TCTA & DBSA close R5.5 billion deal for Vaal River System’s Lesotho Highlands Water Project Phase II

1 June 2021, Gauteng, South Africa – Trans-Caledon Tunnel Authority (TCTA) and the Development Bank of Southern Africa (DBSA) announced their recent conclusion of two loan facility agreements totaling 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.

This transaction strengthens ongoing cooperation between the two parties and furthers their mutual water infrastructure mandates. It will significantly increase the DBSA’s loan book exposure in water and sanitation, one of the Bank’s key focus sectors. The deal will enable TCTA to fulfill its flagship role as a bulk water infrastructure implementing and national funding agency of the South African government per the latter’s legacy 1986 water treaty with the Government of the Kingdom of Lesotho.

“The key milestones of LHWP Phase II over the next five years, will achieve the following:

• The construction of the Polihali Dam in Mokhotlong district, a 165-metre high concrete faced rock fill dam with a capacity to hold 2.2 billion m3 of water; and
• A 38km water transfer tunnel connecting the new Polihali Dam to the existing Katse Dam, part of Phase I of the LHWP for onward conveyance of water from Lesotho to South Africa” said Nhlanhla Nkabinde, the TCTA Executive for Project Finance & Treasury.

“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. The anticipated economic shift speaks to significant combined GDP 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 re-ignite infrastructure led economic recovery” said Zodwa Mbele, the DBSA Group Executive.

“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. Substantial direct and indirect job opportunities of approximately 545,000 are expected from this continued project development in both Lesotho and South Africa,” said the DBSA Group Executive.        

Ends