Africa Must Unlock the Capital Beneath Its Farmers’ Feet

Agriculture is the foundation for Africa’s economic takeoff, but without land tenure reform, its potential will remain untapped.

Africa’s quality of governance has largely stagnated or declined over the past decade, as reflected in the World Bank’s Governance Effectiveness Index, Afrobarometer surveys across countries and the Ibrahim Index of African Governance.

Africa’s youthful population is governed by elderly political elites and often influenced by traditional authorities whose incentives, worldviews and institutional interests favour continuity over change. This mismatch suppresses creativity, weakens accountability and locks societies into low-productivity economic structures.

For most policymakers, Western donors and many academics, prioritising good governance – respect for human rights, democracy and the advancement of women – will ultimately speed up development. But these efforts may have overloaded the menu by emulating practices in high-income democracies rather than those better suited to developing economies, where effective governance and economic growth are perhaps more important.

Africa’s development depends on breaking the grip of gerontocratic political systems and reforming the power and functions of traditional leadership, particularly where these constrain economic transformation and innovation. This can be done by formalising land and property rights and creating institutions that enable innovation, competition and generational renewal.

Given the importance of agriculture, land in Africa is the largest source of potential capital. This point was advocated by economist Hernando de Soto, whose work on formal property rights and ‘dead capital’ highlights the single most important barrier to agricultural development in Africa.

De Soto argues that many of the world’s poor already possess assets – particularly land and housing – but cannot convert them into productive capital because of defects in legal and institutional systems. His book, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, published in 2000, attracted the attention of development economists, political scientists and anthropologists alike.

De Soto introduced the concept of ‘dead capital’ to describe assets (such as land, housing and small enterprises) that cannot be used to generate further capital because they lack formal recognition, legal documentation or clear property rights. He estimated that the value of such assets in developing and former communist countries could be in the trillions of dollars, although his methodology subsequently came in for considerable criticism.

He noted that in those countries, ‘most of the poor already possess the assets they need to make a success of capitalism … But they hold these resources in defective forms … They have houses, but not titles.’ His work emphasised the importance of converting an asset into capital – using it as collateral, liquidating it or leveraging it to generate investment.

For De Soto, much of Western countries’ wealth stemmed from formal property-rights systems, which allowed assets to be converted into productive capital. In many developing countries, such systems are weak or absent. Instead, as much as 90% of land in sub-Saharan Africa is managed under customary tenure systems, meaning that it is not under formal statutory freehold leases.

Land management is important because agriculture serves as the foundation for economic takeoff. Often, agriculture provides the initial productivity gains and surplus that traditionally underpin industrial growth. It does so by freeing up labour and providing capital for other sectors, and by generating a surplus for investment in industry and services.

Africa has the world’s largest agricultural potential, yet it is increasingly dependent on food imports. Given the land-ownership structure and the incentives created by governments and institutions that shape the conditions under which farmers operate, the continent’s potential remains largely untapped.

With a few exceptions, like South Africa’s commercial farming sector, Africa’s agricultural productivity is below that of other developing regions. As a result, relatively modest investments could deliver a ‘step change’. Irrigation, seeds and support services providing farmers with practical knowledge, training and advice to improve productivity and infrastructure could yield substantial gains.

Land ownership reform is also vital. One study found that formal tenure registration covered only 2%-10% of the land in many parts of rural Africa. Challenges include the multiplicity of tenure forms, overlapping customary and statutory rights, weak mapping and record-keeping, and informal subdivision and leasing.

Formalising land ownership is easier said than done. Informal tenure systems, customary rights and communal ownership in Africa differ from Western property models. Formalisation must inevitably be carried out carefully to avoid dispossession and exclusion, or encourage predatory lending.

Secure property rights – including clear titles, official registration, enforceable rights and accessible legal mechanisms – are key for assets to become capital. When property rights are insecure, people are less likely to invest in improvements, less able to use the asset as collateral and more likely to remain stuck in informal markets.

De Soto’s approach is institutional: he emphasises the need for aligned legal frameworks, registries, land markets and valuation systems so that assets can be recorded, traded and integrated into a formal economy. The solution, he argues, is to integrate informal assets into formal systems.

More than two decades after De Soto’s research, technology such as smartphones and digital cadastral systems that combine maps with legal, valuation and planning records in real time, can accelerate implementation and improve clarity in land ownership.

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