Lesotho Highlands Water Project to Benefit Lesotho, South Africa

Above the Katse reservoir, residents overlook the intake tower and Malibamatso Bridge.

If approved, the loan will help finance Phase 1B of the project, providing water to South Africa's water-short economic heartland and critically needed revenues to the small mountain kingdom of Lesotho.

"The Lesotho Highlands Water Project provides the only source of development for Lesotho," says Pamela Cox, World Bank country director for Lesotho and South Africa.

"It also represents the lowest cost alternative for water supply to the Gauteng Province. This is an excellent example of regional collaboration for mutual benefit—achieving truly 'win-win' solutions to urgent issues facing both countries."

The project comprises a 145m dam at Mohale, a 15m weir at Matsoku, and water tunnels from each site to channel water to the Katse dam. From Katse, the water will be transferred by gravity to Gauteng Province in South Africa, through a tunnel built under the first phase of the project, to the Vaal River System.

The project includes an environmental action plan to resettle and compensate those affected by the project and to restore incomes. It will also promote rural development, the environment and heritage preservation activities, a public health program, and monitoring and evaluation activities.

The Bank loan will also support activities to carry out environmental and social action plans, administer the project, and provide training and engineering support.

Lesotho

Lesotho stands to gain about $40 million a year in revenue from the first and second phases of the project for at least 50 years. The project will create jobs and bring basic infrastructure services to the country.

Forty percent of revenues from this project will be used for a social fund to support poor communities. The remaining 60 percent of revenues will support the country's general budget.

Treaty for Water Transfer Phases 1A and 1B of the Lesotho Highlands Water Project are governed by a treaty between the Governments of Lesotho and South Africa, signed in 1986 and reaffirmed in the 1990s when both countries made the transition to democractically-elected governments. Under Phase 1A of the project, the Katse and 'Muela dams were built for a total cost of $2.5 billion, of which $110 million was provided by World Bank funding. The dams have contributed almost $85 million in revenues (royalty and SACU revenue payments) to Lesotho, of which $40 million has been allocated to community-based infrastructure projects creating about 15,000 jobs.

South Africa

The LHWP will provide South Africa's industrially intensive Guateng Province with desperately needed water. The project will enable expanded access to water for people living in informal settlements near Johannesburg.

As part of a plan to restructure the bulk water sector in South Africa, the Project complements an aggressive demand management program—recognized by experts as one of the best in the world. In addition, the project is fully supported by the Rand Water Board [the bulk purchaser of water in Gauteng], the National Water Conservation Committee, local government, and the Soweto and Alexandra civic associations.

The Lesotho Highland Water Project has the support of Lesotho's non-governmental organizations and communities. It has also been approved and supported by an independent environmental and social expert panel.

Total cost of this phase is $1.1 billion, of which $825 million will come from South African capital and money markets, and water users. Cofinanciers include the Development Bank of Southern Africa, European Investment Bank, Government of Lesotho, foreign export credit-backed commercial loans and foreign commercial loans. For more information call Claire Hervey, (202) 473-8294 fax, (202) 473-7917, e-mail chervey@worldbank.org