- White gold powers economic cooperation -

Ambitious power project is enabling Lesotho to produce a surplus of electricity to benefit the region as a whole

esotho used to rely on South Africa for most of its power requirements, but that has been changed by a giant project to produce what has become known as ‘white gold’.
The ambitious $4 billion Lesotho Highlands Water Project (LHWP) is already generating enough hydroelectricity to meet almost all of the country’s needs and provide a profitable source of export earnings.
The project is reputedly the largest and most ambitious project of its kind in the world. It combines water storage and electricity generation, and involves the construction of an extensive system of pipelines and tunnels to deliver water to Gauteng province in South Africa.
The decision to go ahead with the plan followed a water-supply treaty between Lesotho and South Africa in 1986, and the current project is a joint venture between the two countries.

The first stage of phase one was completed when the Katse dam and 82km-long South African pipeline network came onstream in 1998. This has a design capacity capable of delivering 18 cu metres-a-second of water to South Africa and to generate 72MW of hydroelectricity for consumption in Lesotho.
The second stage of phase one, centred on the construction of a dam at Mohale on the Senqunyane river in central Lesotho and a further 32km of tunnels, is scheduled to come onstream in 2003. By then, officials say that spending on the Lesotho Highland Water Project will have reached an estimated $475 million, and the project will be capable of deliver-ing 28 cu metres of water per second.


‘We have the potential to output a great deal more, up to 2,000MW’

The project has had a significant impact on Lesotho’s economy. Until the first phase entered commercial operation in 1999, the country imported 98 per cent of its electricity supplies from South Africa, according to natural resources minister Monyane Moleleki.
“Now we generate 100 per cent of our own electricity and export some to South Africa,” says Mr Moleleki. Whereas Lesotho used to spend $2.4 million buying imported electricity, it now earns about $400,000 by exporting it.
Apart from the boost to the balance of trade, the first phase will produce royalty payments from South Africa to Lesotho averaging an annual $40 million for at least 50 years. Mr Moleleki estimates that the scheme already accounts for about five per cent of Lesotho’s GDP and this is expected to rise to about 20 per cent when all five planned phases are completed.

Negotiations are under way on the details of the much larger second phase of the project. “We still have the potential for a great deal more, up to 2,000MW of electricity,” says Mr Moleleki. “We have the scientifically-proven potential – all we need is the financing to develop it. We have the water, but we need investment.”
Phase two will be much bigger than anything ever attempted so far in exploiting the water potential in the highlands, and it will be a project that requires a long-term approach. The minister says it will take about 30 years to build.
However, it has yet to be decided just what phase two will involve. Uncertainty stems from the fact that expectations of population growth in Gauteng province are lower than when the first projections were drawn up in 1980. Back then, the forecasts suggested that South Africa’s population would reach 67 million in 2025; now the reckoning is that the figure will be nearer 47 million, largely as a result of the spread of AIDS.

The long-awaited privatisation of the Lesotho Electricity Corporation (LEC) is expected to be completed by the end of this year. The government hopes to attract private sector investment for generation and supply of electricity – currently under the LEC’s monopoly.
Meanwhile, changes in the structure of the South African economy could have implications for the Lesotho Highlands Water Project. The decline of the gold mining industry and government-led promotion of economic development along the coast of South Africa is expected to reduce prospects for further growth in Gauteng.
Economic migration within South Africa, including the creation of new industries and the relocation of existing ones to the coast, has developed more quickly than the government expected.


‘My first priority is to maximise social and economic benefits’

That said, Makase Marumo, chief executive of the Lesotho Highlands Development Authority (LHDA), emphasises that the scheme extends beyond water and power supply. “This project also has the objective of economic cooperation between Lesotho and South Africa, and it is not only limited to those two countries,” he says. The scheme is also expected to help the economies of the other members of the 14-nation Southern African Development Community (SADC).
“The water transferred to South Africa feeds the industrial heartland of that country, around Gauteng, and the goods and services produced there are then distributed around the region,” says Mr Marumo. “This project promotes coop-eration and, even though it looks like we are dealing with a giant, a goliath in many respects, it is a win-win partnership in which each country benefits and we support each other.”

However, Mr Marumo concedes that charity begins at home. “My first priority with this project is that we maximise
the social and economic benefits for Lesotho. We ensure that the environment and the communities are protected, so we are not carrying out the project at their expense,” he says.
As is nearly always the case with a large undertaking such as this, there has been controversy over environmental issues and the displacement of local communities. Mr Marumo says: “The Lesotho Highlands Water Project is one of the few in the world where best practice has been adopted to mitigate the social and environmental effects of the dam projects.”

Although criticism has been voiced by several non-government organisations (NGOs) in the US, Mr Marumo points out that the response in Lesotho has been quite different. “We have a commitment from our local NGOs that they fully support the implementation of the project and that they will work with us to make sure the people who are affected get satisfactory compensation, both in the short and long term,” he says.
“It is a fine balancing act and we believe very strongly that this project benefits the majority of people,” he adds. “There may be isolated places where individuals have not been fully satisfied, but we have grievance procedures and mechanisms to resolve conflicts.”
Mr Marumo extends a similar invitation to overseas critics: “We are quite transparent in what we are doing and we welcome the international NGOs who want to come here,” he says.

World Report Limited Inc, PO Box 2339, London, W1A 2NX. Fax: (020) 7495 3707