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Executive Summary
Introduction and Background
The Economic Capacity Building Strategic Objective was developed in 1996 through a process of joint consultation between USAID/South Africa and the South African Government (SAG). The main concerns that emerged from the consultative process was that (1) there was an extreme shortage of qualified black economists to work on economic policy issues; (2) traditionally black universities lacked the capacity to train enough qualified black economists to meet future demand; and (3) economic think-tanks lacked the skills to provide worthwhile analysis on economic issues.
A number of activities were undertaken to address the concerns detailed above. These activities were formulated and implemented to achieve the following objectives:
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To strengthen human resources in economics and policy analysis for key government entities;
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To strengthen government departments that deal with policy matters;
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To strengthen think tanks to formulate and evaluate economic policy options for all economic policy makers and;
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To strengthen centres of economics training (Centres of Excellence in economics) especially within the historically disadvantaged institutions.
Scope and Objectives of the Evaluation
This evaluation assessed USAID’s Economic Capacity Building program in terms of the extent to which the programme contributed towards building South African capacity to formulate, analyze and implement economic policies that support South Africa’s vision of being a globally competitive economy that benefits all South Africans. The evaluation also identified the key accomplishments, as well as challenges that may have impeded the attainment of targeted results. For all major aspects of the program, the evaluation considered the following:
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whether the program generated unintended results, either positive or negative, in addition to its targeted results;
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whether the activities undertaken, were the most effective way of achieving intended results, or whether other activities or approaches might have yielded results more effectively; and
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for activities that were successful, what made them work.
In undertaking the evaluation of the programme, a multi-faceted framework, encapsulating both the specific and broader objectives of the project, was used. The specific objectives related directly to the activities undertaken at a programme level. Broader objectives related to the outcomes of these activities on the beneficiaries, in particular, the South African Government departments. To ensure that the evaluation was informing project activities, it was critical to systematically align the data collected during the evaluation to the project’s objectives, so that the outcomes being measured could be attributable, as far as possible, to these objectives. This required the components of the programme to be analysed with respect to its internal logic i.e. how the components logically fit together to inform the evaluation design.
The evaluation focused primarily on a qualitative assessment of the capacity building programme. Qualitative data were sourced through three primary research methods: observation, interviews and review of documentation. In this evaluation, two main instruments were fashioned for data-collection: documentation review and structured interviews (face-to-face and by telephone, utilizing a structured interview schedule). An indicative interview protocol is presented in Annex 4.
Key findings
USAID’s program on economic capacity development was aimed at addressing the lack of professionally-qualified black economists who could work at the policy level and analyze, design and implement economic policy. Working on the premise that good analysis can lead to good policy, and poor analysis will lead to poor policy, by improving the quality and skills of the economists, as well as those who are involved in the conceptualization, implementation, and evaluation of policy initiatives there will be a concurrent improvement in the policy developed. To this end, a number of activities were undertaken – this included:
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long-term and short term training
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institutional capacity building
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policy development
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Long-term and short-term training
The purpose of the program was to build capacity for formulating and supporting economic policy which is focused and coherent, in the face of educational deficiencies and a significant degree of ideological antipathy.
Mandela Economic Scholars Programme1, the parliamentary program and Southern African Tax Institute successfully addressed the major capacity- building challenges, but MESP 1 failed to incorporate sustainability in its design. The program will continue to be a success as long as the considerable funding is available. The parliamentary program and SATI have proved sustainable due to the promise of continued funding from parliament itself. SATI has graduated into a fee-funded program, leaving the delegates with the problem of fund raising. The program has had two years of self-funding and is looking sustainable. The Labor Research Services (LRS) program failed on sustainability because the target audience incurred a very high cost of their own time in terms of union work being neglected. In their own ways, both the MESP1 and LRS programs proved too costly to be fully sustainable.
MESP 2 failed to achieve its objectives because the program design failed to address the major challenges. These were that:
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The programs did not address the specific circumstances and educational backgrounds of the candidates.
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The design of the programs did not address attitudinal and formative issues.
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Little attempt was made to relate the economic theory and technical skills to the current tasks. The faculty with whom they had most contact was not strong in the area of applied economics, or policy advice, as was the case with many of the USA- based institutions and programs.
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Institutional Capacity Building
The forms of support provided under the institutional capacity building included the following:
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Short-term problem-based technical assistance. (6-8 weeks)
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Longer-term problem-based technical assistance. (1 year or more)
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Longer-term structure-based technical assistance. This was technical support which focused not only on solving a specific problem, but on creating an institution which can solve similar such problems.
Institutions that have managed to build sustainability beyond the time that funding expires are a good measure of the level of success in a program and many of the units created, or sustained through assistance have been empowered to survive. Notable among these are the PPP unit in National Treasury, and the restructuring unit of DPE, TIPS.
Systems and key factors in their success are the centrality of the issues on support to institutions and the support at senior levels of authority. The success of the Public Private Partnerships (PPP) unit relies entirely on the commitment of the national treasury to assume control of this new partnership environment. The credibility of the training given rests on the power exercised by treasury to make the guidelines mandatory before any PPP can proceed.
In contrast, the advice on privatization was no less expertly provided, but had less of an effect because the department concerned lacked the necessary commitment to the issue. As a result, policies and proposals were made but lay dormant in the hands of the client.
Another successful input has been with TIPS. This unit, now self sufficient, has proved to have an enduring effect on economic research and development. It is well–respected and has provided Government, and the policy arena in general, with quality analyses that have contributed positively in the policy debates.
A third success has been the capacitating of the Competition Commission which has carried out a very active role in regulating competition. It has successfully defended its position in several important court challenges and is now held up as a model for other African states.
With the work on Centers of Excellence, Finance and Development Training and Research Unit (FADTRU’s) impact (which appears to be sustainable) on creating an understanding of economics in general amongst those who would not have gained entry into the other institutions is invaluable.
Considerable success was achieved in supporting and building local institutions which are engaged in economic policy formulation and advice. This success was predicated on the identification of needed capacity by the client institution, and was often related to the building of capacity to engage in specific tasks. The experience and expertise of the advisors appointed was a key success factor. Technical expertise alone was not enough. Knowledge and experience of organizational development is essential, as is the personal ability to engage constructively with the client institutions and to act as effective change agents.
As with the SEGA/MESP program generally, this institution building element tried to spread itself over a very wide area. An “infant institution” principle seems to be in place. USAID money is used to initiate a project, in the expectation that it will be adopted by the client and independent funding will be found. The “adoption” is the acid test of project relevance and appropriate project design. We recommend that a more purposeful approach be taken.
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Policy Development: Conclusions
A number of positive results were noted which had a direct impact on policy. The key finding in respect of the policy development was as follows:
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Where there was clarity about the need for policy, and about how the USAID funded input would be used to deliver such policy, success was assured. Support for micro-finance regulation is a clear example. Where the funded input is merely a “nice-to-have” source of information, little tangible result can be expected (Projects within DLA are examples).
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A well-designed policy process, with a clearly defined role for external inputs, is also a pre-condition for successful assistance. In the cases where the specific project was initiated by the client department, and a clear vision was in place of how the assistance would interface with the internal policy process, the projects were successful. The support for micro finance policy is a clear example. In cases where the project was chosen for its potential interest, without any clear intention to incorporate it in policy making, it generally was consigned to the academic arena, and had little impact on the policy environment. Again, the micro-finance regulation project can be seen as epitomizing this point, with the Department of Land Affairs as it’s opposite.
Analysis of the SEGA/MESP policy interventions re-affirms that the identification of the need for policy and the determination of its general nature is, in a democracy, a highly political and therefore frequently contested process. Successful projects somehow managed to evade the pitfalls inherent in policy determination. Policy was relatively easy to formulate in the Departments of Trade and Industry, State Enterprises and Environmental Affairs and Tourism, but was very difficult to bring to finality in the Department of Land Affairs. Reasons for this can be found, if sought, in the centrality of the issues, the potentially conflicting nature of stakeholders’ interests, the ability of the policy protagonists and the degree of political support they enjoy. Work in the Department of Labour was facilitated by a happy and possibly serendipitous alignment of ideologies. Where the funded input is merely a “nice-to-have” source of information, little tangible result can be expected.
In general though, even with the failures, the impact on policy has been strong. Often, this impact is the result of the two other factors discussed above, that of capacity-building, and of institutional building.
Recommendations
The recommendations made under each section are summarized below:
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Human Resource Development
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Continuation of the Mandela Economic Scholarship Program. The provision of high profile scholarships for the study of economics at a postgraduate level should be continued. World-class education is clearly one of the most important benefits the donor countries can offer their clients and represents an export for which the recipient has very poor substitutes.
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The aid support mechanisms for local institutions should be designed so as to ensure that the acknowledged challenges presented by apartheid history are specifically addressed, by means of, for example, bridging programs. Teaching faculty should be given suitable encouragement to improve their learning relationships with their students.
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The focus on “conventional economics” rather than “radical political economy” should be maintained, but provision should be made for students to be exposed to divergent views.
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Institutional Capacity-Building
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Focus of support should be on building the institution itself. It should identify and appoint executive officers and work with them to design systems and procedures, establish a funding model and create a culture appropriate to the task at hand.
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The nature of the systems and procedures should have, as a top priority, the establishment of lines of communication between the technical and political stakeholders.
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The key criterion for approval of projects in this category should be the priority of the issues in the client’s own agenda. Only issues which are considered top priority by the client institutions should be pursued, and structures created to address them.
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The financial support of entirely private think-tanks which set their own research agendas is extremely risky and must be treated with caution. It is likely that the essential link between the researcher and the client department will be tenuous.
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Existing client organizations should be encouraged and assisted to develop an explicit organizational strategy in which the tasks supported by the TA and the capacity created is identified and targeted.
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An effort should be made to focus this form of assistance on a small number of institutions and to intensify the level of support given in order to generate greater depth of expertise, and to follow through once initial support is given.
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Policy Development
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Ownership. It is vital that policy interventions be “owned” by the client. This is even more important in the context of policy than in the capacity interventions. Incumbent decision-makers and executives should be assisted to make a clear identification of what policy outputs form part of their core deliverables, and to formulate an action plan to achieve them with the help of appropriate technical assistance.
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Policy Process. The client department should have in place (or be assisted to put in place) a well-defined process by which policy is formulated and evaluated. Emphasis should be placed on planning the policy process, to assist the client to ensure that the expected return on the advisory process is realized, and that the advice or funded research contributes positively to the achievement of policy goals.
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Institutional Sustainability. The advisory process should not be looked upon as “information transfer” but as a part of institutional capacity-building. Project design should incorporate this goal explicitly, going beyond merely identifying the project champion, and ensuring that the champion is carrying out a defined institutional role in formulating policy, and that, should he or she vacate that position, provision is made for succession so that the policy outcome remains at the core of the institutional agenda.
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Handling Political Conflict. The provision of direct policy advice to recipient departments, rather than the transfer of internal capacity to develop policy must be handled with care. The possible conflictual nature of policy must be recognized, and a selection framework should be developed to ensure that projects are selected with a high probability of success. Objectives and expected results must be expressed in terms that are robust to the effects of the conflict. The project must be able to succeed in its own terms whichever side comes out on top.
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