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}KX-  }K - Introduction.  d(#jSouth Africa is strategically located at a critical point on the sea lanes and contains deposits of a variety  d(#/of significant minerals and strategic materials. It has the most developed and diversified economy in  d(#subSaharan Africa and possesses the continent's most modern and efficient road, rail and  d(#telecommunications networks. The 1994 gross domestic product (GDP) of $120 billion is  d(#approximately 1.5 times as large as the rest of the combined economies of Southern Africa. South  d(#Africa is the United States' largest trading partner in Africa, with a volume of bilateral trade of over $4  }K` - d(#?billion in 1994. U.S. private sector investment in the country exceeds $1 billion. Under apartheid,  d(#0South Africa's external debt was kept low. The total foreign debt in 1994 was nearly $28 billion.  d(#NGiven the strategic and economic importance of a stable and prosperous South Africa, it is in the  d(#national interest of the United States to ensure that all of South Africa's citizens are permitted to  d(#achieve the economic benefits of their newfound political freedoms. Moreover, South Africa has  d(#lbecome a symbol and model to the world of the possibility of resolving serious political, racial and  d(#>ethnic differences through negotiation and compromise. In recognition of South Africa's importance,  d(#"Vice President Gore and Deputy President Mbeki established the U.S.South Africa Binational  d(#>Commission, in March 1995, to facilitate bilateral cooperation on issues of mutual concern. Only two other countries, Russia and Egypt, have similar commissions with the United States.  d(#Yet, South Africa faces serious challenges. The majority of the population has been largely denied  d(#access to health, education and economic facilities and advancement opportunities for decades. Only  d(#kby fully addressing those needs can the full transformation of the country take place. A rise in crime  d(#and political violence underscores the need to show progress quickly. Otherwise, popular rejection of  d(#the current pragmatic approaches to growth and development arising from unfulfilled expectations  d(#/among the majority population will become increasingly difficult to avoid. Such a rejection could lead  d(#mto the type of populist and statist policies that have brought ruin to many subSaharan African  }Kp- d(#countries. South Africa's Government of National Unity (GNU) may face a crisis of expectations in the  d(#longterm, if it cannot produce tangible gains for the disadvantaged population. The GNU's ability to  d(#produce significant social and economic gains for the disadvantaged population will depend mainly on South Africa's successes/actions in spurring economic growth. South Africa faces four major longterm developmental challenges: X` hp x (#%'0*,.8135@8:socioeconomic development challenges. South Africa is a sound investment for foreign assistance.  d(# The twoyear old, postapartheid government, led by President Nelson Mandela, is pursuing prudent  d(#social and economic policies. South Africa's strong commitment to the full implementation of  d(#participatory democracy, its strong resource base, and its efficient infrastructure guarantee solid returns to USAID investments and a mediumterm graduation from external assistance.  }K(-"(0*0*0**"  }K- The Development Challenge.  d(#/Two years into South Africa's transition to democracy, dualism (i.e., two worlds in one country) is  d(#a term that still best reflects South Africa. Its financial, industrial, and agricultural sectors exhibit many  d(#of the characteristics of first or second world economies. However, much of the economy and the majority of the population exist in conditions similar to those in most third world countries.  d(#Growth, investment and economic assistance are needed to reduce the alarming poverty in South  d(#Africa. At present, approximately 48% of all South African households lack adequate housing. An  d(#estimated 34% lack safe water and 45% lack adequate inside sanitation. More than one third of the adult work force is jobless, while 50% of the work force is functionally illiterate. The vestiges of the apartheid system that remain are especially formidable: X` hp x (#%'0*,.8135@8:From its inception the USAID program in South Africa sought to empower the majority population. All  d(#/USAID programs maintain this as a key tenet. Throughout the portfolio, assistance is being provided  d(#=to develop and institutionalize linkages between the government and NGOs and emphasize a community  d(#development approach. This builds on USAID's long-standing relationship with NGOs. In the education "'0*0*0*)"  d(#yand health sectors, governance assistance is being provided to strengthen the newly elected provincial  d(#/governments. In housing, technical assistance is being provided to municipal governments in urban planning and linking that planning process to community organizations.  }K - ,` Strategic Objective 1:  Selected Areas of Democratic Governance Deepen and Consolidated.  }K- Agency Goal: Encouraging Broadbased Economic Growth  }Kx-  d(#Economic growth in South Africa can only achieve its full potential through economic empowerment  d(#0of all South Africans. Four of USAID/South Africa's six objectives actively contribute to this goal through an improved human resource base, economic growth and equity, and educational status.  d(#The Government and NGOs are building analytical skills for examining economic issues. A bilateral  d(#agreement has been signed with the Ministry of Education to work at the national and provincial levels  d(#{to reform policies, improve educational systems, and provide economics training programs. In the  d(#leducation sector, USAID is building on years of experience working with NGOs. Successful pilot  d(#]programs of the nongovernment organization (NGO) community are being replicated, often using  d(#government resources. In the areas of private sector development and housing, capital is being  d(#leveraged through the Small Business Loan Portfolio Guaranty Program, and the Housing Guaranty  d(#Program. Capital is being made available to South Africans who would otherwise have littletono  d(# access to sufficient capital to begin or expand an enterprise or own a home. In addition, about $12  d(#million in private, domestic capital has been made available for small enterprises $75 million USAID  d(#private sector housing guaranty program has created a $225 million fund for housing mortgages. In  d(#1995, the first year of operation, over 23,000 mortgages were provided. The accessibility of equity  d(#or longterm risk capital will become a possibility for historically disadvantaged South Africans through  d(#jthe Southern African Enterprise Development Fund (SAEDF) and bilaterallyfunded technical assistance.  }K- ,` Strategic Objective 2:` Improved Policies, Systems, and Capacities, Contributing to a Transformed Education System. (#  }K- ,` Strategic Objective 4:` Improved Capacity of Key Government and Nongovernment Entities to  ,`*Formulate, Evaluate and Implement Economic Policies to Promote Economic Growth and Equity.(#  }K- ,`; Strategic Objective 5:` Increased Access to Financial Markets for the Historically Disadvantaged Population.(#  }K- ,`) Strategic Objective 6:` Improved Access to Environmentallysustainable Shelter and Urban Services for the Historically Disadvantaged Population. (#  }K -  }K- /d(# "Agency Goal: Stabilizing World Population and Protecting Human Health  d(#>One of the major health care challenges for the new South Africa is to provide equity in basic health  d(#care to all South Africans and rectify the underlying inequities in health services under apartheid. The  d(#impact of past inequities and the urgent need for an integrated health system can be illustrated through  d(#just a few indicators. First, the infant mortality rate among black children is nearly 10 times higher than  d(#lthat of white children. Second, at least a third of women in rural areas give birth at home without  d(#trained assistants and this often results in the mother's death. Third, the HIV epidemic soars with a doubling rate of infection every 1315 months.  d(#MHealth care for its citizens is a major focal point for the GNU. Under the RDP approximately onethird  d(#of program funds will be directed to the restructuring and shifting of health care resources toward  d(#primary health care. USAID will complement GNU efforts through a project designed to assist in the  d(#.integration of primary health care systems. These systems will now incorporate family planning, which  d(#was a sensitive and political issue in the past. The GNU will be developing effective maternal and child  d(#Lhealth care and women's services that will meet the needs of clients to space and/or limit births in order to improve the health of both mothers and children."h)0*0*0*z+"Ԍ d(#ԙOver the past year, USAID has worked with the GNU Ministry of Health (MOH) and the NGO  d(#community on the design and implementation of an integrated primary health care program, including  d(#za program to improve access to HIV/AIDS prevention services. In addition, this project includes work  d(#at the national and provincial levels to reform policies and improve systems to more equitably distribute health care benefits.  }K- ,` Strategic Objective 3:` A More Equitable, Unified and Sustainable System Delivering Integrated Primary Health Care Services to all South Africans.(#  }K@-     }K- Agency Goal: Protecting the Environment  }K