2005 - 2006 - Pinsent Masons Water Yearbook 2012

LESOTHO PART 2: COUNTRY ANALYSIS
Lesotho
Lesotho Highland Water Project
Lesotho is a small country of some 2 million people, surrounded by the Republic of South Africa. The
Highland Water Project described below is the world’s largest water catchment and transportation
infrastructure project to date. While there is no water service element per se, water exports from the
project have become Lesotho’s largest export earner. The project therefore merits attention because
it demonstrates the economic power of water.
Water rich and water poor
Water is arguably the only abundant natural resource in Lesotho. South Africa’s need for reliable long
term water supplies resulted in two water export feasibility studies in Lesotho's Highlands in the 1950s
and 60s. Both failed because agreement could not be reached between the two Governments on
payment for water exports. However, a new feasibility study was launched in the 1970s, which in
1979 and 1983 recommended a 70m 3 per second water transfer scheme, along with hydropower
generation to enable Lesotho to replace electricity imports with locally produced energy. The dams
trap water that normally runs into Lesotho’s Orange River which are discharged into the Atlantic
Ocean, and turns it north towards Johannesburg and Gauteng Province.
On October 24, 1986, an agreement was signed between Lesotho and South Africa to proceed with
the Lesotho Highlands Water Project (‘LHWP’) for the transfer of water from Lesotho. About 115m 3
per second of water flows out of Lesotho via the Sengu River. The LHWP exploits this by arresting
the southern flow, storing the water and redirecting it northwards to the Vaal River, to supply the state
of Gauteng, which has a population of more than 10 million. The cost of phase 1A amounted to €1.5
billion and attracted external funding from European export credit agencies (US$380 million), the
World Bank (US$69 million), the EU Commission (€50 million) and the European Investment Bank
(€23.5 million). In 2002, the cost of Phase 1B was estimated at €1.1 billion and has a similar funding
pattern with €99 million being made available by the European Investment Bank.
Phase 1A and 1B of the LHWP has resulted in savings to South African water users estimated at
US$30 million per year. The aggregate benefits (savings) to both South Africa and Lesotho, amassed
from the LHWP, have a net value of about US$1 billion for Phases 1A and 1 B. Of this sum, 56% of
the cost savings will go to Lesotho in terms of a royalty payable for the sale of water to South Africa.
In addition to the royalty payable to Lesotho, there is a levy paid by water customers in Gauteng to
finance the project. On 1st October 1990, the levy was set at seven cents per m 3 of water and was
increased to ten cents per m 3 from 1 October 1991. From 1 October 1996, the levy was R0.3808 per
m 3 . The levy is to remain at this level for fifteen years.
LHWP – Phases 1A and 1B
m 3 /second Year
Phase Supply Type Incremental Total Water
Commissioned
Water supply supply
Katse 1998 1A Dam & tunnels 18.2 18.2
Mohale 2003 1B Dam & tunnels 9.5 27.7
Matsoku 2003 1B Weir & runnels 1.9 29.6
When Phase 1B was completed in March 2004, the full yield of the system was 933.5 million m 3 per
annum, compared with a yield of 574 million m 3 per annum at the end of phase 1A. Water transferred
increased from 574.1 million m 3 in the year to 31 st March 2001 to 593.2 million m 3 in 2002. By the
end of 2002, the total volume of water delivered was 2,278 million m 3 , generating royalties of
R863million. The water royalty in 2002-03 contributed 6.4% of the Government of Lesotho’s budget.
The fluid politics of water
Times and politics change. At the project’s inception, it was regarded as a mechanism for ensuring
resource stability in the region. After the democratic transition in 1994, the project was seen as a
means of getting water to the arid townships of the region. This area accounts for more than 40% of
South Africa's urban population by the year 2000 and over half of its industry.
The project period runs from 1990 to 2017. The water transfer project is based upon a series of
reservoirs, transfer tunnels, delivery tunnels and pumping stations. In 1998, 18m 3 per second of
135 Pinsent Masons Water Yearbook 2005 – 2006