The World Bank has approved a US$45M loan to support phase 1B of the Lesotho Highlands Water Project (LHWP). The loan has a maturity of 15 years, with a five-year grace period, and will be used to finance environmental, social and technical support to a scheme which will bring water to South Africa’s dry economic heartland of Gauteng.

The total cost of financing phase 1B of the project is US$1.1B, of which the World Bank is contributing 5%.

The largest share of financing (US$825M) will come from the South African capital and money markets and water users. Other financiers include the Development Bank of Southern Africa (US$45M), European Investment Bank (US$110M), the government of Lesotho (US$25M), foreign export credit-backed commercial loans (US$60M) and foreign commercial loans (US$10M).

Phase 1B will include the construction of a 145m high dam at Mohale on the Senqunyane river, a 15m high weir on the Matsoku river and water tunnels from each site to deliver a combined 11.8m3/s of water to Katse dam.

Katse dam was built in phase 1A of the project, along with a 72MW power plant at Muela, and will transfer water to the Vaal river system in South Africa. At a cost of US$2.5B, phase 1A was supported by the World Bank with funding of US$110M in 1989.

This phase of the five-part project is virtually complete and has so far provided Lesotho with US$85M in revenues — approximately 50% of this has been allocated to community-identified infrastructure projects, creating about 15,000 jobs for the local people.