GAO

United States General Accounting Office

Report to Congressional Requesters

September 1999 FOREIGN 

ASSISTANCE

USAID Faces 

Challenges 

Implementing 

Regional Program in 

Southern Africa

GAO/NSIAD-99-237

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Contents

Letter 3

Appendixes Appendix I: Objectives, Scope, and Methodology 22

Appendix II: Comments From the U.S. Agency for International 

Development 24

Appendix III: GAO Contact and Staff Acknowledgments 27

Figures Figure 1: Africa: Countries Covered by the Initiative for Southern Africa 6

Figure 2: Intensive Care Unit at the Eerste River Medical Center, Cape 

Town, South Africa 10

Figure 3: Leaders of an ISA-Supported, Community-Based Natural 

Resource Management Project in Chobe, Botswana 13

Figure 4: Founders of the Media Institute of Southern Africa, an ISA 

Grant Recipient 15

Abbreviations

USAID U.S. Agency for International Development

ISA Initiative for Southern Africa

SADC Southern Africa Development Community
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United States General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-283457 Letr

September 30, 1999

The Honorable Jesse Helms

Chairman, Committee on Foreign Relations

United States Senate

The Honorable Benjamin A. Gilman

Chairman, Committee on International Relations

House of Representatives

To support U.S. strategic and economic interests in southern Africa and 

recognizing that many of the problems facing the countries of the region 

transcend national boundaries, the U.S. Agency for International 

Development (USAID) created the Initiative for Southern Africa in 1994. 

The initiative is designed to address problems from a regional rather than a 

country perspective and to identify solutions that go beyond what can be 

done by any one country.1

 The Initiative for Southern Africa is implemented 

by USAID’s Regional Center for Southern Africa. Programs under the 

initiative are carried out with African partners, primarily the Southern 

Africa Development Community.2

 The Initiative for Southern Africa has 

three strategic objectives: (1) to promote an integrated regional market, 

(2) to accelerate adoption of sustainable agriculture and natural resource 

management approaches, and (3) to strengthen indigenous southern 

African organizations to promote democratic values and institutions in the 

region. You expressed concern about the efficacy of the initiative to 

address the problems facing countries in the region.

Specifically, this report outlines (1) the specific activities USAID’s Regional 

Center conducted to implement the Initiative for Southern Africa, (2) the 

extent to which this regional program complements USAID’s bilateral 

programs in the region, and (3) the challenges the Regional Center faces in 

implementing the Initiative for Southern Africa. 

1

The Initiative for Southern Africa covers Angola, Botswana, Lesotho, Malawi, Mauritius, 

Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe.

2

The Southern Africa Development Community is an organization representing 14 nations in 

southern Africa with a total population of 200 million.
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In completing this review, we met with officials and collected and analyzed 

information from USAID, the U. S. Department of State, and several 

multilateral and research organizations. In addition, we gathered 

information from African government and nongovernmental sources 

during our March 1999 trip to Botswana, South Africa, and Zimbabwe. See 

appendix I for a detailed description of the scope and methodology of this 

study.

Results in Brief Since it was created in 1994, the Regional Center has undertaken a number 

of activities designed to achieve the Initiative for Southern Africa’s three 

strategic objectives. These activities included efforts aimed at achieving a 

more integrated regional market through reducing trade barriers, 

development of model national transport and telecommunications laws 

that improved and helped standardize national regulatory frameworks 

across the region, and efforts to improve the supply of higher-yielding 

seeds and new agricultural products for consumers. In addition, the 

Regional Center provided grants to southern African organizations to 

increase their capacity to advocate for democratic practices in the region, 

to advance regional linkages among key organizations, and to further 

define democratic norms in the region.

At the broadest level, the Initiative for Southern Africa complements 

USAID’s bilateral programs in that the activities are focused on similar 

development objectives. We did not find instances where there were 

conflicting objectives. Recently, USAID has taken several steps to 

encourage closer coordination between bilateral missions and the Regional 

Center.

The Regional Center faces several important challenges in carrying out the 

objectives of the Initiative for Southern Africa. It must work with 

12 different countries, each with different political systems and levels of 

economic development. In addition, regional data necessary to measure 

program impacts are lacking, and regional groups that must play a critical 

role in the program have limited human and institutional capacity. Based on 

the evidence available, it is not clear to what extent the Regional Center 

will be effective in addressing the issues of economic development, 

agriculture and natural resource management, and the lack of strong 

democratic institutions in the southern Africa region. Given that solutions 

to many of the problems facing southern Africa go beyond what can be 

done by any one country and that outcomes from any initiative are highly 
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dependent on cooperation among the countries in the region, the Initiative 

for Southern Africa seems to be a reasonable approach.

Background With the end of the apartheid system of racial separation in South Africa in 

1994, U.S. policy in southern Africa shifted from opposing this system to 

supporting economic growth and the movement toward democracy in the 

region. However, the countries of southern Africa face political instability, 

weak economies, and degradation of natural resources. Recognizing the 

growing U.S. political and economic interest in southern Africa and that 

many of the problems facing the region transcend national boundaries, 

USAID created the Initiative for Southern Africa (ISA). The ISA’s overall 

goal is to promote equitable sustainable growth in a democratic southern 

Africa. Since ISA was created in 1994, USAID has spent $247 million on the 

ISA’s three strategic objectives: $129.1 million on activities to increase 

market integration among countries in the region; $112.2 million to 

accelerate adoption of sustainable agriculture and natural resource 

management approaches; and $5.4 million to strengthen indigenous African 

organizations to promote democratic values and institutions in the region 

(see fig. 1 for a map of the region.) The ISA is implemented by USAID’s 

Regional Center for Southern Africa, located in Gaborone, Botswana.
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Figure 1: Africa: Countries Covered by the Initiative for Southern Africa

Source: GAO analysis based on information provided by USAID.

The ISA includes two funds: the Southern Africa Regional Democracy Fund 

and the Southern Africa Enterprise Development Fund. USAID established 

the Democracy Fund to encourage and sustain regional efforts to promote 

the democratization of southern African nations. Through the Democracy 

Fund, the ISA awards grants to southern African organizations and 

networks that work to strengthen democratic values, processes, and 

institutions. The Democracy Fund has a 22-member project advisory 

committee that is comprised of Africans prominent in civil society and 

living throughout the region. The project committee assists in planning, 

implementing, and overseeing the fund, and it recommends grantees, while 

the Regional Center is responsible for overall program management, 

including monitoring grant performance and providing final approval of 

grantees. U.S. embassy and mission staff located in southern African 
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countries nominate the project committee members and evaluate grant 

applications from the country in which they are located. 

The Southern Africa Enterprise Development Fund, incorporated in 

December 1994 and located in Johannesburg, South Africa, is a U.S.-

sponsored, private, not-for-profit investment company. The Enterprise 

Fund is designed to increase participation in the regional market—an ISA 

objective. The fund provides capital to help strengthen and expand the 

number of small- and medium-sized enterprises in the region owned by 

previously disadvantaged southern Africans. In March 1995, USAID and the 

Enterprise Fund entered into a grant agreement that capitalized the fund 

with $100 million. USAID provided an additional $8 million for 

administrative expenses. The Enterprise Fund’s 14-member Board of 

Directors is composed of distinguished members of the U.S. and African 

business communities. USAID’s primary responsibilities are to monitor the 

grant agreement and act as a nonvoting observer on the Board of Directors. 

At the end of its grant agreement with USAID in 2003, the Enterprise Fund 

is charged with developing a liquidation plan that will transfer the Fund’s 

assets to other nonprofit entities, return the assets to the U.S. government, 

or perform a combination of the two actions.

Most of the Regional Center’s activities are developed and implemented in 

collaboration with African partners. The Regional Center’s key African 

partner is the Southern African Development Community (SADC). SADC is 

a regional organization that was formally organized in 1992 by southern 

Africa governments to bring economic prosperity, development, and 

stability through regional trade liberalization and political and economic 

integration.3

 SADC implements some ISA projects, particularly those 

dealing with market integration. SADC is organized into 19 sector 

coordinating units, each located in and headed by a different SADC 

member state. The units are responsible for leading SADC efforts in 

specific sectors such as industry and trade, or water. A small Secretariat, 

located in Gaborone, Botswana, is responsible for overall coordination and 

liaison activities.

3

SADC’s member states are Angola, Botswana, Democratic Republic of Congo, Lesotho, 

Malawi, Mauritius, Mozambique, Namibia, Seychelles, Swaziland, South Africa, Tanzania, 

Zambia, and Zimbabwe.
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The Regional Center 

Has Undertaken Many 

Activities in Pursuit of 

the ISA’s Objectives

In the 5 years since the ISA was announced, the Regional Center has 

undertaken a number of activities under each of its three strategic 

objectives: promoting an integrated regional market, accelerating adoption 

of sustainable agriculture and natural resource management approaches, 

and strengthening indigenous southern African organizations to promote 

democratic values and institutions in the region. These activities have 

included providing technical assistance, funding, advocacy, and capacity 

building. The Regional Center has also worked behind the scenes to resolve 

disputes between countries. African government officials and others we 

interviewed in the region believed that the Regional Center has made 

important contributions related to its strategic objectives. However, given 

the scope and complexity of this effort, achieving the ISA’s overall goal of 

promoting equitable sustainable growth in a democratic southern Africa 

will be a long-term effort.

The Regional Center Has 

Taken Initial Steps to 

Develop a Southern Africa 

Regional Market

The Regional Center has worked to develop a regional market by providing 

support to reduce trade barriers and increase participation in the regional 

market, to improve the regional infrastructure, and to build consensus for 

regional integration. African government officials and others we 

interviewed in the region believed that the ISA program has made 

important contributions in these areas. However, integrating markets is a 

long-term process involving a myriad of specific steps to remove 

long-standing impediments to free trade among countries in the region, 

such as a lack of standard banking, accounting, and customs procedures; 

insufficient energy, telecommunications, and transportation infrastructure; 

and established restrictive trade and investment policies. According to 

USAID, removal of trade and investment barriers and movement toward a 

more integrated market will enhance the prospects for economic growth 

because a larger, more open market will be more attractive to investors and 

will enhance economies of scale.
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To reduce trade barriers and increase participation in the regional market, 

the Regional Center helped write the SADC Protocol on Trade,4

 an 

agreement that establishes an overall framework for regional economic 

integration. The agreement addresses the reduction and eventual 

elimination of import and export duties, customs procedures, trade laws, 

and intellectual property rights, among other issues. The Regional Center is 

working to secure its passage by SADC member governments by the end of 

2001.5

 In addition, the Regional Center financed the development of a legal 

and policy framework for finance and investment that is a first step toward 

harmonizing central bank policies and regulations, as well as audit and 

accounting standards, throughout the region. The Regional Center is also 

helping countries standardize customs procedures and has helped 

implement a regional truckers’ insurance payment mechanism to ensure 

that truckers pay trucking insurance only once instead of each time a 

border is crossed. Once fully implemented, these activities are expected to 

facilitate more efficient and speedier border crossings. In addition, the ISA 

broadened participation in the market through the Southern African 

Enterprise Development Fund by making capital available to indigenous 

entrepreneurs who could not obtain long-term financing from commercial 

sources. From March 1995 through June 1999, the Enterprise Fund had 

invested over $18 million in 16 indigenous enterprises in seven countries. 

(See fig. 2 for a depiction of an enterprise that received funding—the 

Eerste River Medical Center in Cape Town, South Africa.)

4

The trade agreement has been ratified by over half of the SADC member states needed for 

enforcement.

5

Activities are taking place toward implementation of the trade protocol. For example, a key 

provision of the agreement is the removal of tariffs within the region. Toward this end, 

SADC member countries meet once a month to negotiate tariff reductions, and the Regional 

Center’s ISA program provides technical assistance to aid countries in this process. 
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Figure 2: Intensive Care Unit at the Eerste River Medical Center, Cape Town, South Africa

To improve the southern Africa regional infrastructure, the Regional Center 

helped write SADC’s Protocol on Transport, Communications, and 

Meteorology. This agreement is a first step toward reducing costs and 

enhancing the efficiency of these sectors by harmonizing the policies, rules, 

and procedures among participating countries. For example, the agreement 

addresses truck axle load limits (which will extend the life of the regions’ 

roads, thereby reducing costs); and cellular phone standards (which will 

improve customer service and simplify operations for phone companies, 

thereby improving their bottom line and efficiency). The Regional Center 

assisted in writing and implementing model national transport and 

telecommunications laws and provided technical assistance to establish 
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independent national telecommunications regulatory authorities in eight 

countries. These activities were designed to promote private sector 

investment and to harmonize policies necessary for regional integration. 

Also, the Regional Center provided funding, equipment, and technical 

assistance to establish a computerized rail tracking system that will enable 

railroads in the region to operate as a single, integrated system. 

To build consensus for regional integration, the Regional Center conducted 

advocacy activities with national governments and private sector 

associations. These activities included holding workshops and providing 

training to explain the benefits of privatization and integration and 

supplying analyses of the impact of integration on countries’ economies. 

According to the Regional Center, its advocacy efforts have resulted in a 

shift from a regional debate over whether integration should be pursued to 

a debate over how integration should occur, when it should occur, and 

under what institutional arrangements it should develop. For example, the 

public and private sectors in Mozambique were not supportive of the 

government’s signing the SADC Protocol on Trade. To persuade them to do 

so, the Regional Center brought these sectors together to discuss the issue 

and provided information about the benefits of the agreement to the 

country. Ultimately, the public and private sectors changed their positions 

to support the trade agreement.

Activities to Improve 

Agriculture and Natural 

Resource Management 

The southern Africa region is faced with the need to balance the 

conservation of its natural resource base while at the same time feeding 

and providing jobs for a rapidly increasing population. Nearly two-thirds of 

the region’s population is dependent on agriculture for income and 

employment. However, most countries in the region lack the necessary 

infrastructure in rural areas, investment in agriculture research, and 

policies and regulations to increase production and protect the natural 

resources. The Regional Center sought to address these challenges by 

helping southern Africans manage their environment in a sustainable way, 

while increasing their income and employment. To accelerate the adoption 

of sustainable agriculture and natural resource management approaches, 

the Regional Center helped establish systems for transferring improved 

agricultural technologies and disseminating best practices across the 

region. It also helped establish the policy frameworks necessary for putting 

new approaches in place and for providing incentives for their adoption. 

The Regional Center’s activities in each of these areas included the 

following:
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To establish systems for transferring technologies and disseminating best 

practices across the region, the Regional Center supported regional 

research partnerships such as the Sorghum/Millet Improvement Program 

and the Southern Africa Root Crops Research Network. These programs 

developed high-yielding and increased drought- and disease-resistant seeds 

and crops like cassava that will improve crop sustainability and food 

security. In addition, the Regional Center funded the successful efforts of 

the Heartwater Regional Research Project to develop a vaccine for a 

tick-borne disease that costs the region $80 million annually in livestock 

losses and pesticide purchases.6

 In addition, the Regional Center 

contributed to capacity building of agriculture institutions in the region by 

supporting the training of over 300 agriculture research scientists and 

technicians in crop production, insect and disease control, and other key 

disciplines like research planning and management. According to Regional 

Center officials, training has resulted in a new focus on results and 

improved definition of agricultural research priorities that reflect farmer 

and consumer needs. Because of the critical role that rural people play in 

the stewardship of wildlife and the environment, the Regional Center 

helped form 13 community-based organizations in Botswana, covering 

more than 50 villages, and trained them to conduct income-producing, 

sustainable activities like photo safaris and harvesting grassland products, 

such as thatching. For example, according to the Regional Center, the 

income of 400 women in one area of Botswana rose by 500 percent 

between 1996 and 1998 as a result of their harvesting and marketing of 

grassland products. The Regional Center is playing an important role in 

transferring this best practice approach to natural resource management 

across the region. (See fig. 3 for an illustration of the leaders of a 

community-based natural resource project funded by the ISA.)

6

USAID support for these research activities preceded the ISA. For example, USAID has 

supported the Sorghum/Millet Improvement Program since 1984, the Southern Africa Root 

Crops Research Network since 1993, and the Heartwater Regional Research Project since 

1985.
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Figure 3: Leaders of an ISA-Supported, Community-Based Natural Resource Management Project in Chobe, Botswana

To help establish the policy framework necessary to implement new 

programs, the ISA funded the development of national, community-based, 

natural resource management policies in Namibia, Zambia, and Zimbabwe. 

For example, with ISA support, Zambia passed a Wildlife Act that created 

and empowered community resource boards to manage wildlife in game 

management areas. These new policies will enable villagers to stay on their 

land and earn income in an environmentally sustainable way instead of 

being forced to migrate to urban areas to find employment. The Regional 

Center helped the government of Botswana to draft a unified set of policies 

and legislation for community-based natural resource management that 

clarified the existing conflicting policies, laws, and guidelines. Regional 

Center officials expect the legislation to be passed next year. In addition, 

the Regional Center helped draft the SADC Protocol on Wildlife 

Management that provides a framework for managing the region’s wildlife, 

and supported studies that contributed to the development of Namibia’s 

policies on water conservation, marine fisheries, and land degradation. 
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Strengthening Organizations 

Working to Improve 

Democratic Practices in the 

Region

The Regional Center’s democracy program is predicated on the view of 

USAID officials that stable democracies are promoted by focusing on 

promoting rule of law and respect for human rights; fair and open political 

processes; free and active civil societies; and transparent, open, and 

accountable government institutions. According to the Democracy Fund 

Project Committee, many citizens in southern Africa do not fully 

understand their rights and responsibilities. In addition, they note that in 

some countries, human rights continue to be violated; elections are not 

always free and fair; governments are not accountable and intimidate the 

media; and judiciaries, legislatures, and civil society are weak. The 

executive branches and the ruling parties are often indistinguishable. Even 

when there is a genuine commitment on the part of these entities to 

increase the participation of civil society in governance, nongovernmental 

organizations are often uncertain how to play a role because of their 

limited experience with democratic processes. 

The ISA’s Southern African Regional Democracy Fund makes grants to 

southern African organizations and networks to strengthen their ability to 

advocate for democratic practices, to increase regional linkages among key 

organizations and institutions, and to further define African democratic 

norms. Government officials and others we interviewed in the region 

agreed that the ISA’s approach, which is primarily targeted at strengthening 

the capacity of civil society, is making a positive contribution in this area. 

Through June 1999, the Fund financed 24 grants totaling $4 million.7

Grantees have included human rights, media, educational, governmental, 

research, and labor organizations. The activities of these organizations 

have included training of parliamentarians and election monitors on 

democratic norms and conflict mediation; promoting regional standards 

and values related to ethics, democratic governance, and accountability; 

improving access to information by civil society organizations through 

electronic networking, publishing newsletters, and disseminating 

uncensored regional news; providing equipment and training; and funding 

research, for example, on the administration and fairness of elections in the 

region.

To increase regional advocacy for democratic processes, the Democracy 

Fund provided a grant to the Media Institute of Southern Africa, which 

funded the successful defense of journalists against charges of character 

7

Funding primarily takes the form of grants, but cooperative agreements and purchase 

orders are also occasionally used.
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defamation in Lesotho, Tanzania, and Botswana. These cases established 

legal precedents and helped to define acceptable standards for press 

freedom in other countries in the region. For example, in Zimbabwe, a 

Member of Parliament brought charges against a local newsmagazine for 

defamation regarding a story that questioned the Member’s accumulation 

of property. The charges were upheld, and the magazine faced liquidation. 

The Media Institute’s Legal Defense Fund supported an appeal that 

eventually overturned the initial judgment, and the magazine survived. The 

Media Institute also assisted its national chapters in Botswana, Namibia, 

and Zambia in organizing protest marches against the arrest and alleged 

torture of two Zimbabwean journalists and in presenting petitions to the 

Zimbabwean ambassadors in those countries. The authorities ultimately 

released the journalists. (See fig. 4 for an illustration of the founders of the 

Media Institute of Southern Africa.)

Figure 4: Founders of the Media Institute of Southern Africa, an ISA Grant Recipient
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To increase linkages among key organizations to strengthen their ability to 

influence democratic practices, the Fund financed organizations, such as 

the Botswana Center for Human Rights, to develop networks. This 

organization pulled together 72 member organizations and established the 

first Regional Southern African Human Rights network. By working 

together, Regional Center officials believed that these organizations would 

become stronger and more effective at advocating for democratic reform 

and holding governments accountable. 

To further define African democratic norms, the Democracy Fund 

supported the Cooperative for Research and Education in its efforts to 

develop a training manual for election monitors and trained 160 monitors in 

four countries. Regional Center officials expected that this training and 

information would contribute to the development of election norms in 

southern Africa. 

The Regional Center 

Undertook Other Activities 

to Promote Regional 

Cooperation 

In addition to the Regional Center’s activities to implement the ISA, 

Regional Center officials said that they worked behind the scenes with 

government officials to resolve several disputes between countries. While 

not directly related to the ISA program, the activities were intended to 

facilitate cooperation among countries in the region. For example, the 

Regional Center helped mediate a dispute between Botswana, Namibia, 

and other stakeholders regarding customs and transit charges on the 

Trans-Kalahari Highway. This mediation, according to Regional Center 

officials, resulted in a dialogue that is leading to an acceptable solution to 

the disagreement. The Regional Center also helped mediate a border 

dispute between Botswana and Namibia that resulted from Botswana’s 

erection of a fence at the border to keep out diseased cattle. The fence also 

prohibited the migration of wildlife—a danger to the wildlife’s well-being 

and reproduction. Working with government officials, the Regional Center 

was instrumental in Botswana’s decision to remove critical portions of the 

fence.
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The ISA Program 

Complements Bilateral 

USAID Programs in the 

Region

The ISA complements USAID’s bilateral programs8 in the region because 

they have similar development objectives. Seven of USAID’s eight bilateral 

missions in southern Africa have ongoing democracy and governance 

activities,9

 seven missions conduct activities related to trade and 

investment, and six have activities in the area of agriculture and natural 

resources. As a result, the ISA’s activities for market integration, agriculture 

and natural resource management, and increased democratic performance 

complement ongoing, national-level activities of USAID’s bilateral 

missions. In some cases, the Regional Center and bilateral missions have 

worked together on specific projects. For example, the Regional Center 

and the USAID mission in Mozambique collaborated on a project designed 

to improve the efficiency, reliability, and competitiveness of the surface 

transportation infrastructure. The project was funded by the Regional 

Center and implemented by the bilateral mission. Because of the positive 

outcomes when the Regional Center and bilateral missions have worked 

together, USAID’s Africa Bureau has taken steps to increase coordination. 

In the last 2 years, USAID has initiated biannual meetings of mission 

directors to bring together all the directors in Southern Africa. The last 

such meeting, in April 1999, was held jointly with the U.S. ambassadors 

from the region. In addition, USAID has discussed the possibility of adding 

“support for regional programs” in the mission directors’ management 

contracts.

USAID’s Regional 

Center Faces 

Challenges in 

Implementing the ISA

The Regional Center faces several important challenges in carrying out the 

objectives of the ISA. One is the challenge of working with 12 different 

countries to implement its programs, each with different political systems 

and levels of economic development. Another is the limitation of the 

Regional Center’s African partners in human and institutional capacity such 

as experience, training, skills, financing, and equipment. These limitations 

made it difficult for the Regional Center to work through existing southern 

African organizations to achieve its goals. In some cases, there were no 

appropriate institutions with which the Regional Center could partner. 

Finally, regional economic data frequently have not existed, and national 

8

USAID has bilateral missions in Angola, Malawi, Mozambique, Namibia, South Africa, 

Tanzania, Zambia, and Zimbabwe.

9

The USAID mission in Zimbabwe has proposed a “democracy” objective as the cornerstone 

of its new strategic plan.
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level data have generally been inadequate to develop baselines and 

performance indicators that are necessary to determine program progress 

and impact. 

Working With Multiple 

Countries Is Complex 

Unlike bilateral mission programs, which focus on one particular country, 

the ISA’s portfolio covers 12 different countries—each with different 

governments, political systems, national economies, natural resource 

endowments, and civil society networks. Regional Center staff must keep 

track of political and economic activities in all 12 countries and face the 

logistical difficulties of dealing with multiple host governments and 

numerous other governmental and nongovernmental organizations. The 

absence of a single, authoritative entity to represent the region, like a 

national government, means that there is no common development plan. 

There also are limited mechanisms through which regional stakeholders 

can coordinate programs and exchange ideas. While USAID officials said 

that SADC has the potential to provide such leadership, they noted that its 

current organizational structure, staffing, financial resources, and 

operational policies do not support such a role. As a result, the Regional 

Center has to play a major role in coordinating and conducting ongoing 

consultation with a disparate set of regional stakeholders—each with 

different priorities and ideas—in order to plan and develop programs. 

Furthermore, the Regional Center has to establish working relationships 

and communicate on a continuing basis with the 12 U.S. diplomatic 

missions in the region, in addition to other donors.

The challenge of investing in multiple countries in the region has 

contributed to the Southern African Enterprise Development Fund’s 

inability to disburse its loans to indigenous entrepreneurs within the time 

frame established by USAID when it created the Fund. For example, to 

learn of promising investment opportunities, investment staff and the 

Board of Directors need to be familiar with the local business cultures and 

operating environments and must establish relationships with local 

entrepreneurs. Conducting these activities in multiple countries has been 

extremely complex and time-consuming and even more difficult in 

countries that did not have a well-developed market economy. 

Furthermore, according to a 1998 Coopers and Lybrand, L.L.P., evaluation 

prepared for USAID, hiring and retaining qualified and knowledgeable 

investment staff has been challenging because there are few people who 

have had experience in investment banking, and those that did have been in 

high demand. These difficulties have contributed to the Enterprise Fund’s 

slow start—26 months elapsed between the announcement of the Fund’s 
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formation in 1994 and its first investment in June 1997. Due to the delays 

and difficulties, Fund management believed they would be unable to invest 

all of its capital by the expiration of the grant agreement with USAID, so 

they have negotiated a 4-year extension. Consequently, the administrative 

costs associated with managing the Fund will be more than the $8 million 

USAID originally predicted.

Limited Capacity of African 

Partners Hinders ISA 

Activities 

Another challenge faced by the Regional Center was the limited human and 

institutional capacity of its indigenous partners to deal with complex 

regional issues. According to Regional Center officials, nongovernmental 

organizations and private sector associations lack financial resources, 

experience, and technical skills, which has hindered their ability to 

effectively influence government policies. For example, one of the key 

elements of the ISA’s goal to promote integration of regional markets is to 

encourage private sector participation in national economies. However, 

according to Regional Center officials, industry associations did not have 

the resources to commission research that could have provided them with 

the information and data they needed to show governments the impacts of 

their policies and regulations on industry.

Regional Center officials suggest that national ministries, the judiciary, and 

other national government bodies have often lacked experience and 

technical and administrative capabilities to implement government reforms 

and carry out other functions like negotiating regional agreements. For 

example, they noted that national officials have had limited background in 

handling problems that have had to be solved in order to achieve market 

integration such as reducing tariffs, enabling privatization of state-owned 

enterprises, and establishing regulatory authorities. In some cases, these 

issues involved important national tradeoffs in the short term to achieve 

longer-term gains.

In some cases, there have been no institutions with which the Regional 

Center could partner. For example, the Regional Center had originally 

wanted to locate the Democracy Fund within an indigenous organization 

promoting democracy in the region, but it found no organization with a 

suitably broad mission and the required capabilities.

SADC, the core institution responsible for implementing regional 

development and a key partner to the ISA, has also had a lack of human and 

institutional capacity such as technical expertise, experience, and 

resources. As a result, Regional Center officials note that SADC was unable 
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to take the lead in advocating for passage of regional agreements in the 

face of inertia from national governments. These agreements establish the 

framework for cooperation among governments in particular economic 

sectors. Because SADC members agreed to establish a small Secretariat in 

an attempt to avoid a large and expensive bureaucracy, the Secretariat 

consisted of only a few people with very limited resources for the policy 

analysis or data-gathering activities that were necessary to advocate 

change among its members. SADC’s sector-coordinating units, led by 

national governments, were only as strong as the resources that were 

available in the particular national government. These resources differed 

significantly among countries. For example, according to Regional Center 

and African officials we spoke with the industry and trade 

sector-coordinating unit, located in Tanzania, was weak institutionally and 

did not have the financial and human resources to promote passage of 

SADC’s agreement on trade. The coordinating unit’s capacity was so limited 

that the unit could not afford to compensate its staff. As a result, the 

Regional Center decided to provide advisors directly to the SADC 

Secretariat to support its efforts to establish a trade policy unit. 

Lack of Quality Regional 

Data Impedes Assessment 

of the ISA’s Impact 

Regional data to develop baseline and performance indicators for the ISA 

program have, in many cases, been nonexistent, and national level data, 

when they existed, were often not consistent, reliable, or comparable. As a 

result, the Regional Center has had to conduct primary data gathering in all 

12 countries. For example, in order to measure national product price 

convergence—a yardstick of progress toward achieving regional economic 

integration—the Regional Center had to obtain consumer price index data 

from each country. Not only was this logistically difficult and expensive, 

but also countries in the region used different price structures to compile 

their consumer price indexes, which made comparability impossible. Some 

countries used retail prices and some used wholesale prices. Adding to the 

complexity, the items that make up the “national baskets” did not contain 

identical goods. These problems have contributed to delays in the Regional 

Center’s efforts to develop baseline and indicator data and to finalize its 

overall performance-monitoring plan. As a result, 5 years after the ISA was 

announced, there still is limited empirical evidence to quantitatively 

measure the Regional Center’s progress toward achieving the ISA’s 

strategic objectives.
B-283457

Page 21 GAO/NSIAD-99-237 Foreign Assistance

Agency Comments USAID provided written comments on a draft of this report. USAID stated 

that the report clearly describes the complexities of working regionally and 

added that our observations needed to be considered within a broader 

perspective. USAID stated that the benefits of regional integration in 

southern Africa outweighed the inherent difficulties in achieving that goal 

and that many transboundary issues can only be addressed at the regional 

level. USAID also provided information on progress that has been made 

toward achieving an integrated regional market and noted continued 

improvements in the effectiveness of their regional partners. We did not 

revise the report because we believe that it provides sufficient context and 

accurately reflects the progress that has been made toward market 

integration in southern Africa and the capabilities of USAID’s regional 

partners. USAID’s response is reprinted in appendix II.

We are sending copies of this report to appropriate congressional 

committees; the Honorable Madeleine K. Albright, Secretary of State; the 

Honorable J. Brady Anderson, Administrator of USAID; and other 

interested parties. We will also make copies available to others on request.

Please contact me on (202) 512-4128 if you or your staff have any questions 

about this report. Other GAO contact and staff acknowledgments are listed 

in appendix III.

Benjamin F. Nelson, Director

International Relations and Trade Issues
Page 22 GAO/NSIAD-99-237 Foreign Assistance

Appendix I

Objectives, Scope, and Methodology ApApenednxidexiIs

At the request of the Chairman of the Senate Foreign Relations Committee 

and the Chairman of the House Committee on International Relations, we 

reviewed the U.S. Agency for International Development’s (USAID) 

Initiative for Southern Africa (ISA). In particular, we examined (1) the 

specific activities USAID’s Regional Center conducted to implement the 

ISA, (2) the extent to which the ISA program complements USAID’s 

bilateral programs in the region, and (3) the challenges the Regional Center 

faces in implementing the ISA program

To examine ISA activities conducted by the Regional Center, we visited 

three countries in southern Africa: Botswana, South Africa, and Zimbabwe. 

We selected Botswana because the Regional Center is located there and 

South Africa because it received the largest amount of U.S. assistance of all 

countries in Africa in recent years. In addition, it is the location of the 

headquarters of the Southern Africa Enterprise Development Fund. We 

selected Zimbabwe as the third country at the suggestion of congressional 

committee staff. We interviewed officials from USAID’s Africa Bureau and 

the Regional Center, including the Director and teams managing activities 

under the strategic objectives for market integration, agriculture and 

natural resource management, and promotion of democratic values in the 

region. In addition, we met with the ISA’s African partners, including 

officials from African governments, nongovernmental organizations, the 

Southern Africa Development Community (SADC), and members of the 

Southern Africa Democracy Fund Committee. We also met with field-based 

officials from the European Union and the World Bank. We reviewed 

various documents, including USAID program documents for each 

strategic objective, USAID’s congressional presentations, strategic 

objective reporting cables from the field to headquarters, quarterly 

monitoring reports, strategic planning documents, the grant agreement that 

codified the relationship between USAID and SADC, USAID’s annual 

reports, “Regional Center’s Results Review and Resource Requests,” the 

ISA/Regional Center Strategic Plan for 1997-2003, and cost data for the ISA. 

We also made on-site visits to two ISA projects−the Heartwater project in 

Harare, Zimbabwe, and the Community Based Natural Resource 

Management project in the Chobe Enclave, Botswana. 

We also reviewed the activities of the Southern Africa Enterprise 

Development Fund. We reviewed the Enterprise Fund’s program 

documents such as its business plans, annual reports from 1995-99, 

investment information, articles of incorporation, financial statements, and 

external evaluations done by Financial Markets International in March 1999 

and Coopers and Lybrand, L.L.P., in February 1998. We also discussed the 
Appendix I

Objectives, Scope, and Methodology

Page 23 GAO/NSIAD-99-237 Foreign Assistance

Enterprise Fund’s operations with members of the Board of Directors and 

the management team and with USAID’s Center for Development 

Information and Evaluation. We visited two companies in which the 

Enterprise Fund had invested: PASH Stores (located in Soweto, South 

Africa), and the Eerste River Medical Center in Cape Town, South Africa

To determine the extent to which the ISA complements the activities of 

USAID’s bilateral missions, we interviewed Regional Center and USAID 

Africa Bureau officials and USAID bilateral mission directors in Zimbabwe 

and South Africa and their mission teams for democracy, natural resource 

management, and economic development. In addition, we reviewed 

USAID’s “Results Review and Resource Requests” from eight bilateral 

missions, strategic planning policies, a cable outlining bilateral mission 

support for the regional program, and an external study entitled The 

Southern African Regional Trade and Investment Strategic Framework 

Study prepared in 1998 by Coopers and Lybrand, L.L.P. 

To examine the challenges the Regional Center faces in implementing the 

ISA program, we met with experts on regionalism and African development 

in the U.S. government and international organizations. We interviewed 

officials from USAID, the Department of State, and the Council on Foreign 

Relations. We also met with officials from the World Bank, the European 

Union, SADC, and African non-governmental organizations. In addition, we 

reviewed ISA program documents from 1995 to 1999, a USAID Inspector 

General report, and external evaluations of the program conducted by 

Coopers and Lybrand, L.L.P.

The information on foreign laws in this report does not represent our 

independent legal analysis but is based on interviews and secondary 

sources. 

We performed our review from January to August 1999 in accordance with 

generally accepted government auditing standards. 
Page 24 GAO/NSIAD-99-237 Foreign Assistance

Appendix II

Comments From the U.S. Agency for 

International Development ApendxiI
Appendix II

Comments From the U.S. Agency for 

International Development

Page 25 GAO/NSIAD-99-237 Foreign Assistance
Appendix II

Comments From the U.S. Agency for 

International Development

Page 26 GAO/NSIAD-99-237 Foreign Assistance
Page 27 GAO/NSIAD-99-237 Foreign Assistance

Appendix III

GAO Contact and Staff Acknowledgments ApendxiI

GAO Contact Lynne M. Holloway, (202) 512-4612

Acknowledgments In addition to Ms. Holloway, Mark Dowling, Aleta Hancock, Tracey 

Hebert-Barry, Rona Mendelsohn, and Tom Zingale made key contributions 

to this report. 

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