Poverty in South Africa is predominantly, but not exclusively, a rural problem. Roughly 40% of the total population resides in rural areas. However, the high rate of growth in the urban areas (almost 3% per year) could shift the population such that 80% of the population might live in urban areas by the year 2010. The small, poorly-constructed, over-crowded housing of the urban poor generally lacks public utilities. Housing has been ranked by historically disadvantaged South Africans as one of their three highest priorities, along with education and health. A shortage of 1.5 million units in urban areas alone needs to be addressed.

The following demonstrates the progress which South Africans are making in their transition to a pluralistic democracy: (1) a new constitution and bill of rights are being drafted; (2) Parliament has rejected its past "rubber-stamp" role and has moved to develop more meaningful oversight and legislative initiative; (3) non-governmental organizations (NGOs) continue to be active in policy debate and advocacy; (4) the judiciary is being reformed; (5) human rights are being promoted; and (6) freedom of expression is a reality. More modest progress has been made on reform of the civil service and development of policies on decentralization.

However, the full democratic transition in South Africa will take several years. There is still a complex set of political, institutional, and legal changes to make participatory democracy and human rights protection a firm reality. For example, there is a widespread lack of experience among newly elected or appointed government officials; new government structures are just being formed in the provinces; the relationship between national, provincial and local levels of government is still evolving and is potentially contentious; political violence continues to be a problem, particularly in KwaZulu-Natal Province; and Government and NGOs are still forging new working relationships. In addition, fundamental changes in attitude and behavior are needed for democracy to become not only the letter but the spirit of the law.

The GNU's national Reconstruction and Development Program (RDP) has made solid gains in child-feeding programs, maternal and child health, and electrification. More modest progress has been made in land restitution, access to education, and liberalization of economic policies. Progress has been slower on projects that involve extensive community participation.

Other Donors.

In FY 1995, the United States accounted for 24% of total official development assistance and was the largest bilateral donor. Other major donors are the European Union, Japan, Sweden, the United Kingdom, Germany and Denmark.

FY 1997 Program.

The USAID/South Africa program strategy is designed to assist the South Africans through the difficult, post-apartheid, transition years and leave in place irreversible, improved human capacity and institutions, and greater access to capital that will promote the consolidation of democracy and appropriate, equitable use of national resources. The areas of focus include (1) democracy and governance, (2) educational reform, (3) health system reform, (4) economic policy, (5) private sector development, and (6) housing and urban development. Both global peace and U.S. national interests are served by establishing South Africa as an effective model of non-racial pluralistic democracy. Key to this is the continued access of people to decision-making processes and government structures that are transparent, accountable and efficient.

U.S. interests will be well served by supporting South Africa's emergence as a strong trading partner that can play a leadership role in the Southern Africa region. The economy of South Africa has been faltering for several years due to low levels of investment and productivity. To address this problem, markets need to be established, especially in the area of small, medium and micro-enterprises.

Agency Goal: Building Democracy

Consolidation of democracy is the most apparent political challenge in the new South Africa. South Africa made impressive progress in building a sense of unity and reconciliation under the new democratic government -- particularly in securing the support of the white population. The GNU is succeeding in getting the main political forces in the country to work effectively together and including them in provincial and local governments. The reconciliation process, through the new Truth and Reconciliation Commission, also will soon address past transgressions by previous government officials and others during the apartheid era.

The weakest link in democratic participation in South Africa today is the connection between the formal government structures and the people at the grassroots level. Effectiveness has been hampered by the majority population's lack of experience in political participation, poverty, and lack of education. New methods for involving the majority population in government decisions are being developed.

Governance is a serious weakness of the GNU at all levels -- national, provincial and local. In part, this is due to the inherited, entrenched bureaucracy and the lack of adequately trained personnel to fill key executive and management positions. New officials are trying to establish a new public service culture that is more innovative and less hierarchical, more product- and service-oriented and less procedure-driven, and more in touch with the people. Improvements in democratic governance is a major long-term challenge in South Africa and critical to broader economic development.

USAID provided broad assistance (e.g., voter education, electoral systems support, political party strengthening) for the historic 1994 national elections. This included USAID-funded voter education which reached nearly 25 percent of those individuals who had never before been allowed to vote. USAID also supported the 1995 local elections to deepen and strengthen the roots of democracy at the local level. New decision-makers are now being trained to take up their new posts. Violence mitigation efforts have proven highly successful throughout South Africa to the extent that skills in this area are being sought from other countries in and outside of the region.

From its inception the USAID program in South Africa sought to empower the majority population. All USAID programs maintain this as a key tenet. Throughout the portfolio, assistance is being provided to develop and institutionalize linkages between the government and NGOs and emphasize a community development approach. This builds on USAID's long-standing relationship with NGOs. In the education

and health sectors, governance assistance is being provided to strengthen the newly elected provincial governments. In housing, technical assistance is being provided to municipal governments in urban planning and linking that planning process to community organizations.

The Government and NGOs are building analytical skills for examining economic issues. A bilateral agreement has been signed with the Ministry of Education to work at the national and provincial levels to reform policies, improve educational systems, and provide economics training programs. In the education sector, USAID is building on years of experience working with NGOs. Successful pilot programs of the non-government organization (NGO) community are being replicated, often using government resources. In the areas of private sector development and housing, capital is being leveraged through the Small Business Loan Portfolio Guaranty Program, and the Housing Guaranty Program. Capital is being made available to South Africans who would otherwise have little-to-no access to sufficient capital to begin or expand an enterprise or own a home. In addition, about $12 million in private, domestic capital has been made available for small enterprises $75 million USAID private sector housing guaranty program has created a $225 million fund for housing mortgages. In 1995, the first year of operation, over 23,000 mortgages were provided. The accessibility of equity or long-term risk capital will become a possibility for historically disadvantaged South Africans through the Southern African Enterprise Development Fund (SAEDF) and bilaterally-funded technical assistance.

Health care for its citizens is a major focal point for the GNU. Under the RDP approximately one-third of program funds will be directed to the restructuring and shifting of health care resources toward primary health care. USAID will complement GNU efforts through a project designed to assist in the integration of primary health care systems. These systems will now incorporate family planning, which was a sensitive and political issue in the past. The GNU will be developing effective maternal and child health 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.

Over the past year, USAID has worked with the GNU Ministry of Health (MOH) and the NGO community on the design and implementation of an integrated primary health care program, including a program to improve access to HIV/AIDS prevention services. In addition, this project includes work at the national and provincial levels to reform policies and improve systems to more equitably distribute health care benefits.

USAID/South Africa's limited environmental activities are largely urban and part of the housing and urban development programs. The small, poorly-constructed, over-crowded housing of the urban poor generally lacks access to sanitation, clean water, and electricity. An estimated 48% of all households do not have access to flush toilets or ventilated, improved, pit latrines and 16% have no access to any form of sanitation system. Poor sanitation among low-income households can lead to diarrhea and, in many cases, infant deaths. Currently, only two out of five low-income households are serviced by electricity. In the absence of electricity, coal and wood burning stoves are utilized for heat and food preparation, resulting in serious air pollution and respiratory problems. These conditions, combined with overcrowding, are leading to an urban environmental crisis that will be further aggravated by increased migration to urban centers.

USAID continues to support the establishment and implementation of policies which protect the urban environment. USAID-funded studies have increased the pool of information available to policy-makers and urban planning now incorporates environmentally sound interventions. In addition, through community involvement in the planning process, housing solutions are becoming more environmentally sound and sustainable.

	Encouraging Broad-based Economic Growth	Stabilizing World Population Growth & Protecting Human Health	Protecting the Environment	Building Democracy	Providing Humanitarian Assistance	TOTALS
USAID Strategic Objectives
1. Selected Areas of Democratic Governance Deepened and Consolidated - Dev. Fund for Africa				18,000,000		18,000,000
2. Improved Policies, Systems, and Capacities, Contributing to a Trans- formed Education System - Dev. Fund for Africa	21,509,938					21,509,938
3. A More Equitable, Unified and Sustainable System Delivering Integrated Primary Health Care Services to all South Africans - Dev. Fund for Africa	300,000	12,823,662				13,123,662
4. Improved Capacity of Key Government and Non-Government Entities to Formulate, evaluate and Implement Economic Policies to Promote Economic Growth and Equity -Dev. Fund for Africa	4,650,000					4,650,000
5. Increased Access to Financial Markets for the Historically Disadvantaged Population -Dev. Fund for Africa	17,395,648					17,395,648
6. Improved Access to Environmentally- Sustainable Shelter and Urban Services for the Historically Disadvantaged - Dev. Fund for Africa	3,800,000		4,244,380			8,044,380
Totals - Dev. Fund for Africa	47,655,586	12,823,662	4,244,380	18,000,000		82,723,628

USAID Mission Director: Leslie A. Dean

PROGRAM: SOUTH AFRICA
TITLE AND NUMBER: Selected Areas of Democratic Governance Deepened and Consolidated,
674-S001
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $18,000,000 DFA
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: 2005

Purpose: To deepen and consolidate selected areas of democratic governance through increased human rights protection and access to the justice system; promotion of public and civil society participation in policy development; conflict resolution efforts, partnerships for development among provincial governments, non-government organizations (NGOs), and the private sector; and increased governmental capacity to manage a participatory development process.

Background: Democratic governance is pursued not only as an end in itself but also as a policy tool to achieve USAID/South Africa's other strategic objectives. Progress in the political arena must continue in order to provide the stability and overall framework for sustainable development in South Africa.

USAID Role and Achievements to Date: USAID's program under Strategic Objective one is in transition from short-term election focused priorities to those longer-term, societal changes necessary to consolidate democracy, build governance capacity, and strengthen participatory development. Support for South African NGOs in human rights promotion and conflict resolution activities continues, with a special focus of the latter on the KwaZulu-Natal Province. A bilateral agreement with the Ministry of Justice supports increasing access to legal services by the majority population. Public and civil society participation in policy development will be promoted by assistance to both the NGOs and government (especially legislatures). Previous support for NGOs involved in community and leadership development is giving way to new programs in focus provinces to build and strengthen partnerships for sustainable development among government, NGOs, and the private sector. Short-term governance training and technical assistance will be supplemented by efforts to develop local schools of government in South African universities. Principal accomplishments of the recent past are: (1) major USAID support (e.g., voter education, electoral systems assistance, political party strengthening) to the historic 1994 national elections, which were widely viewed as successful; (2) more limited USAID assistance for the successful 1995 local elections; (3) major contributions to conflict resolution and violence mitigation (including support for selected high-level political dialogues); (4) development of leaders in civil society who moved into key positions in government; and (5) strengthening civil society organizations through training leaders, improving internal management systems and increasing outreach skills.

Description: USAID will continue to channel most of its assistance through South African NGOs and U.S. private voluntary organizations (PVOs), including much of that to assist government. Whereas most programming in this strategic objective was done through unsolicited proposals in the past (with activities selected competitively from large numbers of proposals), most new programming will be through solicited proposals linked to specific results targeted in the USAID's new strategy. To allow effective oversight and monitoring of a large number of activities by a limited USAID staff, the USAID will program a growing proportion of its assistance through "umbrella organizations" that will make subgrants for specific activities. USAID will not focus on areas where it appears the Government of National Unity (GNU) can perform adequately on its own over time. USAID will coordinate carefully with other donors to avoid duplication of assistance.

Host Country and Other Donors: At the national level, the European Union, Sweden, the Netherlands, the United Kingdom, Canada, the United Nations, Australia and Germany, are providing assistance in the development of the new constitution, human rights, land tenure, conflict mediation, election systems, administration of justice, public administration and support for the RDP. The same group ofdonors is working at the provincial level to strengthen government capacity to implement voter education projects and strengthen local community support organizations. Under USAID's bilateral agreement with the Ministry of Justice, the government is providing significant contributions to expanding legal access and coordinating assistance from other donors to support related objectives. Throughout the process of developing this strategic objective, USAID has carried out extensive consultations with local NGOs, U.S. PVOs, government representatives, and other donors.

Beneficiaries: The ultimate beneficiaries of improved governance and democratic processes are the entire population of South Africa, in particular, members of the disadvantaged majority population. Intermediate beneficiaries include national and provincial governments, parliamentarians and NGOs.

Principal Contractors, Grantees, or Agencies: USAID implements activities through a large number of South African NGOs, a small number of U.S. PVOs, the Government of National Unity, and a small number of U.S. contractors.

Major Results Indicators:
Baseline Targets
Long-term results:
Improved Human Development Index^1/ (HDI) .500 (1992) .700 (2002)
for historically disadvantaged population
Improved political participation at all levels race-based (1994) non-racial (2004)
Short- to medium-term results (illustrative):
Conditions for democracy strengthened weak conditions stronger conditions
(South African Democracy Index)
Government capacity for managing 0 provinces 3-5 provinces
participatory development strengthened
Effective models of government/civil 0 provinces 3-5 provinces
society partnerships and
community participation demonstrated
and disseminated in focus provinces
Role of civil society organizations (CSOs) 0 CSOs 2 CSOs
expanded in the southern Africa region

A new census, planned for October 1996, will do away with discrepancies in the past censuses, identify villages and informal settlements, and disaggregate data to show race, among other variables, to help track changes in racial inequality.

ACTIVITY DATA SHEET

PROGRAM: SOUTH AFRICA
TITLE AND NUMBER: Improved Policies, Systems, and Capacities, Contributing to a Transformed Education System, 674-S002
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $21,509,938 DFA
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: 2005

Purpose: To improve policies, systems, and capacities, contributing to a transformed education system through policy reform, establishment of systems to execute and implement policies, and capacity building.

Background: Without improvements in the majority population's educational level, other USAID assistance will be diminished and short-lived. Particularly critical in the immediate future is assistance in basic and tertiary education.

USAID Role and Achievements to Date: USAID will support the implementation of the National Qualifications Framework (NQF) which is extremely comprehensive and defines qualifications required for students to progress along various educational levels. USAID will focus its assistance on the areas of education policy and systems and the capacity of the GNU to manage the same. Given USAID's extensive experience with the NGO community in this sector, USAID will utilize NGO expertise to effectively implement this program and facilitate productive links between the NGOs and government. During the past year, USAID has formalized its relationship with the government at the national and provincial levels. Earlier, USAID worked with NGOs to develop exemplary models for the underserved majority population which will be replicated and used by GNU to broadly address underserved populations.

Description: USAID's support will focus on assisting the GNU in the implementation of its newly-developed NQF, which extends from primary through tertiary levels. USAID will provide assistance to the GNU at the national and provincial levels to establish and reform education policies through NGOs. Also, USAID will provide support to the various commissions established to restructure higher and tertiary education. A National Youth Commission will be established to formulate education policies with regard to majority youth. Support to education sub-systems will focus largely on accreditation and increasing the ability of students to advance through the educational system without losing credits. Also, in terms of support to historically disadvantaged universities, USAID will provide assistance to selected academic disciplines (e.g., mathematics, science, engineering, public administration, and management), faculty development, student academic support, career counseling and research skills as well as help establish Centers of Excellence.

Host Country and Other Donors: USAID has signed three bilateral agreements with the Ministry of Education and one with the Office of the Deputy President. In all cases, the government is providing counterpart support. Major donors in this sector include the United Kingdom and Canada in teacher training and basic education, Japan in technical education, the Ford Foundation and Australia in tertiary education, the Netherlands in youth activities, and Norway and Sweden in NGO strengthening.

Beneficiaries: The beneficiaries of improved educational systems are the South African students, who will receive a better education and teachers and administrators who will receive relevant training. All students and teachers will benefit through improved materials and policies. Employers will benefit through a better educated work force. National and provincial governments will receive improved technical development of their work force and clients.

Principal Contractors, Grantees, or Agencies: USAID implements activities through a variety of South African and U.S. NGOs, the GNU and U.S. and South African contractors.
Baseline Targets
Major Results Indicators:
Long-term results:
Improved Human Development Index (HDI) .500 (1992) .700 (2002)
for historically disadvantaged population
Improved educational status:
--increased access to tertiary education 6 per 1,000 (1992) 18 per 1,000 (2002)
for the majority population
--improved literacy index .766 (1991) .995 (2001)
Short to medium-term results (illustrative):
Improved education system fragmented unified

ACTIVITY DATA SHEET

PROGRAM: SOUTH AFRICA
TITLE AND NUMBER: A More Equitable, Unified and Sustainable System Delivering Integrated Primary Health Care Services to All South Africans, 674-S003
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $13,123,662 DFA
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2002

Purpose: To assist the GNU to provide a more equitable, unified and sustainable system which delivers integrated primary health care services to all South Africans by increasing access to an integrated package of primary health care (PHC) services, and improving the institutional sustainability of critical PHC management and service delivery systems.

Background: The major health care challenge for South Africa is to provide equity in basic health care delivery to all South Africans, and rectify the underlying inequities in the provision of health services. This has led the GNU to designate approximately one-third of its RDP health priority areas to restructuring and shifting of health care resources. USAID will complement GNU efforts through a single, comprehensive project emphasizing the focused nature of USAID assistance in accomplishing the most critical objective of the RDP's strategy in the health sector which is to provide.

USAID Role and Achievements to Date: The rationale for supporting the development of an integrated primary health care system rather than the delivery of specific health interventions, such as family planning or HIV/AIDS, is based on the fact that the GNU has identified this system as the cornerstone of its new health system. Following a year-long design process, a bilateral agreement to implement this strategy was signed with the GNU in September 1995. Other activities were carried out concurrently with the design process. These bridging activities included: (1) implementation of a nationwide demographic and health survey (DHS); (2) a national-level health system situation analysis; (3) development of an in-service training program in integrated primary health care principally for rural nurse clinicians; and (4) development of an in-service management training program for health managers at the provincial level and below. In addition, USAID has continued its work with NGOs involved with HIV/AIDS prevention work which will be part of the strengthened PHC service delivery program.

Description: USAID will implement its interventions for this strategic objective through the Equity Integrated Primary Health Project which is funded through a bilateral agreement with the GNU. Key aspects of that project include: (1) increased access to integrated PHC services for the underserved population; (2) establishment of effective health care referral systems to ensure that clients initially seek care at the appropriate level and are referred to another level when appropriate; (3) enhanced management skills of PHC managers at the provincial level and below through improvement of training and management systems; (4) increased efficiency and effectiveness of PHC service delivery through greater integration of PHC services, better resource reallocation between curative and preventive services, improvement in management systems, and greater cost-effectiveness; (5) strengthened and sustained PHC training programs at the provincial level through the implementation of training action plans and support for the development of a unified national school of public health; and (6) the effective use of information systems at provincial level and below.

Host Country and Other Donors: Key donors in this sector include: the European Union (EU), the British Overseas Development Administration , the World Bank and UNICEF. The GNU has demonstrated its support for this objective by providing counterpart support in excess of the required 25% host country contributions.

Beneficiaries: The ultimate beneficiaries of improved health systems are those individuals previously denied adequate health care. Intermediate beneficiaries will be health care professionals and provincialministries.

Principal Contractors, Grantees, or Agencies: USAID will implement activities through a variety of South African and U.S. NGOs and contractors. The principal institutional contractor will be selected in FY 1996.

Major Results Indicators:
Baseline Targets
Long-term results:
Improved Human Development Index (HDI) .500 (1992) .700 (2002)
for historically disadvantaged population
Improved health status:
--reduced infant mortality rate 1997 DHS by 30% (2000)
--reduced under 5 mortality rate 1997 DHS by 30% (2000)
--reduced fertility rate 1997 DHS by 10% (2000)
Short to medium-term results (illustrative):
Improved primary health care system fragmented unified; more equitable

ACTIVITY DATA SHEET

PROGRAM: SOUTH AFRICA
TITLE AND NUMBER: Improved Capacity of Key Government and Non-Government Entities to Formulate, Evaluate and Implement Economic Policies to Promote Economic Growth and Equity,
674-S004.
STATUS: New
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $4,650,000 DFA
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2005

Purpose: To improve the capacity of key government and non-government entities to formulate, evaluate and implement economic policies to promote economic growth and equity through improving human resource development in economics and policy analysis for key government entities, strengthening the capacity of government departments to effectively manage economic policy matters, enhancing the ability of "think tanks" to formulate and evaluate economic policy options, and to improve the effectiveness of economic training centers.

Background: A long-term challenge for South Africa is to achieve a sustainable increase in the rate of economic growth, including increased employment and a more equitable distribution of national income. This is especially important because the unemployment rate exceeds 35%, and the labor force continues to grow rapidly. To meet this challenge it is critical to enhance the economic opportunity of the majority of South Africans by improving their technical ability to participate in the labor market. To help South Africa reach this objective, USAID is relying on both government and non-governmental organizations.

USAID Role and Achievements to Date: This is a new strategic area for USAID/South Africa. The approach, which focuses on strengthening analytical skills, recognizes that the willingness of the government and other stakeholders to adopt and implement policies promoting economic growth is outside of USAID's manageable interests. Therefore, scholarships and technical assistance will be provided. There will continue to be a consultative process with a steering committee, composed of key government, NGO and USAID/South Africa representatives to guide USAID investments in this area.

Description: Associated with this strategic objective are the following areas of activity which cumulatively will strengthen the capacity of South Africans to formulate, evaluate and implement policies that promote economic growth: 1) human resource development in economics and policy analysis for key government entities through the Mandela Economics Scholars program which will finance post-graduate economics training to improve the capacity of individuals to productively serve in government. This activity also is part of the U.S.-South Africa Binational Commission (BNC); 2) strengthened capacity of government departments and "think tanks" to formulate economic policy reforms through technical assistance, training and research support; and 3) improved effectiveness of centers of economics training, especially within the historically disadvantaged institutions, through the activities under the USAID Tertiary Education Linkages Project (TELP), which has as one of its objectives the establishment of a limited number of "Centers of Excellence" in selected disciplines within South Africa's system of historically disadvantaged universities.

Host Country and Other Donors: Other donor support in the field of economics and economic policy include: Australia in building "think tank" resources, economic policy, economic information generation and dissemination and labor union strengthening; Canada in increasing governmental economic capacity, economic policy, and economic information generation and dissemination; the European Union and the Netherlands in labor union strengthening; the United Kingdom in economics training, increasing governmental economics capacity and economics research; and the World Bank in economics training, increasing governmental economics capacity, economics research and economic information generation and dissemination.

Beneficiaries: Economists who work in South African Government departments involved in economics policy formulation and evaluation, and NGOs and university economic "think tanks" and others who employ and use the services of trained economists.

Principal Contractors, Grantees, or Agencies: USAID will implement activities through a variety of South African and U.S. NGOs, the GNU and U.S. and South African contractors and universities.

Major Results Indicators:
Baseline Targets
Long-term results:
Improved Human Development Index (HDI) .500 (1992) .700 (20020
for historically disadvantaged population
Improved economic growth and equity:
--3 year average real GDP growth rate .4% (1991 - 1994) 4.0% (2000 -2003)
--ratio of median household incomes of the 18.2% (1992) 21.0% (2003)
historically disadvantaged in relation to
those of Whites
Short-term results (illustrative):
Centers of Excellence in Economics 0 1
established
Mandela Economics Scholars Program 0 1 (60 students)
established
Economic Policy Units established 0 6
or strengthened
Economic Policy Think Tanks
with plans for sustainability 0 2

ACTIVITY DATA SHEET

PROGRAM: SOUTH AFRICA
TITLE AND NUMBER: Increased Access to Financial Markets for the Historically Disadvantaged Population, 674-S005
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $17,395,648 DFA
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2000

Purpose: To increase access to financial markets for the historically disadvantaged population through an improved policy environment, improved capacity of the financial sector to serve the disadvantaged population, and improved capacity of historically disadvantaged enterprises to respond to financial market requirements.

Background: Access to capital has repeatedly been cited as the primary binding constraint to ownership and private sector economic empowerment by the historically disadvantaged population. This is an area in which USAID has been involved since 1987 through its work with South African microenterprise finance organizations, and one in which USAID's worldwide comparative advantage in capital markets development can be brought to bear. Given the finite resources of USAID and capital resource availability in South Africa, USAID's focus will be on increasing access to South African private sector capital resources. Innovative financial engineering techniques will be used and USAID funds will be leveraged to the greatest extent possible, including use of guarantees, equity and quasi-equity instruments.

USAID Role and Achievements to Date: USAID's private sector program will focus on the formal and informal sectors. In the past, more than half of USAID's program resources in the area of private sector development were targeted to benefit the informal sector. Assistance was channeled through NGOs delivering technical assistance, training and credit. While the informal sector has generated approximately two million jobs, many of these are survivalist operations with nominal contribution to the economy at large. At present, the informal sector accounts for less than 7% of GDP. Given the need to redistribute income and assets and lay the foundation for the overall growth of the South African economy, USAID will augment its work in this area with formal sector activities in support of small, medium and micro-enterprises (SMMEs). USAID will continue to work through NGOs to reach the informal sector as part of the continuum of SMMEs.

USAID-supported international franchising conferences resulted in nearly 70 new businesses (with links to U.S. firms) and 450 new jobs. In addition, working with six South African private sector banks, USAID helped mobilize credit for approximately 3,000 disadvantaged entrepreneurs.

Description: This strategic objective is being implemented through seven key activities: 1) an NGO Support Facility to channel grants to NGOs providing technical assistance, training and credit to the SMME sector; 2) a grant to the Department of Trade and Industry to restructure government entities supporting SMMEs and to address trade and investment policies; 3) technical assistance to improve access to equity capital; 4) technical assistance to medium and large enterprises as well as government in areas such as restructuring and buy-outs, and privatization transactions; 5) strengthening the capacity of business membership organizations to transfer technical knowledge; 6) training in banking and management skills; and 7) facilitating commercial linkages between the United States and South Africa. The Southern Africa Enterprise Development Fund, which provides a source of equity capital; and the Micro and Small Enterprise Development Loan Guaranty Fund, are regional activities that also contribute to this strategic objective.

Host Country and Other Donors: USAID is the largest bilateral grant donor in the area of private sector development. Germany focuses its assistance on poverty alleviation, training for SMMEs throughNGOs; and support to the Ntsika Enterprise Promotion Agency (NEPA) in its policy formulation function and human resources development. The United Kingdom concentrates on assistance to business skills training and counseling to SMMEs, poverty alleviation among youth, women, in rural areas, small growth businesses and technical assistance to DTI in developing the concept of local service centers. The Commonwealth Development Corporation (CDC), with Investec and Fedsure Mortgages, capitalized the 100 million Rand Enterprise Capital Fund (approx. $30 million) to make equity and quasi-equity investments in medium-sized enterprises owned/managed by disadvantaged South Africans. The European Union, provides assistance to micro-lending activities. Denmark provides assistance to small business development, support to NGOs serving the SMME community, and assistance to the Department of Trade and Industry (DTI) in developing its manufacturing technology centers for the NEPA. Through loan to the Development Bank of Southern Africa (DBSA), Japan is providing $100 million to lend to regional development corporations for SMME promotion. Japan also is establishing a $100 million equity fund to help fund joint ventures and provide intermittent participant training in Japan. Through a line of credit to the Rural Finance Facility, France is funding a program of credits to small business enterprises; and social development in rural and peri-urban areas. Finally, Canada is supporting technical assistance for the design of local service centers.

Beneficiaries: The direct beneficiaries of this strategic objectives are the small, medium and micro-enterprises of South Africa.

Principal Contractors, Grantees, or Agencies: USAID will implement activities through a variety of South African and U.S. NGOs, the GNU and U.S. and South African contractors and universities.

Major Results Indicators:
Baseline Target
Long-term results
Improved Human Development Index (HDI) .500 (1992) .700 (2002)
for historically disadvantaged population
Improved economic growth and equity:
--3 year average real GDP growth rate 4% (1991-1994) 4.0% (2000-2003)
--ratio of median household incomes of 18.2%(1993) 21% (2003)
the historically disadvantaged in relation
to those of Whites
Short to medium-term results (illustrative):
Total Rand value of funds (including 200M Rand (1994) 450-650M Rand (1997)
amount leveraged) made available
for informal and microenterprises
and small, medium and large enterprises
of the historically disadvantaged population
Total number of small, medium and 13,000 (1994) 35,000 (1997)
microenterprise formal loans made to
the historically disadvantaged population

PROGRAM: SOUTH AFRICA
TITLE AND NUMBER: Improved Access to Environmentally-Sustainable Shelter and Urban Services for the Historically Disadvantaged Population, 674-S006
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $8,044,380 DFA
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001

Purpose: To improve the shelter conditions of the historically disadvantaged population, the vast majority of whom currently live in substandard shelter conditions, through improved access to environmentally-sustainable shelter and urban services.

Background: The critical prerequisites to shelter access are good policies, the availability of credit, and appropriate shelter planning and delivery services. USAID is well-suited to undertake a multi-pronged approach to address these factors.

USAID Role and Achievements to Date: USAID has played an important role in fostering policy reform, furnishing technical assistance and providing capital for the housing sector. This role will continue through activities described in the section below. Over the past several years, USAID has developed a strong track record in these areas. There are two Housing Guaranty (HG) programs in place, complemented by an effective technical assistance project. To date, the HG has made available over $133 million for mortgages for low income households. In FY 1995, the first year of operations, over 23,000 mortgages were provided to the target group.

Description: Improved access to shelter and urban services for the historically disadvantaged population will be accomplished through three USAID interventions in the urban sector: 1) technical assistance provided through NGOs and bilateral agreements with the GNU, national and provincial-level departments, to support the development and implementation of policies that facilitate the provision of housing and urban services to the historically disadvantaged population to ensure a better policy formulation process, and to support research and studies to provide baseline information; 2) grants, technical assistance and training provided to increase access to credit for shelter and urban services for previously ineligible borrowers (i.e., historically disadvantaged households, developer/builders, and urban service providers). The Housing Guaranty Loan Program will provide funds to the private sector for the provision of loans to low-income households; and 3) Non-credit mechanisms linked to the provision of shelter for the poorest of the poor will be strengthened through (a) capacity building grants and (b) technical assistance to entities active in the shelter sector, including community-based organizations, and public sector service providers such as municipalities and parastatals.

Host Country and Other Donors: USAID is a major player in the urban sector for the following reasons: 1) its substantial length of involvement in the sector (since 1992) which predates that of most other donors; 2) its role as coordinator of donor activities (primarily through chairing the Urban Sector Donor Coordination Committee), and 3) the comparative size of the USAID program. With a few exceptions, most donors are relative newcomers to the housing sector and are currently involved in establishing programs with community support organizations (CSO) or with the GNU. The other major donors currently active in the sector are: 1) the World Bank, with studies and project preparation/ assessment and technical assistance; 2) Japan, through bulk infrastructure loans and grants; 3) Germany, through project preparation technical assistance and training program for local officials and a $22 million urban upgrading program in the Eastern Cape; and 4) Other Donor Assistance, through numerous small activities including a $2.2 million policy planning unit in one province;

Also, other donors, primarily the Scandinavian countries, are implementing urban sector programs. However, these are essentially small technical assistance programs in urban environment and/ormunicipal management. Others donors are focused on assisting specific RDP projects.

Beneficiaries: Primary beneficiaries, are historically disadvantaged households, communities, developers and builders. A secondary layer of beneficiaries include provincial and local-level officials, and CSOs.

Principal Contractors, Grantees, or Agencies: USAID will implement activities through a variety of South African and U.S. NGOs, the GNU and U.S. and South African contractors and training institutions.

Major Results Indicators:
Baseline Target
Long-term results
Improved Human Development Index (HDI) .500 (1992) .700 (2000)
for historically disadvantaged population
Improved economic growth and equity:
--3 year average real GDP growth rate 4% (1991-1994) 4.0% (2000-2003)
--ratio of median household incomes of the 18.2% (1993) 21.0% (2003)
historically disadvantaged in relation to
those of Whites
Short to medium-term results (illustrative):
Increased total dollar value of funds $0 $ 300 M
made available for environmentally-sustainable (HG& DFA)
shelter and urban services for historically 1992-1999
disadvantaged population households
Increased total number of full or 0 units 150,000 units
partial shelter units and urban services m
ade available for historically disadvantaged
communities by participating partners