The African Development Bank (AfDB) has approved a $86.72-million loan to co-finance the second phase of the Lesotho Highlands Water Project (LHWP).

South African State-owned Trans-Caledon Tunnel Authority, which is mandated to finance and implement bulk raw water infrastructure projects, will use the funds to construct the Polihali dam and reservoir, a 38-km-long water transfer tunnel, roads and bridges and telecommunications infrastructure, as well as extend electricity and other development infrastructure to Lesotho.

The Lesotho Highland Development Authority will implement the part of the project that falls within Lesotho’s borders.

The new construction will complement facilities built during the project’s first phase, which was completed in 2002 and inaugurated in 2004.

The multi-phase LHWP entails harnessing the waters of the Senqu/Orange river in the Lesotho highlands by constructing a series of dams for the mutual benefit of the two countries.

“The two governments’ partnership on this project around the shared water resources from the Orange-Senqu River Basin serves the interests of their mutual development agenda and also deepens regional integration,” said AfDB agriculture, human and social development VP Dr Beth Dunford.

“The intervention will be the first major project to be financed by the bank in the water sector in South Africa and it will complement the bank’s current support in the energy and transport sector, diversify the bank’s portfolio and consolidate the bank’s strong partnership with the country,” she added.

Once completed, the project is expected to increase transfer capacity between Lesotho and South Africa from the current 780-million cubic metres a year to 1.26-billion cubic metres a year and enable additional generation of hydroelectric power in Lesotho.

The $2.17-billion project is also receiving $213.68-million in loans from Shanghai-based New Development Bank.

The South African government will contribute $1.87-billion as well as a loan guarantee.

To date, the AfDB’s active portfolio in South Africa comprises 23 operations with a total commitment of about $4.5-billion in financing.