It took them 289 days to make their micro-enterprise legal and cost $1,231 – thirty-one times the monthly minimum wage in Peru.4

  All rich industrialized countries have secure property rights, accessible to more or less all citizens. No poor country has. Better property laws are not the only reason that some countries are richer than others, but they clearly make a difference. Many poor countries recognize this and are trying to devise ways to make their property systems more inclusive. But the hurdles are high.

  Lawyers often oppose attempts to simplify the law. Tribal chiefs resist changes that may reduce their power. And cultures, though they evolve quite rapidly, cannot be changed by fiat. People who live in traditional rural communities are often wary of alien ways of doing things. Stanley Ngwira, for example, chairman of an association of small farmers from Nashon Zimba’s district, finds the idea of selling land abhorrent. “There would be nothing for our children,” he told me with a frown.

  Tony Hawkins, a professor of business studies at the University of Zimbabwe, argues that it is relatively simple to institute sound property rules in cities but much harder in rural societies. While he admires de Soto’s work, he thinks the Peruvian has “glossed over” the difficulties of switching from communal to individual ownership in Africa, where most people are peasants, and most peasants are unfamiliar with written contracts.5

  Today’s rich countries took hundreds of years to forge uniform property codes. Until the last century (or more recently, in the case of Japan) they were shackled with multiple and contradictory sets of property laws. The early American colonists were mostly squatters. The country was so vast and sparsely populated that the land-hungry simply fenced and ploughed without worrying about title. Big landowners, such as George Washington, tried to evict and prosecute squatters, but they tended to resist violently, and juries seldom convicted them.

  Powerless to stop them, some legislators tried instead to bring squatters inside the law. As early as 1642, the state of Virginia passed a law that allowed for squatters to be compensated for improvements they had made to land they occupied. If the rightful owner was unwilling to pay, the squatters were given the right to buy the land from him at a price set by a jury. This helped many squatters to become legal.

  In the nineteenth century, when the pioneers rushed west to stake out claims to farms and gold mines, they made their own local rules to determine who owned what. Several states passed laws allowing those who occupied and improved idle land to claim title to it. Federal law followed behind. There was a heroic effort to tie all local property systems together into a single code. The Homestead Act of 1862 and the mining law of 1866 essentially formalized the arrangements that extra-legal farmers and prospectors had already worked out for themselves hundreds of miles from Washington.

  For poor countries today, the lesson is not in the details of American history but in the general principles. For property law to be respected, it has to reflect what is actually happening on the ground, and it has to try to include as many people as possible.

  Poor countries’ efforts at reforming property law have rarely succeeded. Middle-class reformers have too often assumed that their ideals could be imposed on the poor. In Peru, for example, numerous attempts to give indigenous people title to their land failed because the mechanisms by which they could assert this right were too complex and costly.

  In Malawi, laws allowing freehold and leasehold were introduced by the British in colonial times but were never widely trusted because they were the means by which settlers hoodwinked the locals into surrendering their ancestral lands. The despot Banda also tried to encourage formal ownership. But his habit of grabbing large tracts of land for his cronies undermined the rule of law. Banks were forced to lend for political rather than commercial reasons, which prevented the evolution of property-backed lending.

  The Malawian government said, in 2001, that it wanted to make it easier for holders of customary land to upgrade to formal leasehold. But it has yet to persuade people that formality offers concrete advantages and that it does not conflict too much with their traditions. All this will take time, especially since not all Malawian politicians are exactly passionate about property rights. In 2002, the government took a retrograde step by declaring that leaseholds held by foreigners, including Malawi’s sizeable Asian minority, would not confer the same rights as those held by native Malawians.

  Africa, like Malawi, has a long way to go before its people can unlock the wealth trapped in informal property. But it can be done. In every poor village, anywhere in the world, people know who owns what. De Soto tells a story. On farms in Bali there are few fences to mark the boundaries between properties. But the dogs know. Cross from one farmer’s land to his neighbor’s, and a different dog barks. The challenge for governments in poor countries is to take the information contained in those yelps and fashion from it a clear and enforceable set of laws. The alternative, in Africa and elsewhere, is to stay poor.

  4. SEX AND DEATH

  The calamity of AIDS

  I was staying in a vile hotel in Port Harcourt, in Nigeria’s oil-rich Niger delta. The sheets on my bed were ragged and torn, the breakfast bacon was leathery and lukewarm, and there was a sign on the door warning me not to steal things from the room. This being an oil town, my fellow guests all had something to do with the business. All were involved either in pumping the black stuff or protesting about its environmental impact. Burly drilling engineers from Texas mixed with earnest greens from London in the execrable Chinese restaurant on the ground floor.

  Port Harcourt is humid, malarial, and prone to riots. No one comes here for fun. But a risky kind of entertainment was rather obviously available. A crowd of prostitutes dawdled in the lobby, between the Chinese restaurant and the elevators. Any male guest who had finished his glutinous chicken-with-tinned-mixed-vegetables and wanted to go to bed had first to dodge some forceful sales pitches. On my first night in the hotel I was outnumbered by about forty to one. The shyer ladies merely beckoned; the more aggressive ones seized handfuls of sleeve or trouser-leg and tugged. One lady grabbed my wrist, declared that she had fallen in love, and pulled me towards the toilets.

  After several embarrassed no thank yous, I reached the elevator. But before I could close the door, one of the largest prostitutes squeezed in too and started to tear at my shirt buttons. Then the power failed, the elevator groaned to a halt between floors, and the lights went out. I’m not sure how long it was before the back-up generator kicked in. But time does not hurry when you are trapped in a steel box with a sex worker who weighs more than you and won’t take no for an answer. Every time I pushed her away, she offered to lower the price. She was down to $5 before I convinced her that it wasn’t a question of money.

  “So you’re worried about
disease?” she asked. I repeated that I was married and simply not interested in her services. She began to explain various ways in which she could enliven my evening without swapping body fluids. “I can give you a massage,” she said. And then, gesturing between her legs, she added: “You don’t have to touch me here.”

  As a man who travels alone in Africa and stays in reasonably expensive hotels, I have been propositioned rather a lot. In bars, ladies with long purple fingernails and brittle perms often sit beside me and smile. In most African cities I visit, hopeful girls wave from under broken streetlights or tap on the windows of my taxis and rental cars. Sometimes they are desperately pushy. A waitress in a hotel in Brazzaville memorized my room number when I signed a bill, knocked on my door at midnight, shoved her foot in to stop me shutting it, and wriggled inside. She then refused to leave until I took her by the shoulders and pushed her gently but firmly outside.

  A barbershop I used to visit in Zimbabwe mirrored that country’s decline over the years I’ve reported from it. It was a friendly place with pink walls in a smart part of Harare, the Zimbabwean capital. In 1998, when I first walked in, it was just a barbershop: bustling, thriving, and businesslike. The young women working there were mildly flirtatious, but they never offered to do more than just cut my hair. They did it cheaply and well, so whenever I later found myself in Harare with a fringe flopping into my eyes and an hour to kill, I went back.

  Each time I returned, the barbershop had grown emptier and sleazier. The government’s terror campaign against whites and dissidents had driven off all the tourists, and the collapse of Zimbabwean industry had drastically reduced the number of locals who could afford to pay someone else to cut their hair. The lines of customers vanished, and the hairdressers gradually switched from light-hearted flirting to insistent hustling. The last time I went there, in 2001, I was the only customer. Before I even sat down in the barber’s chair, the lady I had asked to cut my hair offered instead to take me upstairs for a shower and a body-rub. When I said no, she asked if I preferred one of the other women working there. Two of her colleagues appeared from nowhere and started pulling my wrists. I left a bigger-than-usual tip for the haircut and never returned.