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AM r ii- _ ~~ Xv i: -- OPERATIONS EVALUATION DEPARTMENT ENHANCING DEVELOPMENT EFFECTIVENESS THROUGH EXCELLENCE AND INDEPENDENCE IN EVALUATION The Operations Evaluation Department (OED) is an independent unit within the World Bank, It reports directly to the Bank's Board of Executive Directors OED assesses what works, and what does not, how a borrower plans to run and maintain a project, and the lasting contribution of the Bank to a country's overall development The goals of evaluation are to learn from experience, to provide an objective basis for assessing the results of the Bank's work, and to provide accountability in the achievement of its objectives It also improves Bank work by identifying and disseminating the lessons learned from experience and by framing recommendations drawn from evaluation findings THEAFRICAN DEVELOPMENTBANK GROUP The African Development Bank Group's mandate, as stipulated m Article I of the Agreement Establishing the Bank, is to "contribute to the economic development and social progress of its regional members-individually and jointly " The Bank's mission, therefore, is to assist Regional Member Countries (RMCs) to break the vicious cycle of poverty in which they are entrapped Working towards this goal, the Bank would endeavor to facilitate and mobilize the flow of external and domestic resources, public and private, promote investment, and provide technical assistance and policy advice to RMCs WORLD BANK OPERATIONS EVALUATION DEPARTMENT AFRICAN DEVELOPMENT BANK OPERATIONS EVALUATION DEPARTMENT cmy Lesotho Development in a Challenging Environment A Joint World Bank-African Development Bank Evaluation Fareed M.A Hassan THE AFRICAN DEVELOPMENT BANK f Abidjan http //www afdb org THE WORLD BANK U http //www worldbank org/oed Washington, D.C. © 2002 The Imernational Bank for Reconstnrcnon and Developnment / The World Bank 1818 H Street, NW Washngton, DC 20433 All rights reserccd Manufa-tured In the Unied States of America First Prmtng May 2002 1 2 3 4 03 02 01 The flndings, nterpretations, and conclusions enpressed hern are those of the anthor(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent The World Bank cannot guanantee the accuarcy of th(e daa ncluded m this work The boundaries, cols, , denomna- tions, and other nformation shown on any map In this work do not Imply on the pan of the World Bank any a.dgnent of the legal stains of any teritory or the endorsement or acceptance of sach boondanes Rights and Permissions The material in thts work Is copyrighted No pan of this work may be reprodnced or transmitted in any form or by any means, electromc or mechanical, -iclding photocopying, recordng, or icl-sion In any mformation storage and retriecal system, withoot the prior written permission of the World Bank The World Bank encourages dissemnation of its work and wll nonnally gtant permission promptly For permission to photocopy or reprnt, please send request with complete nformation to the Copyright Clearance Cente, Inc, 222 Rosewoold Dnce, Dancers, MA 01923, USA, telephone 978-750-8400, fax 978-750-4470, www copynghr com All other queries on nghts and hcenses, mclnding subsidiary nghts, should he addressed to the Office of the Pubhsher, World Bank, 1818 H Stret NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail pbinghts@worldhank org Cover photo Co-nesy of Coontry Depanment 1, Africa Region, World Bank ISBN 0-8213-5156-7 Libhary of Congress Caiatogi,g-n-Iilictrion Data has Ieen apphed for Q Pented on Recycled Paper Lesotho Development in a Challenging Environment 33 5. African Development Bank Group Assistance to Lesotho 33 Bank Group Strategy in Lesotho 39 Sector Analysis 51 Crosscutting Issues 51 The Counterfactual 53 6. Overall Assessment of African Development Bank Group Assistance 57 7. Attribution of Perfonnance of Development Partners 57 World Bank lierformance 58 Borrower Performance 59 Aid Partner Performance Issues 59 Exogenous Factors 61 8. Conclusions and Recommendations 61 Poverty, Human Capital Development, HIV/AIDS, and Institutional Strengthening 61 Monitoring and Evaluation 62 Donor Coordination 62 Political Stability 107 Endnotes Bibliography Annexes 63 Annex A Comments from the Government of Lesotho 67 Annex B Country Assistance Evaluation-Comments by the Country Team for Lesotho 69 Annex C Report from the Committee on Development Effectiveness (CODE) 71 Annex D Statistical Annex 83 Annex E Project and Program Data 93 Annex F OEI) Ratings Glossary and Definitions 95 Annex G Background Summaries, Selected Topics 95 World Bank Support for Human Capital Development in the 1990s, by Ellen Goldstein 100 Poverty Reduction and Rural Development, byJack van Holst Pellekaan 103 Evaluating Bank Assistance to Lesotho for Private Sector Development, by Kevin Lumbila 105 Water Sector Strategy Review, by Guy Le Moigne Boxes 2 Box 11 A Brief Political History of Lesotho 13 Box 3 1 Lesotho-World Bank Strategies 16 Box 3 2 The Lesotho Highlands Water Project (LHWP) 18 Box 3 3 The Lesotho Highlands Water Project Dam Safery, Environment, and Other Bank Safeguards and Guidelines 31 Box 4 1 The Muela Hydropower Plant Contents vii Acknowledgments ix Foreword, Pr6logo, Avant-Propos xv Executive Summary, Resumen, Resume Analyaique xxi Abbreviations and Acronyms 1 1. Lesotho's Political, Economic, and Social Development 1 The Economy 4 Poverty, Inequality, Social Conditions, and Gender Bias: Low Welfare Levels 6 High but Declining Aid 7 2. Development Challenges and Constraints 7 Poverty Reduction: The Overarching Objective of Lesotho's Development 7 Human Capital Development: Key forJobs 7 HIV/AIDS: A Formidable Challenge 9 Institutional Capacity: A Major Weakness 9 Private Sector Development: Key for Growth 9 Political Instability: A Challenge and a Constraint to Sound Governance 11 3. World Bank Services and Products 11 Policy Dialogue and Strategic Analysis 19 Economic and Sector Analysis 21 Lending 25 4. The Development Effectiveness of World Bank Assistance 25 Macroeconomic Outcomes 26 Rural Development and Poverty Reduction 27 Human Capital Development 29 Private Sector Development Ii Contents Figures 3 Figure 11 Number of Lesotho Miners in South Africa and Remittances, FY89-99 4 Figure 1 2 Gross Domestic Product and Gross National Product Growth Rate, FY91-00 22 Figure 3 1 Net Disbursements and Net Transfers 28 Figure 4 1 Trends in Secondary School Enrollment 44 Figure 5 1 Trends in Expanded Program on Immunization Vaccine Coverage Tables 5 Table 1 1 Lesotho's Poverty and Inequality Profile, 1993-99 5 Table 1 2 Social Indicators in Lesotho and Comparator Countries 6 Table 1 3 Official Development Assistdnce, Annual Average, 1990-94 and 1995-97 8 Table 2 1 The Incidence of AIDS in Lesotho, South African Customs Union, South African Development Corporation, Sub-Saharan Africa, and Worldwide, 1999 12 Table 3 1 1995 Poverty Reduction Action Plan 14 Table 3 2 Relationships between 1995 Poverty Assessment, Country Assistance Strategies, Lending, and Outcomes for Malor Programs 21 Table 3 3 Sectoral Distribution of Bank Lending, FY66-99 22 Table 3 4 OED Evaluation Findings of Recently Evaluated Projects (Exiting in the 1990s) 30 Table 4 1 Private Sector Development, 1995-01 38 Table 5 1 Sectoral Breakdown of Bank Group-Approved Loans and Grants, as of December 31, 1999 38 Table 5 2 Operations Evaluation Ratings of Completed Projects m Lesotho Annex Tables 71 Table D 1 Selected Social and Demographic Indicators of Lesotho, South Afncan Development Corporation, and Sub-Saharan Afnca, 1980 73 Table D 2 Selected Social and Demographic Indicators of Lesotho, South African Development Corporation, and Sub-Saharan Africa, 1997 75 Table D 3 Annual Assistance to Lesotho and Comparator Countries, Average, 1990-97 76 Table D 4 Lesotho at a Glance 79 Table D 5 Key Economic Indicators for Lesotho and Comparator Countries, 1990-00 81 Table D 6 Current Expenditure in the Social Sector, 1989-00 83 Table E I Lesotho List of World Bank Economic and Sector Work 84 Table E 2 Costs of World Bank Programs for Lesotho and Comparator Countries, FY91-99 86 Table E 3 World Bank Operations Evaluation Department and Quality Assurance Group Ratings for Lesotho and Comparator Cotntries Lesotho Development in a Challenging Environment 87 Table E 4 Summary Evaluations for World Bank Pro;ects Closed since FY90 or Ongoing 88 Table E 5 Lesotho List of AfL)B Plrojects 89 Table E 6 Performance Evaluation of AfDB Transport Sector Prolects in Lesotho 90 Tabel E 7 Summary of Transport Sector Prolects in Lesotho 92 Table E 8 Prolects in the Social Sector, Lesotho, 1974-98 Acknowledgments F areed M A Hassan was the Task Manager arrangements made by staff of the Lesotho High- for this report at the World Bank, and lands Development Authority The contribu- acknowledges with thanks the contribu- tions and cooperation of all those who assisted tions by Oladeji Olo (AfDB), Ellen Goldstein the mission and the evaluation are gratefully (OEDCR), Guy Le Moigne (consultant), Kevin acknowledged Lumbila (OEDCR), and Jack van Holst Pellekaan The study was published in the Partnerships (consultant) Oliver Rajakaruna and Dinara Sei- and Knowledge Group (OEDPK) by the Out- japarova provided statistical information, and reach and Dissemination Unit The task team Norma Namisatc, administrative support includes Elizabeth Campbell-Page (task team For the African Development Bank, Oladeji leader), Caroline McELien (editor), and Juicy Ojo served as the Task Officer, and the support Qureishi-Huq (administrative assistant) of Gabnel Kariisa, Director of the Afncan Devel- opment Bank Group Operations Evaluation i)-retor-O-neiil, Opetisos Ev-imuon Robe Rncoito Department, is gratefully acknowledged D-rector, Op-rti-ons evaluatio- Deparmnit A joint World Bank-African Development egoe. K Mngr. Bank mission visited Lesotho from May 29 to Manager, Country Evaluation and Regional Relitions June 12, 2000 The mission also visited South Rubnn Lamdan.y Afnca and the vanotis project sites of the Lesotho Task Man4ger Fareed MA lassa, Highlands Water Project, including some reset- Petr Rev,ewr-s Sbantayawnai D-raja-ai tlement villages The visit was facilitated by Alice Galenon FOREWORD PROLOGO AVANT- PROPOS This Country Assistance Esta evaluaci6n de la asis- Cente Evaluation de la strat6- Evaluation was prepared in tencia al pals sa prepar6 en gie de laide au Lesotho a 6t6 collaboration with the African colaboraci6n con el Grupo del pr6par6e en collaboration avec le Development Bank Group. Lesotho's Banco Africano de Desarrollo Groupe de la Banque africaine de economic and social development in (BAfD). El desarrollo econ6mico y d6veloppement. Le d6veloppement the 1990s and the development chal- social de Lesotho en los aitos 6conomique et social du Lesotho lenges facing the country were noventa y los desafios quo el pals durant les ann6es 90 ainsi quo les assessed jointly; the roles of each encora en esa esfera se evaluaron d6fis que le d6veloppement pose au institution over the decade were conjuntamente. ademas se llev6 a pays ont 6t6 6valu6s conlointement; evaluated in parallel The partner- cabo en forma paralela una evalua- le rOle jou6 par chacune des institu- ship led to significant capacity ci6n del papel desempeilado por tions au cours do la d6ceonie quant development, and further collabora- cada une de las organizaciones A lui. Ia 6t6 en parallble. Ce parte- tion is already ongoing: the African duranto dicho decenio. Esta coope- nariat a parmis de renforcer sub- Development Bank Group is cur- raci6n permiti6 alcanzar un signifi- stantiellement les capacit6s. et le rently loading a joint evaluation of cativo aumento de le capacidad y collaboration se poursuit. le Groupe the Rwanda program. ahora esta intensificandose el de le Banque africaine do d6velop- Lesotho is a poor, small, moun- Grupo del Banco Africano de Des- pement coordonne actuallement une tamous country of about two md- arrollo actualmente dirige una eva- 6valuation conlointe du programme lion (predominantly rural) people luaci6n conlunta del programa pare pour le Rwanda The country is landlocked and Rwanda. Le Lesotho est un petit pays completely surrounded by, and Lesotho es un pais pobre, pativre et montagneux avec une economically dependent on, pequefto y montafioso con unos population (essentiellement South Afnca Its economy is based dos millones de habitantes (que rurale) d'environ deux millions on limited agricultural and pas- viven sobre todo en zonas rura- d'habitants Enclave dans l Afri- toral production and light manu- les) Carece de litoral y esta total- que du Sud, dont 1d est economi- facrunng (textile, clothing, and mente rodeado por Sudafrica, pals quement dependant, il n'a pas leather) supplemented by large, del que depende econ6mica- de fafade maritime Son econo- although declining, remittances mente La economia de Lesotho mie repose sur une faible pro- from Lesotho miners in South se basa en una limitada produc- duction agricole et pastorale, sur Africa Recently there have also ci6n agricola y ganadera y en acti- la petite industrie (production been royalties from exporing vidades manufactureras ligeras de textiles et de vetements, tra- water to South Africa through the (textiles, prendas de vestir y arti- vail du cuir) ainsi que sur les World Bank-supponed Lesotho culos de cuero), lo que se com- sommes importantes qu envotent Highlands Water Project (LHWP) plementa con cuantiosas remesas les mineurs expatri6s en Afrique A major development chal- de los mineros de Lesotho que dtLi Sud, un apport quo tend tou- lenge for Lesotho is that half the trabalan en Sudafrtca, aunque su tefois a baisser Le pays a recem- population lives below the volumen esta dismtnuyendo Olti- ment commene6 a recevoir des poverty line and income inequal- mamente Lesotho tambiln ha redevances sur leau quil Lty is among the highest in the recibido regalias por concepto de exporte en Afrique du Sud world Other challenges are low la exportaci6n de agua a Sud- depuis qu'a t6 reahsi, avec quality of education and health afnca a trmves del proyecto de Iaide de la Banque mondiale, le services, widespread HIV/AIDS, exportaci6n de recursos hidricos Projet hyclraulique des hautes weak institutions, and lagging respaldado por el Banco terres du Lesotho Lesotho Development in a Challenging Environment pnvate sector development En relaci6n con su des- Sur le plan du develop- External aid to address arrollo, Lesotho enfrenta el pement, un des grands these issues, although i importante desafio de que defis du Lesotho tient ati declining, is higher per la mitad de su pohlaci6n fait qcie la mottit de sa capita than the Regional vive por debajo del uimbral population vit en dessoLIs average Despite some de pobreza y que la des- - du seull de la pauvret6 et macroeconomic successes, igualdad en la distribuci6n que c'est l'un des endroits political instability and del mgreso se sittla entre du monde ot l'megalte weak governance continue to las mrts altas del mundo Otros des revenus est la plus marquee constrain the country's develop- desafios en esta esfera son la bala Les autres probletmes du pays ment, reducing government own- cahdad de los servicios de educa- sont Ia mauvalse quahte de l'6dti- ership of programs and ci6n y salud, la alta incidencia de cation et des services de sante, la hampering implementation VIIH/SIDA, existencia de institu- prevalence du VIH/SIDA, la fai- World Bank assistance evolved clones deficientes y el lento des- blesse des institutions et le retard from an emphasis on stabilization arrollo del sector privado La dans le developpement du secteur and growth to a focus on poverty asistencia externa aportada para prive Meme si elle baisse, I'aide reduction and private sector abordar estos problemas stipera el ext6rieure fotirnie pour repondre development in the latter part of promedio regional sobre una base ft ces problemes est, par habitant, the 1990s The World Bank sup- per c5pita, pero est5 disminiu- sup6rieure ft la moyenne r6gio- ported joint work with the gov- yendo No obstante algtinos dxi- nale Bien qtue certains succes errnment and the International tos alcarnzados a nivel alent ete enregistr6s au niveau Monetary Fund on successive Pol- macroecon6mico, la tiestabilidad macro6conomique, I'nstablhti icy Framework Papers throughout politica y los problemas de ges- politique et une gestion miade- the 1990s The World Bank also ti6n de los asuntos pbhlicos quate des affaires publiques conti- supported a lointly prepared siguen repercutiendo adversa- nuent de freiner le Poverty Assessment and a Strate- mente en el desarrollo del pals, developpement du pays en dimi- gic Economic Options Repon, in reduciendo la identificact6n del nuant la mesure dans laquelle les which the government charted its gobierno con los programas y pouvoirs publics prennent les post-apartheid economic strategy obstaculizando su ejecuci6n programmes au sdrieux et en But other planned analytical work La asistencia del Banco Mun- genant la r6altsation de ces was only partially carried out dial ha evolucionado, pasando del derniers Notably absent were periodic infasis en la estabilizaci6n y el L'aide de la Banque mondiale, reviews of public expenditures crecimiento a la focalizaci6n en la qui pliaait initialement l'accent The LHWP was the most impor- reducci6n de la pobreza y el des- sur la stabilisation et la croissance tant of World Bank programs, but arrollo del sector privado a fines de l'economie, a ete r6orionte education, health, agriculture and del decento de 1990 Durante vers la r6cduction de la pauvrete et rural development, and private todo dicho decento el Banco du developpement du secteur sector development also received Mundial particip6 conjuntamente pniv6 ' la fin des annees 90 La support con el goblerno y el Fondo Mone- Banque mondiale a egalement The successful macroeconomic tario Internacional (FMI) en la soutenu, durant les annees 90, la policies and the substantial impact preparactif de documentos sobre redaction, avec le gouvernement of construction in the LHWP par5metros de politica econ6mica et le Fonds mon6taire internatio- helped Lesotho achieve an aver- El Banco Mundial tambhin res- nal, plusieurs documents-cadre de age annual GDP growth of close pald6 la preparacifn conjunta de politique Ieconomique Elle a to 4 percent during the 1990s una evaluaci6n de la pobreza y prete son concours a la prepara- Although the World Bank de un informe estrat6gico sobre tion conjointe d'une evaluation de financed less than 4 percent of opciones econ6micas, en el que la pauvrete et d'un rapport sur les the first-phase LHWP cost of $3 7 el gobierno plasm6 su estrategia options economiques stratigiques billion, it facilitated an agreement econ6mica para el periodo poste- ou le gouvernement decrivait la Foreword between South Africa and rior al r6gimen cle apart- strat6gie dconomique qu'il Lesotho, served as a cata- heid Ahora bien, otras avait l'intention d'adopter lyst in secunng external a actividades analiticas pla- suite a labandon de l'apar- financing, and advised on neadas s6lo se Ilevaron a la theid Mais d'autres analy- project formulation and practica parcialmente Des- ses prevues n'ont its que implementation Although taca en particular en este partiellement reahsees the LHWP succeeded in sentido la ausencia de exa- L'absence d'examens pnrio- generating sustained export menes peri6dicos de los diques des depenses publi- revenue for Lesotho, the World gastos publicos El proyecto de ques s'est particulidrement fait Bank did not provide adequate exportaci6n de recursos hidncos sentir Le projet hydraulique des technical support for improving fue la actividad mas importante hautes terres du Lesotho consti- rural welfare from the proceeds of del Banco Mundial en el pais, tuait le principal programme de la water sales And the World Bank pero tambidn apoy6 aLtividades Banque mondiale, mais un sou- erred by not insisting on the en los sectores de educaci6n, tien a egalement did accordd dans inclusion of the Muela power salud, agncultura y desarrollo les domaines de I'dducation, de la plant as an integral part of the rural, asi como fomento del sector sante, de l'agriculture et du deve- prolect under the management of privado loppement rural ainsi que de the central oversight authority La aplicaci6n exitosa de las 1'expansion du secteur privd This would have facilitated politicas macroecon6micas y el Le succes des politiques macro- Muela's financing and implemen- impacto significativo de la cons- dconomiques et l'impact substan- tation, and also created an incen- trucci6n del proyecto de exporta- tiel des travaux realises dans le tive for Lesotho and South Africa ci6n de recursos hidricos ayud6 a cadre du projet hydraulique des to save on costs Finally, with the Lesotho a alcanzar una tasa anual hautes terres du Lesotho ont aidc exception of education, other media de crecimiento del PIB cer- ce dernier a atteindre un taux World Bank programs were cana al 4% durante el decenio de annuel moyen de croissance du ineffective 1990 Si bien el Banco Mundial PIB de pres de 4 % durant les The outcome of the World financi6 menos del 4% del costo annoes 90 Meme sa la Banque Bank assistance program is mod- de US$3 700 millones de la pri- mondiale a finaned moms de 4 % erately unsatisfactory The World mera etapa del proyecto mencio- de la phase initiale du projet Bank's contribution to institutional nado, propicid la concertaci6n de (dont le cout s'eleve d 3,7 mil- development was modest because un acuerdo entre Sudafnca y liards de dollars), elle a facildti la most of the institutions estab- Lesotho, actu6 como catalizador conclusion d'un accord entre le lished were weak and oinsustain- respecto de la obtenci6n de finan- Lesotho et l'Afrique du Sud, servi able Sustainabiliry is uncertain ciamiento externo, y proporcion6 de catalyseur pour le montage du since growth has depended on asesoria para las fases de prepara- financement externe et fourni des aid inflows linked to the construc- ci6n y ejecuci6n A pesar de que conseils lors de la conception et tion of the LHWP, which are likely el proyecto ha logrado generar un de l'ex6cution de ce projet Celui- to decline In addition, the econ- volumen sostenmdo de mgresos de ci a effectivement assure au Leso- omy remains vulnerable to exportaci6n par Lesotho, el tho une source r6gulidre de changes in the subregion An Banco Mundial no aport6 apoyo recettes d'exportation, mats la improved environment for growth tecnico adecuado parn mejorar el Banque mondiale n'a pas accordd and private sector development nivel de bienestar en las zonas une aide technique suffisante depends also on enhanced politi- rurales con el producto de las pour que les revenus tir6s des cal stability and better gover- ventas de agua Ademas, el Banco ventes d'eau puissent servir ii nance, and on deeper parastatal Mundial comets6 el error de no ameliorer le sort des populations reform Prospects for all of these insistir en la inclusi6n de la cen- rurales La Banque mondiale a changes are uncertain tral de energia electrica de Muela egalement commis une erreur en The African Development Bank como pane integral del proyecto n'nsistant pas pour que la cen- Group's evaluation assessed AfDB bajo la administraci6n de la auto- trale de Muela soit pleinement Lesotho Development in a Challenging Environment assistance, including sup- ridad central de supervi- integree au projet et placde port to the transpon and sn6n Esto habria facilitado sous la responsabilit6 de social sectors The evaluia- - el financiamiento y eoecu- l'organisme de supervision tion focus and methodolo- ci6n de la central de Muela centrale Cela aurait facilite gles differ, and thuis, the y tambhin habria consti- son financement et sa r6alh- evaluation ratings by each tuido un incentivo para la sation, en plus de donner institution are not always reducci6n de los costos por au Lesotho et a l'Afrique du comparable Overall, the Lesotho y Sudifrica Por Sud des ralsons de r6duire outcome of the AfDB assistance ultimo, con la excepci6n del sec- les conts Enfin, sauf en ce qui program was rated as "lust satis- tor de educaci6n, los demns pro- concerne Itcducation, les autres factory " Nonlending operations gramas del Banco Mundial han programmes de la Banque mon- (policy advice and dialogue, and sido ineficaces diale se sont averes inefficaces economic and sector work) were Los resultados del programa de Les resultats du programme rated unsatisfactory Pnor eco- asistencia del Banco Mundial son d'aide de la Banque mondiale nomic and sector work did not moderadamente insatisfactorios sont moderement insatisfaisants guide strategies and lending Sus- La aportaci6n del Banco Mundial L'institution n'a que modestement tainability of the outcome appears en el ambito del desarrollo institu- contribue au developpement insti- likely, as the government makes cional ha sido modesta porque la tutionnel parce que la plupart des regular and adequate budget pro- mayoria de las instituciones esta- institutions creees sont restees fai- vision for maintenance of invest- blecidas han resultado ser defi- bles et n'ont pu etre rendues via- ments in the transport and social cientes e insostembles Las bles Leur viabilite est incertaine sectors The impact on institu- perspectivas de sostenibilidad son puisque la crotssance economique tional development is, however, dudosas debido a que el creci- est demeuree hee aux finance- modest, as Lesotho continues to miento ha dependido de la ments accordes pour la r6ahsation expenence weaknesses in institu- afluencia de asistencia vinculada du projet hydraulique des hautes tional performance This in made con la construcci6n del proyecto tenoes du Lesotho, qui vont proba- worse by the outflow of trained de exportaci6n de recuirsos hidri- blement aller en diminuant De manpower to South Africa cos, cuyo volumen probable- plus, Ieconomie du pays continue This joint evaluation recom- mente disminuira Ademns, la d'etre affectee par les change- mends that future World Bank economia sigue siendo vulnerable ments qui surviennent dans la and African Development Bank a cambios en la subregi6n El sous r6gion La creation de condi- Group assistance should continue mejoramiento de las condiciones tions plus favorables a la crois- to center on reducing poverty and para el crecimiento y el desarrollo sance economique et au inequality They shotild do this by del sector privado dependen asi- developpement du secteur prive focusing on the quality of educa- mismo del aumento de la establi- n6cessite par ailleurs plus de sta- tion and human capital develop- dad politica y de una mayor bilit6 politique, une amllioration ment (particularly in the poor, eficiencia en la gestt6n de gob- de la gestion des affaires publi- mountainous regions), combating ierno, asi como de la implanta- ques et une reforme plus com- HIV/AIDS, strengthening nural ci6n de reformas mgs profundas plete des institutions institutions (such as improved en el sector paraestatal Las pers- para6tatiques Les perspectives de land tenure, research, extension, pectivas para la introducci6n de changement a ces egards sont and grazing management), and todos estos cambios son inciertas incertaines enhancing the enabling environ- La evaluaci6n realizada por el Le Groupe de la Banque afn- ment for private sector develop- Grupo del Banco Africano de caine de developpement a evalue ment Given the severe data gaps Desarrollo abarc6 la asistencia I'aide qu'elle a fourni, y comprins in almost all sectors, external facilitada por esa instituct6n, en cc qui concerne le secteur des assistance should help Lesotho incluldo el apoyo proporcionado transpons et le secteur social Les improve its statistical database, a los sectores social y de transpor- methodes utilisges pour l'ivalua- most urgently in areas related to tes Debido a Ias diferencias de tion et les elements sur lesquels Foreword poverty reduction, and pro- _ nfasis y metodologia, las elle insiste etant diff6rents, mote monitoring and eval- clasificaciones emanadas les appreciations des deux uation systems The World - de las evaluaciones de institutions ne sont pas tou- Bank's consultation with cada organismo no siempre lours comparables Dans donors on development - son comparables En con- 1'ensemble, le resultat du priorities could be junto, se clasificaron como - programme d'aide de la enhanced by a stronger "apenas satisfactorios" los BAfD a et luge * juste . operational representation resultados del programa de satisfaisant Les services in Maseru, or more frequent inter- asistencia del BAfD Las opericio- hors pret (dialogue et conseils sur action with the government and nes no crediticias (asesoria y dic- les politiques, etudes economi- development partners from the logo sobre politicas, y estudios ques et sectorielles) ont et juges World Bank's office in Pretoria econ6micos y sectoriales) se con- insatisfaisants Lrs strategies et les sideraron insatisfactonas La labor prets ne se sont pas appuyes sur econ6mica y sectorial previa no les erudes effectuees precedem- se utiliz6 para orientar las estrate- ment Les resultats obtenus sem- gias y las operaciones crediticias blent pouvoir etre maintenus Parece probable que los restilta- durablement, puisque le gouver- dos alcanzados sean sostenibles, nement mscnt reguherement au dado que sobre una base regular budget des dotations suffisantes el goblerno incluye en el presto- pour preserver les investissements puesto fondos adecuados para el dans les transports et le secteur mantenimiento de las inversiones social L'impact du developpe- en los sectores social y de trans- ment institutionnel reste cepen- portes Sin embargo, el impacto dant modeste, puisque la en el desarrollo institucional ha performance institutionnelle du sido modesto, pues el desempefio Lesotho demeure marquee par de las instituciones de Lesotho des lacunes L'attrait que l'Afnque sigUe aclolecienrlo de deficiencias dii Stid exerce stir la main-d'mui- El exodo de personal calificado vre qualifi6e a pour effet d'empi- hacia SudlAfrica agrava esta rer la situation situacm6n Dans le cadre de cette evalua- En esta evaluaci6n conjunta se tion conointe, 1l est recommande recomienda que la asistencia que la Banque mondiale et le futura del Banco Mundial y del Groupe de la Banque africaine de Grupo del Banco Africano de developpement continuent d'axer Desarrollo siga centrmandose en la leur aide sur la rcduction de la reducci6n de la pobreza y la des- pauvrete: et des mngaht6s A cette igualdad En este sentido deben fin, elles devraient concentrer hacer hmncapil en la calidld de la leurs efforts sur l'amllioration de educaci6n y el desarrollo del la quahte: de l'6ducation et sur la capital humano (particularmente valorisation du capital hLimain en las regiones montafosas (surtout dans les r6gions monta- pobres), la licha contra el gneuses pauvres), la lutte contre VIH/SIDA, el fortalecimnento insti- le VIH/sida, le renforcement des tucional en el sector rural (como institutions rurales (comme l'ame- mejoras en la tenencia de la tierra, lioration du regime d'occupation las investigaciones, la extensi6n des terres, la recherche, la vulgan- agricola y la gesti6n del pastoreo) sation et la gestion des paturages) y el mejoramiento de las condi- et la crCiation de conditions plus Lesotho Development in a Challenging Environment ciones para el desarrollo favorables au developpe- del sector privado En vista ment du secteur pnvd - de las graves brechas de - Puisque les donnees pre- informact6n que existen en sentent de graves lacunes * casi todos los sectores, a dans presquie toils les sec- traves de la asistencia teurs, une aide ext6teure externa debe ayudarse a devratt etre fournie au Lesotho a mejorar su base Lesotho pour qu'il puisse de datos estadisticos, con aten- am6liorer ses donnees statistiques, ci6n prioritaria a esferas relacto- un besoin qut est particulilrement nadas con el alivio de la pobreza, pressant dans les domaines rela- y a perfeccionar los sistemas de tifs a la reduction de la pauvrete, segutmiento y evaluaci6n La et pour favoriser la mise en place efectividad de las consultas que de systemes de suivi et d'evalua- celebra el Banco Mundial con tion Les consultations entre la donantes acerca de las priorida- Banque mondiale et les bailleurs des en materia de desarrollo de fonds au sujet des priorit6s a podria incrementarse mediante el fixer poLir le developpement fortalecimiento de la representa- pourraient etre facilit6es par un ci6n operacional en Maseru o la renforcement de la repr6sentation interacci6n mas frecuente con el operauonnelle 3 Maseru ou par gobtemo y los asociados en el un accroissement de la frequence proceso de desarrollo a traves de des interactions avec le gouverne- la oficina del Banco Mundial en ment et les partenaires du deve- Pretona loppement a panir du bureau de la Banque mondiale a Pretona Robert Picciotto Director-General, Operatuons Evaluation EXECUTIVE RESUMEN RESUME SUMMARY - ANALYTIQUE Lesotho is a small, poor Lesotho as un pais paqueiio y La Lesotho ast un petit pays country (GNP per capita, pobre (con un PNB per capita pauvre IPNB par habitant de $540). Half of its two million people de USS540). La mitad de sus dos 540 dollars). La moitli de ses deux live below the poverty line and millones de habitantes viven par millions d'habitants vivent en des- income inequality is among the debalo del umbral de pobraza, y la sous du seuil de la pauvrete at les highest in the world. Lesotho is dasigualdad en la distribuci6n del inigalitis dans las ravenus sont landlocked and completely sur- ingraso so situa entre las mis altas parmi las plus marquees au monde rounded by South Africa, and thus it del mundo. Lesotho carece de litoral Depourvu de fa,ada maritime, la is economically dependent on that y esta completamenta rodeado por Lesotho ast enclav6 dens l Afrique country. Lesotho's economy is based Sudafrica, pals del que depende du Sud et est donc bconomiquement on limited agricultural and pastoral acon6micamenta Su economia se dipendant de cella-ci. Sen 6cono- production and light manufacturing basa an una limitada producci6n mie repose sur une faibla production such as textiles, clothing,-and agricola y ganadera y an activida- agropastorale et sur la petite indus- leather. The economy is supple- des manufactureras ligeras (por tre Iproduction de textiles at de mented by large, but declining, ejamplo, textiles, prandas da vestir y vetemants, travail du cuir, par exam- remittances from Lesotho miners in articulos da cuaro). La economia sa pie) Son economia beneficie des South Africa and, recently, by the complementa con imponantes rama- importants envois de fonds des receipt of royalties from supplying sas da los mineros da Lesotho qua mineurs partis travailler en Afrique watar to South Africa through the trabajan an Sudafrica, aunque su du Sud, bien qua catte source de World Bank-supported Lesotho voluman esti disminuyendo. Ultima- ravenus soit an baissa, at. dapuis Highlands Water Project ILHWP). menta Lasotho tambien ha recibido quelquas tamps, des redevancas sur Added to the formidable challenge regalias por concepto del suministro 1eau quoil exporta vers l Afrique du of the difficult physical and eco- de agua a Sudifrica a traves del Sud depuis qua iti ralisi., avac nomic environment is a fragile and proyecto de exportaci6n de recursos Iaide da la Banque mondiale, la unpredictable political situation. hidricos de Lasotho respaldado por Projat hydraulique des hautas terres el Banco Mundial. Al anorme des- du Lesotho Une situation politique Challenges Remain afio qua plantean las dificiles condi- fragile at imprivisible viant aug- Substantial improvements in stabi- ciones fisicas y econ6micas del mantar la formidable difi que posent lization and growth have been pals se sume su frigil e impradaci- des conditions iconomiques at phy- achieved, stimulated in part by ble situaci6n politica. siques difficilas. the LHWP GDP growth averaged 4 percent yearly dunng the 1990s, Desafios qua auin persisten Defis subsistants but dropped sharply toward the Se han alcanzado importantes Des progres substantiels ont 6t6 end of the decade Progress in mejoras en materia de estabiliza- reahses pour cc qut est de stabill- structural reforms and sectoral ci6n y crecimiento, en pane gra- ser la situation et d'accelerer la policies such as privatization, cias al estimulo proporcionado croissance, notamment grace a la health, agnculture, and rural por el proyecto de exportaci6n de r6alisation du Projet hydraulique development has been less recursos hidricos La tasa anual de des hautes terres du Lesotho Le impressive The country's devel- crecimiento del PIB registr6 un PIB s'est accru de 4 % par an en opment continues to be chal- promedio del 4% durante el dece- moyenne durant les annees 90, lenged by widespread poverty, nmo de 1990, pero experiment6 un mals a fortement chute vers la low quality of education and pronunciado descenso hacia fines fin de la decennie Les progres health services, a very high de dicho decento El progreso accomplis dans le cadre des Lesotho Development in a Challenging Environment incidence of HIV/AIDS, logrado en el ambito de las reformes structurelles et weak institutions, lagging reformas estructurales y las des politiques sectonelles, private sector development, - politicas sectoriales, como notamment dans les domai- and insufficient donor privatizaci6n, salud, agri- nes de la privatisation, de coordination cultura y desarrollo nrral, la sante, de l'agncultore et ha sido menos iinpresio- du developpement rural, The World Bank's nante El desarrollo del sont moms impression- Approach in the 1990s pais sigue vi6ndose obsta- nants Le developpement As the country stabilized, the culizado por la pobreza generali- du pays continue d'etre compro- World Bank turned to poverty zada, la bala cahldad cle los mis par une pauvrete g6n6ralisle, reduction and private sector servicios de educaci6n y salud, la la mauvaise qualite de lilducation development in the latter part of incidencia muy alta de VIH/SIDA, et des services de sante, une tres the 1990s The LHWP was the la debilidad de las instituciones, el forte incidence du VIH/SIDA, la most important of World lento desarrollo del sector privado faiblesse des institutions, la len- Bank-supported projects World y la insuficiente coordinaci6n teur du developpement du sec- Bank commitments to Lesotho entre los donantes teur privi et le manque de tnpled-to almost $300 million- coordination entre les bailleurs de in the 1990s because of the El enfoque del Banco Mundial fonds LHWVP Annual average net dis- en los anos noventa bursements were $13 million and Al estabilizarse la situaci6n en el Approche adoptee par la net transfers $10 million during pals, el Banco Mtindial centr6 soL Banque mondiale dens les FY90-00, with peaks of nearly atenci6n en el alivio de Li pobreza ann6es 90 $30 million for each in FY93 fol- y el desarfollo del sector privado a La situation devenant plus stable lowing LHWP approval Although finales del decenio de 1990 El au Lesotho, la Banque mondiale a the LHWP project succeeded in proyecto de exportarL6n de recur- riorient6 son action vers la reduc- stimulating growth and generating sos hidricos fue el mis importante tion de la pauvrete et le develop- sustained export revenue for de los apoyados por el Barco pement du secteur privi dans la Lesotho, its impact on poverty Mundial en Lesotho Como consc- dcrmire partie des annecs 90 Par reduction was minimal The Bank cuencia de este proyecto, los com- suite du Projet hydraulique des also supported education, health, promisos del Banco Mundial con hautes terres du Lesotho, le plus agriculture and rural develop- Lesotho se triplicaron en los afios imponant des projets appuyes par ment, and private sector develop- noventa, alcanzando un nivel de l'institution, les montants engages ment With the exception of cerca de US$300 millones El par la Banque mondiale au Leso- education, other World Bank pro- monto anual medio neto de los tho ont tnpl6 - pour atteindre grams were ineffective Some desembolsos ascendi6 a US$13 pres de 300 millions de dollars - sound analytical work was carried millones y las transferencias netas durant les annees 90 Les decais- out, but periodic reviews of pub- sumaron US$10 millones en el sements annuels nets moyens se lic expenditures and/or poverty periodo de los ejercicios de 1990 a sont etablis ii 13 millions de dol- assessment updates would have 2000, ambos rubros registraron stL lars et les transferts nets a 10 mil- been desirable volumen mas alto, de casi US$30 lions entre les exercices 90 et 00, millones cada uno, en el elercicio et ont fait un bond pour ateindre African Development Bank de 1993 a raiz de la aprobacil6n de de pres de 30 millions dans les Evaluation Findings dicho proyecto Aunque a traves deux cas pour l'exercice 93, c'est- Since it began operations in del proyecto de exportaci6n de 1-dire apres l'approbation du Pro- Lesotho in 1974, the African recursos hidricos se logr6 estimu- let hydraulique Meme si celui-ci a Development Bank Group has lar el crecimiento de Lesotho y stimu1 la croissance et permis ant committed unit of account (UA) generar un volumen sostenido de Lesotho de generer des recettes 275 million for 27 projects, 3 lines ingresos de exportaci6n para el d'exportation regulhires, 1l n'a eu of credit, and 6 studies The pub- pais, su impacto en la reducci6n qu'un effet imiut sur le plan de la I Executive Summary tic utilities and transport de la pobreza ha sido min- r6cduction de la pauvrete sectors are the main benefi- imo El Banco tambi6n ha La Banque mondiale a dga- ciaries, with 28 percent and - respaldado actividades en lement apporte un soutien 26 percent of the portfolio los sectores de educaci6n, dans les domaines de respectively, followed by salud, agricultuni y desarro- I1'ducation, de la santi, de the social sector (24 per- llo rural, y desarrollo del I'agriculture et du ddvelop- cent), agriculture (13 per- sector privado Con excep- pement rural ainsi que de cent), and industry (9 ci6n de la edUcaci6n, los 1'expansion du secteur percent) The evaluation dealt programas del Banco Muindial no priv6 Sauf pour l'ducation, les mainly with the transport and han sido eficaces Si bien se lleva- programmes de l'institution se social sectors Overall, the out- ron a cabo algunos estudios anali- sont aver6s inefficaces Certaines come of the African Development ticos provechosos, hubiera sido analyses interessantes ont ete Bank Group assistance program aconselable realizar examenes effectuees, mais il auralt ete sou- in Lesotho was rated as "'jst" peri6dicos de los gastos piblicos haitable de les completer par des satisfactory Performance in non- o actualizaciones de la evaluaci6n examens pnriodiques des depen- lending activities was unsatisfac- de la pobreza ses publiques ou des mises a jour tory policy dialogue between des dvaluations de la pauvrete Lesotho and the Bank Group was Conclusiones de la inadequate, Bank Group capacity evaluaci6n del Banco Constatations de la Banque building efforts in the country Africano de Desarrollo africaine de developpement were limited to the Ministries of Descle que iici6 sus operaciones Depuis qu'elle a commened ses Finance and Planning, and coordi- en Lesotho enI974, el Gripo del op6rations au Lesotho, en 1974, le nation with other donors was Banco Africano de Desarrollo ha Groupe de la Banque afncaine de insufficient The key lesson was efectuado compromisos en el pais developpement a engage 275 mil- that prior economic and sector por valor de 275 millones de uni- lions d'units de compte au titre work is crucial to the formulation dades de cuenta con destino a 27 de 27 protets, de 3 lhgnes de crddit of appropriate Bank Group opera- proyectos, tres lineas de crddito y et de 6 etudes Les secteurs des tional strategy for a country Sus- seis estudios Los sectores de servi- services publics et des transports tainability of the outcome appears cios p6blicos y de transportes han en ont ete les pnncipaux benefi- likely, given the demonstrated sido los pnncipales beneficiarios, ciaires, a raison de 28 % et de 26 commitment of the government con un 28% y un 26% del total, % respectivement du portefeuille, (through the budgetary provi- respectivamente, seguidos por el suivis par le secteur social (24 %/i), sions) to the intervention projects sector social (24%), la agricultura I'agnculture (13 %/6) et l'industrie (9 The impact on institutional devel- (13%) y la mndustna (9%) La eva- %) L'dvaluation a pnncipalement opment, however, is modest, as luaci6n se centr6 principalmente porne sLir le secteur des transports Lesotho continues to experience en los sectores social y de trans- et le secteur social Dans l1ensem- weaknesses in institutional portes En general, los resultados ble, le resultat du programme capacity del programa de asistencia del d'aide du Groupe de la Banque Grupo del Banco Africano de Des- afncaine de developpement a ete Recommendations arrollo en Lesotho se clasificaron uge u jListe . satisfaisant Les resul- The joint evaluation recommends como "apenas satisfactonos" Su tats obtenus pour les op6rations that the strategies and activities of desempefino en lo que respecta a hors pret ont ete jugds insuffi- both banks should be centered on las actividades no crediticias en el sants le dialogue entre le Lesotho the following goals pais se consider6 insatisfactono su et le Groupe sur I'action a mener * Reduce poverty and inequality diMlogo sobre politicas con Leso- par les pouvoirs publics n'a pas in the medium to longer term tho fue inadecuado, sus esfuerzos dtd adequat Les efforts de renfor- by focusing on accelerating the para ampliar la capacidad del pais cement des capacitds deployes par impact of human capital devel- se limitaron a los ministenos de cette demi6re dans le pays ont dtd opment at all levels finanzas y planificaco6n, y su coor- limitds au minist6re des Finances Lesotho Development In a Challenging Environment * Place HIV/AIDS pro- dinaci6n con otros donan- et dLi Plan, et la coordina- grams prominently on tes foie insuficiente La lec- tion avec les autres bailleurs the agenda - ci6n clave es que los de fonds n'a pas et assez * Use World Bank in- estudios econ6micos y sec- poussee Le principal enset- volvement in the LHWI't toriales previos revisten gnement a retenir est que, and in agricultural pol- imponancia crucial pars Ia pour pouvoir d6finir une icy formulation, along formulaci6n de una estrate- strat6gie op6rationnelle with the African Devel- gia operacional apropiada pour un pays, le Groupe de opment Bank Group, to del Grupo del Banco Africano de la Banque afncaine de developpe- strengthen rural institutions Desarrollo para un pais Parece ment doit absolument s'appuyer and enhance the enabling envi- probable que los resultados serain sur des 6tudes &conomiques et ronment for private sector sostenibles en vista del compro- sectorielles La perennite des resul- development miso demostrado por el gobierno tats obtenus est probable, car le * Identify data weaknesses, most (a traves de las asignaciones pre- gouvernement a mantfest6 (par ses urgently in areas related to supuestarias) en relaci6n con los dotations budg6taires) sa volonte poverty reduction, and pro- proyectos de intervenci6n Sin de soutenir les interventions effec- mote monitoring and evaluia- embargo, el impacto en el desarro- nuees par l'interntdiaire des tion systems lo institucional ha sido modesto, projets L'impact sur le developpe- * Enhance the World Bank's con- pues la capacidad institucional de ment institutionnel est toutefois sultations with donors through Lesotho sigue dando muestras de modeste, et le Lesotho continue de a stronger operational repre- debilidad souffnr de linsuffisance de ses sentation in Maseru capacit6s insotutionnelles Recomendaciones En la evaluaci6n con1unta se Recommandations recomienda que las estrategias y Aux termes de l'valuation con- actividades de ambos Bancos lointe, il est recommande que les se centren en los siguientes strategies et activit6s des deux obletivos banques visent pnncipalement les * Reducir la pobreza y la des- objectifs suivants igualdad a mediano y largo * r6duire la pauvrete et les plazo prestando especial aten- inmgalites, ai moyen et long ci6n a la aceleraci6n del terme, en concentrant les impacto del desarrollo del efforns sur l'accroissement de capital humano en todos los limpact de la valorisation du niveles capital humain a tous les * Asignar un lugar prominente niveaux, en la agenda a los programas * placer la lutte contre le de lucha contra el VIH/SIDA VIH/SIDA parmi les toutes pre- * Aprovechar la participaci6n del minres priorits , Banco Mundial en el proyecto * s'appuyer sur la participation de exportaci6n de recursos de la Banque mondiale au Pro- hidricos y en la formulaci6n de let hydraulique des hautes ter- la politica agricola, conlunta- res du Lesotho et a la mente con el Grupo del Banco formulation de la politique Africano de Desarrollo, para agricole avec le Groupe de la fortalecer las instituciones rura- Banque africaine de develop- les y brindar condiciones mas pement pour renforcer les insti- propicias para el desanrollo del tutions rurales et creer des sector pnvado conditions plus favorables au Executive Summary * Identificar ,las deficien- developpement du sec- cias en materia de teur prive, -l datos, asignandd la * identifier les lacunes maxima prioridad a las dans les donnees, en esferas relacionadas con priontel dans les domai- el alivio de la pobreza, 7 nes hes 3 la r6duction y perfeccionar los siste- de la pauvrete, et favori- mas de seguimiento y ser la mise en place evaluaci6n de systemes de suivi et * Fonalecer el proceso de con- d'6valuation, sultas del Banco Mundial con * intensifier les consultations los donantes mediante una entre la Banque mondiale et representacifn opericional les bailleurs de fonds en mas fuerte en Maseru accroissant le nombre de per- sonnes participant aux opera- tions a Maseru ABBREVIATIONS AND ACRONYMS AAA Analytical and advisory services ACP African, Caribbean, and Pacific countries AfDB African Development Bank AIDS Acquired Immunodeficiency Syndrome ADF African Development Fund ASDI' Agricultural Sector Adjustment Program ASIP Agricultural Sector Investment Program BADEA Arab Bank for Economic Development in Africa BCP Basotho Congress Party BCG Bacillus of calmette and guerin BNP Basutoland National Party CAE Country Assistance Evaluation CAS Country Assistance Strategy CDC Commonwealth Development Corporation CHAL Christian Health Association of Lesotho CODE Committee on Development Effectiveness COSC Computer science (exam) CSP Country Strategy Paper CT Country team CWIQ Core Welfare Indicators Questionnaire DO Development objective DPT Diptheria, pertusts, and tetantis EA Environmental Assessment ED Executive director EPCP Economic Prospects and Counitry Programming EPI Expanded Program on Immunization EPP Emergency Preparedness Plan FSAF Enhanced StnictuLral Adjustment Facility ESDP Education Sector Development Project ESSP Education Sector Strategy Paper ESW Economic and sector work EU European Union FAO Food and Agricultural Organization of the United Nations FIA Financial Institution Act GDP Gross domestic product GEF Global Environmental Facility GNP Gross national product HSA Health Services Area HSDP Health Services Development Project HIV Human Immunodeficiency Virus HNP Health, nutrition, and population sector IBRD International Bank for Reconstruction and Development (World Bank) ICR Implementation Completion Report IDA International Development Association IDI Institutional development impact IFC International Finance Corporation IMF International Monetary Fund IP Implementation performance IPA Interim Political Authority Lesotho Development in a Challenging Environment I-PRSP Interim Poverty Reduction Strategy Paper LADB Lesotho Agricultural Development Bank LAC Lesotho Airlines Corporation LCU Labor construction unit LEC Lesotho ElectricLty Corporation LFCD Lesotho Fund for Community Development LHDA Lesotho Highlands Development Authonty LHRF Lesotho Highlands Revenue Fund LHWP Lesotho Highlands Water Project LIL Learning and Innovative Loan LNDC Lesotho National Development Corporation LSMS Living Standards Measurement Survey LTC Lesotho Telecommunications Corporation LWSC Lesotho Water and Sewage Corporation MOE Ministry of Education MOHSW Ministry of Health and Social Welfare MOPWT Ministry of Public Works and Transport NCDC National Curriculum Development Council NDP National Development Plan NEAP National Environmental Action Plan NGO Nongovernmental organization NORAD Norwegian Agency for Development Cooperation NTF Nigeria Trust Fund ODA Official development assistance OED Operations Evaluation Department, World Bank OPEC Organization of Petroleum Exporting Countries OPEV Operations Evaluation Department, African Development Bank Group PCR Project Completion Report PER Public Expenditure Review PFP Policy Framework Paper PHC Pnmary health care PIU Project Implementation Unit PRGF Poverty Reduction and Growth Facility PRSP Poverty Reduction Strategy Paper PSD Private sector development PSR Project Status Report QAG Quality Assurance Group RB Roads Branch RHSP Rural Human Services Program RIS Reservoir-induced seismicity SACU South African Customs Union SADC South African Development Corporation SAF Structural Adjustment Facility SDR Special Drawing Rights SEOR Strategic Economic Options Report SIDA Swedish International Development Authority SOE State-owned enterprise SSA Sub-Saharan Afnca TAF Technical Assistance Fund Abbreviat,ons and Acronyms TveT Techntcal and vocatLonal education UA Unit of account UNAIDS Joint United Nations Programme on HIV/AIDS UNDP United Nations Development Program USAID United States Agency for International Development WASA Lesotho Water and Sewage Authority WHO World Health Organization Lesotho's Political, Economic, and Social Development Lesotho, which is landlocked and completely surrounded by South Afnca, has had a tumultuous history (see box 11) Established as a British protectorate in 1868, Lesotho became an independent constrwtional monarchy m 1966, with a parliamentary system of government But Lesotho's democratic process remains fragile and is marked by conflict between two major political parties-the Basutoland National Party (BNP) andJ the Basotho Congress Party (BCP)-as well as by power struggles between clvtlian and military regimes Since independence, there have been 4 military coups and 23 years of authoritarnan rule, including 7 years Lesotho's electoral system and to prepare for new of military government Elections have been elections within 15-18 months That periocl generally oontested by the oppositon paries and passed without any elections, and a new elec- followed by civil unrest, army mutiny, and in- uon date has been set for the second lialf of 2002, tervention by South Afnca to restore order but it is possible that elections will be post- The 1990s saw these political upheavals es- poned again The contnued pobitical uncer- calate After a 1993 election, a new consiutnon tainty has hindered Lesotho's economic was introduced, but the one-sided result led to development tension between the newly elected BCP gov- erniment and the military A short-hived palace- The Economy led coup d6tat followed, resulting in sLbstantial Lesotho is a poor country its gross national labor unrest in 1994 and the king's death in product (GNP) per capita was $540' in 2000, 1996 Another one-sided election result in May comparable with the average for Sub-Saharan 1998 brought more conflict over the allocation Africa (S500) but well below South Africa of political power The intervention of troops ($3,020) Eighty percent of the population of from South Afnca and other neighboring coun- nearly two million lives in rural areas Two- tries to quell nots in September 1998 had major thirds of the country's area is mountains and political repercussions, the impacts of which steep valleys with a temperate subtropical clinate are still felt throughout Lesotho An Interim Po- and erratic rainfall its economy is based on litical Authority (IPA) was created to review limited agriculrural and pastoral prdLuction and Lesotho Development in a Challenging Environment light manufacturing (clothing, textiles, and in South Africa and, recently, by the receipt of leather), supplemented by large, though de- royalties for supplying water to South Africa cining, remittances from Lesotho mineworkers Between 1990 and 1999, the primary economic Boe 1.1 A Brief Political History of Lesotho Strong sonso of independence 1988. With South African help, Jonathan was soon overthown The origins of Lesotho as a nation date back to the nineteenth in a military coup and replaced by Major General Lekhanye. A century, when King Moshoenhon I rallied the Basotho from the Military Council was astabhlished to rule the country to consul- remnants oa ethaic groups scattered in the region. In 1868, the tation with the king, and political activity was banned. Relantins king negotiated British protection as tension between Basotho between Lesotho and South Africa subsequently improved, with and South African Beers increased, but in 1684 the British gov- each country agreeing not to permit its territory to be used to ernment took over direct responsibility for the protectorate. mount attacks en or subvert the other. In 1910, when South African provinces were united under the * Union of South Africa, lesotho remained under the control of the More moderate forces take over British South Africa assumed that it would ultimately annex In 1991, the reorganized Military Council promised a new con- Lesotho, but in 1964 a ceonstitution adopted in Lesotho provided stitution and announced thet political activity could resume. A for ito independence as a constitutional monarchy, with tha new constitution went into effect following 1993 general elec- paramount chief serving as king, and with a parliamentary sys- tions The elections resulted in a lendslide victory for the anti- tem of government Beside the Netlonal Assembly there in a apartheid BCP, led by Ntsu Mokhehlea who became Prime nonelective Senate. consisting mostly of principal chiefs Minister. The party won all 65 constituencies on a first-pest- the-poet electoral system with 78 percent of the popular vote Serves of elections However, tensions between the new government and the armed The Besutoland National Party (BNP). headed by Chief Leabua forces-where the BNP has a mator influence-arose A palace- Jonathan, narrowly won the first election In 1966 at the time of led coup dietat In August 1994 was reversed a month later with independence. Chief Jonathan became the first Prime Minister political intenmediation by noeighborig SADC states. Also. 1994 of independent Lesothe-under its king, Meshoeshoe Il-and witnessed aigniflcant labor unrost, the killing of the Deputy remeined Prime Minister for the next 20 years. Prime Minister, and the kidnapping by the police oa four cabinet In 1970g an opposition party-Basotho Congress Party IBCP)- ministers. King Moshoeshoe 11 who hnd been dethroned in 1990 won the second election, but Jonethan ratainad power by a and had regained the throna in 1995, died in 1996 us a result of a coup. The constitution was suspended and the opposition banned, car accident and was succeeded by his eldest snn. Letsie III fercing its leaders into exile or Into the mountains, where they fought a low-key guerrilla war Political Instability remains After a prolonged penod of political instability, general elections Rifts between Lesotho and Sooth Africa were held in May 1998, in which a newlyformed party (Lesotho Jonathan and his BNP perty had initially supported cooperatian Congress for Democracy) within the runing BCP won all but l of with South Africa, but he adopted a more independent foreign the 80 parliamentary seats with only 60 5 percent of the popu- pohicy in the 1970s and 1998s, criticizing his neighbohs apartheid lar vote. The results ware contested by the opposition partias, policies and giving refuge to members of the outlawed African which alleged widespread rigging. The subsequent protests National Congress. Underpressureta reform,the BNPorganized ledto civil unrest and an army mutiny in Septembhr. At the re- elections in 1985 but manipulated themn-oely BNP candidates quest of the newly elected government, a South Africa-led stood for election. This resulted in growing opposition. utraparty SADC force was brought into Lesotho to restore order A new In- strife. and disunity in the army In 1986 the army fought within terim Politicel Authority (IPAi comprising 24 members, 2 from its ranks when a faction supporting Colonel Sehlabo clashed with each of the 12 largest political parties, was set up to promote one supporting Major General Lekhenya and create conditions conducive to a more durable peace and Annoyed bythe BNP support Ofthe African National Congress, to hold genersI elections by May 2000. They were not held, and South Afnca mounted an economic blockade of Lesotho in early considerable uncertainty remains. 2 Lesotho's Political, Economic, and Social Development sectors (predomnantly agnculture and livestock) cent of GNP in 1998-99, largely because of the accounted for 20 percent of gross domestic construction of the Lesotho Highlands Water product (GDP), and secondary sectors (includ- Project (LHWP) (see Chapter 3 and box 3 2 for ing manufacturing and construction) and serv- detailed discussion) These receipts are expected ices accounted for 38 percent and 42 percent, to decline as LHWP-related activities wind clown respectively Furthermore, the Southern African Develop- The country is encircled by and economically ment Corporation (SADC) has agreed on a free- dependent on South Africa Ninety percent of trade protocol for its members 2 The SACU Lesotho's imports come from South Africa and revenue-sharing formula will be revised and 65 percent of its exports go there The gold tanff levels will probably decline in line with the mines in South Africa have been a malor source SADC-negotiated trade hberalization in the sub- of employment for Lesotho's labor force, and region Meanwhile, the LHWP continues to have thus a source of remittances to the economy The a substantial impact on the economy In 1998 the contraction of the South African gold industry, project accounted for 13 percent of GNP-35 however, led to a sharp reduction in the num- percent of value-added in construction and 28 ber of Lesotho's miners in South Africa-from percent of government revenue Lesotho's cuir- 127,000 in 1989-90 to 69,000 in 1998-99 Con- rency (the lotu, plural, maloti) is linked to South sequently, miners' remittances dropped from Africa's rand at a one-to-one rate, limiting 62 percent of GNP in 1989-90 to 18 percent in Lesotho's monetary policy and raising the im- 1998-99 (figtire 11) portance of a healthy fiscal policy and preserv- Lesotho is a member of the Southern African ing the external balance Customs Union (SACU), SACU pools the customs GNP grew at an annual average rate of less receipts collected by its members (Botswana, than 2 percent during the 1990s, but dropped Lesotho, Namibia, South Afnca, and Swaziland), sharply in 1997-98 and in 1998-99 (figure 1 2) and distnbutes them based on a revenuLe-shanng This reversal was brought on by the sharp drop formula Lesotlso's share of SACU receipts rose in LHWP-related investment, weak growth in from 12 6 percent of GNP in 1988-89 to 14 3 per- agriculture and manufacturing on account of Number of Lesotho Miners in ! - Figure 1.1 Africa and Remittances, FY89-99 140- -70 120 - No mineworkers lin thousandst - 0 100- _ --50 Z 80- -40 60-- - 30 l Miners' remittances (percent of GNP) .... . .*.. 40 - *.-- 20 VE 20- -10 0 - l l I 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Year Saour Woild bank daia Lesotho Development in a Challenging Environment Gross Domestic Product and Figure 1.2 Gross National Product Growth Rate, FY91-OO 8- it 4 -________ __ 6-_ ---'- __-- E -2- V 6 _-| _ GDP growth rate -8 *.... GNP growth rate | - -10 -L 1991 1992 1993 1994 1995 1996 1997 1999 1999 2000 Year S-,m Weld tank data adverse weather conditions, and declining mi- lands ' Poverty and inequality also have geo- grant worker remittances from South Africa graphic, regional, occupational, and gender di- Moreover, economic activity, particularly foreign mensions Poverty is overwhelmingly rural direct investment, tapered off in response to more than 80 percent of poor people live in rural the 1998 civil unrest3 Lesotho's growth prospects areas and are concentrated among farmers, over the medium term are expected to remain shepherds, and women, and in the country's constrained as a result of (1) political instability mountainous regions Unemployment, a major and the uncertain outlook for foreign direct in- cause of poverty, remains extremely high-at vestment, (2) continuing decreases in remit- abotit 40 percent, according to the 1997 Labor tances, (3) the expected drop in SACU receipts, Force Survey While economic growth is an and (4) the decline in LH-WP investment important prerequisite for improving welfare, strong economic performance during 1994-97 Poverty, Inequality, Social Conditions, was not accompanied by declining unemploy- and Gender Bias: Low Welfare Levels ment, poverty, or inequality Lesotho's levels of poverty and inequality re- Lesotho's social indicators are generally bet- mained extremely high during 1993-99 (table ter than the Sub-Saharan Africa (SSA) average, 1 1) The Gini coefficient for Lesotho is one of but below the SADC subregion average (table the highest in the world, implying that in a 1 2 and Annex D, tables D 1 and D 2) For ex- country with widespread poverty-half the pop- ample, Lesotho has one of the highest literacy ulation in 1999-many of the poor suffer ex- rates in SSA Due to inefficiency and poor qual- treme deprivation The national average ity of the educational system, however, only a incidence of poverty changed little in the 1990s, small percentage of students reach the higher lev- except that urban poverty moved slightly lower els 5 Consequently, Lesotho's secondary school and rural poverty moved slightly higher, re- enrollment is worse than the region and subre- flecting the substantial growth in manufactur- gion averages Human Development Report 2000 ing and services, the stagnation of crop ranks Lesotho as 127 out of 174 countnes based agriculture, and the deterioration of the range- on its human development index (UNDP 2000) 4 Lesotho's Political, Economic, and Social Development Table 1.1 = 0 s Poverty and Inequuaity !r99 (percent) ,Illf.l' SIb~~~~~~1ii 1!h, I1 All _________________________________ 191:, IriP. 03 fitli * , 1903 13999 Incidence Poverty' - i 28 22 49 51 Extremepoverfy5 Jit 14 10 2t 33 Intensity (poverty gap) Poverty n I 13 22 24 30 Extreme poverty 4 11 9 14 Population share -A if 14 15 100 100 Gini coefficient j s, 1 0 58 n a , ,,v 0 57 0 60 oa NotaiOdblo a The poenoage of dhe populatn srpndmg less thon haif of the moan onsumption level b Those on,sumg less than 25 pester of do agors5o Source Sochaba Conruirntroi1994loted in World eanki1a9l and Sochoba Consuhants t2000t The dcts for a999 weon pspored eopeoalsy forthe OED missor by 9echaba Conosurans ISechabo Co-sulnorts 1S999 Despite progress on omproving social indica- devoted to the health sector steadily declined tors in recent years (table 1 2), Lesotho's social durung 1995-99 by about 7 percent mn real terms service delivery is weak Health personnel are Moreover, the stated commitment to primary on short supply, health centers are not ade- health care is not supported hy the 30-40 percent quately equipped, and schools lack teaching of recurrent health resources allocated to Queen matenals For instance, the population per physn- Elozabeth IT Hospital Similarly, budget prioritoes cian exceeds 20,000, double the average for and equoty in the distribItiuon of educational SADC The share of total government resources resources remain skewed, with the National Social !lwltors in Lesotho and T a blI e 1 . 2 C o m p a r a t o r l o u n t r i e s Ib}l It.) - 1 l |Fgll Indicator j O [1 s r,7M I Life expectancy (years) 9lt IP 54 Total fertility 5 Infant mortality (per 1,000 births) 1 ; 80 * Net primary enrollment I% of age group) I 0 f 1 , 75 Male - i si 75 Female 4 '1i 75 Gross pnmary enrollment I% of age group) - rile 0. 1068 Male sf D 108ro t Female IU D ;: Primary pupil-to-teacher ratio thO 1: 39 Gross secondary enrollment (% of age group) ,t 37 Adult lliteracy I% of population 15 years and older) 0 a i 27 Source World Sack, World Dvetlopmen IndiciorIo , lusrous Issu-sl- details iAn- t tablr,e O and D 2 5 Lesotho iDevelopment in a Challenging Environment University of Lesotho absorbing about a fifth of to economic resources and services such as all recurrent expenditure on public education rural credit InJanuary 2000, the government started to phase in free pnmary education, and the first year of High but Declining Aid implementation witnessed increases in enroll- Lesotho's per capita Official Development As- ments With 80 percent of the population in sistance (ODA) exceeded the SSA average, but rural areas charactenzed by mountainous terrain was comparable with the SADC for 1990-97 and remote villages, the challenge of delivering (table 1 3) Total ODA was high in the early 1990s social services is daunting because of Lesotho's position as a frontine state Progress in improving quality of life mn Lesotho dunng the apartheid era in South Afnca, but since has not been evenly distributed between males 1994 it has declined steadily International De- and females (table 1 2) Boys receive less eclu- velopment Association (IDA) net disbursements cation than girls, and Lesotho's net primary ed- per capita to Lesotho over this period, repre- ucation enrollment rate for boys is much lower senting less than 10 percent of the country's total than in the SADC subregion The bias against ODA flows, were low relative to the compara- boys and men may stem from the fact that par- tor countries, particularly small IDA-eligible SSA ents still view working in South African mines countries (Annex D, table D 3) However, (having spent their youth herding livestock) as Lesotho received additional net International the most promising job prospect for males, mm- Bank for Reconstruction and Development ing is an occtipation requiring physical strength (IBRD) disbursements per capita (for the LHWP) and endurance more than literacy and numer- averaging $10 4 per year over the 1990-97 pe- acy Because of this long tradition of Lesotho riod, indicating a high level of dependence on men obtaining employment in South African Bank resources External assistance to Lesotho mines, the number of de facto female-headed has been delivered in a setting of political un- households is higher than in many other SSA certainty, which continues to weaken the ef- countries However, Lesotho's women have the fectiveness of assistance programs Also, there legal status of perpetual minors For example, are considerable differences among donors in although the Land Act of 1979 and the 1992 terms of assistance strategy because of different amendment provide tenure security to both readings of the political environment, resulting women and men, women have limited access in different levels of commitment Ta b I e 1 3 O f f i c i a I fle v e l o p m e n t Assistance, Annual Average, 1990-94 and 1 995-97 Net ODA per capita ($1 I Ii Net Af DF-ODA per capita .I IDA commitments per capita ($ ' .' *t IDA disbursements per capita (SI I ' Dau Ea Otto ya-,aa teanl detailin m nnei D, tible D 3 6 Development Challenges and Constraints Poverty Reduction: The Overarching Objective of Lesotho's Development G DP growth for agriculture, the sector that employs most of the poor, was disappointing during the 1990s-about 1.8 percent a year, a drastic reduction from 6 percent a year during the second half of the 1980s. Population grew at an average annual rate of 2.6 percent during the 1990s, indicating negative per capita growth in agricultural output Agricultural GDP also suffered from wide yearly fluctuations in output, such as the drop of 16 percent in GDP between 1991 and 1992 from drought Lesotho's agricultural performance was also labor force from largely unskilled miners and below SSA's overall growth rate of 2 2 percent apartheid labor to skilled and semiskilled work- a year in the 1990s Slow agncultural growth has ers Thus, maintaining the competitiveness of contributed to the persistence of rural poverty Lesotho workers within the regional market will (table 1 1) The sharp reduction in remittances require sustained attention to the quality of ed- from miners in South Afnca-on which many ucation and training Among the mnalor chal- rural houiseholds depend for their sub$istence lenges will be reversing the trend of declining and resources for capital improvemerits-has net enrollment rates for pnniary education, vastly also had an impact For a population with shrink- improving outconies and efficiency in primary ing nonfarm sources of income, lower remit- and secondary education, adapting teclnical, vo- tanLes have serious consequences for food cational, and tertiary education to private sec- security in rural areas tor demand in the regional labor market, and striking an appropriate and sustainable balance Human Capital Development: Key for Jobs in public funding for various levels of the edu- The size and unique geographic circumstances cation system of Lesotho make it essential that human capital be well adapted, not only to the domestic labor HIV/AIDS: A Formidable Challenge market but also to the wider regional and in- Lesotho is facing one of the most seriotis health ternational markets Meeting the challenges of and social welfare threats of the new century the post-apartheid era requires a shift in the HIV/AIDS Based only on a very small sentinel Lesotho Development in a Challenging Environment surveillance system, UNAIDS estimates an adtilt pectancy is estimated, based on a modest preva- (ages 15-49) HIV prevalence rate of 23 6 percent lence rate of 4 4 percent, to drop to 45 years by for Lesotho in 1999-one of the highest rates in 2010, without the presence of HlV/AIDS, life ex- the world (table 2 1) Lesotho can expect to see pectancy would have been 66 years (U S Bureau dramatic increases in infant, child, and adult of Census estimate, 1999) More recent esti- mortality rates and decreased life expectancy, mates (UNAIDS 2000) put the HIV prevalence and there will be severe social, economic, and rate six times as high, reducing life expectancy financial consequences from losing people in even further the difference in life expectancy, their most productive years Lesotho's life ex- with and without AIDS, is prolected to reach a The Incidence of AIDS MLesotho, South Table 2.1 African Customs Union, 'louth African Development SWuI'a ' Sub-Saharan Africa, and Worldwide., 99 No. of adults iving with AIDS litfVa4S; No of orphans' Area ( (aged 15-49) . ,.. ilOc (cumulative) Lesotho .. ,; 240,000 'l'tI 35,000 SACU z4lt: 1,195,000 h N;il:0. 141,250 SADC counrtrias K,; 1,064,545 *I;d,l 426,636 Angola ta: 160,000 /li0t 98,000 Botswana Ib,,:( 290,000 1, 6ltIlt 8S,000 Congo, Dem Rap .1100,000 4: ,11600,000 Malawi :Kn,,t 800,000 41.ll; 390,000 Mauritius ; l Mozambique 1,.mt 1200,000 O,ilofl 310,000 Namibia iRtt. 160,000 r l.r.l4. 07,000 Seychelles South Africa i1f U1ti 4,200,000 y .s 420,000 Swaziland D 1. 130,000 i I 12,000 Tanzania ,:uoTI 1,300,000 1iit. 1,100,000 Zambia 8t,i 070,000 6 650,000 Zimbabwe *ll 1.500.000 S i,,tia 900,000 Small IDA-eligible SSA countries' 'kiit, 21,333 ' 7,633 Cape Verde Comoros Djboutti ll /A 37,000 7,200 Gambia, The . 13,000 9,600 Guinea-Bissau 7 ; D i 14,000 *,100 Sao Tome & Principe SSA tOlgiY 24,500,11111)| 12,100,000 Worldwide ,., 34,300,000 13,200,000 Negligible a O,phmni ae de.feO venhidien umd, lSts hawe lvii theii mMhi vr both pa.nii tHIV/AIDSn. ce the begin ol gth.e epidemic b 5mei1 n deliei i evim if np,Iai,nr sie ln®nt,iiv olIi thai t v m o) Souni UNAIDS Itt0W) 8 Development Challenges and Constraints staggering 31 4 years by 2015 (World Bank Lesotho's current workforce While their pro- 2000a, p 16) I'relimin,ry estimates project that duction can grow, they cannot be a source of the annual loss of GDP growth due to AIDS will significant additional employment I Any addi- rise from 0 6 percent in 2001 to 2 7 percent by tional employmnent will need to come from man- 2015 (World Bank 2000a, p 23) The impact of uifacturing In the early to mid-1990s a ntimber AIDS will be greater on the poor, who are less of firms (generally foreign-owned, but with educated about prevention and more vulnera- some governnient equLity) nanufactunng textiles ble to rising medical costs and loss of income and footwear for export on a labor-intensive basis rapidly increased their contribution to GDP, Institutional Capacity: A Major Weakness reaching 14 percent in 1994-95 This growth was Inefficient government bureaucracy and hmitecl based mainly on firms from South Africa that absorptive capacity for external assistance im- were avoiding apartheid-era trade sanctions on pede Lesotho's efforts to sustain broad-based South African exports Unfortunately, the rapid growth and redtice poverty Inadequate ad- growth was not sustained at the end of apartheid ministrative anl institutional capacity in many Nevertheless, the best basis for growth is the pri- ministries and central government agencies ap- vate sector, establisiing the enabling environ- pears to have seriously impeded policy formu- ment for additional private investment remains lation, coordination, and implementation for one of Lesotho's biggest challenges long-term tlevelopment Data management sys- tems are weak, raising concerns about the time- Political Instability: A Challenge and lness and reliability of data about national a Constraint to Sound Governance accounts, poverty, and society There is no agreement among Lesotio's politi- cal partnes on appropriate sectirity and political Private Sector Development: Key arrangements Continuing political uncertainty ior Growth has had a negative impact on public adminis- Lesotho's labor force is growing at 25,000 new tration, private investment, and economic de- entrants a year, while the employment absorp- velopment (Chapter 1 and box I 1) Meanwhile, nive capacity is limitecl to hbout 9,000 a year the governmenit has signed a defense pact with (Lesotbo 2000) The employment problems atre SADC countries, allowing them to intervene at made worse by the substantial reduction of op- the govemment's invitation, and at very short no- portunities for migrant miners in Souti Africa tice, should the need anse lolitical stability, and About 180,000 subsistence farmers and abotit therefore more stable governance, remains a 31,000 small-scale entrepreneurs dominate key challenge 9 World Bank Services and Products T his chapter evaluates each service and product the World Bank has deployed to meet Lesotho's development challenges The services T and products include policy dialogue and strategic advice, eco- nomic and sector work, and lending The evaluation indicates a moderately unsatisfactory outcome overall The Bank's contribution to institutional de- velopment has been modest and sustainability remains uncertain Ongoing lending is riskier than average for the Bank's portfolio Policy Dialogue and Strategic Analysis not rank the development priorities among sec- The complex political and economic transitions tors, it did recommend priority actlons within in Lesotho and South Afnca dunng the 1990s (see specific sectors Chapter 1) required adjustments in poiicy and Policy dialogue was strengthened consider- development strategy Moreover, with Lesotho's ably through the preparation of a Poverty As- return to democracy in 1993, a new development sessment by the World Bank, the government, strategy was needed to reflect the new govern- the Lesotho Council of NGOs, the EU, and ment's vision consequently, a natlional task USAID The assessment was relevant, providing force of the major stakeholders in Lesotho's de- a comprehensive review of poverty in Lesotho, velopment was created to develop a medium- including a detailed analysis of the impact of term (1995-00) strategy The world Bank and growth in different sectors on poverty reduction other donors provided analytical, technical, and based on a Social Accounting Matrix (table 3 1) financial inputs, and the task force produced the The resultanit strategy was, however, moder- Strategic Economic Options Repon (SEOR) The ately unsatisfactory because IaS plan to foster report contained detailed reviews of the issues labor-mtensive growth tn agnculture was unlikely and strategies of 19 sectors and played a part in to succeed It overplayed the opportunities for the World Bank's dialogue with the government poverty reduction through crop diversification, on development priorities For example, the increased growth of high-value crops, and labor- 1996 Country Assistance Strategy (CAS) used intensive production of these crops In any the report as one of its inputs In sum, the SEOR event, the 1990s witnessed limited diversification was comprehensive and relevant While it did or production of high-value vegetables and fruits Lesotho Development in a Challenging Environment Table 3.1 1995 Poverty Reduction Action Plan Foostr labor-intensive growth In agiiculuure resource * Intrduca a fine ,a.ic he.h ,eme Sn.....h.. i a I .... o hl y * IncrearI georahi equi!ty *; Impov unonl anecncl euato * i,.- -.- , O 1 1 .711;O|| ...... ... ....... -4i In the small business sector th n oat L Mai,t l la led 1 . - . 4- r u lnmi .i,r.-,v,hi h . iu ' ' r. ; 4 ........ ... * Enmrai .;, I .. I . ......... . . Through mirsiniciue iFvestmeniis . *Us. , -, f ,,,,,. .......... ,ir. --, a..t Invest in suman resources In health care |In edu ation * Exempt chmo dren less than pve from fees i * Lowr the cost to parents of primary schooleig * Introduce a frBe basic health service *Strengthen informal education for out-of-school youth Increase geographic equRty d * Improve vocatnonal and tuchncal educagon * Allow local faclitiles to retain cetain fees * Invest mora in educapon in poorer regions .Create fncentves fo r qualfied teachers to teach in lemote areas uSpend proporionately mote on primary educataon than university Strengthen the safety n ot lowetrthe cosi ol seaple loods s n a l ir t i t i ug * Remo,.: I nJ- ..... |o.- Ii 2 l-| i * Exemrl1 | l ;|1;-1 .,.1,. , i. - ai 3:- impro ia| -v ;1;";qf i i qiif* i- Improve institutional capacity * Implement a poverty reduction program financed from the * r'vatize activities better performed by the private sector Lesotho H mgh ands Revenue Fund a 2r prove planning and budgeting * Decentralize political, fiscal, and administrative authority *Merge fragmented program management units * Reform the civil service *Starn doing annual household surveys| Saour Woind Bank data beca use of inadequate credit, poor irrigation fat- the Poverty Assessment, becaLlSe of the weak en- cilities, weak technologicaI support, ancd rennote abling environment for investment in light mn- markets (van Holst Pellekaa.m2001) In addition, cdtistry The report stressed improved social successful labor-intensive development of the services and huiman resources as a way to re- nonfarm sectors was unlikely, as suggested in duce poverty, this was right on the mark r2 World Bank Services and Products Apart from the Poverty Assessment, World bon was the overarching goal of the 1996 CAS, Bank strategies during the 1990s were articulated which reiterated the poverty reduction action in a number of Country Assistance Strategies and plan spelled out in the 1995 Poverty Assessment annual Policy Framework Papers (PFPs), which The 1998 CAS reaffirmed the importance of had been prepared jointly by the government, poverty reduction and recommended measures the Bank, and the IMF since 1988 (box 3 1) to enhance the enabling environment for pnvate These strategies evolved from an emphasis on sector development A consistent objective stabilization and growth to greater emphasis on throughout the 1990s was to maximize the poverty reduction and private sector develop- poverty-reducing impact of revenues generated ment in the mid- to late 1990s Poverty reduc- by the LHWP Box 3 .1 Lesotho-Word BanlI Strategies 1994 CAS A Three-Pronged Strategy for Growth Assistfnceprogram. It embraced the ongoing LHWP, the ed- GoalsTa 19.4"strategy aimedto halpthe governmento (1j main- ucation, health, and population programs, proposed a rond re- tain and deepen macroeconomic and structural reforms, in- habilitation and maintenance protect, an agricultural sector cluding privatizationo (2) improve capacity to implement the investment program (ASIP), a poverty reduction project, an ex- program; and (3) capture the benefits of the LHWP. The earlier ports promotion and sails development project end the third stabilization and reform measures were supported by the IMF phase of tho structural adjustment program, includng the prepa- Structural Adjustment Facility/Enhanced Structural Adjustment ration of a PFP. The high lending scenario ($122 million) onvis- Facility (SAF/ESAF) and six successive Policy Framework Pa- aged two additional projects and the triggers for higher lending pers duringthe periods 19B-89and 1993-94 The CAS recognized levels, including a satisfactory macroeconomic program (as the serious poverty situalion and identified the lock of growth ogreedinthelMFstand-byfacility,accelerating progressin pri- in the indigenous privnte sector lexemplified by handicrafts, vatization, deregulating agricultural trade, enhancing cepacity textiles, and agricultural processing nd marketing) s thu root building, and ectivtieg the stalled rurnl development component cause for the high poverty It also noted tho existence of the im- of the LH4WP The CAS did not explicitly list upcoming ESW port ban on wheat and maize as a reason for high food prices that hurt the poor, but ano explicit strategies for poverty reduc- 1998 CAS: A Renewed Focus on Poverty tion were proposed The strategy saw prospects for increased Goafs Notingthe shortfalls in achieving the 1996 CAS ebjectives, employment of Besothos in the new sociaily inclusive South the 1998 CAS substantially reiterated the objective outlined in Africa on the basis that Lesotho tubor was in a strong compet- the 1996 CAS-poverty reduction. itiveposition,butseemedtooverlookthesevereshortageof jobs Assistance program. Thu proposed FY99-00 IDA program in South Africa. under the base cose landing scenario included four credits to- Assistance program It included ongoing LHWP, education, taling $50 million: a Social Fued Learniog and Innovative Loan and health programs and proposad privatization and private (UL),SecondEdunctionSectoroDevelopmnt ahealthsectorproj- sector development projects Progress in structural reforms ect,andthoMaluti-Drakansberg-GEF(GlobalEnvircnmentFa- could trigger preparation of another three IDA credits ($69 mil- cility) project The high case scanario envisaged two moro lion The CAS did not explicitly list upcoming economic end sec- loans in addition to the above-mentioned four projects private tor work (ESW) sector development and watorsupply. The triggers for the high case scenario included addressing the inefficiencies of the 1996 CAS A Poverty-Focused Strategy public utility sector, reforming the Lesotho Highlands Revenue Goals. The 1996 CAS marked a shift in stratogy towurd poverty Fund (LHRFI into a poverty-focused fund, and implementation of reduction. The CAS incrporated the fndigs of the 1995 Poverty the poverty reduction plan. The CAS envisaged five pieces of Assessment (1 (foster labhr-intensive growth; (2) invest in human ESW a public expenditure review, an education review, a health resources, (3) maximizo the poverty-reducing impact of the review, a poverty monitoring system support, and a regional re- LHWP, and (4) enhance institutional capacity view of labor market dynamics 15 Lesotho Development in a Challenging Environment Evaluation of the 1990s CASs The 1994 But the important agricultural price policy, CAS was modestly relevant to poverty reduction grazing management, and poverty reduiction and the outcome was moderately satisfactory objectives were not achieved For example, no Macroeconomic stabilization was achieved, progress was macle on removing the import which was highly relevant and beneficial to the controls on wheat and maize that protected poor The Bank-supported LHW;P helped Lesotho Lesotho's farmers and encouraged them to grow generate substantial growth Also, the outcome maize in marginal land There was no change of a sectorwide eduicational reform stipported by in the exploitive management of rangelands the Bank was moderately satisfactory (table 3 2) There was also no sign of meeting the high Poverty Assessment recommendations Ongoing and proposed incorporated in CASs lending in CAS ReBsulting operations, Outcomes Fte aomenaive grovwnh Support agrlcultural development Agriculture Sector InveItment Agricultural Policy and Capacity Probably moderately satisfactory Program (FYO), $22nm Building (FY98), $7m Stimulate small business sector Poverty Reduction Prolect IFY90), Community Development and Highly relevant but not timely, $20m , Support (LI) (FY01t), s5m low start and no progress yet Increase export-oriented Exports Promotion and Skills light manufacturing Development (FY99), $40m Expand tourism Infrastructure imvestments Road Rehabiitation (FY96), $40m Road Rehabilitation (FY98), $40m Hlghly unsatisfactory so far Invest in hun an resources Improve health services Hoeltlh and Populatiori 11 (FY90, Health and Population 11 (FY90-98), Moderately unsatisfactory ongoing), $1 2m $12m I Increase support to education Education Sector Development Education Sector Development Moderately satisfactory (FY92, ongoing), $25m (FY92-99), $25m Strengthen t he safety net Strengthen the safety net Poverty Reduction Project(FY98), Community Developmentend Highlyrelevantbutnottimely, slow Lower the cost of staple foods $70m Support (LIL) (FY01), $5m5 start and no progress yet Expand labor-intensive public Lesotho Highlands Wrter Lesotho Highlands Water Unsatisf2ctorym tormsof poverty works tA (FY92, ongoing), $1 tOin tA (FY92-99), $68 9m reducton/rurol development Target special program to Lesotho Hglghlands Water LHWP 1 B (FY99, ongoing) $45m Probably moderately satisfactory in vulnerable groups t B (FY99), $45m | terms of povertB reduction/rural Idevelopmallt Improve Inrstulttional capatcity Improve institutional capacity Poverty Reduction Project (NY98), |Community Development and Highly relevant but not tmely, slow $20m Stipport (LIL) (FYOI), $5m Istartand no progress yet Agricultural Policy and Capacity Probably moderately satisfactory Buildiim F9) 7 ateluies u ho recently - pprwed HeAlth Sretor PqoentlrYOO $20 mrllon land the Sec-nd Edu.t,on Sector Deelopmenrt Pro.eot (FhY9 rs m,i,oel teoi- m A,nr. E table E 3 r4 World Bank Services and Products expectations for poverty reduction through ex- in the preparation of the 1996 CAS, it does doc- panded employment of Basothos in South Africa ument sectoral consultations with the govern- foreshadowed in the 1994 CAS (box 3 1) The ment, the Bank, and other donors aim of activating "rural development compo- The 1998 CAS, prepared on a participatory nents" in the context of the LHWP to reduce basis with many stakeholders over six months, poverty in rural areas was also not achieved (box was modestly relevant with a moderately un- 3 2) The 1994 Bank-assisted privatization pro- satisfactory outcome because it had no dis- gram made slow progress Finally, with the ex- cernible impact on poverty reduction While ception of the pnvatizatuon loan presented as part stablization aspects of the refonm agenda, which of the 1994 CAS, no new lending was approved had also involved support from the IMF, were until mid-1996 (table 3 2) successfully addressed, little progress was made A review of the poverty reduction focus of on political and strnictural problems The polit- the FY96 CASs in the Afnca Region commended ical matters will be pursued in more detail the Lesotho CAS as a best-practice example at below, although it is now clear that the Bank had the time, reflecting the linkages between the not correctly assessed the depth of political in- poverty assessment, strategy, and the lending stablity in the 1998 CAS The outbreak of internal program (Taddese 1996) While highly relevant conflict in September 1998 created economic dif- to poverty reduction, it had a moderately un- ficulties that had long-term consequences and satisfactory outcome (table 3 2) This CAS re- delayed the implementation of this CAS flected the difficulty of implementing the The agricultural sector continued to perform proposed strategy and making progress on ad- below its potential and therefore had little pos- dressing poverty reduction in Lesotho in the ab- itive impact on poverty reduction The envi- sence of effective institutions and In the presence ronmental and rangeland problems remained of overoptimistic World Bank aspirations While and there was no progress on changes in land the CAS optimistically stated that the LHWP tenure or grazing rights The rural development would "focus on improving the design and im- component of the LHWP was still not operative plementation of the Development Fund pro- To address the problems of the nonperforming gram" and laid out a number of actions, the Lesotho Highlands Revenue Fund, the Com- Fund never met its objectives Rural develop- munity Development Support Fund (a Leaming ment in the highlands stalled except for the and Innovation Loan, or LIL) was proposed to health facilities provided as part of the LHWP support reforms financed by the Fund However, (box 3 2) ' The proposed Poverty Reduction by mid-2000, the new fund was not yet opera- Project to support the Fund did not matenalize, tional Clearly, while construction progress on despite being listed under the base case scenano the LHWP was on schedule and successful, cru- of the 1996 CAS cial rural development and poverty reduction ob- The $22 million AgncultuLral Sector Investment jectives for the LHWP had stalled (box 3 2) Program (ASIP) suffered from inadequate fund- These aspects were not fully designed at proj- ing and was in effect replaced by the later, less ect inception, contnbuting to implementation ambitious Agncultural Policy and Capacity Build- delays, adverse publicity, and cnticism by non- ing Project (fiscal FY98, $7 million) The Road governmental organizations (NGOs) Rehabilitation and Maintenance Project ($40 mil- On the whole, World Bank assistance strate- lion) floundered (van Hoist Pellekaan 2001) it gies for Lesotho in the 1990s overreached in their aimed to support economic growth and poverty objectives, given weak government ownership reduction by building roads in isolated areas and and insufficient implementation capacity I The providing basic road-related services to district strategies pursued too many goals, and the centers In contrast, the Bank-supported edu- measures they recommended were so broad cation sector program contintes to be moder- that government authorities, NGOs, and civil ately satisfactory (table 3 2) Finally, while there society found them difficult to gauge and im- was no discussion of government participation plement For example, the 1995 poverty reduc- t5 Lesotho Development in a Challenging Environment Box 3.2 The Lesotho Highlands Water Project Background. The LHWP is a four-phase binational project be- oriented programs to reduce poverty; and (3) ensure that the tween Losotho end South Africa, involving the export of wmter nocial and onvironmental aspects of the project ore maoaged, trom Lesotho (through a sones of dams and tunnels) to the water- scarce GaMteng Pmvince in Sooth Africa (which prmdaces 6 per- Substantial macroeconomic impact, The protect has hada sub- cent of South Africa's CDPI. In addition, the Muoel hydropower stontial impact on the Lesotho's economy, both directly and in- plant was consructod to moot Losotho's energy neods Phase directly: (1) the receipt of 484 million maloti ($73 million) in 1 s governed by a treaty and compnses two components Phese water royalties from FY96-97 to FY99-00; (2) buoyant custom 1A (1991-S) and PhaselB (1999-03), with casts of $2.6 billion and revenues associated with the large imports for construction of $1.1 billion respectively. The project is the lowest-cost alter- the project (3) incroased tex revenues as a result of project ac- native, by aboul $1 billion, and South Africa bears the full cost tivitios and (4) several ancillary developments, including the con- and associated debt oftth water transfor, whiln the hydropower struction of ronds and bridges. In 1991 the project accountnd for plant (15 percent of Phase 1A cost) is the responsibility of 14porcentofGDP,35perceetofvalue-addedincnstmection,and Lesotho 28 percent of govemment revenues. But lile progross has been mada ontransfering benefitsframtho proaecttathopoorthrough The role of the World Bank Studies of the LHWP conceptdate the Development Fund and Rural Development Program. back to the 1950s, but the World Bank played a significant and catalytic role in the negotiations of the 1986 Water Treaty, in- Shortfalls in the Distribution of Benefits cluding facilitoting the drafting and signing of the treaty bh- Devolopment Fund A Development Fund was established in tween the governments of Lesotho and South Africa. Although 1992 (with part of thn LHWP revenues) for financing programs the Bank financed 4 percent of the project cost, it was a cata- targetedto the alloviation of poverty. Experience tn date with the lyst for securing extenral financing and advisod on protect for- Fund is very disappointing, even though some 240 projects were mulation and implementation. The Banks objectives wern to help approved at a cost of 215 million maloti, including reads, bridges, Lesotho (1( transfer its most abundantwater resource into much- clinics, markets, and small dams. These projects are reported needed export revenues and alleviate water shonrtages in Sooth to tocus en increased access to public services and appear to Africa; (2) direct the benofits from the LHWP to development- have created significant short-term employment, bat problems hon action plan overextended itself by suig- dearth of information requitred to evaluate gesting between three and seven major, buit tin- progress toward poverty reduction, and bench- prioritized, interventions in each of nine sectors marks were not established The 1995 Poverty (table 3 1) Similarly, the 1998 CAS identified 11 Assessment, the 1996 CAS, and the 1998 CAS all out of 14 areas as high development priorities proposed putting in place a sybtem for data col- Thus the strategies were not sufficiently realis- lection that would permit poverty monitoring It tic, they did not take into account Bank and client was not until the FY00 Community Development resources and strengths, and partictlarly mis- IProject that the Bank suipported a formal survey judged Lesotho's political instability, limited re- mechanism Most of the World Bank's projects sources, and weak institutions in Lesotho do not have a poverty momntoring and The relevance of the World Bank's increas- evaluation mechanism, nor were the CASs used ing focus on poverty reduCtion was undermined to raise consciousness in Lesotho regarding the until late in the 1990s by inadequate attention need for monitoring poverty and setting targets to poverty monitoring and weak performance The 2000 Interim Ploverty Reduction Strategy benchmarks Where performance indicators ex- Paper again emphasized the need for improved isted (for example, in the social sectors), they data on poverty (Lesotho 2000) often exhibited such weaknesses as vague word- World Bank strategies also underestimated ing, nptit onentation, no baseline data, or un- the extent of political instability and did not ad- realistic targets (Goldstein 2001) There was a equately assess the eftect of political upheavals World Bank Services and Products such as inadequate criteria for projectapproval, low-quality con- (SW-B & A Consult 1999). They also show that for many welfare struction, and poor operation and maintenanco have hampered Indicators, households in the project area are no better off than the effective use of projectfunds.The Dovelopment Fund did not other households in the highlands While Bank staff expressed tally achieve whet was intanded Itwas replaced bythe Lesotho doubts about tha validity of this survey, this assessment of the Fend for Community Developmeat The new Fund will be man- impact of the project an poverty reduction is consistent with a aged under the Bank-assisted Community Devalopment Sup- cliant survey in 1997 (quoted in the 1998 CAS) in which re- port Proiect that became effective in July 2iliC. Unfortunately, spundents reported little impact from the Bank's lending on this protect came extraordinarily late. snIce It ie now fivo years poverty reduction. sinoc thu 1996 CAS and its commitment en the use ofthe LHWP revenues for poverty reductiun. So far, the poor have seen faw Sustainability ofthu social componoent. The long-term future of bhonfits from the LHWP. and project prsgress continues to ha the Lesotho Highlands Development Authority (LHDA-_he im- slow plementing agency) after tha currant construction program is complatod in about 2003, and before a possible second phase Rural Devilopmeont Program. The program wau designed to startsup(ateadiest in5-10years, remainsunresolved.Thastrat- provide long-term indirect componsbtion to households di- agyforthe transfar of health facilitias, infrastructure, and human rectly affected by the LHWP, onthe grounds thatthey should not resources to the governmeot or otherthird parties Is still being be worse-off due to the project. An independaen evaluation of developed. The Bank's Operatious Evaluatiun Department (OED the rural program was extremely critical of Its limited achieve- considers that oustainabillty of the social component is not yet ments during Phase IA. A number of components of the program certain, as organizations (public, private, or community) with the (such as improved liveatuck production, irrigated vegetable capabilities to take over the operations and maintenance of production, and fruit tree distribntion) were either sariously at these assets have In many cases not yet bean ideantifiad. Meat- risk of failure or not likely to succeed at all (Eriksen 1996). In Ing internationnl standards for construction, operation, and addition, household surveys suggest that eight yearn after the maintaenance of the facilitios built by the LHDA may be beyond start of Phase IA, there has been virtually no improvement in the present capabilities of Lesotho. Sustalined financing of the the incomes and welfare ot households in the project area facilitios is also uncertain on the implementation of the Bank's program, The strategy's insufficient attention to despite the 1993 election experience In partic- HIV/AIDS raised questions about its relevance ular, the Bank did not appear to understand to broad-hased sector development The impli- policy decisionmaking in the country and was cations of reduiced incidence of AIDS and lower too optimistic in assuming that democratization population growth for enhanced per capita in- and'stability could be accomplished soon after come growth and poverty reduction were not ad- the May 1998 elections For example, the 1998 dressed in the Bank's strategy, despite widely CAS, presented to the Board shortly after the available calculations that they would be of election, noted that the risk to the Bank's pro- malor significance I Although the World Bank gram was "minimized by progress in Lesotho's drew government attention to the importance of ongoing democratization process and efforts to these issues, the Bank did not help Lesotho de- achieve good govemance "The Bank's assistance velop the most basic integrated health informa- strategy did not include contingency plans in the tion system and survey instruments necessary to event the democratization process fell apart, as monitor HIV/AIDS, leading to underestimation it did Awareness of the long-standing souirces of prevalence and, consequently, of its impact of political and social volatility mn Lesotho should HIV/AIDS was not then at the center of the have indicated a far more modest strategy for the country dialogue, and the Bank's 1994 popula- base case scenario than the four prolects pro- tion sector review did not trigger a shift in Bank posed in the 1998 CAS strategy in the last half of the 1990s toward 17 Lesotho Deveiopment in a Challenging Environment The Lesotho Highlands Water Pro ject: Boo 3 3 Dam Safety. Environment, and Other Bank Safeguards and Guidelines Panels of exports contribution DED commends the valuable EnvironmontalassessmentANational Enuimnmotoal ActionPlan contribution made to the project bythetwo World Bark-financed (NEAP) ecluded Inathe original project design was generic in na- panels of expens, one for design and construction and the other turn and covered the LHWP as a whole While meeting the World tor environmental and social matters, and by the Disputes Ros- Banks environmeutal guidelines in effect atthe time of Phase IA olution Board. All partes to tho protect met by the OED mission projoct appraisal, it was net sufficiently detailed and lacked an confirmed the quality oa the panel contributions. In particular, element ot public participation As a result of tha uncertainty of the design panel's recommendalions resulted in sigoUificant cost the original plan, coupled with the Banks optimistic assumptions savings, while the advice of the Disputes Resolution Board aboutthe LHDAscapabilitiestofullydosignandimplemeuttheplano helped avoid costly litigation and arbitration The design and con- the maionty of the Phase tA environmental componem was do- struction panel also analyzed the consequences oa the reservoir- layed. In addition, there was a lack of clarity in Phasoe A as to what induced seismicity (RIS) and concluded that there was no share ofthe projects ensironmental program was attributeble to adverse effect on the safety or operation of the prolect, although the water transfer component and should therefore be funded by it recommended that monitoring be enhanced RIS impacted South Africa. and whit share was of a general development no- the villages adjacat to the Kotse Reservoir. requiring repairs turo and should be fiancod by Lesotho,This confusion contributed to and construection of replacement houses, and created ad- tothedelayinimplamentingtheprmgram Howver, lessonswere verse publicity for the prolect leamod ond applhid in preparing Phase IB and an Environmental Assessment(EA) was synthesizedfom the results of 14coordmated Dam safety Phase IA can be considered satisfactory is meet- baseline studies of physical. chemical, ecological, and social as- ing the World Bank's dam safety guidelines and in developing pects. The EA work was monitored by the Bank and an intema- EmergencyPreparednessPlans(EPP)forthedams However.as tional multidisciplinary team of experts There was also a pointd out in a l999 World Bank implementation completion r- comprehensive consultation of the highland communities par (ICR, tha protect dam safety and surveillance require some fuitherstrengthening, and the EPP ore still tobe tested with the Involuntaryresoftlement. Although households directly affected public at large, as ongoing awareness activities have so far by Phase IA of the project have been resettled (359 households concentrated on pubhic institutions in the area, such as police as opposed tD l73 at appraisal) there are two residual issues bqing and clinics addreassed. One issue includes the definitive legal transfer of more actively combating HIV/AIDS This shift oc- ficiently selective nor realistic,4 and they did curred only at the beginning of the new decade not pay enotigh attention to HIV/AIDS, poverty (World Bank 2000a) monitoring,5 performance indicators, rangeland In sum, the World Bank strategleb were mod- problems, rural development, and Lesotho's estly relevant to poverty redLiction They sup- weak institutional capacity ported macroeconomic policies that had a As the decade came to a close, Lesotho had substantial impact on inflation and growth The seen little progress on agricultural diversification, programs also provided vital support for the fi- eimnployment creation, and rural development nancing and implementation of the LlI-WP Sup- The World Bank-supported education reform port to the educational program was highly program, however, achieved its major oblec- appreciated by the government In the second tives Also, substantial economic growth was half of the 1990s, the strategies focusned heavily achieved during much of the 1990s, spurred by on poverty reduction, but were undermined by the LHWP as well as sound economic policy For a poor appreciation of the political instability, example, the impact of construcion in the LHIWFP which reduced ownership of the reform pro- helped Lesotho realize an average GDP growth gram The sectoral strategies were neither sLif- of close to 4 percent a year dunng the 1990s The World Bank Services and Products resettlement housesto theirbeneficianes and the associated cut- Procurement acod orrption.The alleged coinuption associated off of all oture LHDA legal responsibilities. The other issue isthe with some of the procurement in Phese IA was not mentioned steemal evaluation of resettlement porfonnance using a set of in the ICR for Phase IA hoceuse (as OED was advised by the risk indicators thet include homelessness, landlessness, lob- Africa Region) Itwas not known by the Bank at tho time the ICR lossness, morbidity, and mortality. The proposod evaluanion of re- was written In discussing procurement aspects for Phase lA, settled families will provide a measure of projact impact. For the general maneger of the Engineering Group of LHOA men- Phase 1B, the physical resettlement for the 99 families included lionedtothe OED mission thetthe World Bank had played a key in Stage I has been completed, but not the goal of providing gar- role in assisting the Tender Evaluation Team by financing dens, or sustaiable obs, fortheos familis to achievefod sacunty. 'seven wise men " This assistance proved helpful in refuting The resntledfamilies relyheavilyoacompensetionfortheirbasic corrupinon alleged by various countries and enhancing the needs, making it more difficult to wean them off this entitlement credibility of the evaluation. Nevertheless, a number of con- and to reestablish their integration in nomial village life. Stage 11 sulting firms and contractors working on the project have besn resettlementwillaffect22fihouseholds,reprosentinganincrease charged with paying bribes and their trial is underway. The of 40 percent from the initial 1B3 households identified in the re- World Bonk Oversight Committee for Fraud and Corruption is settlement action plan approved in 1997.The experience of Stage investigating the allegod corruption, but its report has not yet I has caused concern about the chances of achieving the goal of boon completed. nustainedfoodsocurityforthese households.There isa lack of un- dermtending of the compensation policy among the ffected house- The World Bank Inspection Panel. The panel received two re- holds, due in part to the unavailability of the policy in the local quests,in 1999 andm1999.The 1998 requestellegedthattheWorld language, which leads to multiple interpretafions and the per- Bank failed to consider demend management alternatives to sistenceofanumberafcomplaintshighlightedby NGOa Phas 1B. The Panel supported the Bank's and South Africa's analysis that the bhnofits of the projact outweigh the cous of de- Projecrs in inrornational waters.The LHWP is a binational proj- mand management required to lustify the delay The second re- ect Implemented In the Orange River Basin shared by lernotho, quast alleged that the reservoir inundated land over which the South Africa, and Namibia. As a riparian of the prolect, Namibia requesters claim to have a mining Inasne, but the Punel did not was notified and indicated that it had no objection. recommend an investigation annual royalties for supply of water to South is no closer to making progress on these ques- Africa through LHWP, amounting to 18 percent tions It remains unclear how the large pool of of government revenues and 5 percent of GNP relatively tinskilled, unemployed, and under- in 1998, are substantial and sustainable These employed rural Basothos will find jobs 6 The royalties have already contributed to economic Bank's contnbution to resolving these questions and social development expenditures, but they has been moderately tinsatisfactory have so far been unsuccessful in stimulating rural development and achieving poverty re- Economic and Sector Analysis duction It is not clear what will sustain economic The Bank conipleted severiI fonral and informal growth in Lesotho once the impact of the large sector reports in the 1990s, and Lesotho was also construction program has played out Can the included in several regional studies during those manufacturing sector contribute more than its year (Annex E, table E 1) Three areas-agri- current 10 percent of GDP' To what extent can culture, education, and the financial sector- the agncultural sector contnbute to the economy, have been covered in depth, while popuilation, to exports, and to poverty reduction' Despite im- health, and nutriton received less attention I The proved strategies and some investments, Lesotho share of resources allocated to economic and 19 Lesotho Development in a Challeng ng Environment sector work (ESW) for Lesotho-averaging 15 istry of Education noted that 'the World Bank ed- percent a year dunng FY91-99-was below the ucated us to be able to identify our own needs SSA regional average (19 percent), but above the The 1989 report was very helpful Before, we had average of small SSA couintries (10 percenit) multiple donors, and everything was on a first- (Annex E, table E 2) While the reports were gun- come, first-served basis " erally of satisfactory quality, education sector Financial intermediation. Two financial work in particular was effective in producing a sector reports were prepared during the I99s coherent framework to establish pnorities and to The first, in 1990, did not envisage emerging guide lending A summary evaluation of FSW weaknesses of the financial sector and sug- based largely on the approach used by the Qual- gested only modest changes to existing policies iry Assurance Group (QAG) is presented below Toward the end of the decade the financial sec- Agriculure and environment There were tor had deteriorated such that the 1998 report ex- reviews of the agriculture sector in 1981 and pressed concems about the financial system's 1986. as well as a comprehensive National En- weak capacity to support initiatives in the com- voronmental Action Plan (NEAP) m 1989 The sec- mercializaton of agriculture, tourism develop- tor reviews were relevant and of satisfactory ment, and export promotion It therefore focused quality They emphasized the potential of more on the broader issues of financial intermiediation, intensive use of the lowlands for high-value the performance of the banking system, and crops and the importance of improving man- small- and medium-scale enterprise develop- agement of grazing resources in the highlands ment Central to the conclusions of the second The NEAP was also relevant and of moderatoly report was the need to improve the supervisory satisfactory quality It laid out an ambitious but functions of the Lesotho Central Bank This re- unpnontuzed agenda and had ittle impact diir- port did not, however, provide a solution to the ing the 1990s Seven years after the NEAP's re- weak financial services in rural areas lease, the 1996 GAS lamented that up to then, no Healtb, nufritfton andpopulation After a action hacl been taken on the NEAP's recom- Health, Nutntion, and Population (HNP) Sector mendations In 1993 the World Bank undertook review in 1981, no formal analytical work on the a study of environment and agncultural diversi- health sector and the health svstem in Lesotho fication The work was painstakingly prepared was undertaken for nearly 20 years In particu- using considerable published and unpublished lar, there was a lack of analytic work during the data, and its quality was satisfactory But its irn- first half of the decade when the National Health pact on the sector has been limited-for exam- Sector Plan was developed While the work ple (as noted earlier), diversification of crop done in the population sector (1994 population production has been slow and largely unsuc- sector review) was of moderately satisfactory cessful, despite theoretical support for tLhe change quality, it was ill-timed and too poorly dissem- Education. An FY90 study of improvLng qual- mnated to influence strategy or lending as pro- try and efficiency in education was exceptionally posed in the 1985-94 HNP and 1989-98 HNP 11 effective in helping establish a coherent policy Summary Some sound sector analysis was framework for education reform in the 1990s The carned out during the late 1980s and 1990s, but study was of satisfactory quahtiy and identified a there were stibstantial shortcomings For exam- reasonable number of priorities throuIgh a rec- ple, there was no broad economic work to fol- ommended core action plan It was adeqtiatelv low up the action plan in the 1995 Poverty disseminated and timed to provide an input into Assessment e Notable for their absence were the govemment's Education Sector Development periodic reviews of the allocation and uses of Plan (included in its Fifth Development Plan, public expenditures These would have been of 1991/92-1995/96) Of all the sectors, analysis in particular importance to ensure that social education has been most incisive It is therefore expenditures were strengthened, given the sub- no surpnse that the Bink's assistance in this sec- stantial and sustained revenues generated by the tor is well received A senior official in the Min- LHWP A Public Expenditure Review (PER) was 20 World Bank Services and Products planned for 1996-97 as the basis for reformtng peaks of nearly $30 million for each in FY93 fol- public expenditures proposed by the ninth Pol- lowing the approval of the LHWP (figure 3 1) icy Framework Paper (1996), but it did not ma- The Intemational Finance Corporaton has no op- terialize A Public Expenditure and Budget erations in Lesotho The Multilateral Investment Management Review currendy under preparation Gtiarantee Agency currently has an exposure in is highly relevant, and an analysis of labor mar- Lesotho amounting to $23 7 million kets (pan of a regional study) is currently under preparation Given the persistently high unem- OED Findings on Closed Projects ployment level, the analysis of Lesotho's labor For prolects exiting the portfolio since FY90, table market is relevant and important work 3 4 shows that 67 percent (by net commitment) of Lesotho's evaluated portfolio was found to Lending have satisfactory outcomes, comparable with the Over the past three decades, World Bank com- SSA average, hut significandy below the SADC sub- mitments to Lesotho were about $448 million for region, small SSA countnes, and Bankwide resLilts 28 prolects Of this, $293 million was for 26 Sustainability of prolects, however, was rated IDA credits and $155 million was for two IBRD likely for only 22 percent of the net commitments loans Ten-year commitments grew rapidly from evaluated, similar to the score for small SSA coun- less than $50 million in the 1970s to about $100 tnes, but considerably below other comparator million by the 1980s, and then tripled to almost countnes and the Bankwide average Institutional $300 million in the 1990s The Bank's portfolio development fared even worse, it was substantial was changmg rapidly in the 1990s because of the for only 18 percent of the total lending evaluated, introduction of a major water supply project, the lowest rating among comparators Of partic- LHWP, with commitments amocinting to $110 Llar concern is that projects approved dunng fis- million in FY92 and $45 million in fiscal FY98 cal FY90-00 and already closed performed worse While the share going to water supply increased than older ones (Annex E, table E 3) to 51 percent, the share for agnculture, transport, Project performance ratings by sector show and urban development declined The share significant differences (Annex E, table E 4) The going to education also declincd, but less than LHWP, by far the largest and most significant ac- the other sectors (table 3 3) Annual average tivity in the Bank program, has been satisfactory net disbuirsements were $13 million and net in stimulating economic growth and generating transfers $10 million dunng fiscal FY90-00, with sustained export revenuLe for Lesotho The prol- a I D i s t r i b u t i o n o f B a n k L a 9 Sector . i G,,, ,hi; i I srEW jMeii Agriculture _u ! tl Education . I .t '. z ,. i Finance I - - . di ! , Industry i i1iBi iIJlii Health, nutrition, and poi,ii.| ... fij[jI I ijil Public sector managemEr' li | Transportation . lls Urban development I iliLi) 1i eit Watersupply and sanitai i i e 1___1___._i1,, _i_X___ aSorr World eank 21 Lesotho Development in a Challenging Environment 35 - 30- __ Net disbursement$m(m) 25 __________ Net transfer '$m) | 10 - 5- 0- 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Year Setr Mld Brank tusmesmarehouse ect accounted for about 14 percent of Lesotho's surplus in the 1990s and increase allocations of GNP and about 40 percent of value-added in con- public expenditures to the social sectors At the strniction per year during 1994-98 It also gen- same time, there were, until very recently, seri- erated 28 percent of government revenue in oius shortcomings in progress on the distribution 1998, including receipt of royalties for supply of of benefits from the LHWtvP tlirough the Devel- water (on the order of $45 million, or 5 percent (pment Fund and Rural Development Program of GNP), SACU tanff revenues from impons of lHousehold surveys suggest that eight years after materials for construction, and the increased tax the stan of Phase IA, there had been virtually no revenues as a result of project activities (box 3 2) progress in terms of the incomes and welfare of The LHWVP made it possible for the government households in the project area I While Bank staff to turn a budget deficit in the late 1980s into a expressed doubts about the validity of these sur- D Evaluation Findings of Recently Table 3.4 x aluated Projects (Exiting in the 1990s) ,'.:QiS.[-I1n\.i1Wi J-U'La'b I ilf ilDlstt sPIthi u Country ittie .ill, Amli-Ultit i LJ, l 3 l[i- ,-rs{tii4i) 4enmtfljlfltf Lesotho I. : Small SSA countries 01 ', i | .1i l SADC ,Pi ; K . - SSA Mlt It , t si, Or IDA operations -t P. l Bankwide ;1;, : ' L -_ jiij9 Snare OED deals In Anne t arble E 3 22 World Bank Services and Products veys, this assessment is consistent with the per- pacted villages adjacent to the Katse Reservoir, ception of a client survey in 1997 showing that requirng replacement of some houses and cre- the Bank's clients (government, private sector, ating adverse publicity The Bank also prepared civil society, and donor community) did not see an environment assessment that complied with much impact from the Bank's lencling program its safeguiard policy, but there were delays in im- on poverty alleviation (box 3 2) plementaton Although a detailed resettlement In the education sector, Lesotho's prolects plan was implemented, inany issues remained un- scored well The two credits evaluated had a sat- resolved Finally, Namibia, which shares the Or- isfactory or moderately satisfactory outcome By ange River Basin with Lesotho and South Afnca, contrast, the rwo health loans were rated mod- was notified anid indicated no objections to the erately satisfactory and moderately unsatisfactory LHWPI OED suLggests that Bank performance on At the other end of the spectrum, all completed safeguard issues should be reviewed after the agnculrural and pnvate sector development prol- completion of Phase IlB of the LHWP ects had unsatisfactory or highly unsatisfactory outcomes (Annex E, table E 4) Most projects with Efficiency of World Bank Assistance unsatisfactory outcomes had problems of qual- The cost of operations in Lesotho ranks among ity at entry, complex and overambitious design the Bank's most expensive for fiscal FY91-99 given the limited local capacity, noninvolvement (Annex E, table E 2) Lesotho's average program of beneficiaries during design, and failure to cost of $81 per $1,000 of net commitment for sat- learn from previous experience i isfactory and nonrisky projects is much higher Project-level performance is an important in- than that of SSA ($39), SADC ($31), and Bankwide dicator of the World Bank's contribution to eco- averages ($16) Among 107 countnes, Lesotho nomic development, but it tells only part of the ranks as the 93rd-highest cost, and among 50 story The Bank assistance program (lending countoes with similar project size (of $20-$40 mrl- and nonlending) was based on a correct diag- lion), Lesotho ranks as the 35th-highest cost nosis of the country's problems and included rel- The Bank program in Lesotho was expensive evant objectives such as growth and poverty partly because of the large commitment cancel- reduction The outcomes, however, were mod- lations, amounting to 25 percent-more than erately unsatisfactory" because the program in- double the Bankwid6 average of 10 percent for cluded poorly designed and complex projects, fiscal FY90-99 (Annex E, table E 4) overestimated Lesotho's implementation capac- ity, overlooked the need to obtain agreement on World Bank Portfolio Performance: Quality important project conditions before Board pre- Assurance Group Assessments sentation, paid inadequate attention to HIV/AIDS Quality Assurance Group (QAG) assessments of and poverty monitoring, and ignored political portfolio performance show that, as of April conditions that affected ownership of the pro- 2000, Lesotho's active portfolio has 50 percent of gram More important, the Bank provided in- projects (3 of 6) and 71 percent of commitments adequate support for the implementation of the at risk The risk percentage is much hliglier than Development Fund, which was designed to dis- SADC (18 percent), SSA (22 percent), and the tribute benefits from the LHWP to Lesotho's World Bank average (19 percent) (Annex E, table poor While the substantial growth achlieved E 3) Of the three risky projects, two were rated during the 1990s is a prerequisite for improving as actual problems (Road Rehabilitation and welfare, no reduction in poverty or inequality has Maintenance and Agricultural Policy and Ca- been measured during the decade, despite the pacity Building) and one as a potential problem strong growth performance (LHWP Phase IB) These ratios are sensitive to In applying its safeguard policies, the World the time period examined (Annex E, table E 3) Bank took all measures required to meet the pro- Delays in effectiveness and slow disbursements visions of the dam safety guidelines (box 3 3) are among the reasons QAG cites for rating these However, the reservoir-induced seismicity im- projects as risky 23 The Development Effectiveness of World Bank Assistance T his chapter evaluates World Bank assistance in macroeconomics, rral development and poverty reduction, human capital development, T and private sector development in terms of its contribution to Lesotho's development outcomes The evaluation indicates that the devel- opment effectiveness of Bank assistance was moderately unsatisfactory. Macroeconomic Outcomes This impressive macroeconomic performance Early achievements but subsequent disap- reversed toward the end of the decade, however polntments Macroeconomic outcomes were Economic activity began to slow down in pamicularly impressive from FY90-91 to FY96-97 1997-98 and real GDP declined by an estimated (Annex D, table D 5) Real GDIP growth averaged 4 percent in 1998-99 The 1998-99 budget deficit 5 3 percent a year, inflation was moderate, the more than dotibled from the previous year to 4 2 fiscal balance strengthened, and foreign reserves percent of GNP, driven primarily by a large in- accumulated to the equivalent of about seven crease (7 5 percent) in current expenditures in- months of imports by 1990-97 The macroeco- flation increased in the last quarter of 1998 in nomic dialogue, through the joint IMF/Bank/gov- response to the dislocation in the supply of es- emment Poverty Framework Paper (PFP) and the sential commodities that followed the Septem- IMF stand-hy facilites (the SAF and ESAF), helped ber 1998 civil unrest The balance of payments the govemnment estabhlish a souind framework for position weakened drastically in 1998-99, with stabilization and adjustment ' The econoniy per- the surplus lalling from $127 million in 1997-98 fonmed strongly following the construction of the to $33 million in 1998-99 2 As indicated earlier, LHWP, which peaked during 1994-97, the es- many factors contnbuted to this reversal Because tabhlishment of export-oriented manufacturing of these factors, macroeconomic performance output such as clothing, electronics, and light was much lower than projected For example, manufacturing, excellent mid-1994 harvests, and the ninth l'FP, for the program period 1996-97 a favorable external environment for trade The to 1998-99, projected a 10 3 percent annual macroeconomic performance was more favorable growth in GDP, a fiscal surplus averaging 0 9 per- than projected in successive adjustment pro- cent of GNP, and official reserves reaching $577 grams and PFPs for Lesotho million by 1998-99 25 Lesotho Development in a Challenging Environment The counterfactual Could Lesotho have struction program for Phase IB of the LHWP is done hetter without the macroeconomic policies expected to be completed in about 2003, and a and the LHWP7 Despite the difficulties toward possible second phase is not expected to start the end of the 1990s, Lesotho's macroeconomic up for another 5 to 10 years at the earliest The outcomes during the decade were better than end of the apartheid regime in South Africa was those of all SSA countries, the SADC subregion, accompanied by a reduction in official devel- and small SSA countries (Annex D, table D 5) opment assistance and donor and foreign in- During these ten years, Lesotho grew at an av- vestor presence in Lesotho Furthermore, the erage of 3 8 perLent per year, wtth real per continuing political uncerainty, decreased mm- capita GDP growth averaging 1 1 percent, both ers' remittances, and the projected drop in SACU figures were better than the comparator coun- revenues may adversely affect fuLture growth An tries Lesotho's inflation averaged less than 10 improved environment for growth and private percent during the decade, out-performing SSA, sector development depends on enhanced po- SADC, and small SSA cotuntries This would not litical stability, better governance, and deeper have been achieved without souLnd macro- parastatal reform of the state sector Prospects economic policy and the LHWP construction for all of these improvements are uncertain program The series of structural adjustment programs, Rural Development and Poverty which the government has entered into with the Reduction IMF and the World Bank since 1988, laid the Disappointing agricultural growth. While foundation for economic stability and growth aggregate GDP grew rapidly during the 1990s in Under these programs, the fiscal balance tturned Lesotho, GDP from primary sectors grew more from a cleficit of 10 percent of GNP in 1987-88 slowly, at about 1 8 percent per year, which to a surplus of 2 1 percent, on average, from was substantially less than in the second half of 1992-93 to 1997-98 Inflation was halved, from the 1980s (6 percent yearly) In the 1990s GDP 18 percent in 1988 to an average of 9 percent from crops grew at about 3 6 percent per year, during the 1990s The strong growth perform- but livestock declined by 1 9 percent yearly, ancc, stimulated by the LHIWP construction, may hence, the substantial reduction in the average not have taken place without the Bank suppon Per capita agricultural growth declined in rural in formulating, financing (including leveraging areas by about 1 percent per year, a disap- significant international finance), implementing, pointing result given that 80 percent of house- and supervising the project holds depend on agriculture While this The LHWI' also generated substantial and performance prevented any reduction in the in- sustainable water royalties, but, so far, they have cidence of poverty in Lesotho, it was not sig- not been uised effectively for targeting poverty nificantly different from the agricultural growth because of inadequate preparation and weak in- in both Swaziland and South Afnca mn the 1990s 3 stitutional arrangements These failures were The difference is that Basothos are far more de- recognized and the Bank started to address pendent on agriculture than Swazis or South them in a more effective way toward the end of Africans . the decade Poverty may have increased with- Poverty and inequality remained ex- out the LHWP, but the strong growth perform- tremely high. Consistent with the trends in ance dunng the 1990s spurred by the LHWP has agriculture, poverty in Lesotho remains at high so far not been accompanied by declining levels in all rural areas and is paricularly high poverty in the mountainous regions The incidence and While the LHWP construction program pro- depth of poverty are as high as any region in vided a major (one-time) boost to overall eco- Sub-Saharan Afnca (see World Bank 2000c, p 90, nomic growth, its impact on the economy will for comparisons) and a senes of studles indicate obviously not be sustained once the pace of con- rising inequality in Lesotho In 1967-69 the low- struction starts to decline The current con- est 60 percent of households eamed only 38 per- 26 The Development Effectiveness of World Bank Assistance cent of all tncome, while the top 20 percent ful because incentives and stLpportmg insttuttons earned 40 percent By 1972-73 the sttuation for increased crop and livestock production did had deteriorated the bottom 50 percent earned not exist The change in approach toward a de- only about 15 percent of all income (van Holst mand-led development program in agriculture Pellekaan 2001) Later surveys show that the Gini (the Agricultural Policy Capacity Building Pro- coeffictent doubled between 1967-69 and 1993 fect) in the late 1990s, now supported by the to about 0 57 and has remained high stnce then Bank along with other donors, has not yet (table 1 1) 4 shown results However, the project supports Poverty also high in neigbboring regions changes in the right direction for rural devel- of South Africa. High rates of povery, while opment in Lesotho These changes would not of considerable concern for Lesotho, are in part have taken place without the enthusiastic sup- a function of the harsh environment that faces port of the World Bank at the design stage, fol- much of rural Lesotho Similar rates of povery lowing the widely held conclusion that exist in neighboring regions of South Africa supply-led investments assisted by the World Recent poverty mapping for South Africa shows Bank had failed that two of the three provinces that surround Economic and policy analysis of the agricul- Lesotho (the Free State and the Eastern Cape) tural sector and poverty in Lesotho would prob- are, on average, the poorest provinces in South ably not have been done without the World Africa, with poverty rates of 48 and 47 percent Bank The evaluation of the prospects for di- respectively (World Bank 2000d) Therefore, versification and the poverty assessment were while the average Basotho is much poorer than particularly important contributions to devel- the average SotLith African, the extent of poverty opment planning in Lesotho But the promotion tn Lesotho is comparable with the average South of diversifying into hortictiltural crops as a strat- African living in the same stibregion While this egy for poverty reduction proved infeasible is not an encouraging picture of poverty for the given the limitecd available technology and ex- subregion, it might be reassuring when seeking tension services-that is, training, unreliable to explain the high rates of poverty in Lesotho water resources for even the simplest irrigation It is also sobering in terms of the difficulties in schemes, weak financial services, and distant and reducing povery among Basothos in the moun- unreliable markets in South Africa tainous regions The Development Fund created to use rev- The counterfactuaL Excluding the LHWP, enues from the LHWI' to support rural develop- the World Bank provided net credits for nural de- ment and poverty reduction in Lesotho has had velopment (including agriculture, education, senous shortcomings since its incepnon Its fail- and roads) totaling $217 million for projects that ure was recognized by the World Bank and ad- closed or were approved in the 1990s Wotild dressed in Phase 1B of the LHWP After a number Lesotho's economic and social development of failed attempts to make marginal changes in have been worse if the World Bank had not pro- the onginal concept, the World Bank and the gov- vided its assistance through strategic analysis and ernment agreed in FY00 on the Community De- advice, as well as investment support in rural de- velopment Support Prolect Although it is a small velopment? This evaluation concludes that, while pilot, the project foctises on providing assistance the Bank's coninbution to rural development was to rural communities and the panicipation of unsatisfactory, it had a positive impact in some those communities This change in project on- areas (Annex G, "Poverty Reduction and Rural entation would not have taken place without the Development") Bank the onentation follows models for social World Bank support of supply-led agricultural funds the Bank has introduced elsewhere in SSA development projects in the 1970s and 1980s aimed mainly at improving land management Human Capital Development and controlling erosion to improve agricultural Excluding IBRD loans for the LHWP, human productivity t These projects were not success- capital development drew the largest IDA sup- 27 Lesotho Development in a Challenging Environment pon, amounting to 40 percent of all IDA lend- pacity and sLipporting district-level enhance- ing to Lesotho dunng the 1990s Most of this went ments in primary and secondary education The to education, a pattern repeated from previous Directorate of Planning was strengthened and decades In addition to lending, the World Bank there was concerted attention to incentives that provided analytical and advisory services, par- allowed the education sector to recruit and re- ticularly in education tain staff The counterfactual-education. Could the The Bank also supponed the construction highly influential analytical support for policy for- and staffing of ten District Resource Centers, mulation and sector planning, which laid the bringing services closer to the community and foundation for Lesotho to prepare its Education providing a mtich-valued support network to the Sector Development Plan and Action Program, many inexperienced teachers in rural areas The and which guided all partners' efforts for much Bank was credited for bringing about broad of the 1990s, have been provided by institutions consensus of the state, churches, and commu- other than the World Bank? Probably not The nities on education policy through the 1995 Ed- World Bank built on this work with effective sec- ucation Act In sum, the adoption of the Act, torwide interventions to increase capacity establishment of a Teacher Service Division, im- through construction and furnishing of class- plementation of decentralization, and Bank in- rooms and university laboratories and increased vestment in buildings and curriculum have numbers of teachers Enrollment rates increased modernized schools, increased the government's substantially at the secondary level (see figure influence in the education sector, and laid the 4 1) Central and district-level efforts at institu- basis for further sector development tional development were impressive, particularly Whereas enrollments at the university level in a highly uinstable political environment The doubled diring the 1990s, the management ef- World Bank was effective in strengthening the ficiency and cost containment objectives in this Ministry of Education's (MOE) institutional ca- high-cost subsector were not achieved 6 Rising 80,000 - 70,000 A 60,000 _ c 50,000 I 40,000 - 65 30.,000 - l 20,000 - 10,000 1993 1994 1995 1996 Year Sonyr South Alrfan DSeipnm,nt Brank 28 The Development Effectiveness of World Bank Assistance spending for higher education minimized op- ventions have contnbuted more to the emer- portunities to balance sector budgets efficiently gence of an efficient private sector? and equitably, given that the government began The lack of analytical work was particularly implementation of free primary education in evident in the anempt to develop the indigenous January 2000 However, the ongoing FY00 Ed- pnvate sector in the context of the Agro-Industry ucation Sector Development Project (ESPD) 11 Project It ultimately failed because of an toad- supports special efforts to enhance school par- equate assessment of the prospects and con- ticipation through grater emphasis on affordable straints in the sector Similarly, the failure to access and equity I On balance, the Bank's ef- create linkages between the manufacturing ex- fectiveness in the education program was mod- port firms and local entrepreneurs, as a way of erately satisfactory (Annex G, "World Bank developing the indigenous sector, was partly Support for Human Capital Development in the explained by the lack of a feasibility study The 1990s") equity fund, established to assist investment by The counterfactual-bealtb, nutritifon, local entrepreneurs, also failed for lack of Bank and population. The World Bank did not pro- technical support vide much relevant assistance in the health sec- The Industrial and Agro-Industry Prolect was tor during the 1990s Would it have been more very complex, providing, among other thmgs, a effective if the Bank had not intervened? The line of credit for private sector investment OED Bank's contribution, in terms of effectively ex- rated the outcome as unsatisfactory The prol- panding health services and impacting posi- ect attracted foreign investors, but required tively on health status, was unsatisfactory (Annex government suibsidies The project was not suc- G, "World Bank Support for Human Capital De- cessful in encouraging indigenous investment, velopment in the 1990s") No analytic work was or in diversifying agncultural investments into ac- done for nearly two decades in health and nu- tivities of higher value added, or in establishing trition, although a high-quality Population Sec- linkages to the LHWP Only a few investment tor review was completed in 1994 It was too late policy reforms were implemented to encourage to affect the design for Bank lending (for HNP private sector investment, including replacing the dunng 1985-94 and HNP tI durng 1989-98), and costly tax holiday with a general 15 percent it was inadequately disseminated to catalyze corporate tax the necessary shift in strategic objectives as the Apart from political uncertainties, many con- HIV/AIDS epidemic emerged The link between straints remained, such as a land policy that analytic work and lending was weak The Bank discourages investors (by the absence of legal was also ineffective in the cntical areas of sec- titles), a legal system that is incapable of pro- tor management, including resource allocation tecting investors, and inadequate financial in- and developmg basic health information systems termediation These are the areas where a Only recently did the Bank implement a new dialogue on policy should have been more adaptable program credit, supporting a sector- forceful Because Lesotho's indigenous private wide approach for HNP in FY00 sector is still at the microenterprise level (em- ploying no more than one or two workers) and Private Sector Development operates mainly in rural areas, the focus of this The private sector is the third-largest recipient project was misplaced It should have looked of IDA's loans (excluding IBRD loans for the more at microenterprise development, policy LHWP), drawing about 22 percent of total IDA support, and private sector participation in in- lending to Lesotho during the 1990s Recipients frastructure, rather than development of subsidy- included the Industrial and Agro-Industry Proj- dependent banking activities, which would be ect ($21 million) and the Privatization and Pri- expected to support mature enterprises vate Sector Development Project ($11 million) The Pnvatization and Private Sector Devel- No analytical work preceded either of the two opment Prolect also has been problematic The lending operations Could World Bank inter- privatization process evolved more slowly than 29 Lesotho Development in a Challenging Environment Ni v a t e S e c t o r preceded or accompanied by the array of in- Ta h I e 4 .1 v e I o p m e n t terlocking legislative, regulatory, institutional, 9 5 - O 1 and financial measures critical to the creation of a more congenial environment for private sec- (elsjctlsnTU1Ne isetitTh tor investment Sector development would also Privatized enlerprises ' have benefited from improved water supply 1 Plant and Vehicle Pool Services ' lt' and electrical services For example, would con- 2 PVPS Plant Building . etnued Bank engagement in domestic water sup- 3 Minet Kingsway ply, rather than the neglect of the mid- to late 4 Avis : tlr 1990s, have been a more pmident policy to im- 5 Lesotho Airways Cooperation ,tiiDi prove services to urban areas and the manu- 6 Lesotho Flour Mills t#l/l facttiring sector (Le Moigne 2001, p 6)7 The 7 Marakabei 't Bank misjudged the interest of other donors in 8 Orange River Lodge :ji filling the void created by the Bank's disen- 9 Lesotho Telecom Corporation i ,. gagement from domestic water supplies in favor 10 Vedacem Lesetho r~ss. of the LHW'P As it turned out, the 1998 CAS pro- Total proceeds _________ ____ posed a renewed focus on public utilities, and in 1999 the Bank, in collaboration with other Saurra M,n,rneliFeannaat ihi smernmeni totaiviha donors, renewed its interests in domestic water supplies in Lesotho (Annex G, "Water Sector expected Only 10 of 32 state-owned enterprises Strategy Review') have been privatized for a project that called for The Bank could also have insisted on keeping privatization of at least 4 enterprises each year the Muela hydropower component of the LHWP clunng 1995-2001 (table 4 1 provides a list of pn- as pan of the total project, rather than as a separate vatuzed enterprises and privatization proceeds in project outside the management of the central $ million) This outcome is explained mainly by oversight authonty Consequently, the Bank might (1) Lesotho's weak private sector, (2) delays have avoided the procurement problems that brouight on by multipic consultations both in cab- arose and the subsequent high cost of privatc fi- met and parliament about each stage of the pri- nancing of the power plant, as well as the cost of vatization process, and (3) the difficUlty for the diversion tninnel made necessary by the delay Basotho entrepreneLurs of accessing capital The hugher electncity rates (compared with the cost because of the lack of collateral The project of suipplies from Sotith Afnca) have had a severe underestimated the extent of vested interests impact on manufacturers against privatl7ation Overall, the World Bank's Those close to the implementation of the contnbuition to pnvate sector development (PSD) LHWP claim that, since electricity generation during the 1990s was unsatisfactory, althotigh it was not part of the wtiter project, South Africa improved towarcl the end of the decade as the was not prepared to include the Muela power Bank started to address sectoral constraints more plant under the central management authority effectively, incliding the inefficiencies of the Nevertheless, it does appear that the Bank should utility sector under the new Public Utility Sector have tised its influence to insist on including Reform Project (Annex G, "Evalutating Bank Muela in LHWI' management This would have Assistance to Lesotho for Plrivate Sector facilitated Muela's financing and implementation, Development") and also created an incentive for all panies to The counterfactuaL The Bank wouild prob- save on costs-with Lesotho contributing a per- ably have contributed more to the emergencc of centage correspondlng to the cost of the power an efficient private sector had its assistance been plant (see box 4 1) 30 The Development Effectiveness of World Bank Assistance Boo 4.1 The Muela Hydropower Plant The MuelO hydropower plent was constructed during 1998 and power, also suffered from a poorfinanclal situation and, untl the operated hythe Lesotho Highlands DevelopmentAuthority (LHDA) governmnt intervened this year. was unable to paythe LHDA for to achieve energy self-sufficiency. The cost ao the plant,.which its bulk electricity purchases. At completion the estimated rate is fully met by Lesotho, was estimated at 925 million maloti of retum for the power component was only 3 percent Also, as (140 million equivalent as ofJanuary 1999), ofwhich 57 percent painted out in the ICR, the LHDAOs electricity charges are con- was in the form of commercial loans, 38 percent in grants, and siderably above the rates of ESKOM and are unsustainable the remaining 5 percent in concessionary loans. Prier to the The financial restructuring of the hydropower component commissioning of the plant Lesotho imported all of its electricity debt hegan to be implemented following discussions with the from South Africa'S state-owned primary power supply com- World Bank and IMF in December 1999 The government had to pany (ESKOM). pay some 430 million maloti to refinance and pay off debts a FYV0 The rate of returnforthe hydropowercomponeontat appraisal and will hove to moke further payments in the years to come (1991) was 6 percent The analysis was based on the assump- There are indicationsthatthe recentmembershipof Lesotho in tion of a long-term 05 percent a year tariff increase from ESKOM. the Southern Africa Power Pool and the effect of the new Pub- Since electricity generation was not part of the transfer of water, hic Utility Sector Reform Prolect may eventually improve the fi- South Africa declined to finance this component but the African nancial situation of this component This remainsto be seen, and Development Bank (AfDB) and the Commonwealth Develop- OED should review Muela hydropower in its audit of the com- ment Corporation (COC) expressed interest in offering conces- pleted Phase 1. sional loans, amounting to S50 million and $36 million In retrospect, World Bank assistance to Lesotho in the pro- respectively. Unfortunately, the 30 percent drop in the real price curement and financing of this component of the protect (par- of electricity from ESKOM (due mainly to overcapacity) has ticularly after the AIDB withdrew its proposed financing) was, made the power component relatively more expensive than at best, too late to avoid severe financial difficulties for the foreseen at appraisal. In addition, disagreement between the country However, the May 2000 supervision mission consid- LHDA andthe AfDB ovarthe award of the main construction con- ered that, since the Bank does not supervise contracts it does tract led to the decision by the AfOB to withdraw from financ- not finance, it was not in a position to avoid the procurement ing this component. The estimated low rate of return of the problemsandtheirfinancalacoasequencesforthepowercom- power component led the CDC to pull out of financing for this ponent. The OED mission considers that, in view of the loan component. covenants dealing with the financial targets of the power com- These decisionsand the tme required to secure financingfrom ponent and its overall influence on Phase 1A, the Bank should other sources were the main reasons for the 18-month delay in have assisted the government in dealing with the financial con- completing this partof the pwlect.The delay, inttum, wasthe main sequences of the delay in awarding the construction contract. reason forthe significant increase in cost of this component, es- The Bank, however, eventually helped the government in the fi- pecially as it necessitated accelerated construction of the by- nancial restructuring of the power component. passto ensure timely water delivery to South Aftica in accordance With hindsight the OED mission agreas with the comments with the treaty Moreover, the need for the LHDA to arrange al- made by both Lesotho and South African members of the JPTC ternative financing on shorter terms and at higher interest rates (a binational body created to safeguard the mterests of Lesotho (17.8 percent) than those offered by the AfDB and CDC created and South Africa)that it would have been preferahleto include severe cash-flow problems in servicing the debts and in paying the power component as an integral part of the prolect. This contractors An IMF internal commumncation of June 30,1999, in- would have enabled the JPTC to control the procurement pro- dicated that in addition to servieing debt obligations emounting cedure for the power component and facilitated the financing to38millionmalotfiIn1999-0,theLLHDAwasexpectedtopay104 of this component. It would also have avoided difficult and million maloti to vanous contractors for cost overruns sustained lengthy discussions within the JPTC as to whether an expense when constrmction of the Muela plant was suspended in Sep- belongs to the water transfer (and thus to be paid by South tember 1998. The IMF added thatthe LHDA defaulted on its loan Africa) arta the power component alane (to be paid by Lesotho) of 120 million maloti from the Lesotho Bank, In addition, the Also, twould havefacilitated governance of the project. Would Lesotho Electricity Corporation, which purchased tho generated (continued on following page) Lesotho Development in a Challenging Environment Box 4.1 The Muela Hydropower Plant (continued) the difficcitiesivith Muola plant aceabeenaci edlit thebBank arisen it erraprocurementnarrangements had Ien handled nader Iad innstle that t incempgeaa sheold hen annpen artl the eon dstntolnidalines, ithlre comret rsettlamoat c dispct LBHWP?It willl he reclle ut at he oprehlem- ithl Mauewes a sepereincrytbody. twecer,at lentthe nme standard dinsagr nemellhtwenitiBlAtyDBeeedlihe gocorom-eeten pro- woEaVc been eppled, end thin may hace accided the qluite cuorement ornthe main cnastructien cantra ec Ohempnctynitointhetpaiprcurementprclems at otipes ihletsIhaonresu rwhethernthe dta greemcnttwoiehese 1r 32 African Development Bank Group Assistance to Lesotho T his chapter reviews the African Development Bank Group assistance to Lesotho It covers the evaluation of the strategy that governed both T Bank Group nonlending assistance (policy dialogue and advice, eco- nomic and sector work, aid coordination, and resource mobilization) and lending assistance The tentative conclusion that can be drawn from the evaluation is that, overall, Bank Group assistance can be described as mod- erately satisfactory, with nonlending assistance being rated as unsatisfactory The assistance is also sustainable over the long term as a result of its impact on institutional development, as well as overall government commitment to the process of development. Bank Group Strategy in Lesotho potable water and health " It was added that "the continuing inaccessibility of most of the Eastern The 1988 Strategy Highlands districts means that the development Although the Bank Group startecd operations in of a reliable road and rural airfields will remain Lesotho in 1974, it was not until 1988 that it de- high on the agenda Due to the nature of the ter- veloped a strategy toward the country In the ag- rain, the program will necessarily be expensive gregate, Bank Group strategy toward Lesotho Contintied ADF participation in this sector will was no different from its overall mandate of therefore remain on the high side " It was also promoting economic and social development of argued that considerable attention would be other countries in the region in the pursuit of given to improving rural incomes throuigh sup- this objective in Lesotho, however, the Bank porting medium-scale agricultural ,ind agro- Group had to make strategic choices As spelled industrial pro;ects The EPCP also recognized the oit in the 1988 "Economic Prospects and Coun- existing manpower constramints in Lesotho Hence try Programming" (El'CP), Bank GrouIp strategy it proposed the provision of instittitional support in the medium term 'will continLe to be the pro- to various ministries, in particular to the Trans- vision of basic socioeconomic infrastructure, es- port Ministry and the Ministry of Finance and pecially the road network and rural airfields, Economic Planning 33 Lesotho Development in a Challenging Environment With respect to the social sector, the 1988 for poverty reduction and the African Develop- EPCP noted that as a result of its mild climate, ment Bank Group's vision, the CSP articulated Lesotho is largely free from major tropical dis- a strategy aimed at contnbuting to government's eases But with only 2,204 hospital and clinic agenda for poverty reduction through projects beds (or 1 45 beds per 1,000 inhabitants), the and programs for sustainable growth, job cre- country is below half of the World Health Or- atson, and htuman resource development It then ganization's (WHO) recommended ratio for proposed a senes of incentives to encourage pri- Africa As a result, the WHO recommended a vate sector development, with agriculture re- Bank Group strategy of strengthening interme- ceiving the bulk of Bank Group lending (65 diate health units that provide the necessary percent), followed by the social sector (35 per- backup services to the primary units Although cent) The 1999 CSP strategy also recognized that subsequent Country Strategy Papers (CSPs) were private sector development is an essential com- silent on the basic thrust of Bank Group strat- ponent of poverty reduction egy in the health sector, the recommendations of the 1988 EPCP continued to guide Bank Relevance of the Strategy Group intervention When set against the prevailing economic and While Lesotho has one of the highest liter- political situation of the time, Bank Group strat- acy rates in Sub-Saharan Africa, the ineffi- egy as formulated in 1988 was relevant Com- ciency of the educational system does not pletely enclosed by South Africa, whose political permit more than a small percentage of stu- ideology of apartheld was evoking worldwide dents to reach higher levels (see table 1 2) The sanctions, Lesotho certainly faced a hostile de- country's economic development is thus con- velopment environment Lesotho's underdevel- strained by the dearth of well-trained person- oped road network warranted making detours nel Bank Group strategy, beginning with the through South Africa even to domestic destna- 1988 EPCP, aimed to address the lack of human tions Such detours became expensive, both po- resources for national development, the high litically and economically, in view of sanctions proportion of unqualified teachers, and the against South Africa limited and unequal access to educational The development of an efficient road network opportunities The priority areas identified thus became a matter of national survival it included basic education, manpower devel- would reduce Lesotho's dependence on South opment (vocational, technical, and teacher Africa, link the mountainous and urban areas of training), and strengthening institutional man- the country, and facilitate the movement of agement of educational development goods and people Bank Group strategy, which coincided with that of the government, was thus The 1996 and 1998 Strategies relevant in light of the prevailing circumstances The next attempt to articulate a Bank Group For instance, the development of air transport strategy for Lesotho was in the 1996 CSP, the suc- was predicated on the fact that as a mountain- cessor document to the 1988 EPCP In the CSP, ous country, it would take considemble time and the Bank Group recognized the need to address resources to link the country by a road net- constraints to the economy, such as the shon- work Althotugh the outcome of this strategy age of skilled manpower, unemployment, in- might have tuimed out to be unsatisfactory, it was adequate infrastructure, and increasing poverty also a relevant strategy to pursue at the time From these constraints, the Bank Group choose The 1996 CSP was formulated against the to concentrate its intervention on agnculture and background of the collapse of apartheid and public utilities during 1996-98 The 1999 CSP, growing poverty in Lesotho However, with the covering the period 1999-01, is perhaps the collapse of apartheid, the use of South Africa's most comprehensive attempt to situate Bank road network became less cumbersome, and GrouLp intervention in the context of a well- Lesotho had made considerable progress in link- defined strategy Inspired by the global concern tog the country with a credible road network 34 African Development Bank Group Assistance to Lesotho Thus the shift in strategy from the development Nonlending Assistance of infrastrLcture toward programs and projects (for example, in agriculture, health, and educa- Institutional Support tion) that could contribute to poverty reduiction While Bank Grouip lending operations started in was indeed a relevant strategy to puirsuLe T'he Lesotho in 1974, it took some time for it to ap- 1999 CSI' contintied the emphasis on poverty re- preciate that investing in nonlending activities duction, and its objectives renmain relevant, given couild enhance the effectiveness of its lending the depth and severity of poverty in Lesotho (see programs Thus there was little at first in the way table 1 1) and the Bank Grouip's renewed com- of economic and sector work, policy dialogtie, mitment to the eradication of poverty in all and advice 13ut the Bank Group did provide (al- countries of the region beit in a rather incoherent manner) some insti- Bank Group strategy in the social sector was tutional support to certain ministries, such as similarly relevant most interventions were aimed Transport, Finance, and Economic I'lanning In- at simply providing health care facilities, a di- stitutional support to the transport sector aimed rect response to the observed shortage of such to strengthen and sustain government's capability facilities In the education subsector, the short- in the sector Specifically, it attempted to improve age of skilled manpower was constraining na- planning and management of investment and tional economic management Thuis any strategy expenditure, improve the administration and aimed at filling this gap would be relevant to management of civil aviation, and develop a both the needs of Lesotho and the Bank Group's maintenance program education strategy as spelled oLit in the 1986 Ed- Other Bank GrouIp suppon components in- ucation Sector Strategy Plaper (ESSIP) The strit- cltided training and management studies The egy was also relevant to the national goals of support was jelevant to the problem lit hand as tnmproving teacher quality and building capac- it assisted the government in developing an in- ity for cumnculum development It provided stip- dependent roiad network and enhanced gov- port to strengthen public and private sector ernment capacity for the management of the collaboration for education and included an ed- transport sector An example of relevant assis- ucation study as a component of ESDI' I tance is the feeder roads study, aimed at prepar- Although the Bank Group's strategy toward ing detailed engineering designs, Including Lesotho, particularly in the transport and social tender docunients, for Likalaneng-Thaba Tseka sectors, can be descnbed as relevant, it appears Road, and carrying out the feasibility study, in- to have been uindermined by three key factors chiding preliminary designs, of two nural roads One was the inadequate attention paid to gov- (Roma-Ramabanta, Semonilong-Sekare Roads) As ernance issues in the country (see box 1 1) This this project is ongoing, it is difficult to assess its reflected the absence of a forum for policy dia- achievements, but it is relevant in the sense that ijogue The second factor was the slow response it would provide a souind basis for making a de- to HIV/AIDS-related issues in Bank Group lend- cision one way or the other on the feasibility of tog to the health sector The Bank Group was proceeding with the construction of the roads more concerned with the provision of physical Institutional support to the vital ministries of health facdilties than measures to monitor and pre- Finance and 1-conomic Planning has been aimed vent the spread of HIV/AIDS at a time when the at strengthening their analytictal and adminis- epidemic was ravaging the country Finally, Bank trative capabilities Lesotho has a dearth of Grotip strategy paid little attention to poverty is- lIuman and institutional capacity for policy for- sues It was not until the 1996 CSP that poverty mTulation anci implementation, anct the 13ank issues became central to Bank Group mnterven- Grouip response has focused on human resouirce tion in Lesotho, and even then there was no ex- development through trainig and on institLi- plicit poverty-reduction program or any attempt tional development The latter is to be achieved to understand the depth and dynamics of through the provision of essential matenals such Lesotho's poverty as personal computers Although the assistance 35 Lesotho Development in a Challenging Environment is still under implementation, it can be said ten- southern Africa The documentation made a tatively that it is achieving its oblectives Mem- persuasive case that all countries in southern bers of both ministries have been trained and are Africa have much to gain from various forms of now equitpped with personal computers How- regional cooperation and from launching a de- ever, Bank Group assistance faces a malor new termined effort to integrate the regional market challenge As a result of the combined effects of As a small country, Lesotho has much to gain low domestic wages, the collapse of apartheid, (and much to fear) from the economic integra- and porous borders with South Africa, many of tion of the southern African economies To date, the trained personnel are now finding more at- however, it is not obvious how the Bank Group tractive employment opportunities in South has used the findings of the study to affect its Africa The sustainability of institutional sup- interventions in Lesotho (particularly regarding pon is therefore uncertain air transport) Mention should also be made of the Bank Group's work (financed by the gov- Economic and Sector Work, Policy Advice, ernment of Japan) on long-tern finance in south- and Dialogue ern Africa and SAIC countnes Again, it remains Except for the mandatory preparation of the unclear how much this work has influenced EPCP and the CSP, the Bank Group has not car- Bank GrouLp operations in Lesotho ried out any economic and sector work in In recent years the Bank Group has taken Lesotho While the Bank Group has invested some hesitant steps to enhance policy dialogule heavily in the transport and social sectors, it did and advice It took the unsuccessfui initiative to so with limitedl knowledge of these and other encouLrage the government to accept the Sup- sectors The Bank Group was not at all involved plementary Financing Mechanism (SFM) for the in the authoritative and strategic study on the repayment of interest on AfDB loans But the economic and social development of Lesotho- government did not show stifficient interest in LesothosStrategic Econiomic Options (SIDA 1996) the initiative, as it does not consider its debt bur- As indicated earlier, this study, which benefited den serious enough for the purpose The Bank from the analytical, technical, and financial sup- Group is currently engaged in dialogue with the port of tIe World Bank and the Swedish tnter- government on private sector development A national Development Agency (SIDA), laid the public utilities reform project, which would fa- basis for a post-apartheid development strat- cilhtate the reform of telecommtnications, water, egy It has proved useful in the formulation of and electricity and their eventual pnvatization, the World Bank's assistance strategy for Lesotho is being planned for Board discussions before and in the formuLlation of the country's own de- the end of 2000 While these new initiatives ap- velopment agenda Without involvement in this pear to be in the right direction, it is too early influential study, the Bank Group found itself in- to judge them for relevance and impact How- creasingly tied to the policy framework and ever, the overall Bank Grotip contnbution to pol-,i long-term development agenda as set by the icy dialogue and advice to date can only be World Bank and the country judged unsatisfactory The Bank Group's major economic docu- inents (the EPCP and the CSP) have rarely been Aid Coordination and Resource Mobilization used as instruments of advice and policy dia- The United Nations Development l'rogram logue, partly because they are not rooted in se- (UNDP) has been at the forefront of convening nous economic analysis Indeed they have served Roundtable Conferences on Lesotho, with the mainly as instruments for programming Bank Bank Group actively participating in them At Group interventions in Lesotho Lesotho has these meetings, the government of Lesotho pres- never benefited from a policy-based lending ents its long-term plan for sustainable develop- program from the Bank Group In spite of these ment aind identifies the requisite resources to shortcomings, mention muLst be made of the Implement the plan Available information shows Bank Group's work on economic integration in that the coordination of development assistance 36 African Development Bank Group Assistance to Lesotho has been effective In 1992, for example, this co- player in aid delivery, the Bank Group had to ordination played a key role in counteracting the coordinate well with a bigger provider of aid to severe impact of the drought then ravaging Lesotho In the future, the Bank Group should Lesotho and the rest of southern Africa In 1997, strengthen its nonlendmng assistance, since com- aid coordination also played a major role in en- ponents of this assistance are preconditions for listing donor support for the government's the success of its lending operations poverty alleviation efforts This resulted in donor pledges of about $336 mdlion for five years to Lending Assistance finatice a new and targeted approach to poverty Since it started operations in Lesotho in 1974, the reduction through improvements in primary Bank Group has approved loans totaling unit of health and education services and employment account (UA) 274 81 million, comprising UA creation for the poor 88 66 million of AfDB resources, UA 170 72 of The Bank Group has also been active in co- African Developnment Fund (ADF) resources, financing development activities To date, it has and UA 15 43 million of Nigeria Trust Fund cofinanced four projects in Lesotho with bilat- (NTF) resources IThese resources were used to eral and multilateral development partners It co- finance 27 projects, 3 lines of credit, and 6 stuLd- financed a water project with the Organization ies Following the cancellation of a number of of Petroleum Exporting Countries (OPEC) Fund loans (UA 50 96 million) in the wake of the and the Norwegian Agency for Development Co- portfolio restructuring exercise of 1994, Bank Operation (NORAD), road projects with IDA, the GrouLp net commitments now stand at UA 223 85 Arab Bank for Economic Development in Africa million Twenty-three operations have been (BADEA), the OPEC Fund, and the Kuwait Fund, completed In terms of sectoral distribution, the and a health project with the OP'EC Fund Co- public utilities and transport sectors are the main financing arrangements are being planned for the beneficiaries, with 28 percent and 26 percent of Agncultural Sector Adjustment Program (ASDP), the portfolio respectively They are followed by which was presented to and approved by the the social sector, with 24 percent, agriculture, Board in March 1999 The ASDIP represents the with 13 percent, ind industry, with 9 percent Bank Group's financing of the first phase of the As of December 1999, UA 175 82 million have Lesotho ASDIP-a long-term development pro- been disbursed, representing a disbtlrsement gram spanning about 10 years The first phase rate of 78 5 percent (table 51) A breakdown of of the Lesotho ASDP is being financed through the projects is contained in Annex E, table E 5 the Agricultutral Policy and Capacity Building Table 5 2 shows Operations Evaluation Project by various donors, including the Bank (OPEV) ratings of 14 completed projects in Group, the World Bank, and the European Lesotho I The table shows that in terms of im- Union, among others plementation performance (IP), 10 projects (or 85 7 percent of completed projects) were rated Conclusion either unsatisfactory or highly unsatisfactory, While the Bank Group has stepped utp its efforts whereas 2 projects (or 14 3 percent) were rated to make its nonlending assistance to Lesotho as satisfactory Poor project implementation per- more effective in recent years, the performance formance has always been the expenence of the to date is rated as unsatisfactory The Bank Bank Group in Lesotho In 1994, a portfolio re- Group program of technical assistance remains view report of Lesotho recommended the can- fragmented and incoherent, and largely unsup- cellation of several loans as a result of poor portive of its lending programs The Bank implementaion The 1998 cotntry portfolio per- Group's role in policy dialogtie and advice is formance review concluded that delays in loan weak, and it has not made any contribution to effectiveness and project start-up, noncompliance economic and sector work It has, however, co- with Bank Group proceduLres, and weak insti- ordinated well with other donors, particularly the tutional capacity are largely responsible for World Bank, presumably becatise as a small Lesotho's poor record on the IP criterion On the 37 Lesotho Development in a Challenging Environment Sectoral Breakdown of Bank Group- Table 5.1 Approved Loans and Grants, as of December 31, 1999 (net commitments in UA million) -~ No iveiliti Sector AD NTF el% Agriculture d l tle n t oar 131 Industry h usiao12 50 h l 9 3 Transport dengaintlen- d Reai25 5 Public utilities i 3.4 - 11 2 l 2 Multhiector I R Deoel - opme3 F HU3 Total lh436 1463 il1000 % of total approvals I24 - Not a tallbi,, Nor TAF TCradit and Bankn Find Soad AaDB 12001ta development obMective (DO) criterion, the table In terms of aggregate performance, the Bank shows that 10 of the rated projects (71 4 percent) Group portfollo in Lesotho appears satisfactory had satisfactory ratings, whereas only 4 (28 per- According to the annual portfolio performance cent) had unsatisfactory or highly unsatisfac- review, the portfolio has also been improving tory ratings over time For example, in 1998 and 1999 the _a_too Ra t of - - iS 3 ~~~~~~~~~~~i n L e s Project name asasmat nsfntntS Health Service Development HUS _ Butha-Butha-Roma-Somokong Road Construction HUS _ Joel-Drift-Khamana Road Construction 51 HUS _ Maseru Water Supply HUS _ Parc d'engraissement du Betadl HU Phuthiatsana Integrated Rural Development (ADF) HUSI Telecommunications I Project rUS II Line of Credit to Lesotho Bank S i Rural Health Services HUS - .+ Rural Health Services 11 HUSt _ Rural Credit and Banking Facilities US r Road Maintenance S li t Four Centres Water Supply and Maseru 11 Water Supply Projects US_ Khamane Oxbow Road Project fus 'i _ Nor S ia,isf.ctory, US unr.tWsfacry HUS higjhly unr.tMwacory Sourc African Oavelop-ent Birk datai 3 8 African Development Bank Group Assistance to Lesotho review found that there were no problematic through the roads of South Africa when travel- projects on the IP and DO criteria However, it tng from Maseru to the remote areas of the found that three projects (3 percent of the port- country Traffic growth rates after construction folio) met the project-at-risk criterion This exceeded appraisal expectations with the ex- amounts to commitments of UA 10 37 million (or ceptions of the mountain roads from Khamane 19 percent of total commiLments) at rsk The age to Oxbow and from Oxbow to Mokhotlong In profile of the portfolio also appears reasonable 1994, the length of pnmary, secondary, and ter- by Bank Group standards the average age was tiary road networks was estimated to be 5,323 6 25 years between 1995 and January 2000 In kilometers As of the time of this evaluation, the January 2000, it was 5 6 years All these are in- total length was estimated at 6,216 kilometers, dicative of an ever-improving portfolio, which excluding urban roads may be due to institutional strengthening, par- In the air transport subsector, the construc- ticularly in the transport sector tion and fumishing of a new internatonal airport were satisfactorily carned out Comprehensive Sector Analysis training and technical assistance were provided to the new intemational airport and the De- The Transport Sector partment of Civil Aviation A feasibility study and detailed design of domestic airports (1990-91) Efficacy and a management study of Lesotho Airlines Bank Group assistance to the transport sector Corporation (LAC) were also carried out compnses 13 operations as listed in Annex table E 7 The net commitment in the sector is UA 78 52 Efficiency million, representng 30 percent of total com- The implementation of Bank Group projects in mmtments to Lesotho The portfolio compnses nrne the transport sector is noted for long delays De- infrastructure construction projects and one in- lays in completion of road projects vaned from stitutional support project The infrastructural fa- 7 to 62 months and had a tendency to increase cilities funded by the Bank Group were road over time Loan deadlines were also often ex- sections of the western (A2 and Al) and north- tended Time overruns vaned from 29 to 113 per- ern (Al) perimeter main road, and sections of cent, while cost overruns varied from 13 to 53 penetrating main roads (A3 and A5), as well as percent (Annex E, table E 6) Cost overruns the new international airport of Maseru Of the sometimes resUlted from extensions in the scope three studies in the transport sector portfolio, the of projects, and very often from technical first resulted in the construction of three new sec- shortcomings tions of the northern penmeter main road The Road projects resulted in lower vehicle op- second study on feeder roads did not result in erating costs and were generally followed by any construction activity A Feeder Roads Prot- high traffic growth rates The new sealed roads ect was planned in March 1994 but has not been are providing low-cost access to rural areas for appraised by the Bank Group to this date The persons and goods, particularly agricultural in- third (ongoing) study concerns two important puts and outpuits, and are contnbuting to rural penetrating roads that provide access to the cen- development tral mountain areas With the exception of two projects, the road With the exception of the new international subsector projects were efficient, with economic airport, the transport sector projects achieved internal rates of return higher than 12 percent their major goals of providing low-cost access at completion and at post-evaluation The ex- to remote areas of the country and connecting ceptions were the mountam roads from Khamane the major population and economic centers to Oxbow and from Oxbow to Mokhotlong Access has been provided to all distncts and im- For the first road, a 22 kilometer section climb- portant population and production centers As ing from the foothills (1,750 meters) to the high a result, it is no longer necessary to transit plateauL (> 3,000 meters), an attempt was made 39 Lesotho Development in a Challenging Environment to decrease constructon costs and improve the The sutccessfLul implementaion of the 10 proj- efficiency of the project by adopting a substan- ects in the transport sector by the borrower and dard cross-section and cutting steep slopes This its implementing agencies is indicative of tnsti- resulted in serious environmental and safety tutional strengthening The training components hazards and an internal rate of return of about of some of the projects have actually enhanced 6 percent at completion and post-evaluation human resouLrce development, while valuable ex- At the time of its construction, the Maseru In- perience has been accLunulated in road con- ternational Airport was relevant to the develop- struction by both public servants and private ment needs of the couLnoy It served the purpose sector operators In the 1970s and 1980s, many of reducing the isolation of Lesotho dunng the road departments were managed by expatriate apartheid era by providing a means of trans- technical staff The training components of some portation independent of SouLth Africa How- of the projects have obviated the need for such ever, with the collapse of apartheid and the expatriates progress made in road construction, air traffic was The use of direct labor for roadl construction reduced considerably Although the airport can and maintenance wlthin the Roads Branch and be useful in winter when road transportation the LCU has not adversely affected the devel- becomes difficult, there is no doubt that in rela- opment of pnvate cointractors in Lesotho, and has tion to the cost of construction, maintenance, and indeed been an advantage in their training trained personnel, the project has become inef- Labor-intensive contractors carried out 181 roti- fictent over time The Depanment of Civil Avia- tine, penodic maintenance, and upgrading con- tion is currently marketing the airport for cargo tracts for the LCU between 1997 and 2000, or an transport, following e-argo congestion in regional average of 60 contracts a year international airports it is still hoped that the air- port could be used for shipment to Europe of Sustainability of theAchievements fresh vegetables and frilts from Lesotho, as well Available data from the Roads Branch and from as fish and seafood from South Africa the Department of Rural Roads shows that, since construction, all sealed roads have been regularly Institutional Development maintained Some sections have also been In broad terms, Bank Group activities in the strengthened by the LHDA to carty the heavy taf- transport sector have supported institutional de- fic required by its dam constnuction activities velopment in Lesotho All the projects, without Road projects have therefore been satisfactonly exception, restLilted in significant enhancement suLstained Some road sections-sections of Al, of institLtional capability Transport sector proj- A2, A3, and A5 that were rehabilitated in 1985, ects also contributed to the development of the 1987, and 1988-are reaching the end of their 15- private sector by providing jobs to the national year structural design life HIowever, no sign of road construction inclustry, which now com- structLral fatigue is apparent in these sections A prises more than 50 aLtive contractors provid- detailed study for strengthening and upgrading tog both labor and equipment The former Labor of the BuLtha Buthe to Oxbow section of Al was Construction Unit (LCU) of the Mmistry of Pub- commissioned to a constLiltant, and works are pro- lic Works and Transport has carried out a pro- grammed under the Road Rehabilitation and gram for training of labor-based contractors on Maintenance Project But in two projects (the unsealed road maintenance, while the Roads Khamane to Oxbow and Oxbow to Mokhot- Branch (RB) has promoted training of truck long roads), winter maintenance was ignored As haulage subcontractors in mechanical road con- a result, the Roads Branch has no capacity for stnuction The institutional support to the Min- winter maintenance, and access between istry of Transport has strengthened the capacity Khamane, Oxbow, and Mokhotlong is not all- of the government to manage the sector, while weather as expected many of the studies have assisted in the formu- The sustainability of the road subsector is ftir- lation of road projects ther assured by the appropriate allocation of re- 40 African Development Bank Group Assistance to Lesotho sotirces by the government for maintenance sealed road network The Roads Branch Is man- The evidence shows consistent allocation (of aging machine-intensive contracts ancl the high- about 20 percent of total road expenditure) for volume road network The Roads Branch also this purpose While buidget allocations were suf- has three regional units for routine and penodic fiient for rouitine anct periodic maintenance of maintenance Additional contractor and super- sealed roads, they did not permit proper main- visor training programs and pilot prolects are tenance of the whole network A backlog of being discussed with donors maintenance was accumuilated in the tinsealed The limitecd achievement in the air transport road network, but more money was allocated in sector, liowever, is not Sustitinable This is duLe recent years to reabsorb the backlog and bring partly to the decline In passenger traffic over the unsealed road network to good condition time, and partly to the increasing importance of i'he country also has the relevant instittitions road transport As the country was connected by for enstinng sUstainability The Ministry of Pub- roads, air transport became relatively more ex- hc Works and Transport (MOIPWT) now has pensive In the years ahead, however, the air- overall responsibility for the tiansport sector field cotild also (in addition to its use to transport The rural road network and main urban roads fresh vegetables ancl fruits fiom Lesotho to EU- are managed by two different cleparunents of the rope and fislh and seafood from South Africa) MOPWT the Roads Branch is responsible for the provide service to the South African towns near sealecd road network ancd for unsealed toads the Lesotho border with high volumes of traffic, and the Department of RLural Roads has responsibility for all low- Performance of the Bank Group volume unsealed roads Both departments op- Bank GiouIp assistance foctised on the clevel- erate a pavement management information opment of the main road network, with six pro)- system ects and a total length of 368 9 kilometers of Based on government commitnient, social newly constructed and rehabilitated trunk roads and financial support, and management effec- With the exception of the new internattional air- tiveness, it can be said that futire prospects fot port, which only achieved its physical objective, road maintenance and project scistainability are transport projects generally achieved their ob- bright in Lesotho This statement is reinforced lectives But Bank Group interventions expert- by the observation that Lesotho has been able enced significant technical shortcomings Stich to address most critical issctes of the road trans- shortcomings (lack of consideration of water- port sector, such as the backlog of road main- logged soils and frost conditions, for example) tenance, appropriate management and sustained repeatedly caused difficulties in two roads (Joel's financial resources for the road network, insti- Drift to Kliamane and Khamane to Oxbow tnitional reform and road user involvement, en- Roads) and three successive projects (loel's Drift forcement of axle load limits, a road safety to Khiainane, Kliamane to Oxbow, ancI Oxbowv action plan, well-adapted guidelines, anct stan- to Mokhotlong Roads) The implementation of dard specifications for road and bridge road construction in several projects witnessed constniction unnecessary design reviewvs, redesigns, and de- Finally, the government of Lesotho has also sign changes Inappropriate specification and achieved remarkable results in training and pro- contract clauses, depamtire from well-established moting both labor-intensive ancI plant-oriented standards and codes of practice, poor investi- contractors The national road contracting in- gations anct unforeseen site conditions, mis- duistry already comprises more than 50 units takes in lime stabilization of nattiral materials, dealing with rehabilitation and maintenance of and pavement design problems also caused cost tinsealed roads, is wvell as rehabilitation and and time overrins conistniction of bitumen sealed roads The De- The less-thain-satisfactory performance of the partment of Rural Roads is currently managing Bank Group is also evident in other stages of the labor-intensive cont-acts and the low-volume, un- project cycle Out of i total of 10 projects, only 41 Lesotho Development in a Challenging Environment 6 were subjected to self-evaluatton in the fortn support in the social sector In addition, the of project completion reports (PCR) Two ini- Bank Group has provided sippon for the con- portant projects, the new international airport and duct of a health study By the beginning of the institutional suppor project, were not sub- 1998, operations in the social sector amounted jected to self-evaluation Only road construction to UA 55 73 million, representing 23 49 percent projects (six projects) were self-evaluated and, of Bank Group total commitment to Lesotho among these, four have been subject to post- (Annex E, table E 8) evaltuation by the Operations Evaluation De- partment In the area of donor coordinationi, Health Subsector however, the Bank Group performed very well Bank Group assistance has provided suppon for as it coordinated its activities with the World Bank the strengthening of immunization services and (through cofinancing operations) renovation and upgrading of district hospitals Overall, Bank Group performance can be The goal was to provide better referral services rated as just satisfactory While the Bank Group for rural clinics and health centers, and to offer delivered the resources for financing the colt- technical support to public health and other struction of the roads, it did not carry out any sec- health promotion activities in the Health Service tor study in order to inform itself of the situation Areas (HSA) where the district hospitals are lo- on the ground In several cases, the road designs cated A total of six projects have been supported were considered inadequate But the Bank Group in the health sector A secondary health care did well in the areas of aid coordination, cofi- study was implemented as a component of the nancing, and institutional development first Rural Health Service Project in 1976, and a health study is ongoing Performance of the Borrower The figures in Annex E, table E 6, on time and Efficacy cost overruns indicate poor concern of the bor- A major constraint in assessing the efficacy of rower for time effectiveness The borrower geni- 13ank Group strategy in the health subsector is erally complied with reporting requirements, the absence of time-bound, measurable goals and except for annual audited reports ProcuLrement indicators for evaluation and impact assessment was generally satisfactory The borrower and its in the appraisal reports Evaluation is also con- implementing agencies are in the process of strained by the absence of baseline data against improving their performance and have gained which the impact of interventions can be as- experience in the course of implementing suLc- sessed, thus making it difficult to assess the cessive projects In spite of poor manpower contribution of the projects to the attainment of resources and lack of experience, they were the overall sector goal to provide more and im- always committed to successful implementation proved health services on a sustainable basis of projects Furthermore, there was no pnor sector work that The borrower created suitable conditions for could have served as a good basis for Bank project sustainabiliry and reguilarly maintained tie Group intervention Such a study also could roads Institutional reform in the road sector is have, for example, identified private operatives progressing with the Roads Board, the such as the Christian Health Association of establishment of the Roads Fund, and the es- Lesotho (CHAL) and recommended strategies for tablishment of a central road authority The per- strengthening existing collaboration between formance of the borrower, which continues to public and private providers of health care improve, can be rated as satisfactory Nonetheless, the assessment of efficacy relies principally on discrete measures obtained from The Social Sector published and unpublished government reports, Since commencement of Bank GrouLp assistance information from other donors, and from an in 1974, a total of eight operations, (six in health analysis of social indicators in popUlation data and two in education) have been approved for sheets published annually by the Ministry of 42 African Development Bank Group Assistance to Lesotho Economic Planning and Development These health centers were also renovated, while 10 new data sheets provide national-and to some cases, ones were constructed These have also been fur- dlistrct-estimates of access to health care and nished and equipped A very commendable fea- demographic characteristics, but are of limited ture is the extensive use of solar power in all ADF value in the assessment of the health status of facilities the target population Data on utilization were Improvements have also been reported in obtained from rouinely collected information on the health of the Basotho It is reported, for ex- consultations, referrals, and reattendance from ample, that between 1988 and 1998, life ex- the Statistics Unit of the Ministry of Health and pectancy increased from 51 to 53 7 years, and Social Welfare from 1992 to 1998 These data are infant mortality declined from 113 to 89 7 per also of limited value as they are incomplete and 1,000 live bhrihs, partly as a result of these in- inaccurate terventions The first tntervention in health aimed These limitations notwithstanding, Bank to strengthen immunization services It is re- Group interventions achieved their stated ob- ported that the nuinber of childreln under one ectives Under Rural Human Services Program year of age who had received the third dose of (RHSP) 1, 31 health centers were renovated and diphthena, perisis, and tetanus (DPT) increased 10 new ones were constructed The renovated by 43 59 percent-from 24,744 in 1981 to 35,531 and new health centers compnsed 22 percent of in 1985 During the same period, there was an the total national coverage of 187 health centers increase of 19 15 percent and 67 15 percent in in 1995 RHSP I also constructed and renovated the numbers vaccinated against tuberculosis and staff houses, waiting mothers' lodges, and food measles, respectively The percentage of children stores However, these health centers did not pro- immtunized rose from 31 percent for the third vide for staff accommodation, consequently, the dose of DPT in 1976 to 68 percent in 1985, mothers' lodges have been converted to staff nearly a twofold increase (figure 5 1) The re- accommodation ported increase in numbers immunized against RHSP II-IV has completed the construction, measles was more pronounced, rising from zero equipping, and furnishing of eight district hos- percent in 1976 to 67 percent in 1985 It was re- pitals in Leribe, Mohale's Hoek, Butha BLuthe, portecd that for 1984, approximately 91 percent Mafeteng, Quthing, Mokhotlong, Berea, and of the actual beneficiaries of the program had Qacha's Neck This comprises 90 percent of been reachedl through fixed and outreach im- government-owned district hospitals in Lesotho, munizauon services provided by Bank Group as- but excludes hospitals owned by nongovern- sistance, and coverage extended to all parts of mental partners in the health system, particularly the county However, mountainous areas remain those managed by CHAL, raising queshons of eq- underserved uity in access and quality of health care The ex- clusion of CHAL hospitals was premised on a Efficiency need to prionti2e investments in health and the Virtually all the projects experienced significant absence of guarantees for loans disbursed to sup- slippage in tune to completion, but there were port assistance to CHAL hospitals An analysis no cost overrtins In health prolects where cost of trends on hospital utilization suggests a higher data were available, there was a mean cost un- mean number of annual consultations, refer- derrun of UA 0 33 million The number of doc- rals, and reattendance in districts where the tors per capita increased from I i 13,905 in 1992 Bank Group has provided support for facility ren- to 1 in 16,548 in 1998, and the number of den- ovation and strengthening tists per capita increased from 1 in 104,712 in Bank Group-assisted projects have con- 1992 to I in 113,998 in 1998 The cofresponding tnbuted significandy to the number of health cen- figures for nurses were 1 in 2,761 in 1992 to I ters and the rehabilitation of district hospitals in in 2,340 in 1998 The number of consultations Lesotho A total of eight district hospitals were increased from 29,269 in 1991 to 40,842 in 1998 renovated, equipped, and furnished Thirty-one There was no discernable trend in referrals dur- 43 Lesotho Development in a Challenging Environment F Trends in Expanded Program on Figure 5. 1 Immunization Vaccine Coverage 100z 1___ __i i- 90 80 __________i____ 70- 60 - 50- 40- 30- 20- 10 1992 1993 1994 1995 1996 1998 Year , BCG F] DPT * OPV * Measles * Full So Afacan Developmant lak data ing this period, as they fluctuated between 247 RSHI' 1, hence mothers' lodges have been con- in 1994 and 460 in 1960 Reattendance increased verted to staff accommodation from 3,388 in 1992 to 5,860 in 1998 These ag- Capacity building was a major objecLtve under gregate results notwithstanding, there is evi- RHSI' I-IV AcLordingly, field officers were dence that the mountainous areas remain trained to implement EPI (Expanded Plrogram on uinderserved The health sector of Lesotho, like Immtinization) at the local level, but were later the rest of the economy, is suffenng the para- deployed to district hospitals This created a doxically adverse effects of the collapse of vacuum in the implementation of EEll at the apartheid Following the collapse, labor has community level Doctors, dentists, nurses, and been migrating to South Afnca in response to bet- nurse clinicians were also identified for in- ter remuneration and better living conditions country, regional, and overseas training How- Thus the health sector is currently facing severe ever, tramining and capacity building components problems of brain drain from Lesotho to South of all prolects were underutilized, and of those Africa This has significantly reduced the avail- trained, it is estimated that only about 25 per- ability of all cadres of skilled human resources cent are retained Besides the low numbers of lor the sector suitably trained staff to manage these facilities, There is evidence of poor utilization of in- the staff deployment policy of the government stalled facilities The district hospitals are being has limited the numbers of staff posted to these consulted for primary-level care This repre- centers In addition, staff are not kept at one lo- sents a misuse of clinics, the district-level facil- cation long enough to involve local communi- ities that were designed for stich care and as the ties in the management of the facilities It is Rirst step in the medical care continuum There also observed that staff are often not trained in was no provision for staff accommodation under the use of the sophisticated equipment pro- 44 African Development Bank Group Assistance to Lesotho vided Lack of trnitng is exacerbated by the high strengthening for scrvice delivery and health post-training attrition of health workers from management public sector service to Lesotho Health centers were not clearly deltneated by health service or Sustainability of Achievements district area, and local responsibility for their While per capita government expenditure In management remains unclear There Is also an Lesotho has tncreased from 507 maloti in 1992 emergtng threat to security In the urban clinics to 1,203 maloti in 1998, there is a decrease in per- in the absence of staff to manage the clinics, local centage of total expenditure in health from 38 0 bandits raid them for equipment percent in 1992/93 to 25 6 percent in 1998/99 This reprcsrnts a decline of 32 6 percent in Institutional Development health in relation to total expenditure Capital ex- Bank Group assistance has aided the establish- penditure as a percentage of total expenditure ment of an effective Project Implementation on the social sector dIropped sharply, from 48 1 Unit (IU) in the Ministry of Health and Social percent in 1992/93 to 12 5 percent in 1998/99, a Welfare (MOHSW) The capacity of the MOHSW decline of 74 0 percent Cufrent expenditure in- to implement and manage civil works and pro- creased from 9 2 percent of total current ex- curement has been significandy enhanced by the penditure of the government in 1989/90 to 9 7 intervention The PIU has also been strengthened to 12 6 percent in 1994/95 It then declined grad- to manage Bank Group procurement, disburse- ually to 9 5 percent of total current expenditure ments, and reporting procedures It is important of government in 1997/98 (Annex D, table D 5) to mainstream this PIU into broad activities in Over the years, government budgetary coin- the MOHSW for wider institutional develop- mitment to health, relative to other sectors, has ment impact dropped significantly, with a greater drop in Institutional and operational linkages be- capital investments This decrease in capital in- tween the health centers project and the four vestments raises doubts about the ability of the RHSI' projects are not clearly articulated Health government to maintain investments in infra- centers established to provide services at the local structuLre and equipment in the health sector The level are poorly linked to the district hospitals drop in current expenditure also highlights the This linkage is required for the development of government's inability to sustain maintentance an efficient referral system and for sustained and operations in health in the absence of con- capacity/technical resource building for health tinued donor investment and improvements in systems development based on the primary distributive allocations health care (PHC) approach Poor linkages have The government has traditionally charged limited project contribution to the establishment user fees for the uise of health facilities These of a decentrali7ed system for health care deitv- fees have increased from 2 0 maloti in 1970 to ery in Lesotho a current high of 5 0 maloti for up to one week The MOHSW was unable to identify candi- of outpatient consultation A similar increase is dates for training, and the few that were trained reported in the cost of inpatient charges in the were lost to more attractive positions in South period being evaluated The increase in iser Africa The absence of a health management in- charges from 2 maloti to 5 maloti may actually formation system, which would include an in- be couinterproductive to Lesotho's major policy ventory of human resources, limits the ability of objective of increasing access to health services, the health system to quantify attrition How- especially for deprived rniral and other vulner- ever, officials of the MOHSW estimate that at- able groups The effect of the increase is to ex- trition may be as high as 75 percent of trained clude those who cannot afford to pay, to lure health workers This level of loss of trained staff needy users to cheaper, substandard, and un- has limited the impact of Bank Grouip assis- reliable sources of health care The objective of tance on human resource development and the increase is to enable the government to availability, and consequently on institutional meet recuirrent costs, but the 5-maloti charge is 45 Lesotho Development in a Challenging Environment not even enough to meet operations and main- and engineering, but limited exposure to health tenance costs This cost recovery strategy is management and systems design The overall ef- therefore doomed to fail because it deprives fect has been that prolects have been imple- the needy of basic health services, and in the mented as mainly engineering concerns, with mediLum and long term, it may translate into minimal attention paid to health systems devel- lower productivity rates The current strategy may opment, management, and planning Infra- be much more expensive than maintaining the structture and equipment were of acceptable former user charge of 2 maloti and adopting an standards and quality alternative strategy of collaboratmg with the pn- Poor provider attitude and staff motivation are vate sector However, the alternative stmtegy of real threats to sustainable health care delivery in tapping Lesotho's potential capacity for private the constructed facilities It was observed dur- health care provision could lure away benefici- ing the visit to the Berea distnct hospital that con- aries (who can afford to pay) from public health sumer attempts to access health care services services to private facilities were attended by long waits, often withouLt in- The previous gains in EPI vaccine coverage formation on procedures or any reason for the are also rapidly declining, as the personnel wait This becomes more alarming given the trmined to manage and implement EPI at the presence of adequate supplies, equipment, and community and health-center levels have been facilities for effective and efficient patient care deployed to manage district hospitals Current Consequently, it is reported that end-users in- figures from the Lesotho population data sheets creasingly patronize traditional and unorthodox report full immunization coverage of 67 percent health care providers for more expeditious and in 1996 This represents a decline of 26 percent user-fnendly services, or resor to the use of local from the level reported in 1985 Reported cov- herbal remedies erage for bacilluts of calmette and guerin (BCG), The sustainability of the PHC approach to a tuberculosis inoculation, in 1998 was 57 0 per- health systems development depends largely cent This is very disturbing an the face of a resur- on community initiatives and partnerships at all gent epidemic of tuberculosis infection, a new stages, from design to evaluation There has consequence of the HIV/AIDS epidemic and been insignificant community participation in the rising levels of poverty design of infrastructuLre and the location of fa- Institutional capacity for the maintenance of cilities The management of the facilites provided these structures is also largely unavailable in by Bank Group investments rests solely with the these rual settings, and is becoming even scarcer public sector This remains a major obstacle to with dwindling donor support for the soci,il sustainability of the public sector projects in sector in Lesotho The MOHSW was unable to health provide a human resource development plan, or accurate numbers of trained personnel lost on Performance of the Borrower account of deployment from the primary facil- The borrower is the government of Lesotho, ity of identification or to migration outside while the Ministry of Health and Social Welfare Lesotho It is estimated that about 75 percent of (MOHSW) is the executing agency of all proj- the trained staff have been lost The availability ects in the health sector The initial design of the of a huLman resource development plan for the HSDP (Health Services Development Prolect) MOHSW could not be ascertained at the time of was ambitious, as it did not recognize the in- this evaluation ability of both institutional and manpower ca- The PIU established to manage RHSP prolects pacity to manage and implement the project is centrally located, with offices and staff only Consequently the HSDP had to be redesigned in Maseru This has limited the ability of district- to exclude the construction of a maternity wing level staff to contribute to project design and im- for the Queen Elizabeth 11 (QE 11) hospital in plementation The PIU is also largely staffed by Maseru and construction works in the nurse military officers with qualifications in clvil works hostel and school of nursing The implementa- 46 African Development Bank Group Assistance to Lesotho tion of HSDP was plagued by prolonged delays, Performance of the Bank Group with an overall implementation delay of about Bank Group performance was generally unsat- 45 months The borrower was also unable to ful- isfactory Clear targets and strategies were not fill loan conditions, and in some cases had to defined in log matrices of appraisal reports make significant changes to project design after Log-frame matrices, which came into existence its approval, stich as the exclusion of civil works in 1996, were prepared for the more recent in QE 11 and the nurse's hostel Design issues projects, RHSP 111-IV, but there were significant were eventually resolved by reduiction in the divergences between activities in the log frame scope and magnitude of proposed activities and planned outptit As d result, appraisal reports The implementation of all training and ca- did not clearly define measurable indicators of pacity building components of the projects was impact and success, or set time-bound targets or uinsatisfactory Approved budgets were not dis- country-sensitive strategies to foster local own- bursed for this category of assistance, as the gov- ership or community participation, which is the ernment was unable to identify suitable bedrock of the l'HC approach It is thus difficult candidates for training in the indicated cadres to assess progress toward attainment of goals This failure to utilize approved amouints for ca- stated in the Bank Group's sector strategy pa- pacity building has recuirred in all projects in pers or the efficacy of its intervention in health health The health deployment policy of the Although the sector strategy papers indicated government has meant that the manpower health improvement as the overall goal of Bank trained for the established centers have not been Group intervention, projects in health were im- retained in the centers This has had a negative plemented as mere engineering or finance proj- impact on service quality and the effective uti- ects Little or no attention was paid to the local lization of equipment and infrastructure participationi required by the PHC approach or The institutional capacity to identify, manage, to the development of indicators or strategies to and implement projects is weak, as evidenced measLire overall impact on health status Ap- by the low availability of skilled human re- praisal reports focused on the design of struc- sources This situation is made more difficult by ttiral components of the intervention and the the absence of information for health manage- imount of equipment to be procured In their ment The only information system available is self-evaluation, project completion reports also a disease reporting and notification system, focused on achievements in these areas All which is itself incomplete and inaccuirate The docuIments paid very limited attention to health absence of a robtist health management infor- status, equity, improved access, and community mation system has been a major constraint in as- participation, all of which Ire components of the sessment of project contribution to the overall sector goals of improvement in health sector goals of improving tdie health status and Several assumptions were made in the pro- quality of life of the Basotio jection of the potential contribution of these There was significant slippage in completion projects to the overall sector goals of improving of all projects in the health subsector, with a the statuis of target populations and promoting mean slippage of 28 months However, techni- equity in access One presumption was that an cal assistance and supervisory missions from increase in ntimbers of facilities alone would be the Bank Grotip significantly improved institu- sufficient to increase access of rural popula- tional capacity to comply with Bank Group re- tions to health care services Consequently, prol- poroing and procurement procedtires Current ect designs did not give adequate consideration projects Ire thcis implemented with minimal de- to the epidemiological pattern of disease and lays All borrower reports (quanterly, financial, were not placed in the context of an overall and project completion) have been submitted on health plan time and the government has honored all legal The Bank Group did not enstire the avail- covenants of the project and is not in arrears to ability of appropriately trained manpower as a the Bank Group component of project appraisals, more so when 47 Lesotho Development in a Challenging Environmnent there was a huge investment in infrastructure Efficacy This remains the major limiting factor in efficient As in the health sector, evaluation is limited by utilization of investments in health in Lesotho failure to define targets or select indicators for There exists a Lniquie partnership between thc evaluation and to obtain baseline information in government and CHAL in the management of the completed ECdLicaton Plroject I The evalua- health centers and distrlit hospitals, with CHAL tion of the efficacy of the strategy is also limited managing aboLit 40 percent of health facilities by lack of information While the borrower has and providing 50 percent of coverage in Lesotho prepared a PCR, the Bank Group is yet to finalize Intervention in RHSP I supported only eight its own I'CR In the case of Education 11, the only CHAL-operated clinics, and none of the CHAL available information is contained in the bor- FlSAs were incluided in all other RHSI' projects rower's progress report The achievements in this This unfortunate failure to harness the unique- report refer to Education l, for Education 11, the ness of private-piblic partnership for health, report assesses the progress of implementation and the comparative advantage of CHAL insti- The achievements are assessed for the period tutions in community engagetment and outreach 1992-98, for which some edtLcational indica- programs, has resulted in inequtities in delivery tors were available from the annual poptilation and access to qiality medical care Bank Group data sheets published by the Department of assistance has strengthened only the public sec- IPlanning and Economic Development During tor hospitals, with an almost total neglect of this period, there was a 13 97 percent increase CHAL hospitals and centers that provide 50 per- in the number of secondary schools (179 to cent of the coverige for health care delivery, par- 204) and a 5 09 percent increase in the number ticularly to the rutral poor There was no of primary schools Primary School stuident en- constimer consultation in the location and de- rollment also increased from 51,908 in 1992 to sign of district hospitals ancI health centers Thuts 71,475 in 1998-37 7 percent Enrollment in sec- improvement in infrastructure, equilpment, and ondary schools increased from 55,342 in 1993 facilities was not accompanied by a sense of local to 71,475 in 1996 There were also improvements ownership of the facilities The exclision of in teacher to stcident latios in both secondary and CHAL hospitals from project assistance also primary schools mcant that there remained inequities in the dis- The 1998 Impact assessment report of the tribution of facilities and services, and thus in ac- MOE evaluated the educational system between cess to quLality health care 1990 and 1996 The report observed that the ntimber of stuidents passing junior certificate Education Subsector examinations increased froin 59 2 percent in 1Bank Group intervention in the education sec- 1990 to 71 9 percent in 1996 There was also an tor in Lesotho commenced in 1990 At the time increase in the ntitmbers who passed the com- of evaluation, two projects had been supported, pater science (COSC) examinattions, from 27 8 with a total investment of UA 14 72 million percent in 1990 to 34 2 percent in 1996 Gender (Annex E, table E 8) The Education Ilroject I fo- participation in education is tiniquLe The statis- ctised principally on secondary eduIcation and tics reveal positive female participation in edu- was national in scope, while the EduIcation lPrcj- cation, with 54 percent female enrollment There ect 11 provides support for both secondary and is a real threat that with this trend, males may primary eduIcation in the three districts of Thaba- be marginalized in educational achievement in Tseka, Qacha Nek, and QUthing 13oth projects the long term The observation that males of pn- were designed and approved in the period cov- mary school age Ire often herding cattle and ered by the ESSP of 1986, with the goal of tm- those of secondary school and higher ages have proving education in science ind technical emigrated to Sotith Africa for less professional subjects and strengthening capacity of the Cen- but higher-paying occtipations in the mines nay tral Inspectorate for monitoring, supervision, be indicative of thlis potential for males to be and cLirrictiltim development marginalized 48 African Development Bank Group Assistance to Lesotho Bank Group intervention in education has Efficiency provided 18 science units, each composed of a There is insLlfficient data to estimate cost effi- laboratory, preparation room, and classroom It ciency in projects in education, as project com- has also sipponed the construction of 18 prac- pletion reporns are yet to be prepared There was tical subjects units, each of which comprise a a htuge slippage in botil loan effectiveness and storeroom, workshop, and drawing room This completion in Education I The estimated slip- represents a contribution of 64 29 percent and page in conmpletion date is 96 months It is not 100 percent respectively of the total national in- possible to assess cost efficiency, as no PCR crease in the number of science laboratories was available at the time of this evaluation and practical subjects workshops between 1990 There has been a decrease in the proportion and 1998 A total of 31 schools have been ben- of unqualified teachers Thils has been achlieved eficiaries of this intervention All constructed through in-country and overseas training Both buildings have been furnished, equipped, and long and short-term courses have been offered are cuLrrently fully functional In addition, sets of and the attrLtion rate has dropped A teaching reference library books for science laboratories session was in progress in one the project schools and practical workshops have been purchased visited and a high level of teacher and student and supplied to all sites Thirty-six staff houses motivation wvas observed have been constructed and furnished It should be noted that Education 11 became The percentage of qualified teachers has also effective in December 1999, about five months increased from a level of 72 5 percent in 1990 to before the evaluation The progress report sub- 81 6 percent in 1996 Correspondingly, the num- mutted by thie borrower reflects principally ber of expatriate teachers dropped from 21 9 preparatory activities, as intervention is yet to percent to 17 0 percent, and the percentage of commence expatriate science teachers from 41 8 percent to 25 4 percent during the same period Institutional Development The Central Inspectorate for EduLcation and the There lias been a significant improvement in in- National Curriculum Development Council frastrticrure in all intervention schools with the (NCDC) have been strengthened for supervision construction of science and practical subhect by the purchase of project vehicles and spare workshops AlthouLgh not all schools had the parts In-country and overseas training have been benefit of having both a science laboratory and completely utilized and have covered ccirriculum a practical subject workshop, the distribution of development and school inspection The qual- the 31 beneficiary secondary schools was na- tty and quantity of teachers in the science sub- tional It is also noted that the numbers of both jects have also been significantly improved by secondary and primary schools have increased, various in-country courses and short-term train- with consequient increase in access to education tog courses in overseas institutions as evidenced by enrollment ratios (table 1 2 and The capacity building component of the proj- Annex D, tables D 1, D 2) ect was completely utilized and a zero percent The Central Inspectorate has also been attrition rate reponed for both in-country and strengthened for supervisory functions by both overseas training Projects have effectively tote- training and support of the purchase of a vehi- grated quantitative and qualitative development cle to improve support logistics This has made to education, but are limited by the unavailabil- a meaningful contribution to an increase in the ity of indlcators and a management information number of supervisory visits to schools Staff system This information and technology is quality has improved and the instiutonal capacity needed to monitor progress toward the achieve- for cturricultum development strengthened ment of the overall sector goal of improved qual- In-country and overseas training have re- try and access to 1both formal and nonformal sulted in an increase in the number of qualified education, and the provision of hciman resources teachers Attrition is low, and has decreased required for national development from 13 0 percent in 1990 to 8 8 percent in 1996 4 9 Lesotho Development in a Challenging Environment Sustainability of Achievements to form a more coherent pohcy and management The percentage of government recurrent expen- structure for the schools that allowed participa- diture in education in relation to total expendi- tion by parents and the local community This ture rose from 18 1 percent in 1989-90, to 22 1 has fostered a sense of local ownership of the percent in the 1992-93, to 45 1 percent in educational system, a factor that is imponant to 1995-96 Thereafter, it declined progressively its sustainability This'is also relevant to the to a level of 27 9 percent in 1998-99 (Annex D, Bank Group's policy and support for the adop- table I) 6) The percentage of government cap- tion of participatory approaches to education de- ital expenditure in education in relation to total velopment that involve beneficiary groups and expenditure also declined from 16 1 percent in stakelholders not merely in project implementa- 1992-93 to 12 5 percent in 1995-96, and to an tion, but also in the design and choice of inter- all-time low of 9 9 percent in 1997-98 ventions in the sector Between 1992 and 1996, government ex- penditure for each primary school pupil in- Performance of the Borrower creased from 86 to 385 maloti, an increase of 37 Implementation delays were common occur- percent in real terms, and for secondary edu- rences among projects in the Bank Group port- cation from 432 to 1,331 maloti, an increase of folio in Lesotho In the case of the Education I 188 percent Furthermore, the impact assess- Project, there was a completion delay of 96 ment report of 1998 observed that the total cost months This was pnncipally due to a delay in of education, inclusive of indirect costs such as compliance with the legal covenants and con- travel, uniforms, and school meals, has increased ditions of the project At the time of the evalua- sharply, an increase that is observed to be be- tion, all project actvities had been completed, but yond the sustainable capacity of many Basotho a PCR has yet to be wntten This delay is prin- families cipally due to the failure of the executing agency Spending on secondary education as a per- to familiarize its managers with Bank Group fi- centage of total expenditure of the Ministry of nancial management, reporting, and procure- Education declined from 31 percent in 1990 to ment procedures It also took over three years 26 percent in 1996 Spending on technical aiid to establish ani effecLive PIU and to identify a proj- vocational education, however, increased from ect manager to oversee implementation These 2 7 to 5 6 percent, and for university education lapses, however, have been addressed, and it is from 19 to 27 percent over the same period In anticipated that the implementation of Education spite of these achievements, in 1998 there still II will proceed with minimal delays It should be existed the problem of a high pupil-to-teacher noted that there have been significant improve- ratio of 59 1 and inadequate teaching materials ments in preparation for this second project and In addition, of the school-aged population, only there is increased confidence m borrower capacity 57,000 (21 5 percent) were enrolled in school at to manage and implement it The borrower ex- the end of 1998 The introduction of free primary perienced difficulties in compliance with the education in January 2000 has worsened the al- legal covenants of the project, another factor re- ready high pupll-to-teacher ratio, necessitating sponsible for the prolonged period between the the recruitnment of unqualified teachers to meet date of approval and the effective date of the loan the demand for primary education These limitations have been rectified in the on- Traditionally, missionaries and the churches going Education 11 Project However, based on have managed schools in Lesotho, while gov- the difficulties described above, borrower per- ernment participation has provided grants to formance should be judged as unsatisfactory support the payment of teachers' salaries and the purchase of teaching aids The government's Performance of the Bank Group 1992 Education Sector Development Policy was Although projects were identified in the context developed in response to the complexity of of the country's development priontes and Bank managing the educational system, and anempted Group sector strategy in education, there was in- 50 African Development Bank Group Assistance to Lesotho adequate assessment of the capacity of the gov- better The national adult illiteracy rate is 29 ernment and its executing agency in the edu- percent but it is 7 5 percent for femrales and 28 5 cation sector-the Ministry of Education-to percent for males implement and manage the Education I project Environmental IssUes were similarly not taken at the time of its identification and appraisal Con- into account in Bank Group lending to Lesotho sequently, there was a prolonged slippage of 96 This evaluation found that design shortcomings months in completion of the project, and even resulted in senous environmental hazards on the at the time of the evaluation, no PCR was avail- Khamane-Oxbow road There was also no pro- able for review There was inadequate supervi- vision for winter maintenance on some roads sion during the first few years of implementation On other roads, serious environmental hazards of the Education I Project This is partly re- were created by inappropriate design of cut sponsible for the slippage in effective and com- slopes The estabhlishment of the Ministry of pletion dates of the project Youth and Environment is indicative of the will- The Education I Project was designed during ingness of the government to correct current en- the ESSP of 1986 and the appraisal did not vironmental problems and safeguiard against clearly specify indicators of outcome and impact future problems in all its development projects assessment, thus making it difficult to quantify Recent interventions, however, indicate that the the contribution of the project to improving ed- Bank Group is now more seriotis about envi- ucational quality This limitation has been ad- ronmental issues For example, the recently ap- dressed in the design of the Education 11 Project, proved Lesotho Highlands Natuiral Resources which has approximately developed log frames and Income Enhancement Project has some 40 On balance, it can be said that Bank Group percent of its budget allocated to naniral resource performance was barely satisfactory management and conservation of the highlands of Lesotho Crosscuning Issues Until recently, the crosscutting issues of envi- The Counterfactual ronment and gender did not figuire prominently The economy of Lesotho grew at annual aver- in Bank Group lending and policy Hence, the agc rate of 1 3 percent during the past decade older projects in its portfolio, including all those The growth rmte has fluctuated sharply, and even m Lesotho, did not show explicit concem for these declined in the late 1990s The bulk of Bank issues One of the findings of the present evalu- Group lending has not been allocated to directly ation is that Lesotho scores low on both issues productive activities, but rather to social (over- As pointed out earlier, the poverty situation head) capital To the extent that this has facili- in Lesotho has a gender bhas more women are tated growth, the Bank Group contribution can poor than men Although the Land Acts of 1979 be said to be indirect But could the recorded and 1992 tried to accord eqtial tenure security achievements have taken place in the absence to both sexes, it is still true that women have jim- of Bank Group intervention? The answer is prob- ited access to economic resources suich as credit ably no The Bank Group obviously filled a re- The government is aware of this bias against source gap in Lesotho While it cannot be credited women and has taken steps to address the sit- with the entire ouitcome, it can lay claim to what- uation It has set up a Ministry of Youth and En- ever has happened in Lesotho-success or fail- vironment to develop programs and projects ure The responsibility for economic otitcomes for ameliorating the gender bias In the area of in Lesotho is therefore to be shared by all donors education, however, women appear to be doing and the government of Lesotho 0 1 Overall Assessment of African Development Bank Group Assistance T he Bank Group has intervened on a systematic basis in Lesotho since 1974. Its net commitment currently stands at UA 223.85 million. In T terms of sectoral distribution, the public utility and transport sectors are the main beneficiaries, with 28 percent and 26 percent of the portfolio respectively They are followed by the social sector (24 percent), agricul- ture (13 percent), and industry (9 percent) The bulk of interventions were not in drectly productive activies, bLut rather in opment of infrastructure, mostly road networks social capital-transport, ptblic utilities, health, With the collapse of apanheid, Bank Group and education The interventions may not have strategy appeared to have shifted emphasis to led to direct impact on GDP growth rates, buLt the promotion of growth and poverty reduction insofar as they eased constraints in the affected The Bank Group had no strategy for its lim- sectors, they must have facilitated economic ited interventions in nonlending activities There growth was also no prior economic and sector work to Although not explicitly stated, Bank Group in- facilitate lending activities While the more re- tervention in Lesotho appears to have been in- cent CSI's have been used as instruments of formed by the country's history and geography policy dialoguLe (for example, in the context of Geographically, Lesotho is a small, landlocked, the AgricuLltture Sector Reform Program and the mountainous country that is completely sur- Public Utilities Sector Reform Program), this rounded by South Africa As a result, Lesotho suf- cannot be said of the earlier EPCPs Indeed fered from apaiheld-indtced sanctions on South there was practically no policy dialogue prior to Africa Thus, government policy was aimed at 1996 There was, in addition, nothing coherent reducing the country's vulnerability to devel- about the limited institutional support programs opments in South Africa, including its depend- and technical assistance programs that the Bank ence on the country's road network Bank GrouLp GrouLp provided to Lesotho The programs were strategy, as spelled out in the 1988 EPCP, coin- also not geared to be supportive of Bank Group cided with that of the government In that EPCP, lending activities the Bank Group decided to puLrsue a strategy of Sectorally, Bank Group lending to the trans- assistance that placed emphasis on the devel- port sector coincided with government devel- 53 Lesotho Development in a Challenging Environment opment imperatives of the time The 1988 EPCP Although the prolects have increased equip- merely mentioned the inaccessibility of most of ment and the number of faclitles, they have con- the eastern highlands as the prime motivation tributed only marginally to the overall sector for Bank Group intervention in the transport sec- goals of improving the health status of the pop- tor There was no explicit reference to the trans- ulation of Lesotho Good buildings do not make port constraints posed by location of Lesotho for better health While the availability of the in- inside South Africa In spite of this shortcoming, frastricture promoted consumer confidence, poor the strategy achieved its objective In the road service and provider attitude soon eroded it The sector, it achieved the oblective of linking the projects were also presumptuous of institutional major urban centers with the rural areas It also and human resource capacity for health systems achieved the objective of reducing the country's management and development The civil works dependence on South Africa's road network focus of the projects also meant that little atten- Bank Group intervention has also strengthened tion was paid to the development of a decen- the capacity of the various government depart- tralized information management system or to ments connected with the sector Similarly, tm- building institutional resources for health sys- plementation agencies have been strengthened tems monitonng, evaluation, and planning through tramning The Department of Rural Roads Bank Group assistance in education has sig- has a direct labor force unit that is equipped and nificantly contnbuted to increased infrastructure trained for labor-intensive rehabilitation and the for education and improvement in the quality of construction of new unsealed roads education in science and practical subjects The The transport sector projects also contributed Bank Group has also supported increases in the to the development of the private sector by pro- number of qualified teachers and in strengthen- viding jobs to the national road construction in- ing uistitutional capacity to manage education and dustry, which now compnses more than 50 active curriculum development Trained capacity has contractors Their labor-intensive operations have been retained and the numbers of Basotho chil- resulted in significant employment generation dren enrollrng in and completing education have They also carried out about 181 routine mainte- increased The focus of the interventions has nance and upgrading contracts for the Labor covered infrastructure and operations, with a Construction Unit (LCU), between 1997 and significant amount of investment in human re- 2000-an average of 60 contracts per year The sources and institutional strengthening How- LCU has also embarked on an extensive program ever, appraisal documents have not documented of training for labor-based contractors on un- the intended useful life of physical structures sealed road maintenance Similarly, the Roads and vehicles provided for logistical support Branch has promoted the tramnig of truck haulage They have also not included strategies for sus- subcontractors in mechanical road construction tamable maintenance of increases in current ex- Bank Group assistance in the social sector penditure, particularly teachers' emoluments, came early in the history of the Bank Group- infrastructure, or private sector participation in Lesotho relationship There was no Lesotho- eduIcation In addition, there is no strategy for the specific strategy in the sector other than the development of a management information sys- broad Bank Group sector policies approved in tem to monitor and evaluate the effect of varn- 1986 for health and education Bank Group in- ous interventions on teacher quality, access to terventions in the two sectors, which were education, and quality of education guided by the sector policies, were relevant to In conclusion, it can be said that Bank Group the situation prevailing in Lesotho at the time assistance to Lesotho has certainly filled a re- Bank Group assistance in the health sector has souirce gap in the country But the delivery of contributed to an increase in the number of that assistance was not carried out in the con- health facilities and has led to construction of 10 text of a clearly defined strategy Perhaps this is health centers, the renovation of 31 more, and understandable, given that the use of a prede- the upgrading of 8 district hospitals fined strategy to guide aid allocation is a recent 54 Overall Assessment of African Development Bank Group Assistance phenomenon in the Bank Group Nevertheless, fective aid is not just about the provision of fi- Bank Group assistance to the country can be nance it should also include the provision of ludged as barely satisfactory Lending assistance ideas The Bank Group has provided finance performed relatively better than nonlending as- through its vanous interventions, but at has failed sistance Bank Group assistance in the latter to provide ideas that can continue to generate area is indeed poor As is very well known, ef- and sustain economic growth 55 Attribution of Performance of Development Partners T his chapter examines the contribution the World Bank and its de- velopment partners to Bank assistance programs, as well as the im- T pact of exogenous factors Such attribution is obviously difficult to measure, because it requires disentangling the World Bank's contribution from that of the government and the Bank's aild partners World Bank Performance tion was based on relevant and timely analytic During the 1990s the reforms of the Lesotho work and was consistent with government and economy supported by the World Bank and the CAS objectives The moderately satisfactory IMF achieved growth of nearly 4 percent a year 1991-99 Edtucation Sector Development Project The Bank also provided strong leadership for the (ESPD) led to a strong relationship with the review of implementation of Phase IA of the client, allowing for effective problem-solving LHWP and managed the appraisal of Phase IB despite considerable political turmoil These reviews were competently camrred out and The World 13ank was associated with some won praise from the govermnent and all parmners project failures in agriculture, roads, health, and in the project The opinion is that Phases 1A and the private sector because it had not adequLately IB of the LHWP would never have come to investigated the sectoral issues and the govern- fruition without Bank leadership and guidance inent's weak ownership of prolects and pro- duLring difficult negotiations among financiers grams Agriculture projects were unduly and the government over 13 years However, complex, which meant that start-up was slow Bank support did not strengthen the govern- in addition, the Bank did not apply a lesson from ment's ability to utilize the royalties for supply the past many conditions of project effective- of water through the LHWP to stimulate rural de- ness are sure to cause difficulties if not dealt with velopment It was not until the 1998 appraisal of at or before negotiations As a result, quality at Phase IB of the project, when the failures in rural entry for agricultuLral projects was poor Conse- development became a prominent issue, that qtiently, supervision became difficult and there action was taken in this direction were long delays in achieving effectiveness ' in Another successful series of activities was in the road setaor the situation was more serious education The World Bank's support in eduLca- Failed institutional development resulted in an 57 Lesotho Development in a Challenging Environment unsatisfactory implementation of the ongoing of GDP dunng most of the 1990s speak for them- road project selves, but reductions to mine workers' jobs in The World Bank failed to do any formal South Afnca since the early 1990s led to a low analysis of health and nutrition issues, leaving growth in GNP, except for the peak in 1997, it unprepared to support two complex HNP which was again clue to LHWP constructon projects from 1990 to 1994 The Bank also se- There was, however, hmited enthusiasm on the verely underestimated the institutional capacity part of the borrower for the World Bank's proj- needed for satisfactory implementation of these ects for agriculture and nrral development It is projeLts This oversight was compotunded by difficuLlt to assess the reasons for the government's lengthy gaps in formal supervision, as well as views, but there were, for example, bitter dif- slow Bank action to resolve implementation ferences on the need for parastatal reform m agri- problems culture, on the justification for changes in In pnvate sector development, the Bank did agncultural pnce policy, on the urgency to amend not exercise sufficient prudence in the design of laws on land tenure, and on regulations for graz- projects The projects were complex-involving ing rights Some of these differences have been mtiltiple objectives and implementing agencies resolved, but many remain and ntLimerous conditions ofeffectiveness-and Implementation of the rural development experienced delays in effectiveness ranging from program in the LHWP was originally to be in- 9 to 19 months (Annex E, table E 4) Quality at tegrated into ongoing national programs and entry was therefore poor The Bank also did not managed by a combinatlon of government agen- take measures to improve the poor performance cies, NGOs, and local and regional contractors of the Agro-Indtistry Project line of credit, de- This approach was clearly an attempt to give all spite warning signals concerning financial per- institutions using public resources some access formance of the host institution, the Lesotho to the large increase in government revenues, Bank Similarly, although the performance of the but this disparate management was also the rea- project's equity fund was dependent upon on- son the program did not work Despite gov- going technical assistance, the Bank did not ernment commitments to efficiently manage the provide it Officials of the Chamber of Commerce Development Fund and the subsequent con- and Industry reported to the OED mission that version of the Fund into the Lesotho Highlands the equity fund did not help entrepreneurs be- Revenue Fund (LHRF), Fund management was cause they could not meet the conditions put in inadequate, with insufficient internal controls to place by the Lesotho National Development account for expenditures and weak technical ap- Corporation, the implementing agency Thus, a praisal and supervision of projects 2 In 1999 the large pan of the fund was undisbursed and re- LHRF was superceded by the Lesotho Fund for turned to the Bank Conceming the Privatization Community Development (LFCD), which will be and PSD Project, officials indicated to the mis- supported by the FY00 Community Development sion that the Bank's support was weak The of- Support Project It will still take some years for ficials suggest that Bank support available at the new LFCD to be activated in a substantial the beginning of the project in terms of work- way, since it was only recently that key staff for shops and seminars shouLld have continued dtir- this Fund were appointed in Lesotho ing the implementation to clarify the rationale The borrower provided considerable leader- for privatization ship in education, and used analytical work by the World Bank to develop a comprehensive ed- Borrower Performance ucation sector reform program Consultation The government was a construcuve partner in with stakeholders on education policy was sub- IMF and world Bank efforts to improve macro- stantial, while consultation with, and coordina- economic policy during the 1990s, although tion of, external partners has been reasonably much of the success was due to the impact of effective through the Directorate of Planning the LHWP construction The high growth rates under the umbrella of ESDP I and II Counter- 58 Attribution of Performance of Development Partners pan funding and program implementation were However, donors indicated that consultation frequently delayed, but ultimately satisfactory, was still inadequate, particularly with respect to while compliance with covenants was achieved the recently adopted 1999-1I education sector In the health sector the lack of capacity and program supported (in its first phase) by ESDP political will to generate basic clata systems con- It Donors providing parallel funding claimed that tnbuted to the lack of meaningful analytic work they were not invited to participate in such key and a sector strategy Thts led inevitably to the preparation events as log-frame sessions to iden- poor quality at entry of lending operations Ac- tify key project performance issues In the HNP countable departments took insufficient re- sector the ratio of other donors' support to IDA sponsibility for implementation, shifting the was lower than in education Aid coordination burden to a separate Project Management Unit in the design phase was satisfactory, resulting in The Ministry of Health also fell short in reach- complementary inputs in many areas (such as ing agreements with nongovernmental partners rural clinics, the National Health Training Col- essential to achieving sector and project goals lege, and the National Tuberculosis Program) Fmally, compliance with legal covenants, which But aid coordination was difficult in the imple- were admittedly excessive and imprecise, was mentation and evaluation phases (which tracked not achieved disbursements from other donors) because of The government's madequate analysis and the donors' diverse reporting standards ' Finally, absence of a strategy had a detrimental impact partners appreciated the World Bank consulta- on attempts to make progress on private sector tive process with donors while preparing the development As a result, except for financial and Health Sector Reform Program (2000-09) legal covenants, project preparation and imple- While donors collaborate in the major sectors, mentation of World Bank assistance projects there is almost no leadership 5 The Country As- faced many difficulties and the outcomes were sistance Evaluation (CAE) mission found strong disappointmg Nevertheless, over the last year support among donors for the World Bank to the government has recognized the importance provide such leadership Lesotho's limited ab- of makng progress in pnvate sector development sorptive capacity for external assistance also and has strengthened the management of this ef- means that it could benefit from harmonization fort in the context of the ongoing project Thlis of donor polices and procedures and from more appears to be bringing better results effective aid coordination At present the World Bank has only a liaison Aid Partner Performance Issues office in Maseru staffed by one support staff The The strength of partnership among donors vanes country director has been based in South Africa according to the sector It has been strong in since 2000 Thlis is not adequaite to provide the LHWP and education, moderately strong in Bank support and leadership expected by the health, and improving in rural development fol- client and donors A stronger operational rep- lowing the introduction of the FY98 Agricul- resentation in Maseru or more frequent interac- tural Policy Capacity Building Project, jointly tion with the government and development financed by a number of donors and now ef- partners from the World Bank's office in Preto- fectively coordinated by the Food and Agricul- ria is recommended Such representation could tural Organization of the United Nations (FAO) help develop a closer partnership with the gov- Although the Bank financed less than 4 percent ernment, enhance coordination with donors and of the estimated $3 7 billion cost of the first NGOs, and improve portfolio performance phase of the LHWP, it was a catalyst for aid and pnvate capital inflows Exogenous Factors Donors played an important role throughout The end of apartheid in South Africa presented the 1990s in shaping the eduLcation sector de- Lesotho with extraordinary opportunities for velopment program and in mobilizing coordi- greater economic integration and employment nated international and government support In the short run, however, it caused a sharp drop 59 Lesotho Development in a Challenging Environment in foreign investment in Lesotho, reduced re- environment 6 For instance, the trade prefer- mittance flows from South Afnca, created a bnin ences once afforded to small states were eroded drain of skilled professionals, shifted donor re- following the agreement on post-Lome arrange- sources toward South Africa, reduced fiscal rev- meoms recendy concluded between the Eutropean enues from SACU, and lowered regional growth Union (EU) and the 71 African, Caribbean, and opportumaties Another factor that has already had Pacific (ACP) countries The ACP countries will a considerable impact and promises to cause fur- have to gradually give up the principle of non- ther difficulties is the regional HIV/AIDS pan- reciprocal tiade preferences More important, the demic Already high adult prevalence rates in phasing out by 2004 of the Multifibre Arrange- Lesotho (currently one in four adults is infected) ment will remove incentives to invest in ACP will certainly rise because of increased interre- countnes Under the current agreement, Lesotho's gional movement of people in southern AfriLa textile exports to the United States and Canada The policy changes needed to adapt to both the are not subject to quiota restnctions As a result, opporttnities and the challenges presented by almost all of the growth in Lesotho's exports to the new South Africa have occurred slowly, and the United States-which increased by 73 per- are still incomplete cent between 1994 and 1998, though starting In addition to subregional developments, fronm a very small base-came from the textile Lesotho, one of the most vuilnerable small coun- sector, mainly garments Textiles constituted tries in the world because of its limited re- more than 80 percent of Lesotho's total mer- sources, is facing a changing global economic chandise exports in this period 60 Conclusions and Recommendations Poverty, Human Capital Development, HIV/AIDS, and Institutional Strengthening T hese are major challenges for Lesotho in the foreseeable future Half the population remains below the poverty line. The Gini coefficient T of 60 percent is one of the highest m the world Unemployment is about 40 percent Highland rangeland resources continue to deteriorate The adult HIV/AIDS prevalence rate is estimated at 24 percent. Poverty and in- equality have regional, occupational, gender, and income dimensions more than 80 percent of the poor live in rural areas, ulatory institutions for rangeland manage- particularly the mountainous regions, and are ment in Lesotho (including land tentire, re- concentrated among small farmers, shepherds, search, extension, rural finance, and grazing and women This evaltiation recommends that management) to foster the sustainable pro- donor assistance should focLIs on the following duction of livestock in the highlands and an goals enhanced enabling environment for private . Reduce poverty and mequiality in the medium sector development to longer term by focusing on the quality of education and human capital development at Monitoring and Evaluation all levels, particularly in the poor mountain- A cntical need across almost all sectors is to es- ous regions, to increase employment tablish better monitonng and evaluation systems prospects for Basothos within Lesotho and Thiis is a problem with roots in the lack of data South Africa collection and analysis The timeliness and reli- . increase the focus of donor assistance pro- ability of national accounts, fiscal, tracde, mone- grams on HIV/AIDS by featuring it promi- tary, and social data have been of paricular nently in donor assistance strategy, such as concern Without reliable data, neither the gov- in support to institutions capable of moni- ernment nor donors can monitor and assess de- toring and coping with HIV/AIDS velopment progress or identify more successful * Use World Bank involvement in the LHWI' strategies The evaluation recommends that and agricultural policy formtilation, along * Donors, including the World Bank and with the AfDB, to enhance the policy and reg- AfDB, should help Lesotho improve its sta- 6t Lesotho Development In a Challenging Environment tistical database, most urgently in areas re- * The World Bank should establish a stronger lated to poverty reduction (for example, operational representation m Maseru, or more houisehold suirveys and health and nutri- frequent interactton with the governinent and tion information systems) and promote mon- development partners from the Bank's office itoring and evaluatioti systemiis within key in Pretoria This would enhance coordination line ministries among donors and improve portfolio Monitoring and evaluation should be ac- performance companied by an economic and sector work program that includes poverty assessment Political Stability updates and public expenditure reviews External assistance to Lesotho has been deliv- ered in a setting of political Lincertainty witlh Donor Coordination limited government ownership, which has ham- There are considerable differences in views pered prolect implementation At the same among donors about development assistance time, donors, who differ in their readings of the to Lesotho that can usually be resolved through political environment, differ in their perspec- collaboration and leadership While there is tives on the risks associated with the imple- collaboration among donors, this evaluation mentation of their programs The evaluation found that the leadership vactuLIm is real, and suggests there would be strong sUpport for the World * The donor community should improve its Bank to provide that leadership The World understanding of the political economy of pol- Bank's consultation with donors on develop- icy change in Lesotho, and hence enhance its ment priorities was viewed as insufficient buit assessment of government ownership of as- improving, and hampered by lack of local sistance programs and the risks associated representation The evaluation recommends with those programs 62 ANNEXES ANNEX A COMMENTS FROM THE GOVERNMENT OF LESOTHO i .eply hc., q- C bl. .".. PiAN\OtI r l,. f. - T:',,olu ,,M X .... P O DON~~~~~~~~. )MS6I C Xi%~~~~INTRY OF DEVELOPMENT PL.A1%66I1. P0 BOX N1.6 630 MASIN. 100 LESOTHO 3rd July 2001 CPO/04/ 14 Mr Fareed Hassan The World Bank Group Washington, D C 20433 USA Dear Mr Hassan The Government of Lesotho was pleased to receive Country Assistance Evaluation reports following a Country Portfolio Performance Review mission of May 2000 The reports were circulated to all key sectors and comments were discussed with Mr. Fareed Hassan during his mission in June 2001. Please find attached the consolidation of Government of Lesotho comments I thank you for you usual cooperation. Yours sincerely L A Hlasoa Director - Department of Sectoral Program Lesotho Development In a Challengling Environment Comments to OEDIs Country Assistance all lack of data collection and analysis The last Evaluation of Lesotho (CAE) household survey was conducted in 1993 There The government of Lesotho agrees with the is a lack of health information system and sturvey analysis of the CAE and shares with OED the instruments necessary to monitor HIV/AIDS Agn- main conclusions of the report The officials cultural surveys are not carned out, and little is noted that the CAE rightly focused on areas most known about labor markets More seriouLsly, lit- critical for Lesotho's development poveny and tle is known about the economics and institutions ineqtiality, health (HIV/AIDS), education (declin- of the rural sector, where the matority of the ing net enrollments, improving outcome and population and of the poor people inhabit and efficiency of the educational system), monitor- make a living Recently, the World Bank has pro- tng and evaluation, and private sector develop- posed a Core Welfare Indicator Questionnaire ment The authorities found most of the (CWIQ) under the FYOO Commurty Development recommendations enligltening and of great guid- and Stipport Protect that should produce signif- ance in designing future strategies conducive to icant information on poverty and its determi- poverty reduction and social development nants The Bank is especially qualified to assist As it is correctly stated in the CAE doctLiment, the couLntry in developing a continuotLis system addressing poverty and inequality has become of household surveys and/or pubhlic expenditure one of the main priorities of the government of reviews, indispensable to monitor and evaluate Lesotho The I-PRSP of March 2001 was a part the impact of social programs and propose adjust- of a larger process of formulating a longer-term ment to them Given that Lesotho is a small coun- strategy for poverty reduction and social devel- try, a five-year interval rather than an annual opment (i e , Vision 2020) To address the prob- survey/update may be feasible lems of the nonperforming Lesotho liighlands Government officials agree with the CAE's Revenue Fund (created in 1992 to support tar- conclusion that combating HIV/AIDS should geted poverty reduction efforts), the Lesotho also enjoy high priority in the govemment plans Fund for Community Development (LFCD) was The CAE also concluded that the World Bank was establisled The Bank approved in FY00 a Com- ineffective in critical areas of health sector man- munity Development and Support Project to agement, including resource allocation and support reforms financed by the Fund However, developing bastc health information systems it will take some years for the new LFCD to be Only recently did the World Bank adopt a new activated in a substantial way since it was recently adaptable programme credit, supporting a sector- (between JLily and November 2000) that key wide approach for HNP in FY00, and the author- staff for this Fund were appointed itoes are pleased with the new approach We also agree with the CAE's conclusion that Educational objectives of World Bank's pro- monitoring and evaluation are weak in almost gramme were oriented toward expanding phys- all sectors, most significantly in areas related to ical access to, and quality of, formal education, poverty reduction The government of Lesotho rather than enhancing participation through is committed toward addressing this siortcom- non-format or more flexible forms of schooling tog The Ministry of Development Planning is and eliminating financial barners to participation estabhlisllng a Projects Monitoring and Evaltia- by the poor These omissions became obvious tion Unit and has already appointed staff The by the end of the 1990s, leading to a revision new Unit will work closely with planning tinits of World Bank objecLives to include a renewed in different sectors These efforts will require emphasis on affordable access and equity, non- technical assistance from international institu- formal education, and early childhood devel- tions The Ministry of Development Planning is opment to achieve universal primary education requesting technical assistance from OED to by 2011 (FY00 Eduication Sector Development train and strengthen the capacity of the staff Project 11) In January 2000, the government of The absence of an adequate monitoring sys- Lesotlio started to phase-in free primary educa- tem in Lesotho is a problem with roots to the over- tion, and the first two years of implementation 64 witnessed increAses in enrollments For the 3rd introduced a culttire of transparent and account- grade throuigh the 8th grade, the government is able management practices in state enterprises now providing a free meal supponed by the The erosion of public resources by way of sUb- World Food Ilrogri-amme sidies to inefficiently run loss-making state enter- Comments on specific projects (for example, pnses, such as Lesotho Airways Corporation, was Plrivatisation and Private Sector Development revealed for what It was for the first time, and Plroject and Health, lopuilation and Nutrition 11) action was taken accordingly The poor concition are provided below of the enteiprises concerned did not help in attracting strategic Investors in an already risky 1. Privatisation and Private Sector investment cnvironment The fact that there was Development Project sonme suLcCess in attracting investors even in dis- As far as thie government of Lesotlio is con- tressed enterprises sicli as Lesotho Airways Cor- cerned, indeed the pace of implementation has poration or Lesotho Bank has to be commended been slow, however, valuiable lessons have been learned in privatisation process Critical reasons Capacity Building for the project to have yielded less than expected it has already been noted th:at there was no oUtcomes are as follows local expertise and experience of privatisation The design of the project was externally dnven at the commencement of this ambitious project by World Bank consUltants There were no local The evaluators argue with some justification experts or expenence of pnvatisation progriamnmes that it mighlt have helped to have begun with a It shotild be bome in mind that the World Bank more modest pilot project Whilst the govern- consultants were severely handicapped by a gen- itlent of Lesotlho agrees with this observation, it eral lack of credible information about the enter- is worth noting that the Lesotho Ilnvatisation Pro- prises, which were to be at the core of the ject quickly built up a credible local capacity to privatisation portfolio programme At the incep- manage the project throtigh its intricacies, and tion of the project the external consuiltants, who this mLIst be recorded as one of the notable suc- were retained by the project, broLIglt consider- cesses of the project able experience of privatisation in other Africin countries such as Zambia and Ghana, bLIt clearly Political Sensitivity many of the assuimsptions which they brouight with The implementation of the Lesotho Privatisation them regarding stich critical issues as local cap- Project has heen remarkable for Its political sen- ital availability and entrepreneuirship had to be sitivity Privatisation and economic testructiring tested against the practical realities of Lesotho are politically sensitive The government of Lesotho wisely recognised that implementation of Conditions of Portfolio Enterprises the privatisation programmnle should test oLit the The first sample suirvey of 12 ponrolto enter- political implications of each move for It would prises, conducted by Deloitte ToLIche Tohniatsu not be pnicdent to rush headlong into controver- as early as 1995, revealed thiat the condition of sial transactions at the risk of political riots and the Lesotho SOEs [state-owned enterprisesl was other social uipheavals, as have been expert- muich worse than it had been generally antici- encecd in other African countries The evaluators pated, with more than half of the enterprises in of the project shotiul give dlue credit to the gov- a seriouIs loss-making situation The condition of erminent of Lesotho for steering these major eco- management records was appalling The lack of notnic translormations with suiccess, in spite of trarcsparency had assured that no one had the least the considerable political nsks that were involved idea of the homfic details that were to be revealed The insistence on Cabinet involvement in later when proper duLe diligence exercises were monitoring and approving transactions may not launched tinder the auspices of the Lesotho Ilri- be ais negative as perceived by outiside observers vatisation Project One of the notable successes one positive is that tie piecluded chances of cor- of the pilvatisation project in Lesotho is that it rLiption and over-hiasty decisions 65 Lesotho Development in a Challenging Environment Private Sector Participation 2. Health Realism and practical knowledge of Lesotho cir- cumstances woUld have indicated that there Health, Population, and Nutrition 11 were extremely limited chances that in the period The government of Lesotho accepts the overall between 1994 and 2000 any significant pur- evaluation of less than satisfactory performance chases of enterprises such as Lesotho Airways in this sector Corporation, Lesotho Flour Mdll, Lesotho Bank, Earlier projects in the health sector, including or Lesotho Telecommunications Corporation this one, were hampered by political instability could be by Basotho private sector interests of the time with attendant problems of high The prolect could do what it could to arouse con- tuirnover of managers in key project compo- sciouisness, to indicate possible opportunities, to nents This resulted in loss of direction and poor restrnicture the culture of regulations in prepa- efficiency raion for Basotho pnvate sector parmcipation that The preparatory work wis weak as it was pre- will surely come in time It is only now, after sat- scriptive and did not involve lower levels of the isfactory completion of the first phase of the eco- operations It was a top-down approach This nomic transformation, that we can see the made the problemil of lack of direction more stirrings of local private sector participation of pronouincecd any significance as former employees of priva- In project design, the HIV/AIDS burden and tised state-owned enterprises stiLh as Lesotho its impact was grossly underestimated, if not Telecommunication Corporation and new local ignored The relationship between HIV/AIDS investor grotips, such as Sekhametsi Investment and human development was overlooked Holdings who pLirchased the government share- holding in Vodacoin, make their first significant Human Capital Development moves All above adversely affected project sustain- ability Hence the facilities like Qoahng are not Time Factor fully utilised becaLuse of poor human resources It is merely stating the obvious to say that the preparation evaluation of the outcomes of the Lesotho Prn- vatisation Programme thUs far requires time for Current Project Health Sector Reform changes to take effect The newly privatised Leadership had been very much invisible companies stich as Lesotho Telecom require because of poor preparatory work The high some time to reposition themselves before yield- tLirnover in civil service leadership and prolect iog any tangible benefits management unit also have contributed to poor performance of the sector Lessons Learned A more pragmatic approach has been brotight It is quite possible that useful lessons can be into foctis The program is owned by the peo- derived from an oblective evaltiation of the ple and is accountable to them The Bank is now Lesotho Privatisation and Private Sector Devel- a partner-collaborating, not dictating A small opment Project using models of expected out- degree of flexibility in the conditionality has comes For practtioners on the ground there may been injected by free consultation with the Bank be even more Useful lessons if evaluations take and other partners into account the peculiar circcimstances in which Consensus bUilding-participation and privatisation and economic restrcicturing have people-led-was the crtical step out that shaped been initiated in Lesotho, in circuLmstances which the ctirrent program could hardly have been less favourable In the Consultancies aimed at capacity btildmng are final analysis, when an objective evaluation con- helping performance, supported by time-bound, cludes that the pace of implementation in joint annuial evaluation meeting of all stake- Lesotho has been slow, the answer is a resound- holders These measures are aimed at bnnging ing yes about project relevance and effectiveness 66 ANNEX B COUNTRY ASSISTANCE EVALUATION-COMMENTS BY THE COUNTRY TEAM FOR LESOTHO The Lesotho Country Team (CT) is pleased to are shared hy the CT, it has proven to be very note that there was substantial consultation by difficult to achleve these goals because of OED staff with members of the Lesotho Coun- Lesotho's acute management capaciry constramints try Team, Lesotho's development partners, and Lesotho's management capacity constraints are the client during the preparation of this CAE accentuated by the high level of out-immigration Given the wide range of themes and issues eval- of qualified personnel (usuLally to South Africa), uated, thie consultation process was deemed making it impossible to implement programs thorough and extensive, and the current CAE which at the time of project preparation are seems to capture the main issues on IDA assis- seemingly simple tance strategy for Lesotho in the 1990s The The CAE also does not stufficiently recognize report does a good job of highlighting the con- the constramints on resources faced by the CT In straints to development in Lesotho and ade' hindsight, IDA could have pald greater attention quately documents the nature of Bank assistance to being more selective (in view of limited over the decade The report also highlights the resources) and in taking on more of a leadership weaknesses in IDA assistance strategy, in par- role in Is coordination with Lesotho's develop- ticular by noting the tendency by the CT to ment partners But that has not been possible sometimes be over-ambitious on the prospects because the challenges facing Lesotho are small for reformn in Lesotho and numeroLls, and yet the required resources are While the CAE provides a ntumber of lessons disproponionate to the size of the economy As for the CT in developing future country strategy, the CAE noted, and the CT concurs, the strategy, it does not seem to adequately recognize the sequencing, and the content of the IDA assistance constraints faced by IDA in terms of (1) the lim- program were appropnate to the challenges of ited prospects for development in Lesotho in Lesotho Whether IDA was overly ambitious or terms of its massive resource constraints, (2) not in its ludgment of government commitment the limited management capacity both in the and implementation capacity depends on the public and private sectors for policy formulation appropnateness of using current standards and and implemntation, and (3) limited resources pnorities to judge past actions, rather than the (both financial and available manpower) at the standards and priorities at project inception, disposal of the CT The CAE adequately docu- including those of the government in office ments the likely impact of the constraints posed The CT concurs with the CAE that greater by Lesotlo being a small, landlocked, and moun- attention needs to be paid to a thorough assess- tainous economy suLrrounded by a major econ- ment of the unstable political environment in omy like South Africa But the CAE seems to Lesotho and witl a focus on institutional devel- suggest that the prospects for migration and opment and capacity building Complementing private sector development (as the main outlets these recommendations, the CT is working with for poverty reduction) could come from the government in developing a Poverty Reduc- improved education and an enhanced enabling tion Strategy Paper by focusing on strengthen- environment (including a stable political envi- ing monitorinig and evaluation and identifying ronment) Unfonunately, while these sentiments potential sources of growth in Lesotho A CAS 67 Lesotho Development in a Challenging Environment progress report is being prepared that focutses IDA has the expertise and comparative advan- ongoing interventions on the key problems ot tage, such as health, education, water, and capacity building and mitigating the negative macroeconomic policy development, appropri- impact of HIV/AIDS The CT recognizes the ate leadership would be taken in promoting complex challenges facing Lesotho, and where donor coordiniation 68 ANNEX C REPORT FROM THE COMMITTEE ON DEVELOPMENT EFFECTIVENESS (CODE) The Informal Subcommittee of CODE met on deal with poverty reduction in Lesotho, includ- November 26, 2001, to discuss the OED Coun- ing limited sources of growth try Assistance Evaluation (CAE) for Lesotho The subcommittee broadly supported the (CODE2001-0078), covering the 1990s OED findings of the evaluation report and raised the rated the overall outcome of World Bank assis- following issUes tance to Lesotho during this period as moder- Partnerships. The subcommittee welcomed ately unsatisfactory, although the Bank's the collaboration with the AfDB and noted that assistance program had been based on a cor- in the high-cost operating environment of rect diagnosis of the country's problems In Lesotho, partnerships were vital for maximizing their view, the strategy overreached in terms of the developnient impact of the Bank Members objectives given weak government ownership, asked hIow much effon it would be appropriate overstretched implementation capacity, and to devote to Lesotho, given that OEl) had iden- political tensions In the end, the Bank program tified the need for a stronger local presence in had little impact on poverty reduction OED Maseru Strategic coordination among donors and noted tiat this CAE had been carned out jointly greater selectivity wouild be critical in light of with the African Development Bank (AfDB) both resource constraints and the limited absorp- and that significant capacity for evalLation had tive and managerial capacity of Lesotho In this been developed in the AfDB through this regard, they underlined the need for the Bank process to play a strong leadership role Management Comments by Management. Management concurred on the need for a strategic use of welcomed the CAE and noted that the Bank's donor resources and for building partnerships, strategy toed to leverage the two major resources especially given the critical need for core ESW of the country people and water Lesotho faced in such countries It planned to increase suipport major challenges including a lack of capacity, to Lesotho from Pretoria and was working with poor resource endowments, an unfavorable donors on improving capacity in agrictilture geography, and the emigration of its most edu- However, the UNDP had been assigned the lead cated people to South Africa It noted that prob- role for coordinating development assistance in lems like HIV/AIDS originated in South Africa Lesotho and were brought to Lesotho by migrant min- Needs of small states. Committee members ers, making it necessary for the Bank to take a noted that the CAE's findings had broad apphi- regional rather than country-specific approach cability to small countries with limited resources to them The Bank's strategy therefore focuised and capacity, which were critical strategic con- on increasing integration with Souith Africa, siderations for the CASs for these countries especially through joint projects that uised South They emphasized that OED's recomnmendations African expertise and that thus helped improve should be reflected in the PRSP and CAS for capacity Management stated that poverty reduc- Lesotho, and that they should be implemented tion had been central to the various CASs in the context of the country's relationship with reviewed by OED It highlighted the constraints South Africa Commenting that many small states faced by the Bank in formulating programs to ftinction very well, the executive directors (EDs) 69 Lesotho Development in a Challenging Environment wanted to know more about the sources of of today's criteria when the project had made a growth in Lesotho They felt that PSD would be substantial positive contribution to GNP OED the key to growth, job creation, and poverty alle- responded that they judged outcomes agatnst viation in the country, notng the need for greater current standards and that the poverty reduction realism in program design They urged IFC objective had become more imponant to the involvement In attracting foreign investment and recent past However, they had taken account in pnvatization in Lesotho Management agreed, of the onginal project objectives when rating the but stated that the lack of local partners made performance of management They noted that IFC entry difficult in Lesotho Bank involvement in the LHWI' was motivated Lessons. Members commented that the by an interest in ensuring that the project had Bank's expenence in Lesotho provided many les- an impact on poverty and included appropriate sons to improve implementation in the future, attention to environmental and social manage- including the need for ensuring monitoring and ment In this respect, the management of rev- evaluation, the assignment of adequLate resources enues from large unfrastructure projects was key for supervision, and the need for analytical to ensunng that benefits were widely distnbuted work, especially on the functioning of the gov- and did not result in enclaves of development emnment, to underpin the strategy The project had not performed well on this Members agreed with OED that the dlsap- count At the same time, OED recognized the key pointing impact on poverty of the Lesotho High- role played by Bank suLpport in finalizing the lands Water Project (LHWP) represented a lost treaty between Lesotho and South Africa that opportunity Members questioned management provided the former with a permanent revenue about the delay in addressing the problems in stream from the export of water Management the Development Fund that was meant to have responded that the project had been designed used the revenues generated by the LHWP (froni to provide Lesotho with revenues but acknowl- the export of water to South Africa) to support edged that the rural development aspects had rural development and poverty reduction in been unsatisfactory It commented that rural Lesotho They asked for further information oti development remains dfficult m Lesotho because the shortfalls in the functioning of the Fund A few areas are appropriate for agriculture and member asked whether the project had con- many products are uncompetitive vis a vis South tributed to a decline in poverty among those Africa It is actively working to find solutions to resettled due to the project Another member the problems with the rural development pro- wanted to know whether staff faced appropri- gram under the LHWP ate internal incentives when designing such Capacity. Members also asked how OED projects, since the sustanability of these projects would advise implementing the health and edu- appeared to be declining OED noted that a cation initiatives they were recommending given major lesson was that large projects should be the lack of capacity in the country An ED pursued only after critical institLutional issues wanted to know what the Bank needed to do have been resolved Management respondecl and how management planned to address the that the limited poverty impact of the LHWP hacl problem of low capacity in Lesotho been recognized during the preparation of thc Political tensions. Some EDs asked how second phase of the project, and that the rev- the political environment had been factored enue fund was revised so that a major share of into the articulation of the Bank's assistance revenues went to the general revenues of the strategy, and whether Bank support could help government and the remainder to a social fund reduce political volatility They wanted to know' Basis for OED rating. Committee members if management had developed contingency plans noted that the major development concerns in in view of the political tensions in the country Lesotho in the early 1990s had been related to macroeconomic stability, and that it appeared MafhtinM*-vi, Cba)rian inappropriate to judge the LHWP on the basis CODESabrv,nire 70 I I 7~~~~~~~~~~~~3 - Seriesname .2__ I ___IEiz Population characteristics i ~ T1 T~ Life expectancy at birth Iz Total (years) 53~ 41 58 49 44168 44 53 57I 52 50 5 55 52 51 48 Femrale (years) 55 43 60 51 4 69 46 54 t0 54 52 52 5 54 3 4 Male Iyears) 521 4o5l 1 5 848 52 57 54 53 49 Mortality rate, rinfant (per 1.808 live I births) 11 5 1 12 6 2 15 9 7 10 18 9 0 103 106 115 Birth rate, crude (pert ,000 people) 40 50 45 4 55124 48141 29 36 44 47 58143 443 7 I. 3 43 43 4 Death rate, crude (per 1,000 people) 15 23 18 16 23 i 28 14 7 12 15 15 15 12 15 15 18 Fertilityrate.ototal (births perwoman) 6 7 8 1 8 3 7 l 8 7 / o 87 Access to safe water (1915) Total, of population with access I 5 i I Rural I ______ Eduscation1 Illiteracy rate28 7 3424412 Adult total I% of people 15+) 29 42 66 882 7 4 4 4 0 41 3 3 Young adult femaleI% aged 15-24 ys~O 25, 62I 0 2 5 2 3 3 0 3 5 5 Young adult male (% aged 15-24 pro ) 30 I 32 31 2 1 43 18 15 24 43 35 20 3 4 4 1.!~~~~~~A Series oame A~ S 0 5" 0 01 School enrollment Primary(% net) 67 03 76 71 i 3;93506180I08 77 7 70170 FemaleI%neot) 6001 0 83 59 38179032 9260 2 73 6 9.0 1 69 Male(% net) 55 87 M 2 4 0640 67 67 7 81 771701711rw Secondary(I% net) 60181 40 44;39 56 '0 6 262, 35201 5t10 Female(I% net) 02 67 40 31 22 0 131 71 6e1 Dl 25 1J7 47 461 Male (% net) 00196 341571 57j57 49161 631631 4 24 55 055 SecondaryI% gross) 16 21 I19:2415 50 5: 3813 16 8 619 l Pupil-teacher ratio,primary 4 : '32 '55,2012 4 4 9 4 9 3 Health , :1 T r - Immuoniztion,' I I OPT 1% of children onder 12 months) 50 875908 6 Measleso%of childrenounder12 months) 1 63 , II I9 45 44 4 LandiUse , , 'I£ _ _ _ _ 0 - _ Arahle land %nfland area) 8 6 2 3 071 20! 13 3 40 3, 36, 0 8' 22 1021 100 2 70 69 641 9 8 Labor force IF fV Total (millions) 0o 3 4 0 4 It9 31 0 3 671 0 4 1005 02 9 2 4 32 40 j 30 16908 Femalel% of total) 37 9 470 ,50 1 445 60 6; 20 7 49.0 401 L 301 1 3305 4980 45 4 444 i43 43 j42 Neoglt,bhi Nose Member of touth Af,oaro te .ponlnro C -orltuo, lSAnC a.e Anolt muaa B 0o Cg D 8 -thsor Mew, M-aur-u Mo-mhbque. Nam,r Se,Oheles tooth Afroa, Samol[od a nta- dembte end di,obohe,e a.. korenh sa she Sou,th Afl.Cos ut- rto O SiotACOl ws,rmt ot Bot-ae testro Nam,b,e touth Afo,e ndSard Owu,aOOly lute presey enollmen -noadble for the p,ood 1993-00 Seurn World eask Ifi99 too Afo - DIterpOoelonmetld,oeors NeWes Table D.2 Series name -.iJ~c 2 2 2 Population characteristics Life expectancy at birth Total (years) 56 46 47 51 43170 45 56 71 65 56 48 431521 54 53 St Female (years) 57 48 46l52 43 75 47 57 75 68It6049l43 54 55 54 52 Male (years) 5 4 6 4 3 6 4 5 8 6 5 4 3 5 5 1 4 Mtrtality rate, itfanit (per 1,000 I I livobirtho) ~~~~~~93 i5 125458 93 I 9 liebirthsrt,)od pt166 tpe 35 485 34 133! 26 135 65 1 8 6 5 113 66 66 82 9 Birt rae, cude(per1,00 peple 35 8 3 47 48 17 41 36 21 25 37 41 42 31 361371 41 Death rate,crude (per1,O00peotple) 12! 19 15 15 1231 7 2D 12 71 8 10 t6t9 12 14 14 Its 7 4 6 6 2 5 3~~~~~~S Fertility rate, total (births per woman) 5 72 5 2 Access to safewater (1995) I T Total,%tof ptpulatitt with access 62 33 701 60 166 24 601 63 5660 49 59336158 56 4 Urban 64 16Io 62 ig9o 861 79 77 74 Rural 60, 771 __ 45 i33,421 51 58133 Education I Illiteracy rate Adult totalI% of people 15+) 181 25 42 431 17159 261 i16 22 28 25 14 27 28 42 Yontg adult female I I% agedt15-24 yrs 21 9! 30 42 6 158 81 16110 14 '17 15 18 1t8 30 Young adult maleI% agedI III 15-24 yrs 19 1 7 1 3 21 7 27 11 9 1 12 7 HO! 2 113 13120 - . - S A f ri ca, 1,99 7 V '. A. Female net) 7 34 R3 48 ~100 97 34 4 1100 5 49 7 92=75 73 72 63 5 8 6 9 96 45 89 10* 48'- = 3 94 75 7 7 Maenes na et 0 II I _ _ _ ~ _ _F _ Fermale)% net) 69 35 910 58 599 .70 4 9184 197~ 49 72 193 75 573 9 Male(% net) 83 35 6 4 1 6 78 7 9 8 4897 62 75 :73 32 SecondaryI% gross?a 31 85 28 1 7 85 7 695 549 127 0 405 837 3 Pupil-teacher ratio. primary' 48 34 , . 37 Health 39 F9F3F F ImmunizationF F:FFF DT(% of childrenundert12mronthsn)57s 41 78 18 95 6 1 6 3 98 6 7 I74 F780 78 687 687 5235 Measles(% of childreneunderIF : 12 monts_ _3 8 79 20 87 _ _ 57 10 57 89 89 73 88 88 5709 Land floeIFF FFF Arableland(I% ef landearea) 19 712 41 OO6F3 , 16 1 49 3 3 L 1 0,.. 2Il 21312 9 8 3 5 7 1i i 0 9 9 Labtor force 9 4FI IF FF~ 8 Total (millioons) 8 54 7 1986 4 9 9 5 86 0 7 ' 15 993: 160 4 0 53 I 84 5 1881 Female)% of total) 36 46 F445 7 43 ',48Z9. 31 9 L48 4408 37 3I6I9F 45 2 444 433 4 cOnerot penmary -1en rtlmn aaa.Fbin in, rho penci tOt3-O5 Neow Membrn at tas Afinor Dnninwnoi C-ueruny(SAnDC are ANenia Bnvat-a canoe o R Ltera Moran. Maaeuas, M-sobqun Nambta ehOnylrln Surth AMic, tcaaariad nan.ranaZamb'o oid Zt.nbatw n e g nown as trn tau, Ainn casnn- Ur-a (tACU) enrstsr at Onrwmra tewfti aN-FSa teeth Afnna and SwaIrard Sonor World Bark totI 999nd AMnnar Deopnemrnr indirar Darmban Annexes Table D.3 Annual Assistance to Lesotho and Comparator Countries, Average, 1 990 -97 - G1zyGi1ib d oborsamonts Sib. Poollion, 't par cp t p Flow total ODAnet n $o11o1 . ilo _ Lesotho bc,IO 0 iDL // | ¶I& J | tU . c SACU tJ U | 6 J { O t/ SADC 'dhil!P 4Ri I Id Angola tilL:I U Mf!i! slIUS Botswana ilkii' sli a' 1. 1 35D Congo, Dem Rep 'ri,;, | U l. Malawi IC; a. | i. I ,, l I Mauritius A1Ji.; | t tD Mozambique till:0,6 | $ . If:! II |i Seychelles iz./, JlI 1 a{|,t (iIl) 'tI Swaziland ng 41, i AA i, Aw) IE ,CIIC' Tanzania i rtl/l) aSa//lil WA SfI/i / NP Zambia I :.1 i:,n i itO| Zimbabwe i : 6 tile U n.$ Small IDA-elgible SSA countrieet CapeVerde il 9 1: 1i0 I Comoros *rJ . I tO. Djibouti i i~3 /t 1 Gambia, The '; 1 bi I Guinea-Bissau : : j 1J1j3 n ' jJ il S5o Tomi & Principe n. Sr Si Non-SAOC SSA .Yt3 Em I# i LRIII tir i Netiitrbie Nol sThe fcilow,gnSSA0 countries are elcudeo South Afica and Nige.a because of then thne Liberia Namibe SomaIia am Sudae because /fdata probiems a Smaii is defined in tactic of popuintion area Inounries with less than I 5rniiiionf SOur WolddBank WDI arious ears, OECOD arious yea.I) 705 Lesotho Development in a Challenging Environment Table D.4 Lesotho at a eFIUVI MLg S...." ,Development Diamond' Poverty and social E m Alrino c al Ca 1999 Population, mid-year (millions) Life expectancy GNP per capita (Atlas method, US$1 1.) i6iji . GNP (Atlas method, US$ billions) jii Average annual growth, 1993-99 | Population 1%) GNP Gross Labor force i%l .: per primary Most recent estimate (latest year available, capita enrollment 1993-99) capita Poverty (% of population below national poverty line) 1 Urban population I% of total population) . Life expectancy at birth (years) ... ' l 'I Access to safe water Infant mortality (per ,OOG live births) :' I Child malnutrition I% of children under 5) . Access to improved water source I% of population) %i7v l j Lesotho Illiteracy 1% of population age 15+) I - Low-income group Gross primary enrollment 1% of school-age population) (jIg;, - I4 I Male o | - gLg Female ' I .' f i; Key economic ratios and I long-taem trends 9 ),ri3 | r irl GDP (US$ billions) 0 9 I i Economic ratios Gross domestic investment/GDP 30 dtiru t ' Exports of goods and semices/GDP 2. |3 | Trade Gross domestic savings/GDP 4: 1 Gross national savings/GDP f34 ,.: Current account balance/GDP I-2t5 IIgi s l / \ , Interest payments/GDP Investment Total debt/GDP svn Investment Total debt service/exports U." Present value of debt/GDP g Present value of debt/exports,, 1999-99 ,pj 1999 Indebtedness (average annua growth) GDP GNP per capita i - Lesotho Exports of goods and semvices 1e otho - Low-income group 76 Annexes Table D.4 Lesotho st a Glance Structure of the economy 1979 1 ) _ Growth of Investment and GDP I%) (% of GDP) 19 - GDP Agriculture 31 4 t0Lt 18 2 . 0 -5 _ _ _ Industry 23 0 vt i. 381 5 - _\ . Manufacturing - ServICes 45 6 'k1A 43 7 5 -\ Private consusmption 13909 Vrf/i 11406 G -t General government consumption 181 //rhr 200 -15…- - Imports of goods and services 100 l ilA/d3 1088 -20n 1 1979-41 *19M9191 1998 91 (average annual growth) Growth of E.ports and Imports I%) Agriculture -05 I I 309 /t 30 Industry 48 t/f -141 1 20p s Manufacturing 9 6 D 3 -9 3 , Services 45 % / 12 10 ____ Private consumption 32 nit, -42 General government consumption 4 7 (Itil 9 5 Gross domestic mnvestment 42 4i/f -13 6 / ft Imports Imports of goods and services 3 4 tSii -7 0 3. // -t Gross national product 4 1 f0)1 -90 a ile,1 94 as 96 97 98 99 Prices and government finance [1197g j 1998 M 9BP Domeslic prices (% change) infletion 1%) Consumer prices 160 l4i1 152 iD - CPI Implicit GDP deflator 2 4 14, / 8 4 nO ) GovCrementfinence 12- / (`/ of GDP includes current grants) Current revenue tilIl 45 9 6f 1 Current budget balance h3a, 13 1 .S.fi Overall surplus/deficit Wi1ll -2 8 ti/C Trede 1979 Ig) 199B 0- I (US$ millions) 94 95 96 97 98 99 Total exports (fob) 39 /It3 183 D/4) Light manufactured goods !3 n a Export and Import Levels USS millhon) Manufactures .891 !Expor-ts * Imports Total imports (cif) 317 Wti/ 873 P.l Food - 800-_ Fuel and energy 5/1 Capital goods It(tj too - _ Export price index (1 995=100) Import price index It1005=100) 0- Terms of trade (1995=100) 93.94 9 96 97 98 99 77 Lesotho Development in a Challenging Environment Table D.4 Lesotho -at a Glance Balance of payments 1979 lIhi f I ) Current Account Balance to GDP I%) (US$ mi/lions) 0I Exports of goods and services 58 4Rj 250 ,.7if Imports of goods and services 352 ItItF 932 4/t:I_ Resource balance -294 4itt -682 4i/f -20 - Net income 214 SI.lt 281 ". S t30 - ____ Net current transfers -132 :Y.t 166 fP' Current account balance -212 il/s -235 '1 /4 Financing items (net) 210 ffw) 241 -50 -9 419 619 819 Changes in net reserves 3 al -6 bl Memo Reserves includig gold (USSmillons) '%il 576 i't Conversion nate (DEC, local/USS7 O 88 .'t 5 5 t 5 External debt and resource flown | 1979 M/ f WAll (US$ millions) Total debt outstanding and disbursed 53 99 835 /BRD 0 tl 64 64 E IDA 20 SIp 208 iOl5 Total debt service 2 tV.D 71 /1t' Composition of t999 debt IBRD 0 12 :1 IUS$ million) IDA 0 , 4 P Composition of not resource flows Short-term /8/ Official grants 36 4l6 33 Official creditors 10 1t/ 35 0i Private creditors 8 ri 144 /l11t Foreign direct investment 0 285 laterl Portfolio equity O ' 0I \ IDA i18) World Bank program Commitments 15 72 Aft, Disbursements 3 lI 32 Principal repayments 0 t 9 '6 \Other malt/terol /274/ iMF Not flows 3 ¾> 23 b / el Interest payments 0 7 4 Net transfers 3 25 16 hote 1999s da at-eprehiniary ms.iott a Th Odianissorw four kyngdimton in th country Im boldl cmpanod with i-tis rome guoup -rag. If data or miosng tho diamond .,II N, inconplion 78 Table D 5 2iEIIE~ IIiK iiiIi ii . R. lGDP grovtlonrl%l 41~ 486 371 371 5 40 48 38 08 10 38 34 21 7 708103 381 11 13 Oorro,7 GOlP g.vwth(p-oernn 873 1 18 1 67 1 33 J 70 28 5 7 -IS (? -1 184 12 841 -0 4085 '8 l -8 7 8aI1opno 80p rSl8pr 73 38 70 38 88395390 I471 8 4338 48701 4801 0480 391 7 ~ 88 883 4 412 0 5178 883T77 84 8452 317 287 0 47 Oonrel,o--eg(%olGDP) -5' 536 -5 -44 -98 -373 -24 1 -232 32 3 32 27 388 4 71 18 7 102: -35 112 273 -8 5 OI 88-18 5 Orovfioed mop4llvrnror,v% of GDPl 5301 5984 43 3 471 557 8 558 568 78 38IG 358 48I88 E1 18 15 26 77 47 180 178 18A 7448 43 5 P-t41 fr,.d op7ol toerrt,o(% of GDP) 58 7 3 817 1072 18 81 3.8, 6 5 7 6 04 81 78 1441 14 1 4 80 18 108 167 128 5 7 4 137 Oveol-mv t l nnof GlCOP)r 52r4n59 0 4- 471 587 5561 0881878 3553 356 38874873171 178 763 8890 (%of GDP) -889 -0 5 31 7 5.3 3 4 14 18 . 131 -1605 -1 5 83 4 0 58 0 -1106 -1884 30a -0a -2 4 -12 5 -35.7 l%vlofPi -120 -789 -277 07 8.6 -1 1 -4 2 -78 -5 4 11-4-183 57 683 -50 I 77 -7117 -24 6 15 2 -88 58! -756 -53 1 1 b.1 - ulhlnM (of GDPl -81 4 -03 3 31 74 80 S1 -01 -8 18 74 -71 012.9871 177 -734 -141 -00 1 7 1988 -4271 Gver men revn- rrlrdo,g gravv I I I ]ID (% ofGDP) 4785 4881 47 7 5181 51.5 521 531 41 51 1 4683 478. 45 4983 24 8 24 1 2386 2276 3083 37 6 2606 34 0 240 25 1 34 7 700700GD) 3340413B 468' 8717 1 47 34379,41 0 3944 1 14 7 323 4 L 01 712 2384' 145 348 0 &v 121, '08 Goverro tn eovwd,rur 1% of GDP) 88 4 43 5 45,45 2 4-2 486 47 493 .1 ,03 4 90 24 741- 8 9 0 4 3 (% of tml 21 8 29 3 2985 28 6 3278 381 3158 308 34 34 757! 332 2985 317 70 1 321 4 18e61 2 1 2- 0 52 Govenmet ped,,ng on dnetron 3 2 7 8 f% ofrotIoml ekn0,1r 18 5 21 1 20 71 313 25 4 25 23 0 2381 3 7380 23 0 2384 272 7 233!2 101 12 7 17!2 881 7 8 ove ftnetalepe d,t.,on 787310,9 at7 7 , 238,a 78! 84 1 l 9 12 2 I r 1% 29 ~~~~~~~~~~~~~~I-, 78 8 2.0 7 3-3' 772. l%ollololeopevd,trrrvl 112 ~~~~~~118 105o 11 1 10, 11 7 10710 17 107! '7L4 110: 87E821 !7 7 . 8 1 l%vlOPf 44 i4!42 1 478 434 469 70 474! 6 87 5610 41 8 2361 39 42435l 3.7 31 Go-Wt "o""'t --p`d,t_ ~ ~ ~ ~ ~ I ~ 46 761331 81 Lesotho Development in a Challenging Environment am W&. WIV W C! _ r . r bd z a) ta~~~~~~~7 w)1 Lno IDE -0 i5! avw4° U Eill! _ -r !I || , 0 ^,= = =c -~~~~ - g1 E TC_ w = ~ 1m = Irou IZ ~ v u ! __~ _ ~ _ _ _e vn'~ 80 3 _ o C c° Co o Co Co to to Co C R o ~~~~~~~~~~~~~~~~0* o, t~~~~~~~~ as_ _i K~~~0 _ ~~~~~~ K tU w nn RS3 s~~~~~~ ANNEX E PROJECT AND PROGRAM DATA -_: of World Banl< Economic _o ~ ~~~~~~~~~~~ r k ritle 111o1ron Reporn no R rpr- Lesotho Poverty Assessment Report r ,, Implementing Educational Policies in Lesotho I V Interactive Radio Instruction Impact, Sustainabhility, and Future Directions 114'vi. Rural Sanitation in Lesotho From Pilot Prolect to National Program Low-cost Urban Sanitation in Lesotho 1. 4.A National Environmental Action Plan ot I , I Regional Promoting Regional Power Trade-The Southern African Power Pool 1 .I International Watercourses-Enhancing Cooperation and Managing Conflict, Proceedings of a World Bank Seminar vv | I I Financing Health Somvicos Through User Fees and Insurance Case Studies from Sub-Saharan Africa i: Sustainable Health Care Financing in Southern Africa - j 'itt ' i World Bank HIV/AIDS Interventions-ex ante * and ex post evaluation E -- : Basic Education and Agricultural Extension Costs, -- - Effects, and Alternatives . ,.t. I SADC Region-Special Programme for African Agricultural Research SPAAR)lnformati i ....- 1.. = t3926 83 Lesotho Development in a Challenging Environment Table E.2 Costs offW l Banl< Programs for and Com- Wu Countries, FY91-99 Lending ES W + Lending W jESW D m completion *5 5 campllo ill CYompcleion sl 2f,i;campleilncin CounlryrReqgia S USSM o USSM us I I .a1 . I- Im Lesotho a4 I 41 RUM Fil 1 SADC 63 40 > C, i rj I-"' I,dl . . . j l H 4 ' l i 4 . Small SSA counlries' .- 3 ; 40 _C-" ' M b | 14~~~ ~ ~~~~~~~~14 , …-.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~F Bankwide 4 84 Annoxes b EfficiancytableI l , ~~~~~~~~~~Average j Net CUSS$;,000S ~cfffmlmatnt Average of not ! for costs USS commitment Memo satisfactory Average per for Average Totel Number Net & ceerisky costs per USS1.000 satifsactry project costs of ommitment. proect, project, of net & nenrisky size, Country/Region USSM projects USSM USSM US$1,000 commitment, projects USSM Lesotho 9.1 9 254 112 1,011 36 R1 28 SADC 1596 128 6.,881 5,1957 1 1,247 23 31 54 Angola 119 10 256 149 1,190 47 90 26 Botswana 0 9 1 12 12 900 73 1 12 Congo D R 82 5 19 1,640 439 4 Malawi 23 7 20 1051 651 1,195 23 36 53 Mauritius 71 9 84 59 789 85 121 9 Mozambique 209 21 1,285 1,183 995 16 18 61 Namibia 1 3 Seychelles 07 1 5 7001 156 5 South Africa 122 1 24 24 12,200 508 5098 24 Swaziland 2 2 1 29 29 2,299 76 76 29 Tanzania 320 22 1,338 19050 1,455 24 30 61 Zambia 229 25 11,897 1,407 916 12 16 76 Zimbabwe 1516 12 883 631 1,300 18 25 | Small SSA countries 268 37 412.3 2427 724 65 110 11 Cape Verde 5 2 10 127 97 | 520 41 53 13 Comoros 4 5 8 62 7 563 73 682 a Djiboutl 26 4 36 3 650 72 867 9 Gambia,The 49 6 78 64 | 617 63 | 77 13 Guinea-Bissau 7 0 6 82 45 | 1,167 85 155 14 SAOToms & Prncipe 26 3 27 27 867 97 97 9 Bankwide 2292.1 2,229 197,103 1144,120 1,028 12 16 88 AFR 6564 564 25,157 | 16,920 1,164 | 26 39 45 Neehgab,le Small Is doused i aroek or Woula--on size lie whulxoon <1 5 mlionl Sourcel World Bank Busmness warehouse Lesotho Development in a Challenging Environment Ta b I e E . 3 a o0rations Evaluation fnputmint Ratings Satisfactory outcome I%) Likely asutainabiltty t%) Substantial ID 4%) No. of commitment No. of Net No. of Not No. of Net Countro projects (US$M) projects commitment projects commitmant projects comminmen? Through August 2Xd0 Lesotho 21' 166 67 69 46 33 31 27 Small countries 65 476 i 63 70 27 24 25 31 SADC 391 9,359 83 72 35 33 27 30 SSA 1,G36 39,277 61 62 31 31 23 23 IDA operations 2,196 60,153 68 74 36 43 28 31 Bankwide 5,194 263,133 71 75 46 59 31 37 FY19bb-89 _ Lesothn 17' 1D4 71 79 67 66 33 40 Smal countries 65 476 63 76 27 24 25 31 SADC 328 5.968 62 65 33 30 1 22 18 SSA 1,373 27,548 60 59 30 25 i 22 21 IDA operitirns 1,777 41,204 67 71 33 37 1 25 27 Bankwide 4,338 184,5B6 70 71 44 54 28 33 FYw199t9-9 Lesotho 4t 62 50 53 0 0 25 15 Smallcountries 12 119 75 76 ; 7 8 50 61 SADC 62 3,357 70 85 42 37 40 45 SSA 257 11,652 61 73 33 49 27 27 IDA operations 405 18,733 71 s0 44 52 34 35 Bankwide 862 77.689 74 84 53 65 39 45 a Dl theie21 proinnts9 prniantiappn-de n heel 1970s-eosrated i te-son a,i,nns Ivy b Tesh trolep s are Thaia Bnsiu Sural Dev tiSM Edtrtnon I-IV iS32ml, Roads 11 It6MI INtL i-Il I e-a De, I. $a10l Ror Illi 1S7MI highlands Wonnn Inaieen ng (10MI Wvaer Supply PoieitdtMl. Lad Managentn 13 9Ml Populanen HeaI and Muniuion Ilt ($121 Ml, l4tHga PrlosiltlVl$1 M Popolat on, Halth andNuiee S3M3 UWran Semons Oniaionion Ml tS9MI c Thetep rseusPlann nson HsandNt4.ino 1912 isM!I stne em hnd v-.ndn tnasl5lti, h6ternsech r En n -ieg..mr ,$TMI ondtosronscensr LE-nttl nnerD Pnyec:$/24CM1 b. tluali tAssuranco&ro m RatingstnsoofA ril200t01 Net No. at commitment Projects at commitments ranlism lden Proactlvtty projects (US$M) risk 4%) at risk 4%) Index 4%) Lesotho 6 128 s5 71 67 na SADC 86 3,805 17 16 73 n SSA 359 13.374 21 22 79 70 IDA operalions 717 32,302 1 1 16 60 70 Bankwide 1,503 1 1 926 f9 | 19 1 92 72 na Notapplicabla a Pe-em ol plaisn viad unssiislace ongf devnlopmant obl%aonr or npienenna-os prgress as - rapned in thI last Pnonct Stttns Pepon rPSF)-t. piiemsat tnsk bPenner of Insleas naiad as ponlan pnn1asas 1 nnnths eas isannat havs usma bain reannonured rInsed s-spended er pavalinoann ad Vita 'stoss en as innnninive intohe petndoan.nrd Asnot.ule 1t99193. ieaspe Laesotios pontalin it tohlna anInuasoslytpennerInner rhaipinlenl pr heeasSSAs sas 23 pr-ant. and Ban-ida was 20 W-nar Sotnse World anks OuaityiAssuanoe Groap Table E.4 Delays inf I , Amount credit Idislomrsed as effectivenessl Extension |Cncellation OE raings 0E0 rabtgs fOED ratings Sector/project Commitmenb of 8/31/00 1 montths) (months) )%) odrelevance oefficacyIof outcome Sustainabilfty ID impact Watersupply LHWP Phase 1 gA 110 0 68 120 | 2 37 Substantial | Substantial S Likely Substantial LHWPPhaseIB(ongong) 45D 1 90 2 12 ongo1 I Highlands Water Engineering 98 104 3 j 0 High Substantial HS Likely Substantial Infrastructure Engineering 98 93 6 12 I 11 Substantial Substantial S Uncertain Substantial Rural developmenVtpoverty Land Mgmt & Conservation 16b0 40 8 0 76 Modest Negligible HU Uakety | Negligible Agr Policy & Capacity Bldg j I (ongoing) 088 9 8 13 euarng Substantial Madest MS Uncenarn Modest LHWP Phase 1A Development I I I Fund Modest | Negligible HU Unlikely Negligible LHWP Phase IARural I |ab antrl Development Substantial Modest MS Uncertain Modest Community Dev Support ongoing I (ongoing) 4 7 t0 01 ngang High Road Rehab and Maintenance I i (ongoing) 40.0 8 5 8 eorgoing Negligible Modest HU Unlihkely Neglgible Education I I I Education IV 100 128 8 1 24 0 Substantial Substantial S Likely Modest Education Sector Development 25 2 25 2 7 27 4 Substantial Modest MS Uncenain Modest Health I I i I Health and Population I 35 41 5 24 14 Substantial Modest MS Uncertain Mndest Health and Population 11 121 107 4 27 18 substantial Negligible MU Unlikely Negligible Pnvate sector development 2 1 ' , I Industries and Agro-industries 210 t88 9 24 12 Substantial Negligible U Unlikely Negligible Privatization and PSDI ongoing) 110 85 19 ongoing Substantal Negligible U Unlikely Modest Other M o d e Urban Sector Reorientation 204 54 12 0 I 7 1 U Totailaverage 3453 , 1971 1 7i58 e 16 7 | 245 r i t a I I Oosoz Hlghty SitiWadory SatMslac1ory Mod-MY S-tely may Mod-rately U-rwfs ry U-usfactory Hlghly Unsf-ato e -mc H,gh Subst,=n,, Modew Negbglbibl EffiYH,gh Substamial Modes Neai. g,hle Eff-ueyr oigh Sibg.antil Modis NSgilgble Ci.m t H,gh Siuboanwal Modest Nesi,glble Suva-rabryikei y un e UrU ynibkli a The Banikde average af ranreied - Om I 0en n -ertar rYn- 99 S-urce 8ackgrourd mers Lesotho Development in a Challenging Environment Table E.5 Lesotho: List of AfDB t'ojects 1 Completed projects for which PCR has been done Phuthiatsana Integrated Rural Development It Rural Health Services I Ini Rural Health Services 11 iv Masianokeng-Mafereng/Roma Roads Rehabilitation v Maseru Water Supply VI Institutional Support to Transport Sector vii Glazed Ceramic Wall/Floor Tiles viii Four Centers Water ix Health Services Development x Rural Health I Loans Savings xi Rural Health Services Ill Xii Maseru 11 Water Supply xiii Road Maintenance XIv Khamane-Oxbow Road 2 Completed prolects for which PCR has not been done or hes nol been finalized I Rural Credit and Banking facilities ii Industrial Line of Credit in Feedlot iv Phuthiatsana Irrigation Provect v Leribe-Dxbow / Roma-Semonkong Roads Study vi Leribe-Butha Ruthe-Joelos Drift Road vii New Maseru Airport viii Joels Drift-Khamane Road Feeder Roads Study iX New Maseru Airport I (Suppl I x Phuthlatsana Integrated Rural Development xi Oxbow-Mokhotlong Road Prolect xii Institutional Support to Transport Sector xnii Electricity Master Plan 3 Cancelled prolects Pig and Poultry Development II Wool and Mohair Scooring Plant Ini Muela Hydro-power iv Lesotho Bank Line of Credit and Institutional Support S,vrc Afv ivan DOv,la;m,nt eank vata Table E.6 Performance Evaluation of Aflr Transport Sector Projects In Lesotho Project identification Project dates ance indicators Perfornance evaluation ratig | -E ~ ~ ~ ~ ~ ~ ~ No 4~~~~~~~~~~~~~~~~~~~~~~~ . 0 2 | U 2 Leribe-Butha Buthe- Sept June Dec 9 7 24 21 5 Joel's Drift Roads 1977 1984 1985 4 Joel's Drift-Khamane Road Jan June Dec l' ' 10 18 -12 155 1980 1984 1985 S Road Maintenance Project Nov Mar Sept -T 8 18 6 22 24 26 1 8 23 247 (Fourth Highway Project) 1983 1993 1997 7 Masianokeng-Mafeteng/ Feb May . i 4 25 48 21 0 Roma Roads Rehab 1984 1998 9 Khamane-OxbowRoad _l Mar July May .' 7 18 33 1 8 20 27 20 24 66 1988 1988 1999 10,12 Oxbow-MokhotlongRoad Oct June EW Z: 24 62 54 15 25 24 30 27 55 1986 2000 Srrurr Air-an e-velormeni Bank data T ab I e E . 7._° Project r Loan amount UA million) 0 no Name , Components Loan number AfDB ADF TAF 1 IPLribe-Oxbow/Roma-Semonkong Roads Study Detailed engineering design r FS/ILES/TR!75,2 r 83 2 Leribe-Butha Buthe-Joel's DnIt Roads Construction and construction supervision f CSILES/TR/77/5 6 17 3 3 New Intemational Maseru Airport I 1 Preliminary works (govemment) CS/LES/TRI79/001 j 00 2 Constauction of airport onfrastructure (BADEA, Saudi, S Abu Dhabi and Kuwait Fund, OPEC, govemment) j 3 Buildings and navigational aids (AfDB, government) I 4 Navigational aids and telecommunications (European j Development Fund) c 5 Electricity power distobution and airfield lighting j I (govemment of Finland) I i | 6 Housoing ofrastucture (govemment) (7, 8, 9, tO) Housmng for airport staff (govemment) , ____ | 2 ! , ~~~~~~~~~~~~~~~~~~~~~~~~~~~3 4 Joel's Drift-Khamane Road Construction and construction superision CS/LESITR/80/7 662 in 5 Road Maintenanrce Proect )Fourtt Highway I Rehabilitation of the Maseru Road,kin 6to Leribe, CS/tES/TR/l4/1t 1 06 Project] km 87 7 rehabilitation works and construction supervision 2 Rehabilitation of 195 km urban roads in Masemu (Wodd Bank) 3 Improvement of 444 km unsealed roads (World Bank) i j 4 Traffic countrng and enforcement of axle load limits (World Bank) 5 Review of the domestic constmuctionindustrry (Woorld Bank) 6 Techmcal assistance to the Roads Branch and plant and vehicle pool services (World Bank) j ' 7 Procurement of training facilitiesfor the Roads Branch (World Bank) 8Fellowships for the Roads Branch and plant and vehicle I i j i pool service (World Bank) Table E.7 Project Loan amoirnt (UA million) no Name Components -Loan numbr I AfDB I ADF TAF 6 Feeder Hoads Study 1 Study of tertiary roads CS/LES/TR/94/13 090 7 Masianokeng Mafeteng/Roma Roads Rehab 2 Detailed design of selected feeder roads 8 Naw Maseru Istefoational Afrport 11 3 Rehabilitation works and construction supervision CS/LES/TR/84/14 6 45 Refer to3 CS/LES/TH/84/004 12 04 | _ 9 Khamane-Oxbow Road 1 Construction and constuction supervision i CS/LES/TR/88/18 | 60 10 Oxbow-Mokhotlong Road 1 Design review F/LES/TRA-ROAD/87/20 I 17 17 2 Construction supervision | 3 TechnicalassistancetotheRoadsBranch (121 man/month) _ _ _ 11 Institutional Suopnrt to Transport Sector 1 Study on manpower, training, technical assistance, and F/LES/GR-IS/89/1 2 60 institutional requirements of the Roads Branch, 1991 2 National transport study Lesotho, 1994 3 Management study of the Lesdtho Airways Corporation 4 Rural airfields feasibility study and detailed design 5 Technical assistance on transport planning and economics to the Ministries of Planning, Economic and Manpower Development, Transport and Communcations, and Werks | (55 man/month) 8 Technical assistance to the Deparunent of Civil Aviation (63 man/month) 7 Two fellowships in transport planning and economics 12 Oxbow-Mokhotlsng Road (Supplementary) Refer to 10 F/LES/RGAO/93/SUP/8 288 1 22 13 yTwo Rural Roads Stiufy Feasibility study and detailed design j _j____ Swune Afi- 3etwieet BOnk dare Lesotho Development in a Challenging Environment Table ~ jects in the Social Sector, Le_ Ta b I e E . 8 j 4r 98 Projects A)crvzc (PIAvoilslf Status Health Health Services Development Project ADF t-1tE Completed Rural Health Services Project I tojtH ADF s, Completed Rural Health I Savings Loan ePo TAF i Completed RuTal Health Services Project 11 cilg ADF ;ll Completed Rural Health Services Project Ill i!olD ADF A OPEC Fund h,Et Completed Rural Health Services Project IV P4h ADF I litili Ongoing Health Sector Reform Study Hr/ AOPF 111:11 Ongoing Total health VliVD Educatlion Strengthening of Secondary Schools Education Project I AlIti ADF hEr Completed TAF :JP Strengthening of Secondary Schools Education Project 11 i:J: ADF lit Ongoing TAF J£t Total education Total sector ussistance 92 ANNEX F OED RATINGS GLOSSARY AND DEFINITIONS OED's rating methodology is constantly evolv- (4) hligh, (3) suibstantial, (2) modest, and (1) neg- ing to take account of changes in evaluation ligible Ratings are hased on an assessment of methods and operational policies This Annex the Bank's assistance impact in strengthening the summarizes the rating scales currently used in client's capacity to manage the following areas country assistance evaluations (among others) a Economic management Ratings for country assistance perform- b The structuire of the pubilic sector, and in ance (outcome) Currently, OEI) utilizes six particular the civil service rating categories for ouitcome, ranging fronm c The institutional soundness of the financial highly satisfactory to highly tinsatisfactory The sector three higher ratings are gradations of satisfactory, d Legal, regulatory, and ludicial systems while the bottom three are gradations of e Monitoring anci evaluation systems unsatisfactory f Aid coordination 6 Highly satisfactory g Financial accountability 5 Satisfactory 4 Moderately or partially satisfactory Ratingforsustainabiity Sustainabilhry meas- 3 Moderately or partially unsatisfactory ures the likelihood that the development bene- 2 Unsatisfactory fits of the country assistance program will be I Highly Linsatisfactory maintained Suistainability can be rated as (3) likely, (2) uncertain, and (1) unlikely It is OED's Ratingfor institutional development. The intention over the coming months to increase to institutional development impact can be rated as five the nUmber of possible ratings 93 ANNEX G BACKGROUND SUMMARIES, SELECTED TOPICS World Bank Support for Human Capital Development in the 1990s Author: Ellen Goldstein This report evaluates the development effec- for action, and extremely weak capacity for sus- tiveness of the World Bank's support for human tained reform or program implementation Sec- capital development in Lesotho in the 1990s It ond, the end of the apartheid er in South Africa is based on extensive document review, inter- has presented Lesotho with extraordinary long- views with World Bank staff, and a mission to rin opportunities for greater economic integra- Lesotho in June 2000 tion, labor migration, and rationalization of social Lesotho is a small, mountaiotis cotintry of services In the short run, however, it burst the two million people, entirely encircled by South btibble of foreign investment in Lesotho, redticed Afnca Dunng the 1990s, the country expenenced remittance flows from South Africa, created a rapid GNP growth, largely related to a tempo- brain drain of skilled professionals, shifted donor rary increase in investment associated with the resources toward South Afnca, reduced fiscal rev- Lesotho Highlands Water Prolect (LHWP), as enues from the Southern African Customs Union well as investment by manufacttirers evading (SACU), and lowered regional growth prospects apartheid-er sanctions in neighboring South The paradigm shift needed to adapt to both the Africa By 2000, average GNP per capita stood opportunities and the challenges presented by at $540, at par with the average for Sub-Saha- the new South Africa has occurred only slowly ran Africa (excluding Souith Afnca) Along with and incompletely in Lesotho 7hird, the LHWP strong aggregate growth, the country experi- generated substantial import duties and water enced rising inequality (with a Gini coefficient royalties in the second half of the decade that of 0 6 by decade end) and a deepening of could have been used effectively for targeted poverty, particularly in rural areas A 1999 poverty reduction and human capital develop- poverty assessment defined 51 percent of the ment However, this was a missed opportunity population as poor, including 33 percent who in the 1990s Furthermore, the temporary surge are extremely poor in aggregate growth and fiscal revenues due to During the 1990s, development effectiveness the prolect drew attention away fronm rising in the area of htiman capital development was poverty in rural areas and reduced pressure to shaped by four malor factors exogenous to the reallocate and improve the cost-effectiveness of social sectors First, Lesotho suffered from con- social spending FSort/i, the regional HIV/AIDS tinial political turnmoil, which erupted into vio- pandemic virtually destined Lesotho to high lence several times (most recently in 1998) The adult prevalence rates (currently estimated at 23 5 high degree of political instability has led to percent) While data are weak, anecdotal evi- constant turnover in ministerial and civil serv- dence abounds that HIV/AIDS is already over- ice appointments, resulting m slow and limited whelming Lesotho's understaffed and govemment decisionmaking, shifting prorities undersupplied health care system The epidemic 9s Lesotho Development in a Chial enging Envitonment has already beguin to increase monaitty rates to Development Effectiveness of World Bank an extent thar may reduce life expectancy by a Support in Education and Training decade or more in coming years Development effectiveness of W'orld Bank sup- port in the 1990s in the education and traming Human Capital Development in World Bank sector is judged as moderately satisfactory This Conntry Assistance Strategies ovemll rating is based on the following summary The World Bank's Country Assistance Stri'te- evaluations gies (CASs) for Lesotho (produced in 1991, Outcomes: moderately satisfactory. Rel- 1994, 1996, and 1998) showed increasing evance of the Bank's strategy was substantial poverty focus and a growing role for human Main objectives were to expand physical access capital development in reducing poverty-influ- to, and quality of, formal education However, enced particularly by a comprehensive Poverty relevance was undermined by inadequate focus Assessment in FY96 However, poveny monm- on deepening poverty and lingering gender dis- toring and benchmarks remained weak A lack parities that reduced school participation and of montonng resulted in a dearth of informa- reversed long-run progress toward untverssl pri- non between 1993 and 1999 that undermined mary education The efficacy of the Bank's ana- the relevance of the World Bank's strategy to lyric services and policy dialogue was also reduce poverty While performance benchmarks substantial, with strong sector work in the late were established in the social sectors, many of 1980s underpinning lending and a leading role these benchmarks suffered from weaknesses in policy dialogue In the last few years, how- such as vague wording, no baseline data, or ever, the Bank was more reactive than proactive unrealistic targets Benchmarks with respect to on the important issue of declining primary poverty reduction were not established until late enrollment rates Through lending, efficacy was in the decade Althotigh a main objective of substantial with respect to strengthening sector every CAS was to maximize the poverty- management, moclest with respect to improving reducing impact of LHWP, both the Bank and sectoral resource allocation and the quality of the country failed to exploit this potential in the basic education, and negligible with respect to 1990s technical and vocational education (TVET) and Along with increasing poverty focus, the ternary education Quality at entry was poor for World Bank increased its share of IDA lending the TVET and tertiary interventions Outcomes to the social sectors from around 25 percent in with respect to aid coordination and resource the 1980s to around 40 percent in the 1990s mobilization were also moderately satisfactory, While the commitment to social sector lending with Bank resources helping to leverage equal was stronger than It had ever been, stipporting amounts of donor support, which were ade- analytic work was sparse, and the link between quately coordinated by government Bank con- analysis and lending was weak until very late in sultation with external partners was viewed as the decade Overall, the relevance of the Bank's insufficient but improving. and hampered by lack increasing focus on human capital development of local representation or regionally based tech- was substantial relative to Lesotho's needs and nical staff stated policies However, the relevance of die Institftional development impact: nmod- strategy was undermined until late in the decade est Considering the degree of political turmoil by inadequate attention to poverty monrtoririg and institutional instabiliry in Lesotho, modest and poverty reduction It was also undermined progress in istitutional development impact (IDI) by failure to pay sufficient attention to gender is a notable achievement IDI was subsLantial- disparitLies, panticularly boys' educational par- and particularly notable--with respect to educa- ticipation and women's economic participation tion system and human resources management The Bank's Board noted these weaknesses at at the center, as well as in budding decentralized every CAS review support servces at the distnct level IDI in these areas had a direct impact on the country's imple- 96 Annexes mentation performance, prolect outputs, and sec- Development Effectiveness of World Bank tor outcomes However, IDI was negligible in Support in Health. Nutrition, and Population three areas essential for improving sectorall Development effectiveness of World Bank sup- resource allocation and adapting the ecltication pon in the 1990s in health, nLitrition, and pop- system to the regional labor market financial uilation (HNP) is judged as uinsatisfactory This management, TVET, and tertary education overall rating is based on the following suimmary Sustainability uncertain. SUstainability of evaluations net benefits is strengthened by the considerable Outcomes: moderately unsatisfactory. institLitional development within the Ministry of Strategic objectives in HNI focuised largely on Education, the relatively good monitonng capac- expansion of the health infrastructure network, ity, the strong sense of ownership within the sec- increases in staffing, promotion of family plan- tor, a growing degree of community participation, ning, selected disease control programs, and an and the pnonty accorded to edcUcation by the cur- array of health system ma.nagement issues Rel- rent political leadership However, sustainabil- evance was, on balance, suibstantial, buit objec- ity is highly uincertain in two critical areas tives were overly ambitiouis and lacking in political instability and financial viability (whichi selectivity By mid-decade, relevance was tinder- could be compromised by the introduction of mined by inadequate adaptation to the rising free primary education in 2000, failire to rein threat of HIV/AIDS Efficacy of interventions is in tertiary spending, and expected sluggishness difficult to assess duLe to inadequiate monitoring of goverrunent revenUes) For this reason, on bal- mechanisms and failuire to develop reliable sur- ance, sustainability is Lincertain vey instrirments and basic information systems Bank performance. satisfactory. The However, one can conclude that efficacy was Bank's support was grounded in appropnate ana- modest in strengthening family planning and dis- lytic work and consistent with the objectives of ease control programs Very modest efficacy the government of Lesotho and the Country was achieved with respect to decentralized Assistance Strategy The dialogue fostered a health services and pharmaceutical supply Over- strong sense of client ownership and stake- all attainment of physical objectives expanded holder participation The Bank maintained highly the rural and cirban network of facilities and the satisfactory lending supervision during a period infristructuire for distributing drugs, but was less of considerable political tunnoil The Bank team effective in ensuring provision of basic health had high continuity, ancl developed a strong rela- services EffiLacy was negligible with respect to tionship with the client that allowed for effec- analytic services, where no sector work was tive problem-solving Monitoring and evalciation done for neatly two decades in health and nLitri- were good, reflecting their inclision in project tion, and work on population was poorly timed design and inadequately disseminated Efficacy was Country performance: satisfactory. The also negligible with respect to the policy dia- Ministry of EdLication participated in, and macle logue, despite improvement at the end of the LISC of, analytic work to help define a compre- decade Finally, efficacy was negligible in hensive education sector reform program Con- addressing widespread chronic malntitrition and sLIltation with stakeholders has been fairly in the critical areas of sector management and extensive, while consultation with, and coorcli- resource allocation nation of, external partners has been reasonably Institutional development impact: negli- effective throLigh the Directorate of Planning gible. IDI was suibstantial with respect to two dis- tinder the umbrella of the two edUcation sector eaise control progrims benefiting from sustained development projects (ESDP I and 11) Cotin- technical assistance IDI was modest with respect terpart funding and program implementation to integrating family planning services into pri- were frequiently delayed, but uiltimately satis- mary health care and establishing a nutntion unit factory, while compliance with covenants has However, IDI was negligible where it counts the been highly satisfactory most in terms of overall sector management, 97 Lesotho Development in a Challenging Environment resource allocation, organizational structures, Constant turnover in political and civil service public and private institutional roles, human leadership undermined continuity and limited resources policies and manpower development, clecisionmaking needed for successful imple- information systems development, and moni- mentation Accountable departments took insuf- toring and evaluation The failure of IDI at this ficient responsibility for implementation, shifting level meant that the sector was largely without the burden to a separate Project Management leadership and direction for the entire decade, Unit The Ministry of Health also fell short in with substantial impact on implementation per- reaching agreements with nongovernmental formance, project outputs, and sustainability panners essential to achieve sector and project SustainabiUly: unlikely. Net benefits of inter- goals Finally, compliance with legal covenants- ventions in HNP in the 1990s are difficult to which were admittedly excessive and impre- ascertain due to lack of data, poor reliability of cise-was highly unsatisfactory data, and the confounding effects of HPV/AIDS However, if net benefits could be shown to be Key Lessons of Experience positive, their sustainability would be unlikely This report focuses on a few key lessons that Political and financial viability are highly uncer- emerge from carrying out a broad review over tam, particularly given the growng financial bur- the course of a decade, covering the entire den of addressing HIV/AIDS Technical range of Bank products and services and pro- viability-especially concerning maintenance of viding comparisons between two sectors infrastructure and retaining skilled personnel- involved in human capital development The remains unlikely Sustainability with respect to three most salient lessons are as follows government ownership, policy environment, Analytic services (economic and sector effectiveness of institutions, and participation work) benefit botb the Bank and the coun- must also be viewed as unlikely, despite progress try ifthey are bigh-quality, wetl-time4 and made since 1998 in developing a broad health adequately disseminated Timely sector work sector reform program through a consultative in education in the late 1980s provided a strong process that has begun to heighten ownership platform for the Bank's policy dialogue throtigh- and raise morale within the sector out the 1990s and contributed to satisfactory Bank performance: unsatisfactory. The quality at entry for subseqtLient lending opera- Bank's support was not grounded in timely ana- tions At the same time, this sector work assisted lytic work, and the policy dialogue was not the country in developing a sense of ownership well-sustained throughoit the decade Simuilta- of resulting reforms and interventions Dunng a neous implementation of two HNP projects dur- decade of political disarray, strong initial sector ing 1990-94 added complexity to already work helped develop a coherent framework to complex designs, and prevented the full incor- which the ministty could adhere In the HNP sec- poration of lessons leamed from the earlier proj- tor, a lapse of nearly two decades in formal ect into the follow-on project Hence, quality at analysis of the health sector and system under- entry for the laner project was unsatisfactory The mined the Bank's role in the policy dialogue, Bank also severely underestimated the institu- negatively affected quality at entry for lending tional capacity needed for implementation This operations, and offered little continuity to a was compounded by lengthy gaps in formal ministry buffeted by political change A high- supervision, as well as slow Bank action to qtality population sector review was produced resolve implementation problems as they arose too late to influence the design of lending oper- Country performance: unsatisfactory. ations, and was too poorly dissemrnated to serve The lack of capacity and political will to gener- as a catalyst for a necessary shift in strategic ate basic systems data contnbuted to the lack of objectives as the HIV/AIDS epidemic emerged meaningful analytic work in the sector, and the Relevance of Bank support witbin a sec- country must share accountability with the Bank tor can be eroded over time througb insuf- for poor quality at entry of lending operations ficient monitoring of sector trends and 98 Annexes crosscutting variables. In both sectors, the There is no substitutefor long-run devel- country's lack of capacity to monitor crosscut- opment of institutions capable of nanaging ting vanables prevented the Bank from maxi- the sector. T'his is particularly true in a politi- mizing the poverty focus of its strategy for cally unstable environment The Bank needs to human capital development The cotintry has no take the time and provide the specialized inputs regular poverty monitoring mechanism, making required for adequate assessment and capacity it relatively easy to overlook (especially in a con- building within lead institutions responsible for text of strong aggregate economic growth) the sector and subsector management Although impact that deepening poverty in rural areas has fragile and far from perfect, the institutional had on children's access to basic schooling development within the central and distrnct-level Likewise, insufficient analysis of gender- Ministry of Edtication offices has had a positive disaggregated data slowed the Bank's response impact on sector outcomes and is the most pos- to gender dispanties in education participation itive factor influencing the sustainability of out- inability to monitor HIV/AIDS led to underesti- comes Institutional development fosters mation of its prevalence, and consequently to leadership independent of political pressures underestimation of its impacts on poverty and Where institutional assessment was weak, insti- social welfare In the HNP sector, it is difficult tutional development forgotten, or capacity to say anything definitive about the development building failed, outcomes were invariably poor, effectiveness of Bank mterventions due to the as in TVET and tertiary education, as well as lack of performance indicators and monitoring throughout much of the HNP sector A sus- and evaluation systems Thus is not simply an eas- tained focus on human resource policies, work- ily corrected flaw in project design It is rooted ing conditions, and incentives also has a high in the long-standing failure of the country to payoff in terms of continuity of managers and develop basic capacity to collect, synthesize, staff-with subsequent impacts on the continu- and analyze data in the sector Regardless of the ity of vision, commitment to objectives, and country's manpower constraints, the Bank and implementation performance Through sector- otlier external partners must bear some respon- wide approaches and adaptable program cred- sibility for allowing the achievement of physi- its in both the education and HNP sectors, the cal project oblecives to overshadow the critical Bank enters the new century with a long-term development of informarion systems and reliable perspective on institution building that has the survey instruments potential to enhance development effectiveness Lesotho Development in a Challenging Environment Poverty Reduction and Rural Development Author: Jack van Hoist Pellekaan This paper evaluates the impact of the World of satisfactory internal qualtry Their impact and Bank's assistance program on poverty reduction overall valuLe, however, varied from satisfactory in Lesotho, with a focus on the contribution to to moderdtely unsatisfactory Giving most weight rural development The evaluiation is mainly for among AAA work to the poverty assessment the 1990s, btt it will also look at the penod prior completed in 1995, the over-all rating for ana- to the 1990s in order to put the recent decade lytical work is moderately satisfactory At the into perspective same time, the relevance and efficacy of the While the period covered by this evaluiation poverty reduction strategies and project assis- was one of considerable internal political change tance were moderitely unsatisfactory and, giv- within Lesotho, perhaps the most important ing relevance most weight, the outcome of the change was external-the transition in South assistance program with respect to poverty Africa from a political economy of apartheid to reduction was also moderately unsatisfactory one of racial inclusion This transition changed Specifically, the strategy of labor-intensive pro- the relationship between Lesotho and the South duction of high-valuLe crops sUch as vegetables Africa to one in which greater exchange of peo- proposed in the poverty assessment did not ple and trade wotild be possible The transition have a strong practical impact on incomes in agn- also resulted in changed partnerships between ctilture This was hecause small farmers gener- the government and donors anc different incen- ally did not have the resouirces to finance tives for private investment in Lesotho These increased production, irrigation for reliable pro- changes also had implications for the Bank's duction was extremely limited, technological assistance program Hence, the overall evalua- stipport was weak, and markets for high-value tion of Bank assistance needs to take account crops were remote and not strong Essential of the substantial socioeconomic changes that changes in the management of the mountain took place in the Souith Africa in the midst of the grazing resources, along with more intensive evaluation period produiction of livestock in lowland areas, which This evaluiation focuses on the overall out- would have had a malor impact on the poor, come of the World Bank's assistance program for were also not achieved Labor-intensive growth poverty reduction and niral development based in nonagricUltural sectors such as textiles did on their relevance and efficacy dtiring the 1990s increase but could not be sustained because of it also evaluates institutional development and the weak enabling environment for foreign direct the suistainability of these programs investment (for example, poor services) and the increased political uncertainty Strategic sector Conclusions work on social services and human capital devel- Poverty reduction. Poverty in Lesotho, meas- opment were relevant, but their inipact was Lired in terms of the headcount index, the depth only substantial in education of poverty, and inequality showed virtuially no In terms of other sectors, the education prol- change dtring the 1990s Nonetheless, poverty ects were relevant and effective in terms of did decline in the capital, Maseru, but it increased poverty reduiction, but their benefits for the in other urban areas and in nrital areas Projects poor are long term and hence not yet apparent financed by the World Bank had little or no Among the other projects, regardless of the impact on poverty reduction in the domains of strong implementation and income genermting those projecms performance by some, stich as the Lesotho High- The World Bank's poverty-focused analytical land Water liroject (LHWI'), all hald negligible and advisory (AAA) services were relevant and impacts on poverty reduction Obviously the 00 A-ne.es construction activity in the LllWP provided a capacity When the 1994 objectives were not major (one-time) boost to overall economic achieved they were then expanded in the next growth and employment, and would have CAS, but again not achieved While estab- increased the wage incomes of many Basothos' lishing challenges is an important function for who had assets stich as good health and rele- CASs, a lesson derived from this evaluation vant skills, but these were not necessarily the is that the Bank overreached in the chal- poor Apparently Phase IA of the LHWP created lenges that it set A more modest strategy about 8,000 jobs, of which close to 90 percent would have been prudent in the context of were held by Basothos It is not possible to the incertain and weak political, institutional, assess the number of poor who participated in and technical circumstances in Lesotho dur- this lob market, yet it is known that the total num- ing most of the 1990s ber of jobs generated by the LHWI' is less than * Supply-led agricultural development strat- the number of new entrants to the job market egy usually fails. In the 1980s and early each year in Lesotho 1990s, Lesotho, with strong World Bank Institutional development for poverty reduc- support, focused on a supply-led food self- tion as a result of World Bank-assisted projects suIffiCiency and agricultural development strat- was modest, some lasting institutions were estab- egy, which foundered because there was lished but there were many more disappoint- neither a sound technical production basis nor ments Since no Bank-assisted projects could be adequiate markets for output The likely fall- shown to have had an impact on poverty reduc- tire of supply-led strategies in nLiral develop- tion in the projects' domains, sustainability in ment was a lesson that the World Bank had terms of poverty reduction is not an issue already learned in earlier years Rural development. The relevance and quial- * Successful institutional development ity of analytical and advisory work in respect to needs strong government commitment. rural development was generally satisfactory A regular and logical objective in Bank- in contrast, the relevance and efficacy of World assisted agriculture and rural development Bank-assisted rurl development projects, taken projects in the 1990s was institutional devel- as a group durng the 1990s, were modest at best opment in areas such as land and grazing Therefore their outcome was evaluated as unsat- management, road rehabilitation and main- isfactory The ongoing rural development proj- tenance, and rural development in the high- ect, however, shows some promise that it will lands None of these objectives were met be at least moderately satisfactory Institutional because there was at best a weak commitment development in rural development projects was from the government to make the necessary evaluated as modest, and the sustainability of instituItional changes these projects following the end of World Bank * Substantial economic growth was not suf- support was evaluated as unlikely ficient for poverty reduction in rural areas. Annual GDP growth of about 2 per- Lessons Learned cent per person in Lesotho during the 1980s The following main lessons emerged from this anrd 1990s had no impact on poverty reduc- evaluation of the World Bank's assistance pro- tion in the chronically poor rural areas grams in agriculture, niral development, and because agricultural and rural development poverty stalled during these years It will be essential Assistance strategies need to be realistic. in the future to focus on growth and employ- Three CASs in the 1990s proposed assistance ment in agricultuire, livestock production, strategies and investments in agriculture and agro-induIstry, and services in rural areas, if rural development from the first CAS in 1994 poverty is to be reduced from its current high their goals proved unachievable because of levels unrealistic expectations, weak government * Technical change in agriculture is a time- commitment, or inadequate implementation consuming process. While prospects for 101 Lesotho Development in a Challenging Environment some crops (such as horticultural crops) may and grazing policies in the highlands, along appear promising on the basis of theoretical with improved advisory services to achieve analysis, the technical changes needed to the sustainable development of livestock pro- achieve the promises on a sustainable basis duction in those areas based on wool and take many years to accomplish and act as sub- mohair production, as well as the production stantial constraints on filfilling the original of young steers for fattening in South Africa promise There should also be increased attention to Future development of a sustaiaaable live- fostering the intensive production of live- stock industry. The World Bank should, in stock in the lowlands This would increase partnership with the government, make a incomes and ease the pressures on the high- renewed effort to improve land management land pastures 102 Evaluating Bank Assistance to Lesotho for Private Sector Development Author Kevin Lumbila Summary Main Conclusions and Recommendations This paper evaluates the impact of the World The Bank's program for improving the poiicy Bank's assistance program for private sector environment for private sector development development (PSD) in Lesotho during the 1990s has been substantially relevant, as has its sup- This program was the third-largest in IDA's port- port for privatizing SOEs and reforming the folio during the 1990s, accounting for about 22 financial sector However, otutcomes have been percent of total IDA lending to Lesotho- There unsatisfactory due to insufficient government were two prolects the Industrial and Agro- commitment, weak institutions, and poor imple- industries project ($21 million, approved m fis- mentation of overly ambitious and overly com- cal FY91 and closed in FY98), and Privatization plex Bank assistance and Pnvate Sector Development ($11 million, In deploying Bank products and services, approved in FY94, and closed in FY01) As a the overall assistance was substantially relevant, whole, PSD assistance focLuses on supponing pol- with a few exceptions However, the efficacy of icy changes to improve the environment for Bank's lending operations in achieving their PSD, promoting foreign and indigenotus invest- objectives was negligible with regard to the first ment, developing linkages between the formal project, and is so far modest in the second proj- sector and small and medium-size enterprises ect tinder implementation, leading to an over- (SMEs), and privatization of state-owned enter- all unsatisfactory outcome The PSD program as prises (SOEs), banks, and utilities The overall a whole was successful in supporting a nuLmber objective is to promote export-led growth, lead- of investment policy reforms and attracting for- ing to a reduction In unemployment eign investors, but required government subsi- The period covered by this evaluation (the dies The program was not successful in 1990s) was one of relative prospenty duLe to two encouraging indigenous investment, diversifying major factors the construction of the Lesotho agncultural investments into higher value-added Highlands Water Project (LHWP) and the rapid activities, or establishing linkages to the LHWP expansion of the export-oriented manufacturing The privatization process evolved more slowly sector owned by foreign investors (mainly South than expected The other two dimensions of this Afncans) evading anti-apanheid sanctions How- evaluaton-development effectiveness and attn- ever, growing unemployment rates in the 1990s button-indicate the same results required broad-based economic growth, forcing Sustainability of benefits Is unlikely since the government of Lesotho to develop a strat- growth in the pnvate sector has depended on egy that would not only sustain growth but also large inflows of aid and temporary increases in develop (through linkages between foreign and foreign direct investment by manufacturers evad- local firms) an indigenous pnvate sector capa- tog textile export quotas or apartheid-era sanc- ble of diversifying employment opportunities tions in South Africa, all of which are likely to The World Bank assistance program supported decine An improved environment for pnvate sec- such a strategy tor development and growth depends also on The outcome of Bank assistance has been enhanced politcal stability, better governance, evaluated in terms of the Bank services and deeper parstatal reform, and a stronger financial products, the development effectiveness of the sector The Bank's contnbution to such institu- program, and the extent to which the outcome tional changes has been modest during the 1990s of the program is attributable to the Bank's This evaluation suggests that future World effort Bank assistance should continue to focus on key 1 03 Lesotho Development in a Challenging Environment constraints to private sector development These Privatization and private sector development include the lack of local market opportunities that are highly political processes, but in designing limits the emergence of an incigenous private its assisrance program the Bank did not take suf- sector, a legal system that is not capable of pro- ficient account of the political economy of tecting investors, the slow privatization of the change 13efore undertaking an ambitious sec- large ptibhlic enterprise sector that avoids the tor reform suich as this, the Bank should assure creation of a level playing field for the private that the government is committed and imple- sector, and the financing of the public enterprise menting agencies have the required technical, sector losses, which crowds out private sector financial, and legal capabilities The Bank did not investment In addition, continued inefficien- assess the extent of vested interests against pri- cies in Lesotho's public utilities and weaknesses vatization, and Bank-supported private invest- in the financial sector have also hindered pnvate ment promotion agencies lacked such skills sector development and burdened the govern- The Bank's assistance would probably have ment budget contributed more to the emergence of a viable private sector had it been preceded or accom- Lessons panied by the array of interlocking legislative, No analytical work preceded either of the two regulatory, and institutional and financial pending operations to impact their design phase measures critical to the creation of a more con- This was particularly evident in the attempts to genial environment for private sector invest- develop the indigenous private sector in the ment Slow progress has been made on the context of the Agro-Industry prolect, it did not imposition of financial discipline on loss-mak- succeed partly because of an inadequate assess- ing public enterprises, including ptiblic utilities, ment of the prospects and constraints in the sec- increasing their recouirse to commercial bank tor Similarly, the failure to create linkages credits and crowding out private sector invest- between the manufacturing export firms and ment These credits were provided with gov- local entrepreneurs, as a way of developing the ernment guarantees, negatively affecting the indigenous sector, was partly explained by the health of the banking system and crowding out lack of a pre-feasibility sttudy private investment 104 Annexes Water Sector Strategy Review Author: Guy Le Moigne Summary consequences of a delay in starting Phase 1B that World Bank lending in the water sector to Lesotho led to the justification of its implementation in since 1990 has been limited to the Lesotho High- accordance with the Treaty lands Water Project (LHWP) The exclusion of The parties to the project agreed to apply the other water projects from Bank assistance pro- Bank's environmental and social safegtuard poli- grams followed an explicit decision in the mid- cies, although they were introduced too late to 1980s to focus on the LHWi' It was assumed that apply in Phase IA Nevertheless, a number of other donors would finance the development of donors consider that the Bank contributed to the domestic water sLupplies However, other donors dependency syndrome of the people directly did not assist and domestic water suLpplies affected by the project by endorsing the exten- remained at a low standard The Bank has taken sion of compensation to families that were forced a constructive approach to assistance in this sec- to resettle from 15 to 50 years In addition, sus- tor in the past year that is much appreciated by tainability of the social and environmental com- government agencies and donors alike ponents is not yet certain, as organizations Studies of the LHWP concept date back to the (public, private, or community) with the capac- 1950s, but the project was prepared in the 1980s ity to take over the operation and maintenance The main objective is to meet the growing of these assets have, in many cases, not yet demand for water in the heartland of the South been identified Afnca and to help Lesotho export its most abun- Expenence to date on using royailties from the dant natural resource Total lending by the World project to reduce poverty in the cocintry through Bank for the project to date amounts to $123 7 the Development Fund (established to provide million equivalent (net of cancellations of $41 1 financial support for economic and social devel- million), representing less tItan 4 percent of the opiient) indicates that sucd a LISc of royalties will estimated $3 7 billion total cost of Phase I of the require far more attention than it has received project so far The Bank's objective of assisting Lesotho to In retrospect, the Bank should have made broaden its economic base through a substan- greater efforts to convince the two governments tial increase in the economic exploitation of its to bring the hydropower component under the water resources remams relevant There is unan- purview of the central oversight authonty estab- imous agreement among the various agencies lished for the project This would have facilitated associated with this major endeavor that the implementation and financing of the power Bank played a significant and catalytic role in the component, whlle the sharing of the total cost negotations of the Water Treaty between Lesotho of the project between Lesotho and South Africa and South Africa, as well as in the formulation, (with Lesotho contributing a percentage corre- financing, and implementation of phases IA spondmg to the estimated cost of the power com- and 1B of the project These project phases will ponent) wocild have improved governance and transfer about 17 and 12 million cubic meters per created a joint incentive to save on all costs second of water respectively to the South Africa The Bank rightly concluded that Phase 2 of The role of the Bank in financing consulting the project woLild be postponed by several years engineering and a Panel of Experts was bene- clue to chinged circumstances in South Africa, ficial to ensure the quality of construction, in but it has not paid enough attention to the con- developing emergency preparedness, and in sequences of this postponement on the future detaied study of instream flow requirements The of the Lesotho Highlands Authority (LHDA) and Bank also carried out a detailed analysis of the its staff 105 Lesotho Development in a Challenging Environment Bank assistance in the evaluation of bids was satisfactory It is likely that the LHWP is sus- considered helpful by LHDA However, in ret- tamable asstiming the continLed sound per- rospect, it seems that the Bank's procurement formance of the LHDA guidelines at the time did not prevent the alleged The presence of a Bank resident representa- bribery charges and legal proceedings on this tive in Lesotho would probably have facilitated matter are,now underway in Lesotho The Bank Bank assistance to the government and LHDA Oversight Committee for Fratid and Corniption in the implementation of the social and envi- is evaluating the case OED should carry out an ronmental issues of this very large and complex audit of the LHWP at the completion of Phase prolect It would also have enabled the Bank to I B when key decisions affecting the achievement conduct a more effective dialogue with cntics of of the prolect objective of redicing poverty and these issues from NGOs and the media protecting the environment will have been taken and their consequences on the distribution and Lessons sustainability of project benefits can be assessed There are five major lessons to be learned from this project They are as follows Conclusions * Detailed, competent, transparent, collaborative So far the LHWP has been a very sticcessful prol- planning and preparation of projects is highly ect that has met its major goals, although it is not likely to result in sound outcomes The good yet close to meeting its social goals This short- work done by the various project teams m coming is a disappointment, but vigorous action Lesotho, South Africa, and the World Bank are is being taken to address the problems and it is clearly reflected in the results on the ground possible that in the end the social goals will also * Where there was far less planning (such as be achieved for the social objectives), the results were The outcome of this project (made up of the disappointing and damaging to the status of Engineering Credit and the Phase IA and lB the project so far loans) is evaluated as satisfactory, based on * Leaving the responsibility for the implemen- high relevance and substantial efficacy Institu- tation of an integral component of a project Lunal development for the project as a whole to miianagemilent outIside the central oversight has been evaliated as substantial on the basis authority (as in the case of the Muela power that various instittitional arrangements such as plant) is likely to lead to differing standards conimissions and ptinels, as well as the core and a lack of cohesion in the overall progress implementing authority (LHDA), performed in of a project excellent fashion At the same time, there tire * Independent monitoring of the progress of some instituItional arrangements concerned with projects (such as by panels of experts) is social development (rural development, poverty valuable and pays high dividends in efficacy reduction, and resettlement) that have not per- and efficiency fonmed as well, and their combined performance * Avoiding stakeholder participation in the in Phase IA was rated as unsatisfactory For design, planning, and implementation of proj- Phase lB the outcome of the social development ects will inevitably mean that important issues components is likely to be significantly improved are overlooked and support for the project is and has provisionally been rated as moderately undermined 106 ENDNOTES Chapter 1 per year in the second half of the decade, the 1 All dollar amounts represent U S dollars LHRF had the potential to suipport targeted unless otherwise notecl poverty reduction efforts and strengthen basic 2 SADC members are Angola, Botswana, social services While the LHRF did support the Democratic Republic of the Congo, Lesotho, local employment-generation schemes, and trans- Malawi, Mauritius, Mozambique, Namibia, the ferted about a thlid of its revenue to the gov- Seychelles, South Africa, Swaziland, Tanzania, ernment's general revenue account, use of the Zambia, and Zimbabwe funds became highly politicized and lacking in 3 A UNDI'/World Bank mission estimated the transparency A project appraisal for Plhase I B total cost of reconstnrcting damaged properties of the project noted that the selection of the ni- at 160 million maloti, or $34 million (World tial projects was not transparent, technical Bank 1998b) designs were weak (and hence some dams and 4 The 2000 Intenm Poverty Reduction Strat- roads have been washed away), and weak- egy Paper (I-PRSP) (Lesotho 2000) indicated a nesses have been detected in financial control slight improvement in the national incidence of and monitoring poverty in 1999 compared with 1993 (68 percent 2 Regional staff argues that whether the Bank as opposed to 71 percent) Country Assistance was overly ambitious or not in its judgment of Evaluation (CAE) and I-PRSP estimates differ government commitment and implementation because the CAE estimates are on a per capita capacity depends on the appropriateness of basis, the l-PRSI' estimates on a household hasis uising current standards and priorities to judge 5 Less than 4 percent of children entenng pn- past actions mary school successfully complete secondary 3 For instance, it had been estimated that in school, and only 10 percent of students enter- countries with adult prevalence of 10 percent or ing secondary school successfully complete that more, HIV/AIDS will erase 17 years of potential level (Goldstein 2001, p 3) gains in life expectancy (UNAIDS 2000 and 6 The Human Development Index is a com- World Bank 2000b) posite index that measures a country's achieve- 4 Regional staff argues that selectivity has not ments in terms of life expectancy, educational been possible because the challenges facing attainment, and adjusted real income Lesotho are numerous and require resources disproportionate to the size of the economy Chapter 2 5 The country team for Lesotho is working 1 According to the 1997 Labor Force Survey, with the government in developing a Poverty about 13 percent (46,100 persons) of Lesotho's Reduction Strategy Plaper by focusing on working population are employed in government strengthening monitoring and evaluation or in parastatals The rest of the workforce 6 The search for work will need to range well (about 87 percent, or 307,000 persons) is occu- beyond South Africa, even though it is an obvi- pied in the informal sector Of those working in ous place to look Economic growth in South the informal sector, 10 percent are working on Africa has been low and rates of unemploy- their own, 26 percent are paid employees, 3 per- ment are high (reported at about 37 percent in cent are unpaid employees, and the remaining 1997 by Gelb and Tidrick 2000) Furthermore, 61 percent are subsistence farmers (which sug- the informal sector in the South Africa, which gests about 180,000 subsistence farms) would be the most logical sector for the employ- inent of Basothos, is small by Afncan standards Chapter 3 7 A recent World Bank study indicates that I The Lesotho Highlands Revenue Fund ESW has significant positive impact on the qual- (LHRF) was established as an extrabudgetary ity of World Bank loans, due to better designed fund in 1992 and inflows began in the mid- and implemented projects (Deininger, Squire, 1990s (initially import duties, later, water royal- and Basu 1998) Furthermore, OED's evalua- ties) With inflows averaging around $45 nillion tion of Bank's lending to Lesotho by sector 1 07 Lesotho Development in a Challenging Environment shows that sectors with effective ESW, such as Chapter 4 education, scored well I The government embarked on a sertes of 8 A country economic memorandum and structural adjustment programs supported by Ptiblic Expenditure Review were prepared for the International Monetary Fund (IMF) SAF for Lesotho by the World Bank in 1987 and 1988, 1988-89 to 1990-91 of SDR (Special Drawing respectively No such economic reporns were pie- Rights) 3 0, 4 5, and 3 0 million, respectively, and pared in the 1990s The 1995 Poveny Assessment ESAF for 1991-92 to 1995-96 of SDR 4 5, 6 0, 7 6, proposed putting in place a system of data col- 8 4, and 7 2 million, respectively The IMF and lection that would penmit poverty monitoring the World Bank emphasized key structural 9 See SW-B & A Consult (1999) and Eriksen refomis, including pnvatzation, parastatal reform, (1996) and deregulation of agricultural markets 10 For example, rural development projects 2 The government has responded to these had unsatistactory outcomes over a long period negative developments by taking several meas- starting well before the 1990s There has been ures During January-September 2000, the gov- a sequence of failed projects followed by ernment implemented an IMF Staff-Monitored attempted solutions in follow-up projects that so Program and, in December 2000, reached under- far have not yet shown positive results Specif- standings with the IMF and the World Bank on ically, the unsatisfactory Thaba Bostiu Area a program that would be supported by a three- Development Project (1973-79) was followed by year arrangement under the Poverty Reduction the unsatisfactory Basic Agricultural Services and Growth Facility (PRGF) In March 2001, the Project (1978-85) Both projects were intended IMF approved a PRGF loan amounting to 24 5 to support increased agricultural production, SDR ($32 million) but both fell far shon of tieir targets because the 3 The annual growth rates for Swaziland necessary technology had not yet been clevel- and South Africa in the 1990s were 0 6 percent oped, and the policy environment was not pro- and -0 6 percent respectively For the second half pitious They were followed by the unsatisfactory of the 1980s their growth rates were 5 8 and 2 4 Land Management and Conservation Project percent respectively (1988-97), which set back progress on impor 4 In 1998, the United Nations Development tant issues such as land policy This was followed lirogram (UNDP) found that 45 percent of all by the contemporary 1998 Agncultural Policy and income flows to the richest 10 percent of the Capacity Building Project, which tackles land pol- population, compared with less than I percent icy again Two years after Board approval, this for the poorest 10 percent, translating into a Gint project, apan from meeting conditions of effec- coefficient of 0 57 (UNDP 1999) tiveness one year after Board approval, has only 5 "Supply-led" refers to a development strat- recently met a number of important milestones egy focused on generating a supply of goods and on process issues It has made virtually no services without necessanly taking account of progress on substantive matters sucs as improv- demand "Demand-led" refers to a strategy ing marketing, pricing policy, and land man- focused on responding to a known or projected agement Its closing date will therefore inevitably demand for goods and services be delayed The most recent Community Devel- 6 Under the recent fiscal 2000 ESDP 11, the opment Support liroject became effective in July World Bank hopes to reverse the negative trend 2000 but is already behind schedUle in recurrent resource allocation through public 11 Aggregate country portfolio performance expenditure review and establishment of a can differ from the performance of a country pr- medium-term expenditure framework gram as evaluated in a CAE Nevertheless, prol- 7 Until the end of the decade, World Bank ect portfolio performance tends to be positively objectives were oriented toward expanding but weakly associated with OED's overall rating physical access to, and quality of, formal edu- of the Bank's country program (World Bank cation, rather than enhancing participation 2001) through nonformal or more flexible forms of 108 End-otes schooling and eliminating financial barriers to 2 World Bank (1999) participation by the poor These omissions 3 Within ESDP I (1991-99) and ESDP 11 became obviouis by the end of the decade, lead- (1999-03), IDA finding has been more than ing to a revision of World 13ank objectives to matcied by parallel funding from external part- include-in addition to a continued foctus on ners (EC and USAID for ESDI' 1, U K, AfDB, Ger- improving the quality of basic education-a milany, and Ireland for ESDP 11) The IDA renewed emphasis on affordable access and commitment has also helped to mobilize gov- equity, nonformal educauon, and early childhood ernment resources, which amount to nearly 30 development to achieve universal primary edu- percent of total program costs under ESDIi I cation by 2011 4 A new lir6lect Accounting Unit will be established within the Ministry of Health to Chapter 5 allow for standardized aind synthesized report- 1 As not all completed projects are sLibject ing of all partners' contributions to OPEV evaluation, there could be a dibcrep- 5 The UNDP is responsible for donor coor- ancy between table 3 3 and Annex table E 6 dination in Lesotho and organizes the country's These evaluations were carried out before the penodic roundtable conferences The last round- cuirrent use of the multilateral development table was held in Geneva in 1997, duiring which bank-recommended evaluation criteria (that is, it was agreed that there would be no roundtable relevance, efficacy, efficiency, institutional devel- conferences until the government reformtilated opment, and sustainability) its poverty program (then anticipated to haippen in two years) However, no roundtable confer- Chapter 7 ence has been held since 1997 becaulse of the I Overall, the qualiry of supervision was mod- political instability following the 1998 elections erately satisfactory, but Bank staff turnover was 6 The Commonwealth/World Bank vtilnera- sometimes rapid For instance, for the Agrcultural biliry index, which ranks countries according to Policy and Capacity Building Project, the tisk measurable components of exposure (such as manager has been the same since appraisal, also, lack of diversification, extent of export depend- for the rural development component of the ence, and impact of natural disasters) and LHWI', the task manager has been the sIme since resilience to external shocks, lists Lesotho among the appraisal of Phase IB However, in the case the most vujlnerable countries (World Bank, of the Road Rehabilitation and Maintenance Proj- 2000e, table 6, p 22) ect, there have been three task managers since Board approval in May 1996 and very little evi- Annex G dence of improvement in project performance 1 A person who is a national of Lesotho is The problem of changing task managers also referred to as a Basotho The national langtiage applies to the Community Development and SUp- is Sesotho pon Plroject approved in fiscal 2000 1 09 BIBLIOGRAPHY AfD]3 (African Development Bank) 2001 SIDA (Swedish International Development Lesotho, CotintryStrategyPaper 1999-2001 Authority) 1996 Lesotho'sStrategicEconomic Ahidjan Optiois Toward Closer/ntegration Macro- _ 1988 "Economic Prospects & Country economic Report 1996 4 Stockholm t'rogramming " Ahidjan Taddese, Aheha 1996 "A Review of the Focus Detninger, Klaus, Lyn Squire, and Swati Basu on Poverty Reduction in FY96 Cotntry Assis- 1998 "Does Economic Analysis Improve the tance Striategies in the Africa Region " World Quality of Foreign Assistance?" World Batik Bank Africa Regional Office, Washington, Economic Review 12(3) 385-418 1) C Photocopy Enksen,John H 1996 "An Evaluation of the Agn- UNAIDS (Joint United Nations Programme on cultural and Livestock Activities of the Lesotho HIV/AIDS) 2000 7he UNAIDS Report New Highlands Water Protect-CUrrent Status and York, NY Oxford University Press Future Onentation " World Hank, Washington, UNDI' (United Nations Development Program) D) C Photocopy 2000 Hunian Developniest Report New York, Gelh, Alan, and Gene Tidnck 2000 "Growth and NY Oxford University Press Job Creation in Africa " World Bank Africa _ 1999 World Income Inequality Database Region, Washington, D C 'lihotocopy New York Goldstein, Ellen A 2001 "Lesotho CAE World van Holst Iiellekaan, Jack 2001 "Lesotho CAE Bank Support for Human Capital Develop- Poverty Reduction ancI Rural Developmcnt " ment in the 1990s " OED Lesotho CAE Back- OEID Lesotho CAE Background Plaper World ground Paper World Bank, Washington, I) C Bank, Washington, D C Photocopy Plhotocopy World Bank 2002 2001 Annual Reviezv of Deed- IMF (International Monetary Fund) 2000 World opnientEffectiveness Making Chotces Oper- E'cononnic Ouitlook Washington, D C ations Evaluation Depanment Sticly Series Lesotho, Ministry of Development Planning Wasliington, D C 2000 Interim Poverty Rediction Strategy - 2001 AniiuialRevmeevofDevelopmentLffec- Paper Maser (Also availahle at the IMF tiveness From Strategy to Results Operations website ) Evaluation Department Study Series Wash- Le Moigne, Guy 2001 "Lesotho CAE Water ington, D) C World Bank Sector Strategy Review" OED Lesotho CAE P 2000a Lesotho 7heDevelopmentitmpactof 13ackground Paper World Bank, Waslsing- IIIV/AIDS Selected Issues aid Options World ton, DC Photocopy Bank Repon No 21103-LSO Washington, DC Lumbila,Kevin 2001 "LesothoCAE Evaluating - 20001h ItetsijfytngActionagainstHII/AIDS Bank Assistance for Private Sector Develop- in Afnca-Responding to a Development Cn- ment " OED Lesotho CAE Background liaper sts World Bank AIDS Campaign Team for World Bank, Washington, I) C Photocopy Africa Washington, D C OECD Vanous years "Geographical Distribhition _ 2000c Cat Afnca Claim the 21st Cen- of Financial Flows to Aid Recipiencs " Paris tury? Washington, D C Sechabh, Consultants 2000 Poverty and Liveli- _ 2000d "Is Census Income an Adequate hoods iz Lesotho 2000 Morethan aMapping Measure of Household Welfare? Combining Exercise John Gay and David Hall, eds Censis and Survey Data to Construct a Poverty Maseru Map of South Afiica " SLatstics South Afnca and _ 1999 Poverty in Lesotho, 1999 Maserni the World Bank, Washington, D C Photocopy _ 1994 Poverty in Lesotho, 1994 A Mapping - 2000e Small States Meeting Challeniges in Exercise Maseru the Glohal Economy Report of the Com- SW-B & A Consult 1999 "Report on the 1999 monwealth Secretaniat/World Bank Joint Task Socio-Economic Survey of Phase IA " Paper Force oni Small States Washington, D C, and prepared for the Lebotho Highlands Water London World Bank and Commonwealth Project Maseru P'hotocopy Secretariat Lesotho Development in a Challenging Environment _ 1999 "Lesotho Community Development _ "Lesotho Highlands Water Project-Phase Support Project" Report No 18387-LSO IB" Project Appraisal Document 17727 Wash- Washington, D C ington, D C _ 1998a "Lesotho A Review of Strategic - 1995 "Lesotho-Poverty Assessment Options for Financial Sector Reform " Wash- Sector Report 13171 Washington, D C ington, D C Photocopy Photocopy - 1998b "Kngdom of Lesotho Post-Conflict _ Various World Development Indicators Needs Assessment " Washington, D C Washington, D C lihotocopy tt2 OPERATIONS EVALUATION DEPARTMENT PUBLICATIONS The Operations Evaluation Department (OED), an Ordering World Bank Publications independent evaluation uinit reporing to the World Customers in the United States and in territories not Bank's Executive Directors, rates the development served by any of the Bank's publication distibutiors may impact and performance of all the Bank's completed send publication orders to lending operations ResuIlts and recommendations are reported to the Executive Directors and fed back into The World 13ank the design and implemcntation of new policies and 10 O Box 960 prolects In addition to the individuial operations and Herndon, VA 20172-0960 country assistance programs, OED evaluates the Bank's Fax (703) 661-1501 policies and 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