Watershed: The Lesotho Highlands Development Authority building in Maseru. Photo: Sechaba Mokhethi
The cost of the second phase of the Lesotho Highlands Water Project to deliver water to South Africa’s industrial heartland and generate hydropower for Lesotho has increased by R45 billion.
In 2008, phase two was projected to cost R8 billion. By 2022, this had ballooned to R42 billion. It now stands at R53 billion, raising questions about governance, oversight and accountability.
“Despite Minister [Pemmy Majodina]’s public acknowledgement that a probe into the escalating costs of phase two of the [Lesotho Highlands Water Project] would be conducted, no further details have been shared with parliament or the public,” Democratic Alliance deputy spokesperson on water and sanitation Stephen Moore said last week.
Moore has filed a Promotion of Access to Information Act application to the department of water and sanitation. This follows two unanswered letters, the first sent on 8 May.
The department’s spokesperson Wisane Mavasa said the May letter had not been sent directly to the minister or director general. “Unfortunately, the letter was not acted upon by the officials that it was sent to,” she said, adding that the minister would respond “shortly”.
The department says the escalation is the result of various factors, including years of delays, treaty complications and market fluctuations.
Oversight gaps
South Africa’s portfolio committee on water and sanitation raised concerns about the cost of the project with the auditor general at a sitting on 6 May.
The meeting flagged weaknesses in governance created by the dual-implementation model between the Trans-Caledon Tunnel Authority and the Lesotho Highlands Development Authority (LHDA).
Delays have pushed completion from 2019 to 2028, affecting the delivery schedule and future phases of the project.
The committee also noted constraints stemming from the 1986 treaty preventing the auditor general from auditing the LHDA directly, “leaving South Africa reliant on Lesotho’s audit structures”.
But, says Mavasa, the Lesotho Highlands Water Commission (LHWC) has equal representation from both governments, had “full access to the cost records of the LHDA” and had received detailed information about the delays.
The committee also criticised the royalty arrangement, which it said obliges South Africa to continue payments to Lesotho even when water deliveries are interrupted.
Other concerns included limited local procurement, dominance of foreign contractors and opaque financial flows. Some MPs went as far as calling for an immediate funding suspension, citing mismanagement and treaty flaws.
However, the auditor general cautioned against such a drastic move, warning of legal consequences. It recommended treaty reforms, including joint audits, instead.
Mavasa says South Africa and Lesotho have agreed to review the treaty, but the “matters for review” have yet to be decided.
Lesotho’s Finance Minister Retselisitsoe Matlanyane told parliament in February that the government intended to pursue “the overdue review of the treaty” to negotiate a better deal for Lesotho.
From R8 billion to R53 billion
Mavasa outlined the project’s financial journey in detail. The original 2008 feasibility study produced a preliminary R8 billion estimate — excluding inflation, currency shifts, contingency allowances and modern environmental and social safeguards.
Construction of the main works was expected to start in 2013 and deliver water to Gauteng by 2019. However, she said, the main contracts were only awarded in 2022 because negotiations with Lesotho took longer than expected. The situation had worsened with years of administrative and procedural delays.
“The phase two agreement was signed in August 2011. It then took 14 months for the [South African] parliament to ratify the phase two agreement and a further seven months for the Lesotho parliament to ratify the agreement after the ratification by the SA parliament,” Mavasa said.
After Lesotho’s 2013 change of government, the agreement was subjected to fresh scrutiny, adding further delays, according to Mavasa, who also pointed out that, between 2013 and 2022, the department of water and sanitation had five different ministers and 11 directors general, which slowed decision-making.
There were also financing complications. Funders raised concerns over procurement processes for the main contracts and requested they be tendered afresh. The Covid pandemic also disrupted preparatory work.
In October 2022, the LHDA projected a R42 billion completion cost — incorporating contract prices; social and environmental programmes; foreign exchange effects and administrative costs.
More than R20 billion in extra costs was due to inflation linked to the delays, Mavasa said.
In October, the figure rose to R53 billion. The department attributed this to:
• R4.2 billion from boosting the contingency provision in line with international good practice from R3.3 billion in 2022 to R7.5 billion last year
• R5.4 billion for additional social obligations requested by Lesotho, such as rural water supply and road infrastructure
• R1.7 billion in price escalations, design changes and contractor claims linked to delays, including work-permit issues.
Governance fixes and audits
According to Mavasa, the project costs and time overruns have been a major concern for the department of water and sanitation and Minister Majodina. She said the Lesotho Highlands Development Authority has developed a plan to minimise any further delays and cost overruns.
The LHWC would appoint a multidisciplinary team of experts to conduct management audits of contracts.
Although the project is about half completed, she said two primary contracts are behind schedule.
“However, the LHDA is executing a turnaround plan to avoid further delays and recover lost time.”
Last year, Mavasa said the department had established a governance committee comprising the department, the Trans-Caledon Tunnel Authority and the South African delegation to the LHWC, which meets monthly to review progress.
The director general of the department of water and sanitation and the principal secretary of the relevant department in Lesotho held ad hoc and quarterly meetings to address issues arising from the project. Unresolved issues were escalated to the ministers.
Lesotho’s Minister of Natural Resources Mohlomi Moleko said he could only respond next week as he was outside the country.
This story was first published by GroundUp