The Trans-Caledon Tunnel Authority (TCTA) and the Development Bank of Southern Africa (DBSA) have concluded two loan facility agreements, totalling R5.5-billion and spanning 20 years, for the implementation of Phase II of the Lesotho Highlands Water Project (LHWP), which forms part of South Africa’s Vaal River System.

The investment comprises R3-billion and R2.5-billion loans and was negotiated alongside other facility agreements with the five major banks in South Africa for a total of over R15-billion.

“The DBSA’s funding will be used for new infrastructure development, ensuring water security in South Africa,” the DBSA said in a statement on June 4.

The deal significantly increases the DBSA’s loan book exposure in water and sanitation, which is one of the bank’s key focus sectors, while enabling TCTA to fulfil its flagship role as a bulk water infrastructure implementing and national funding agency of the South African government.

“This is a significant transaction and, as the DBSA, we are proud to be instrumental in the continued implementation of this historical and highly developmental project for both South Africa and Lesotho,” said DBSA group executive Zodwa Mbele.

“The anticipated economic shift speaks to significant combined gross domestic product impact of about R245-billion in the two countries, additional water supply to support about 60% of the South African economy and incremental royalties to the Kingdom of Lesotho, which are key to its fiscus and national economy. This positive impact is timely to reignite infrastructure-led economic recovery.”

The projected social impact includes the provision of additional water to about 45% of the South African population across multiple provinces, including Gauteng, Free State, North West, Northern Cape and Mpumalanga.

The continued project development is expected to create about 545 000 direct and indirect job opportunities in both Lesotho and South Africa.

The key milestones of LHWP Phase II over the next five years include the construction of the Polihali dam in Mokhotlong district, a 165-m-high concrete faced rock fill dam with a capacity to hold 2.2-billion cubic metres of water; and a 38 km water transfer tunnel connecting the new Polihali dam to the existing Katse dam, concluded TCTA project finance and treasury executive Nhlanhla Nkabinde.