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Behavioural aspects in budgeting



Every organisation has a mission, which explains the reason for its existence, and vision, which describes what the organisation aims to be in the future, which is usually inspirational and aspirational. The goal of the organisation will be to achieve its mission and vision.
To achieve the mission and vision, organisations develop strategic plans which have a combination of short-term and long-term strategies. Short-term strategies are implemented through the annual budgets.

Since budgets are used to implement the strategic plan, they are commonly used as tools for controlling and planning in an organisation. When the budget is achieved, it also means short-term strategies have been successfully met. It is therefore important that when preparing a budget the objective should be to achieve the following: implement the strategic plan, motivate staff to achieve the targets, help in evaluating the performance of the organisation and employees, and optimally allocate resources among others.
There are behavioural issues that arise when crafting budgets. If the process is not handled correctly there are certain negative behavioural issues that can arise during the process thereby destroying the benefits that should accrue from having budgets.

Budgets are useful in motivating staff to perform to meet or exceed targets. However, for a budget to motivate staff, the targets set should be achievable and realistic. When the targets are set too low, employees will not be motivated because the targets are easily attainable and therefore the employee will not stretch themselves to achieve them.
In the same vein, if the targets are perceived as unattainable and unachievable the employees will not be motivated to work harder because they see the budget as too difficult anyway. The budget should therefore be set at an achievable level, the level at which actual performance is expected to be, and therefore employees will perform as expected. When setting targets it’s important that the targets be realistic otherwise they will be de-motivational to employees.

A budget contains targets against which the performance of employees and the organisation is evaluated. The evaluation process would normally involve a comparison of actual performance with the budget. This process is however fraught with challenges. One of the challenges is that the budget may have been inaccurate from the beginning, thus making it unachievable for the employee; or with the changes in the environment the budget may become unachievable, as time period progresses; or one departments’ bad performance can interfere with the other department if one department’s performance is dependent on another.

As a result, the outcome of the evaluation will have an adverse impact on the other department and the employee. Poor performance by the employee can impact on incentives or penalties if the attainment of targets is linked to reward. So it’s critical to ensure that the performance of an employee is not negatively affected by another department’s poor performance. The preparation of the budget should therefore bear these issues in mind to avoid causing a dysfunctional behaviour on staff.

When the performance evaluation is linked to a form of reward or penalty system, there is a possibility for managers to distort information passed to upper level of management by underestimating revenues or over-estimating the costs during the budgeting process. The manager’s behaviour towards the budget will be influenced as a result because his actual performance against the budget will either have a favourable or adverse effect on his job appraisal which impacts on his salary increment, annual bonus or chances of promotion. A number of dysfunctional behaviours creep in and so need to be addressed in as discussed below.

For a manager to be motivated to work towards achieving organisational goals there should be goal congruency between the organisation’s goals and those of the manager. The manager’s actual performance will meet the expected level of performance or even exceed the expectations if there is goal congruency. However, if there is no alignment and consistency of the individual’s goals with the organisations’ goals, a case of goal incongruence exists, then the manager will not be motivated to achieve the goals. This behaviour will impact on the actual performance of the organisation resulting in failure to meet the organisation’s short-term and long-term objectives.

To address this problem it’s important that the managers that will be responsible for the budget participate in preparing the budget. There are two methods of preparing budgets. Budget are either prepared top down or bottom up. Under the top down method, top management prepares the budget without consultation of lower level staff and pass on the budget to them for implementation.
However the bottom up method involves lower level employees in the budgeting process. They are consulted. This gives them a sense of commitment and ownership and therefore, they will be motivated to achieve the targets, which they regard as their own. Lower level managers’ participation in budgeting helps to increase their motivation and reduces resistance to the budget as well as reduce possible conflict within the organisation.

Participatory budgeting allows both top management and its lower level managers and employees to have a better understanding on each other’s roles and areas of concern where the budget is concerned. The top management will be able to know whether the targets set are reasonable and realistic. There is however a challenge that needs to be managed when lower level managers are involved in setting the targets. Sometimes managers introduce budgetary slack by underestimating revenues and overestimating costs and expenses so that when the actual results are compared with the budget they will look favourable. Managers will have past experiences when preparing budget and so they can build in some budget slack in their figures.

This type of behaviour is likely to manifest especially when the actual performance has a direct link to the incentives the manager receives. To guard against budgetary slack it’s important for managers to be rewarded for consistently preparing realistic budgets and then they will avoid building a budgetary slack.

l Stewart Jakarasi is a business and financial strategist and a lecturer in business strategy, advanced performance management and entrepreneurship. For assistance in implementing some of the concepts discussed in these articles please contact him on the following contacts:, call on +266 58881062 or WhatsApp +266 62110062.



Jobs galore for Lesotho



94 000 jobs.

That is what the Millennium Challenge Account (MCA-Lesotho) will create in the next 10 years, according to Prime Minister Sam Matekane.

The MCA-Lesotho was created by the Lesotho parliament last year after the United States’ Millennium Challenge Corporation (MCC) found Lesotho eligible to receive development funds.

The MCC gives development grants to poor countries that respects democratic principles and human rights.

The MCC has unlocked a staggering US$322 million (over M5 billion) to the government of Lesotho after the country enacted three laws the protect people’s basic rights this week.

Matekane advised youths to visit MCA-Lesotho offices to understand how best they can benefit from the fund and the projects that will be financed.

The MCC’s investments are aimed at increasing the availability of water for household and industrial use, enhance watershed management and conservation methods, rehabilitate health infrastructure and strengthen health systems, and remove barriers to private investment.

The MCA-Lesotho’s Health and Horticulture Compact seeks to assist the country in unlocking equitable and sustainable economic growth in partnership with the private sector by addressing key constraints to growth.

Matekane said the job creation potential of the horticulture project alone is estimated at 4 000 jobs.

This excludes indirect jobs that will be created through packaging supplies, logistics, cold chain activities as well as the processing of the output.

“Let us all be ready and ensure we spend all the funding that is available,” Matekane said.

He said the money is going to be invested in agriculture, trade and industry, value chains, infrastructure development, tourism and creative sectors.

“The Compact has come at a critical time when the country is in dire need of financial injections to revive the economy,” he said.

“This second Compact forms the core of Lesotho’s private sector-led economic growth, recovery and job creation agenda.”

He said the MCA staff should work diligently, to implement this Compact.

“There are several Basotho businesses out there that are eager to seize the opportunities that the Compact brings,” Matekane said.

“Serve them with integrity, accountability and dedication.”

Matekane said the government has established the Cabinet Sub-Committee on the Compact which is under the leadership of Deputy Prime Minister Nthomeng Majara.

The sub-committee is mandated to ensure that the government provides overall oversight, strategic direction and support for successful implementation of the Compact.

He said he expects the MCA-Lesotho to ensure the full implementation of the project within the next five years.

“Our economy needs this capital injection to boost productivity and job creation,” Matekane said.

Matekane said the government had to enact three pieces of legislation which were necessary to support the investments that the MCC is making.

The enacted laws are the Labour Code Amendment Bill, the Administration of Estates and Inheritance Bill and the Occupational Safety and Health Bill.

Majara Molupe

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Bank spearheads career expo



Standard Lesotho Bank will tomorrow host a career expo at the ’Manthabiseng Convention Centre for high school students who will sit for their final exams this year.
The 14th Annual Standard Lesotho Bank Career Expo was launched in Mokhotlong on Monday where the Lesotho Highlands Development Authority (LHDA) welcomed students in areas around the Polihali Dam construction site.

On Tuesday the expo was at the Butha-Buthe Community High School, yesterday it was at Assumption High School in Teya-Teyaneng while today it is in Quthing at Holy Trinity High School.

The five-day nationwide event is dedicated to connecting ambitious Basotho youths with exciting career opportunities.

Standard Lesotho Bank says it’s career expo “is a cornerstone of the bank’s commitment to empowering Basotho youth and shaping the future of Lesotho’s workforce”.

The 2024 edition of the event is the 14th where the bank is now the headline sponsor of this important expo that reaches about over 10 000 students countrywide.

The expo promises to be an even better offering where over 35 institutions of higher learning from Lesotho and South Africa as well as professional bodies will explain different career options to Basotho students.

Standard Lesotho Bank communications manager, Manyathela Kheleli, said students in Mokhotlong did not only learn about different engineering disciplines but got to appreciate engineering in action at Polihali.

He said it was a lifetime experience for students from Mokhotlong, “thanks to the collaboration with LHDA, who are fully responsible for the Polihali leg of the event”.

There were also motivational speakers from different professions in the bank and other selected institutions.

Key influencers in the football fraternity, former Likuena captain and now Corporate Responsibility Manager at Letšeng Diamonds, Tšepo Hlojeng, and former Orlando Pirates dribbling wizard, Steve Lekoelea, are among the influencers that have been invited to address the students.

The event is a sponsorship initiative under Personal and Private Banking that is open to all youths, communities, and individuals, where the bank intends to use this event to drive the new Youth or student Customer Value Proposition and attract high school students to open accounts ahead of their enrolment into tertiary institutions.

The objective of this sponsorship is to first create an environment where future leaders of Lesotho will be nurtured and informed of top career choices that demonstrate various skills requirements for the growth of Lesotho’s economy.

Secondly, the career expo is a clear demonstration of the bank’s intention to put youths at the centre of its initiatives.

This position is shown by the bank’s initiative to not only develop special products for youths, such as the Youth Account but also through several initiatives that promote youth empowerment. These include the bursary scheme and the Bacha Entrepreneurship Project.

“We are more than a bank for our youths, but a good corporate citizen and a partner for the education for Basotho,” Kheleli said.

“We believe that as we grow our youths, they will become assets to this country and by extension, develop into a feeder market for our banking products when they enter the job market,” he said.

The bank has invested M150 000 towards sponsorship of the annual Career Expo.

Staff Reporter

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Ministry launches fresh industrialisation drive



A new policy to drive industrialisation in Lesotho was launched in Maseru this week.
The Lesotho National Industrialisation Policy 2024–2028 is being spearheaded by the Ministry of Trade.

The ministry says the policy seeks to accelerate economic diversification in the industrial base, enhance productivity and productive capacity for industrialisation and advance domestic and regional value chains for industrialisation.

It also seeks to promote and develop industrial clustering, promote inclusive industrialisation, support entrepreneurship development and strengthen business linkages.
The new policy will also seek to enhance energy efficiency and sustainability, promoting technology adoption and innovation, services-based industrialisation, and stimulating agro-based industrialisation.

This is not the first time Lesotho has launched an industrialisation policy. Previous policies have all failed.

The first attempt was the 2015–2017 industrial policy, whose aim was to accelerate the industrialisation agenda and address key challenges facing the country.

The second one was the 2018–2023 policy, which after its unsuccessful execution during the three years of implementation, the government extended it to the National Strategic Development Plan Strategic Focus (2023/24-2027/28).

The new industrial policy’s target is set to activate implementation on innovation to enhance the efficiency and competitiveness of domestic industries, create decent jobs and improve the welfare of Basotho.

Thabo Moleko, the Ministry of Trade Principal Secretary, said the implementation of the new policy is set to deepen economic growth, promote industrialisation and enhance competitiveness.

“The plan includes greater investment in industrial development with the intention to create employment and incomes while building on maintaining the existing industrial trade,” Moleko said.

Mamello Nchake, a consultant for the United Nations Economic Commission of Africa (UNECA), said the development goals of the industrial policy are set to ensure an achievable inclusiveness and equitable growth as they aim to create sector-led quality jobs for Basotho.

Nchake said the goals are meant to “develop and maintain enabled infrastructure that is critical to the private sectors and also to promote gender equality, environmental and climate risk management”.

“Moreover, the policy (will seek to) harness the collaboration with private sector firms to address common challenges and promote industrialisation,” she said.

The workshop discussed constraints that hindered the implementation of the 2018 – 2023 policy that undermined investment and trade opportunities.

The constraints include access to land for investment, inadequate provision of infrastructure, an outdated and a lack of appropriate regulatory environment, low productive capacity, market size and topological constraints, unstable macroeconomic environment, external factors, and over-dependency of trade preferences.

To address the strategic objectives, the previous industrial policies had proposed tax incentives for industrial development, trade policy and regional integration as the main vehicle for industrialisation and structural transformation.

They had also proposed mechanisms for policy coordination and implementation, institutional alignment and linkages.

However, several key challenges were identified in the implementation of the 2015-2017 industrial policy.

They included limited financial and investment capacity to effectively implement the industrial policy actions.

“Financing instruments are not aligned with the level of development needs of the private sector,” stakeholders heard at the workshop.

They also heard that there is “persistent dependency on few industries that poses risks in the face of global economic uncertainties and ever-changing consumer preferences”.
Another identified problem is limited investment climate that makes it costly for foreign firms to invest in Lesotho.

It was also observed that a shortage of specialised education and skills crucial for growth of industries impact the ability of firms to adopt advanced technologies and improve productivity and the productive capacity.

Stakeholders also heard that there is limited global competitiveness and access to global markets.

Lesotho’s industries, they heard, particularly textiles and garments, face competition from other low-cost manufacturing countries.

The country is also spooked by poor coordination between the implementing agencies due to a lack of a clear implementation framework.

Khahliso ’Molaoa

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