CAFI project spends just 41% of budget
As Auditor General exposes growing gulf between the country’s fiscal plans and economic reality
MOTSAMAI MOKOTJO
MASERU — A scathing new report from Auditor-General, ’Mathabo Makenete, on Lesotho’s consolidated financial statements for the year ended March 31, 2024 has laid bare a deepening disconnect between the government’s fiscal policy and the lived economic reality facing the nation.
Within the 400-plus pages of the voluminous audit document, one initiative stands as a stark symbol of Lesotho’s implementation crisis: The Competitiveness and Financial Inclusion Project, better known as CAFI.
Despite maintaining technically clean accounting books, the project has failed catastrophically in its core mission of stimulating the private sector.
Launched under the Ministry of Trade, Industry, Business Development and Tourism, CAFI was designed to address two critical weaknesses in Lesotho’s economy – low private-sector competitiveness and shallow financial inclusion. Funded through a grant from the International Development Association (IDA), the project was intended to channel resources directly into businesses, entrepreneurs, and financial access points across the country.
Yet the Auditor-General’s latest findings reveal a project functionally paralyzed. For the period under review, CAFI recorded a spending capacity of just 41 percent of its revised budget.
Against a revised allocation of M11.74 million, the project had managed to execute only M4.86 million by March 31, 2024. Nearly 60 percent of intended stimulus funds remained untouched – a failure that the Auditor General’s office describes as far more than an administrative oversight.
“It is a profound failure to deliver,” the report states.
Adding to the paradox, CAFI received an unqualified audit opinion for its 2022/2023 financial statements – a “clean” bill of health on paper. However, that technical success is undermined by the fact that the project’s 2023/2024 financial report remained outstanding at the time of the Auditor General’s review.
This delay reflects a systemic malaise. The Auditor General notes that late submission of financial reports by Chief Accounting Officers (CAOs) is a “persisting challenge,” with some submissions arriving as late as October 2024 – months after statutory deadlines.
For CAFI, the combination of a missing current-year report and anemic spending suggests that while past books may be tidy, present management is failing to meet the urgency of Lesotho’s economic needs.
The Ministry of Trade, which oversees CAFI, presents its own paradox. While its development projects struggle to move money into the economy, the ministry itself proved remarkably efficient at collecting it. The Auditor General reveals that the ministry’s actual revenue collection reached M22.33 million – an over-collection of 106 percent against its original budget.
“This disparity – where the state over-collects from the public but fails to spend even half of the grants intended to help them – is a symptom of a government that is more focused on its own survival than on national development,” the report warns.
Such over-collection may also indicate that revenue projections were set too low, leading to a misleading assessment of the government’s true fiscal position.
CAFI’s failure to deploy its budget unfolds against a backdrop of rapidly rising national debt. Lesotho’s total debt has increased by 103 percent over the last seven years, reaching M25.81 billion by March 2024. Much of this debt consists of multilateral loans intended for infrastructure and social benefits.
The irony is biting – while CAFI sits on donor-funded grants meant to boost competitiveness, the government has simultaneously failed to meet M2.81 billion in payment obligations to suppliers and contractors. When the state cannot pay businesses within the 30-day statutory window, it strangles their cash flow and risks widespread closures and job losses – directly undermining the very “competitiveness” CAFI was built to foster.
Beyond spending failures, the Auditor-General highlights broader breakdowns in asset management. Four spending units purchased assets totalling M96.03 million, yet only M2.07 million were recorded in their asset registers. While CAFI’s specific acquisitions are not detailed in that list, the Ministry of Trade operates within an environment where missing registers lead to loss, misappropriation, and an inability to safeguard public property.
“This systemic lack of accountability means that even when a project like CAFI does spend money on equipment or infrastructure, there is no guarantee those assets will be tracked or maintained for the benefit of Basotho,” the report notes.
The paralysis also strikes directly at the Extended National Strategic Development Plan II (NSDP II), which is supposed to monitor progress on economic outcomes. The Auditor-General observes that ministries often engage in activities outside NSDP interventions, leading to duplication and inefficiency.
While CAFI is technically aligned with economic growth goals, its 41 percent spending rate mirrors a wider government trend: physical progress on capital projects regularly lags behind scheduled timeframes.
The overall project expenditure for the government was only 73 percent of the budget, with physical progress “generally lagging.”
The Auditor General concludes that the quality of financial reporting requires continuous cooperation from Chief Accounting Officers, who must “start to own the preparation of the reports for their spending units.”
For CAFI, this means moving beyond the technicality of an unqualified audit and focusing on the vigorous execution of funds. The Budget Controller and CAOs must ensure that grant budgets are accurately recorded and aggressively implemented in line with public financial management rules.
As it stands, CAFI represents a missed opportunity of the highest order. With only M4.86 million spent against an M11.74 million target, a project named for financial inclusion is failing to provide precisely that.
“Until the Ministry of Trade can bridge the gap between historical audit compliance and actual economic stimulus,” the report concludes, “the Competitiveness and Financial Inclusion Project will remain a symbol of a government that knows how to count its money but doesn’t know how to use it for the betterment of its people.”
The Auditor General has laid out the facts. Whether the Ministry of Trade will prove that “inclusion” means more than a line item in a deeply flawed book of estimates remains an open question.
