- Democratic Alliance calls for immediate investigation
- LHDA blasts DA for misguiding the public
The cost of Phase II of the Lesotho Highlands Water Project (LHWP) has skyrocketed from an initial budget of M8 billion in 2008 to a staggering M53 billion, with an increase of M11 billion recorded in just one year, according to the Democratic Alliance (DA), a key partner in South Africa’s Government of National Unity.
The DA is now calling for an immediate investigation by the Auditor General into what it terms “financial mismanagement” of this critical cross-border infrastructure project, which supplies water to over 16 million people in South Africa’s economic heartland.
In a statement issued on Wednesday, DA Deputy Spokesperson on Water and Sanitation, Stephen Moore, said the cost escalation was confirmed by the Auditor General during a parliamentary meeting of the Water and Sanitation Committee on Tuesday.
“This alarming increase is unacceptable, and the Democratic Alliance (DA) calls on the Minister of Water & Sanitation (Pemmy Majodina) to seek an immediate investigation by the Auditor General into this financial mismanagement,” Stephen Moore, DA’s deputy spokesperson on water and sanitation, said in a statement.
Moore stated that originally budgeted at M8 billion in 2008, equivalent to about M19 billion today after adjusting for inflation, Phase II of the LHWP has seen its projected costs balloon to M42 billion under the previous administration.
“The project is pivotal in supplying Rand Water’s service area, affecting 16 million residents across Gauteng, the Free State, and North West. Although current water outages in these areas are largely municipal-borne, South Africa’s rapidly growing population means we face a critical water supply shortage,” he said.
He mentioned that these escalating project costs will inevitably burden ratepayers. Bulk water boards, he explained, will be charged significantly more to extract water, increasing municipal costs and subsequently inflating household water bills.
He said municipalities already owed water boards more than M28 billion, and further debt accumulation threatens the collapse of local water systems.
“Access to affordable water is a fundamental human right, and the DA will not accept a scenario where South Africans must choose between dry taps and unaffordable rates. Immediate, decisive action is demanded from the Department of Water and Sanitation to prevent a deepening crisis,” he emphasised.
In a written response to Newsday yesterday, Lesotho Highlands Development Authority (LHDA) Public Relations Manager, Mpho Brown, contextualised the cost evolution of LHWP Phase II.
“It is important to clarify the framing and provide context, particularly with large, complex, multi-decade infrastructure programmes like the LHWP II, which are binational in nature and impacted by a broad set of macro, political, and economic variables over time,” Brown said.
He said the M8 billion figure was a feasibility-stage estimate dating back to around 2008.
“At that point, many assumptions had to be made in the absence of final designs, current market rates, and detailed procurement planning,” he said.
Brown stressed that it was worth noting that feasibility estimates are not binding project budgets but indicative planning figures.
Also, he added, the M8 billion estimate did not include adequate provisions for inflation, foreign exchange fluctuations, global commodity market shifts, or contingencies, factors that significantly affect large infrastructure projects.
He explained that at that time, the figure covered the entire scope, without the benefit of refined designs, scope adjustments, or clear timelines.
Brown also mentioned that the project was delayed by over a decade due to binational governance challenges.
“One of the core structural challenges of LHWP II is its binational nature. The project requires joint governance, decision-making, and approvals from both Lesotho and South Africa through the Lesotho Highlands Water Commission (LHWC) and various binational structures,” he said.
He indicated that these layers, ensure cooperation and astute oversight, but they have also impacted the speed of decision-making and procurement processes.
It took 2 years for the two governments to ratify the Phase II Agreement, and there was a moratorium placed on the procurement process for Phase II contracts in 2014, according to Brown.
There were also imposed repeats of key procurement processes (pre-qualifications of main consultants and contractors).
“Disruptions created by the COVID-19 Pandemic also deferred implementation of key contracts. These factors resulted in multi-year delays during which market dynamics and cost factors significantly changed,” he said.
He also mentioned that market forces and economic conditions have evolved substantially.
Between the 2008 feasibility estimate and contract awards in 2022, he explained, the global and regional construction markets experienced major inflationary pressures, particularly in materials like steel and cement and currency depreciation in the Rand and Loti, affecting imports and contractor pricing.
“Shifts in the cost of capital, logistics, fuel, and labour.”
Explaining the M53 billion figure, Brown said it is a forward-looking estimate, not an overrun.
“The M53 billion referred to is not an indication of a “cost overrun” from M8 billion, but a current estimate of the full long-term cost to completion under present-day market conditions,” he said.
He indicated that it includes adjustments for inflation, foreign exchange risks, scope finalisation, and contractor pricing and lessons from Phase I and modern project delivery standards, including environmental and social safeguards.
He said the figure is reflective of actual market rates as implementation is taking place.
“Comparison between the latest (market-based) costs and the feasibility estimate of M8 billion is misleading to the public,” he said.
“Due to all of the above reasons, the value and long-term cost projections for the project have been evolving over the years,” he added.
Brown further stated that the LHWP Phase II’s implementation and cost trajectory should be understood within the wider context of a binational governance framework, prolonged procurement timelines, evolving economic conditions, and realistic market-based pricing.
“While the original M8 billion figure served as an early reference point, it is no longer an appropriate benchmark for today’s scale, complexity, and market conditions,” he said.
Below are some of the indicative figures of how the project costs have been estimated over the years from the initial RM billion of the 2008 feasibility phase.
- May 2014 – M16,2 Billion
- May 2015 – M22,9 Billion
- May 2018 – M26,8 Billion
- May 2020 – M32,5 Billion
- May 2022 – M39,3 Billion
- Nov 2022 – M42,0 Billion
- May 2023 – M53,3 Billion
The LHWP was established through a bilateral treaty signed on October 24, 1986, between the governments of Lesotho and apartheid-era South Africa, a time marked by political instability in both countries. Lesotho was under military rule following the overthrow of Prime Minister Leabua Jonathan, while South Africa was internationally isolated due to its apartheid policies.
Despite these tensions, the two countries found common ground in the shared benefit of developing Lesotho’s abundant water resources. The treaty was signed by Dr. Chris Heunis, then South Africa’s Minister of Constitutional Development, and Evaristus Sekhonyana, Lesotho’s Minister of Finance.
The Treaty laid the legal and institutional foundation for the multi-phased LHWP, aimed at delivering water to South Africa’s economic hub in Gauteng and generating hydroelectric power for Lesotho, enhancing its energy security and economic development.
LHWP was designed to be implemented in phases, consisting of multiple dams, tunnels, and infrastructure elements.
Phase I was divided into Phase IA and Phase IB.
Phase IA consisted of the construction of Katse Dam (completed in 1996), the transfer Tunnel from Katse to ‘Muela (45 km), ‘Muela Hydropower Station (commissioned in 1999), and the delivery Tunnel to South Africa.
Phase IB included the construction of Mohale Dam and an interconnecting tunnel between Mohale and Katse. Phase I was inaugurated in 2004.
Phase II, currently underway, consists of the construction of Polihali Dam in the Mokhotlong district, Polihali Transfer Tunnel to connect to Katse Dam, road and bridge infrastructure development, and environmental and social mitigation projects.
Phase II will increase water deliveries to South Africa and sustain energy production in Lesotho.
LHDA oversees the implementation of the project on behalf of Lesotho while the Trans-Caledon Tunnel Authority (TCTA) – Implements and finances the South African side of the project.
Authored by our expert team of writers and editors, with thorough research.
