SA pays R230m monthly water royalties to Lesotho
SA pays approximately R230m monthly in royalties to Lesotho for water from the Lesotho Highlands Water Project, while Lesotho owes R513m in outstanding VAT refunds as of February 2024.
These monthly payments drop to around R120m during periods when water delivery is disrupted, reports The Citizen.
According to a briefing yesterday by the Department of Water & Sanitation to the Portfolio Committee on Water & Sanitation, the royalty structure operates on a 56-44% split favouring Lesotho.
Teboho Nkhahle, SA chief delegate to the Lesotho Highlands Water Commission, confirmed SA ‘started paying the revised royalties in January 2024’ following recalculations using updated methodologies.
The current treaty includes a 12-year review cycle for royalty rates.
Committee members called for external auditing by the Auditor-General of SA to provide more rigorous oversight.
Water & Sanitation Deputy Minister David Mahlobo indicated a willingness to explore such arrangements. The R513m VAT debt represents outstanding VAT refunds that Lesotho owes to SA. Nkhahle confirmed that diplomatic efforts are underway to resolve these financial obligations.
The second phase of the Lesotho Highlands Water Project will deliver an additional 490m cubic meters of water annually to SA, supplementing 780m cubic metres from phase one.
The water primarily serves Gauteng, according to The Citizen.
The project operates under the 1986 treaty between SA and Lesotho, with oversight from the Lesotho Highlands Water Commission, comprising six commissioners from each country.
Mahlobo confirmed that the project remains on track for commissioning by 2029, despite recent setbacks, including contractor suspensions due to negligence and concerns over pollution.
The project’s budget, however, has escalated significantly from its original estimates, with current projections at R53.3bn.
Originally estimated to cost R42.06bn, the project escalated to R53.3bn.
Mahlobo reaffirmed that water delivery is expected by August 2028, with completion scheduled for September 2028.
Construction progress has reached 77% for major components. Nkahle explained that the R53.3bn long-term cost plan already includes R6.2bn in contingencies.
Article disclaimer: While we have made every effort to ensure the accuracy of this article, it is not intended to provide final legal advice as facts and situations will differ from case to case, and therefore specific legal advice should be sought with a lawyer.
