How SA's Lesotho water project costs ballooned from R8bn to R53bn

The Citizen

9 hours ago

More than R20 billion was due to inflation linked to the delays.
The cost of the second phase of the Lesotho Highlands Water Project (LHWP) to deliver water to South Africa's industrial heartland and generate hydropower for Lesotho has increased by R45 billion.
In 2008, phase 2 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 2 of the LHWP would be conducted, no further details have been shared with Parliament or the public,' Democratic Alliance (DA) deputy spokesperson on water and sanitation Stephen Moore noted in a statement issued by the party last week.
Moore has now filed a Promotion of Access to Information Act (PAIA) application to the Department of Water and Sanitation (DWS).
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This follows two unanswered letters, the first sent on 8 May.
DWS spokesperson Wisane Mavasa said the May letter was not 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'.
DWS says the price escalation is the result of various factors, including years of delays, treaty complications and market fluctuations.
Regarding the DA's PAIA application, Mavasa said the department has 30 calendar days to respond, and it would do so within the legal timeframe.
Oversight gaps
The South African Portfolio Committee on Water and Sanitation raised concerns about the cost of the project with the Auditor-General of South Africa (AGSA) at a sitting on 6 May, chaired by the DA's Leonard Basson.
The meeting flagged weaknesses in governance created by the dual-implementation model between the Trans-Caledon Tunnel Authority (TCTA) 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 AGSA from auditing 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.
READ MORE: Completion date for R53 billion Lesotho Highlands Water Project postponed again
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, AGSA 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.
She said South Africa has already set up its review team. Submission of the Lesotho government's team is awaited.
Lesotho's Finance Minister Retšelisitsoe Matlanyane told Parliament in February that the government intended to pursue 'the overdue review of the treaty' to negotiate a better deal for Lesotho.
How R8 billion became 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 worsened with years of administrative and procedural delays.
'The Phase 2 agreement was signed in August 2011.
'It then took 14 months for the RSA Parliament to ratify the Phase 2 agreement and a further seven months for the Lesotho Parliament to ratify the agreement after the ratification by the SA Parliament,' said Mavasa.
READ MORE: Municipal water crisis 'nothing to do with bulk water supply', says minster at LHWP reopening
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 DWS had five different ministers and 11 director-generals, a turnover that slowed decision-making.
There were also financing complications.
Funders raised concerns over procurement processes for the main contracts and requested that they be tendered afresh.
The covid pandemic also disrupted preparatory work, pushing back the award of main contracts.
In October 2022, the LHDA projected a R42 billion completion cost – incorporating contract prices, social and environmental programmes, foreign exchange effects, and administrative cost of managing the project.
More than R20 billion was due to inflation linked to the delays, said Mavasa.
In October 2024, 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 in 2024.
R5.4 billion for additional social obligations requested by Lesotho, such as rural water supply and road infrastructure – not yet approved by the LHWC but included in the LHDA's projections.
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 cost and time overruns have been a major concern for DWS and Minister Majodina.
She said LHDA has developed a plan to minimise any further delays and cost overruns.
She said LHWC will appoint a multidisciplinary team of experts to conduct management audits of contracts.
Although the project is about 50% complete, she said two primary contracts are behind schedule.
'However, the LHDA is executing a turnaround plan to avoid further delays and recover lost time.'
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In 2024, Mavasa said the department had established a governance committee comprising the department, the TCTA, and the South Africa delegation to the LHWC, which meets monthly to review progress.
Mavasa said the DWS director-general and the principal secretary of the relevant department in Lesotho hold ad-hoc and quarterly meetings to address issues arising from the project.
Unresolved issues are escalated to the ministers.
Lesotho Minister of Natural Resources Mohlomi Moleko said he could only respond next week as he is outside the country.
This article was republished from GroundUp under a Creative Commons license. Read the original article here.