LESOTHO HIGHLANDS

Project profile

 

The Lesotho Highlands Water Project was instituted as a bi-national project spanning the borders of South Africa and Lesotho in accordance with a treaty signed in 1986. This almost miraculous engineering feat diverts water from the Senqu River System in Lesotho to South Africa’s economic hub, the water-stressed Gauteng region.

  

The year 2003 saw the completion of the project’s Phase 1B. TCTA was responsible for the section of infrastructure development under Phase 1A. TCTA is now fully accountable for the debt management and funding of the water transfer portion of the project as well as the operation and maintenance of the Delivery Tunnel North. The LHWP’s primary infrastructure for Phases 1A and 1B encompasses the building of three dams, ie, the Katse, Mohale and Muela; an intake tower; transfer tunnel; a delivery tunnel; and a hydropower station. The focal point of the project, the Katse Dam, is a double curvature concrete arch, 185 m high and 710 m along the crest. This design was the most cost-effective to span the wide U-shaped valley of the Malibamatso River, downstream of its confluence with the Bokong River. Some 2,32 million m3 of concrete was used to build the dam wall, 60 m thick at the base and 9 m at the crest. The contractor was an international consortium of companies from Italy, France, Germany, the United Kingdom and South Africa. The Lesotho Highlands Water Project is a multipurpose undertaking that transfers 780 000 million litres of water and generates 72 megawatt (MW) hydropower at the Muela Power Station. The water en route to South Africa is put to good use, powering an underground hydroelectric power station that generates electricity to meet the needs of Lesotho. Before the station was built, Lesotho depended entirely on South Africa for its electricity requirements.

 

Water exits from the three 24 MW turbines into the Muela tailpond, a 55-m-high, 6 million m3 capacity dam. Built on the Nqoe River, it supplies the headwater, allowing uninterrupted water delivery to South Africa. Water from Katse Dam is delivered to the power station through the transfer tunnel, and the delivery tunnel transports it from there to South Africa. Associated social development and environmental programmes were completed by the end of 2009. Royalties paid to Lesotho for water transferred amounts to R438 million for the period covered in this report, bringing the total royalties paid to date to R3 430 million.

 

Funding

 

The total project cost was R16 400 million. Water delivery from Phase 1A began in January 1996, and the project relies on the revenues generated by water sales from the Vaal River System. It is a sustainable, bankable, bulk raw water infrastructure project with an explicit government guarantee. The South African Government is responsible for the full water transfer costs incurred by both TCTA and the Lesotho Highlands Development Authority. These costs are included in TCTA’s statement of financial position. In the year under review, revenue from the sale of raw water from the project amounted to over R2 708 million, compared to R2 420 million in the previous year. Income is sufficient to repay all water transfer debt over approximately 20 years after completion of each subphase of the project, which is in line with the Water Pricing Strategy of the Department of Water and Sanitation.

  

Socio-economic development objectives

 

In accordance with the treaty between South Africa and Lesotho, social development programmes in the project area were implemented by the Lesotho Highlands Development Authority following International Best Practice and World Bank Guidelines. Annual compensation to the amount of R20 million is paid to the affected households and communities.

 

Social issues were assessed at the Annual Stakeholder Conference in October 2010 attended by representatives of local, regional and national stakeholders. The Katse, Mohale and Muela project areas were awarded a combined score of 84%.

Environmental

 

The agreement between South Africa and Lesotho stipulates environmental protection and sustainability of the river system. In Lesotho, the Lesotho Highlands Development Authority implements the programme, while in South Africa, TCTA is responsible. The Lesotho Highlands Commission monitors both bodies. No significant incidents marred the project’s overall environmental performance. The Lesotho Highlands Development Authority reviews the relevant policies on an ongoing basis and makes changes to operational procedures, where necessary, to achieve the requisite results. An international Panel of Environmental Experts reviews the performance of the LHDA twice a year and, overall, is satisfied with the results.

 

Operation and maintenance

 

The operation and maintenance of the scheme is being done in accordance with the annual maintenance plan. No significant incidents marred the project’s overall performance. The annual budget for operation and maintenance is R81 million.

 

Future phases

 

The South African Government has approved the second phase of the project at an estimated cost, at 2010 price levels, of R9 300 million for the water transfer segment of Phase 2. Subject to the signing of an agreement with the Lesotho Government, the Phase 2 project entails the construction of the Polihali Dam; a transfer tunnel from Polihali Dam to the Katse Dam; advance infrastructure; and environmental and social development programmes in Lesotho.

 

Phase 2 will also include a pump storage scheme to generate 1 200 MW, associated transmission lines and appurtenant works, by utilising the existing Katse Reservoir as the lower reservoir and a new upper reservoir in the Kobong Valley, or any other similar scheme close to Katse Dam. The pump storage scheme will start generating electricity in January 2018. The estimated cost of the pump storage scheme at 2010 price levels is R7 600 million and will be borne by Lesotho. Lesotho is now seeking a Power Purchase Agreement from Eskom and other large users in the region for the excess power that could be generated. Construction of this dam and related infrastructure will guarantee the desired level of water availability in Gauteng and the Vaal River water supply region in the most cost-effective manner. In parallel with waterconservation measures in the Vaal River, it will influence the improvement of water quality and curb illegal water use. Phase 2 water delivery is expected to come on line from June 2020. The new phase will be funded off-budget,  meaning funds will be borrowed from financial markets. Apart from being a lifeline for South Africa’s economic nucleus, the Lesotho Highlands Water Project is a prime example of what can be achieved when neighbouring countries join forces and work towards a common goal.

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