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The African Development Bank (ADB) Group has approved a loan of US$86.72mn to co-finance the second phase of the Lesotho Highlands Water Project
The multi-phase project will provide water to the Gauteng region of South Africa and generate hydroelectricity for Lesotho. The project entails harnessing the waters of the Senqu River in the Lesotho highlands by constructing a series of dams for the mutual benefit of the two countries.
The Trans-Caledon Tunnel Authority, a state-owned entity in South Africa charged with financing and implementing bulk raw water infrastructure projects, will use the funds to construct the Polihali Dam and reservoir, a 38-km-long water transfer tunnel, roads and bridges, telecommunications infrastructure, and to extend electricity and other development infrastructure to Lesotho.
“The two governments’ partnership on this project around the shared water resources from the Orange-Senqu River Basin serves the interests of their mutual development agenda and also deepens regional integration,” said Dr. Beth Dunford, AfDB vice-president for agriculture, human and social development.
Expected project benefits include greater water security in South Africa’s Gauteng region and a boost to Lesotho’s socio-economic development due to infrastructure improvements and increased hydropower capacity. These developments are expected to positively impact 26 million people in South Africa and boost a region that accounts for 60% of the country’s economic output. Lesotho’s economy will also receive a boost from the royalty payments it will receive for water transfers.
The project, with a total cost of US$2.171bn, is also receiving financing US$213.68mn in loans from the Shanghai-based New Development Bank. The South African government will contribute US$1.871bn as well as a loan guarantee. The first phase of the project was completed in 2003 and inaugurated in 2004.
AfDB Group’s active portfolio in South Africa comprises of 23 operations with a total commitment of about US$4.5bn in financing.