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African Development Bank approves loan for Lesotho Highlands Water Project

The multi-phase project, which entails harnessing the Senqu/Orange River in the Lesotho Highlands by constructing a series of dams, will generate multiple benefits for South Africa and Lesotho including greater water security in South Africa’s Gauteng region and a boost to Lesotho’s socio-economic development through infrastructure improvements and increased hydropower capacity.

The African Development Bank (AfDB) Group has approved a loan of US$ 86.72 million to co-finance the second phase of the Lesotho Highlands Water Project. It will be the first major project to be financed by the bank in the water sector in South Africa, the AfDB announced on 11 October.

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. This will complement facilities built during the project’s first phase, which was completed in 2003.

The Lesotho Highland Development Authority will implement the part of the project that falls within Lesotho’s borders. Once completed, the project is expected to boost annual transfer capacity between Lesotho and South Africa to 1.26 x 109 m3, up from the current 780 x 106 m3, and enable additional generation of hydroelectric power in Lesotho. These developments are expected to positively impact 26 million people in South Africa and boost a region that accounts for 60 per cent of the country’s economic output. In Lesotho, the project will benefit more than 85 000 people in the project area, and generate more than 6000 jobs over the next six years. Lesotho’s economy will also receive a boost from the royalty payments it will receive for water transfers. The US$ 2.17 billion project is also receiving US$ 213.68 million in loans from the China-based New Development Bank. The South African government will contribute US$ 1.871 billion as well as a loan guarantee.