Lesotho Highlands Project

One of the first task I was given in the Division of Planning was an economic comparison between the second phase of the Tugela-Vaal Scheme and the Lesotho Project as proposed in the report of Binnie and Partners. At one stage after my retirement, I was asked by Marie Ashpole of the SA Institution of Civil Engineering to write a paper on my experiences of the Lesotho Highlands Water Project. I did produce the requested paper, but it was too long for publication in the Journal. Marie said she would approach the TCTA (Trans Caledon Tunnel Authority) to publish my paper in a pamphlet, with further contributions by my successors on the Project. As part of my Memoirs, I reproduce the paper below.

RECOLLECTIONS OF A MEGA PROJECT

INTRODUCTION

Water supply to the Witwatersrand goldfields and the accompanying industrial and urban development has always been problematic. The City of Johannesburg lies astride the continental watershed: to the South it is drained by tributaries of the Vaal River, which ultimately sheds its waters via the Orange River into the Atlantic Ocean, and to the North tributaries of the Limpopo River rise, finding their way to the Indian Ocean. They all start as rather insignificant rivulets, soon to be engulfed and polluted by the growing urban conurbation. It was only with the establishment of the Rand Water Board and the construction of the Board’s barrage in the Vaal River in 1914 that water supply to the region became dependable. It meant however, that the muddy water had to be purified and pumped over a distance of some 60 km against a static height of about 300m! In 1938 the Vaal Dam was constructed by the Government to augment the Barrage’s yield, as well as to supply water to the Vaal-Harts Irrigation scheme, then also under construction (Vaal River Development Act of 1934). In the meantime, the Free State Gold Fields had been developed and were also dependant on the Vaal River (Vaal River Development Act of 1947). With the growing demand, the Vaal Dam had to be raised in 1956 and again in 1986. This was made possible by the enactment of the Water Act of 1956, which gave the Government the necessary jurisdiction over the rivers of the country. To reduce the demand on the Vaal Dam, the Bloemhof Dam was constructed lower down in 1970. In the meantime, the Rand Water Board area of supply had grown enormously, stretching as far as Pretoria in the North, the Vereeniging-Sasolburg area in the South, Rustenburg in the West and Bethal in the East. Areas in the Crocodile River basin had to be included, because of the relatively small run-off of its tributaries, and the large irrigation demands already placed on them, such as the Hartebeespoort irrigation scheme, dating from the 1930’s.

The continuously growing water demand, stimulated by the rapid industrialization after the Second World War, could no longer be met from the resources of the Vaal River, and it became necessary to look for additional supplies in neighbouring river basins. The climate to the west becomes progressively drier, so that east was the logical direction. However, the east-flowing rivers of the Highveld such as the Komati and Usuthu were already being developed for water supply to the coal fields and their power stations. In addition there were large demands for irrigation from these rivers in the lowveld, and neighbouring states Swaziland and Mozambique also had claims on their waters. This led to investigations being concentrated on the Upper Tugela and the Upper Orange. Both rivers were relatively little-used, and rise in the water-rich Drakensberg. Both river basins were studied more or less simultaneously. This paper deals with the diversion of the Upper Orange, but as will be seen, the Tugela development had quite a lot of bearing on the former.

Gauging stations in the RSA downstream of Lesotho, and at Whitehill within Lesotho, operated by the RSA Department of Water Affairs, showed that the upper Orange, called Senqu in Lesotho, looked promising for development, but little was known about the distribution of run-off in Lesotho itself. The country used to be called Basutoland, a British Protectorate. In 1950, the then High Commissioner of Great Britain, Sir Evelyn Baring, launched a survey of the water potential of the whole territory. This study was helpful when in 1955 Sir Peter St C Ballenden, Director of Public Works of Basutoland, promoted a study of the mountain streams as a source of water for the fledgling Orange Free State Goldfields. In 1956, the Basutoland Government appointed the eminent Ninham Shand and his firm as consultants. His name became synonymous with the proposed Oxbow Scheme to dam the waters of the Malibamatso River, a high-level tributary of the Orange, and to divert its waters through the Maluti range, enabling hydro-electric power to be generated, and water to be piped to the Orange Free State. This and other possible diversions north and westward are described in a fascinating paper by Colin Carter in “Die Siviele Ingenieur in Suid Afrika” of October 1965. The original Oxbow proposal envisaged a tunnel from the dam site on an oxbow in the Malibamatso River issuing in the Caledon River, via a cascade of two hydropower stations. Water could be supplied to the Free State Goldfields by tapping the tunnel above the lower power station. Because the South African Authorities had decided to supply the OFS Goldfields from the Vaal River, this was later modified to a tunnel system towards the Elands River, a tributary of the Wilge, in its turn a tributary of the Vaal. A 157 million m3 live storage would regulate a flow of some 4 m3/s which could be exploited in three power stations by an available total maximum static head of about 880 m. The diverted water would be available to the users from the Vaal River system, either via the rivers, or, if the quality were to be conserved, via a pipeline to the Johannesburg region. All subsequent proposals were along similar lines. After further studies, alterations and additions and discussions with the two Governments concerned, a report by Ninham Shand and Partners in association with Merz and McLellan entitled: “The Oxbow complex – consolidated proposals”, was produced in September 1968. These proposals also introduced a dam at Pelaneng, lower down the Malibamatso that could serve as reserve storage for the Vaal demand. The scheme would also tap some of the waters of the Caledon River, and would terminate in the Klerkspruit, instead of the Elands River. The United Nations Development Programme agreed to finance a feasibility study of these proposals. The International Bank for Reconstruction and Development, better known as the World Bank, oversaw the study on their behalf, which was conducted by Binnie and Partners, a firm of British Consulting Engineers. They produced a report in 1971, entitled “Lesotho, Study on Water Resources Development, Feasibility Report”. In this report a dam was proposed at the Pelaneng site, regulating a flow of 8 m3/s to the Elands River for supply to the Vaal, but without a hydro-station, which was found to be uneconomic. I was fortunate to have had insight in a draft of this report, and because of this background knowledge was asked to accompany the then Deputy Secretary of Water Affairs, Mr. Bill Murray, in August 1970, on a visit deep into the mountains, conducted by Tom Hyde, a hydrologist in the service of Lesotho. This started my 21-year long involvement in the Lesotho Highlands Water Project!

At the time I was engaged with the design and re-planning of the Tugela-Vaal project. Originally, it was intended to construct a pipeline and pumping stations raising the waters of the Tugela, regulated at the Spioenkop Dam, then under construction, over the watershed and then via further pipelines and a major tunnel to a storage dam to be constructed on the Elands River, near the bridge on the road between Harrismith and Bethlehem. After the White Paper describing the project had already been produced, the then Department of Bantu Administration and Development (or whatever that Department was called in those days), protested on the ground that much of the agricultural lands of the then (unknown to Water Affairs) proposed Qwa-Qwa homeland would be flooded. This caused a complete re-planning of the project, which was fortunate, because it enabled substantial savings to be made. A new dam at Woodstock, higher up the Tugela, would regulate the river. A pumping station and weir at Driel, below the confluence with the Mlambonja, the last major tributary above Bergville, would deliver the water in a canal, leading all the way back to the foot of the low Drakensberg at Jagersrust, where it would be pumped over the watershed into another canal leading to the reserve storage site at Sterkfontein, on the Nuwejaarspruit, a tributary of the Liebenbergsvlei River, from where it could be released to the Vaal Dam. I was instructed to compare the unit cost of water from the Lesotho Project as per the Binnie report, including the cost of getting that water from the Elands valley to Sterkfontein, with the cost of water from a second stage of the Tugela-Vaal Project. The latter cost proved to be substantially less, mainly for four reasons:

1. The canal system from Driel to Sterkfontein had been designed from the beginning to a capacity of 11m3/s, sufficient for the second stage. 
2. The possibility existed to construct a major pumped storage project, (the Drakensberg Project) that could lift the water at a running cost of only the incremental cost of coal burned in the thermal power stations of Eskom and a small share of the capital cost. 
3. The water of the second stage would issue directly in the reserve storage at Sterkfontein, which was not the case with the Binnie proposals. 
4. On advice of the World Bank, Lesotho wanted an 8% return on the full cost of their project, while the RSA would have to also bear that full cost and the associated risks!

During the ensuing discussions, the RSA delegation offered Lesotho a royalty initially of 0,5 c/m3, later raised to 1,25 c/m3, which was not acceptable to Lesotho as advised by the World Bank, and led to the collapse of the negotiations at the end of 1972. It is rather ironic that the latter figure, updated to present day price levels (47 c/m3 ), is better than the royalty paid to Lesotho today (35,29  c/m3  ).

WATER AFFAIRS STUDIES
In a way, this delay in implementing import schemes from Lesotho was fortunate, because when discussions were re-opened, the demand on the Vaal’s resources had exponentially grown to such an extent, that a much larger-scale project would be required. The Planning Division of the DWA continued studying proposals for the diversion of the Upper Orange, while the Tugela-Vaal / Drakensberg Project was under construction, because it was clear that eventually, both schemes would be needed. Following a top-level meeting in Maseru, in September 1974, the Division submitted a report, dated January 1975, by Chris James (now Professor at Wits) and myself to Water Affairs Management, describing a proposal for a dam below the confluence of the Malibamatso with the Senqu at a site called Mohhlanapeng. The then Secretary for Water Affairs, Dr JP Kriel, appointed Henry Olivier and Associates, a small firm of consulting engineers, assisted by the engineering geology firm of MJ Mountain to do a desk study of these proposals, which resulted in an interim report, dated 1978. Philip van der Riet, of the former firm was the main driving force of this study, also taking part in the subsequent study mentioned further on. He regretfully was lost to the country when he emigrated in 1981. In June 1976, I accompanied the then Minister of Water Affairs, Braam Raubenheimer, the Secretary JP Kriel and Johan du Plessis from Water Affairs and Viljoen and Lindeque from Foreign Affairs to Maseru for Ministerial level discussions. We were met at the border by Deputy Prime Minister Maserebane, and conducted to our hotel. That evening, there was a reception where everybody important in Lesotho, bar Prime Minister Jonathan and the King were present: Ministers, bishops, diplomats, senior public servants etc. Early the next morning, the Deputy Prime Minister arrived back at the hotel, asking Minister Raubenheimer and his party to quietly leave the country, to avoid embarrassment when the Lesotho Government was going to issue a strongly-worded anti-South African statement. The date was 18 June 1976, two days after the Soweto uprising! Nevertheless, on our way out, we were shown some industries financed by the Lesotho National Development Corporation, which is largely a creation of the South African industrialist Dr Anton Rupert.

PRELIMINARY FEASIBILITY STUDIES
At the end of 1977, when the dust had settled, Lesotho approached the RSA to re-open the topic. On 24 January 1978, I attended a meeting at Departmental Head level between the two countries’ Foreign and Water Affairs Departments in Cape Town, in the presence of officials from the World Bank. Agreement was reached to call into being a Joint Technical Committee (JTC) with representatives from the RSA Department of Water Affairs and from the Lesotho Ministry of Water, Mining and Energy (WEMIN). A joint preliminary feasibility study, financed by South Africa, would be conducted under the direction of the JTC. The Committee was initially chaired by Johan du Plessis, but after his promotion, I took over. The two firms of consultants involved in the two previous studies, Henry Olivier and Associates on the one hand and Binnie and Partners on the other hand, were commissioned to do the necessary investigations and studies to produce a joint report. Progress was regularly monitored by the JTC and directions issued, so that a detailed brief at the start was not needed. The Committee’s first meeting took place in August 1978. The Lesotho Government insisted on two conditions: a hydro-electric component for supply to Lesotho had to be incorporated, and no dam would be allowed on the Caledon River as part of a proposed layout. The reason for this was that Lesotho lays claim to parts of the Eastern Free State, which they consider as territory conquered from the Basotho by the then Republic of the Orange Free State. These two conditions had important consequences for the project, as will be seen later. All reasonable alternatives were to be identified for consideration by the JTC and the ultimate delivery of these should be at least 30 m3/s. Provisional drafts of the consultants’ report were submitted to the JTC. After discussion, the RSA delegation required that no reserve storage, similar to Sterkfontein was to be included in the comparisons between layouts, and Lesotho insisted that the maximum amount of energy was to be generated. The latter requirement could, however, possibly lead to higher total costs. In May 1979, the JTC submitted a preliminary feasibility report produced by the two consultants. A phased project was proposed consisting of five dams ultimately delivering 35 m3 /s, with hydro power as an integral part. However, the report had not identified a single layout to be subjected to further study. Nevertheless, it was decided to proceed with a full feasibility report, this time with each country paying half the cost, with the JTC appointing joint consultants. Although the JTC had its final meeting on 22 May 1979, further work by the two consultants continued on some of the layouts, under the direction of a Works Committee. A draft report to that Committee dated 23 April 1981 caused a furore. It was shown that the most economic layout would be a head-pond and from there a headrace leading to an underground power station, with the tailrace ending in the territory of the RSA. This layout was rejected by Lesotho, without giving reasons, in favour of a layout with the tailrace ending in a regulating pond on Lesotho territory. This made the securocrats within South Africa extremely nervous, because it would enable Lesotho to cut off the water during a drought when it was most needed, without interrupting their power supply. This almost resulted in abandoning the project. The DWA put a possible solution to the impasse before the then Minister of Water Affairs, Dr Nak van der Merwe. The idea was to make provision for the installation of gates in front of the tunnel leading from the tail-pond, so that this tunnel could be shut down in an emergency or for maintenance, but to keep the gates themselves on the SA side of the border, and thus under control of the RSA. Wording to that effect was prepared to be submitted to Lesotho, but the Minister thought that this wording should also make provision for other possible solutions. On 5 June 1981, I accompanied the Foreign Minister, Mr. Pik Botha, to Lesotho on behalf of Dr van der Merwe, in an attempt to resolve the deadlock. When I tried to explain the background to the wording that was going to be put to the Government of Lesotho, Mr. Botha refused to listen, saying that “he could read, couldn’t he”? During the discussion he said that, if the engineers could not agree, he would put his “word engineers” onto the case, meaning his diplomats. However, an agreement on paper alone was not acceptable to the Prime Minister, Mr. PW Botha, who wanted more concrete measures. The latter was in any case not favourably disposed towards a joint project with Lesotho, saying on one occasion that he had grown up in the Eastern Free State, and that he did not trust the Basotho. In the end, the problem was left to be solved by the engineers later, by which time the changed conditions in South Africa did away with these concerns altogether. Another incident occurred, that at one stage seriously threatened the continuation of the Project, when, totally unexpectedly, the South African Defence Force invaded Lesotho to attack Umkhonto We Sizwe cadres there. Afterwards, the DWA was instructed to halt all work on the Project. Fortunately, I stuck out my neck and disobeyed this instruction by telling the consultants to get on with the work, assuring them of payment, while refraining from entering Lesotho. I also requested Hans Pettenburger, the Permanent Representative on the JTC to stay put in Maseru until the dust had settled. Hans was an extremely courageous individual, who agreed to do so. (To further illustrate his courage: he fought off six burglars who entered his house). If a different course of action had been taken, it is doubtful whether the Project would have been completed on time, or for that matter, would not have been abandoned altogether.

FEASIBILITY STUDY
A serious delay occurred due to the difficulty Lesotho experienced in raising the necessary funds for its half of the cost of the feasibility study. In the end, the European Development Fund agreed to this financing, but laid down the condition that none of these funds could be used to pay for the services of South African consultants or contractors. That was the time when the RSA Government was the polecat of the world. The idea of a joint study had thus to be shelved, and a bizarre arrangement had to be adopted. The study area was divided into two physical parts, each being investigated by the respective Governments’ own consultants. Each consultant had to review the work of the other, in the end producing a single joint report. Even more absurd was that each consultant could only be supervised by their own “Study Supervisor”. The two supervisors were supposed to regularly meet and coordinate the study. Provision was also made for meetings of the two Technical Departments involved, and for ad-hoc meetings at Heads of Department level if required.

The RSA Department of Water Affairs appointed Ninham Shand and Partners, because of its previous involvement in Lesotho, with Henry Olivier and Associates, the latter partly responsible for the study under review. This was called the Olivier Shand Consortium (OSC). Lesotho appointed the German/British consortium of consultants, Lahmeyer MacDonald Consortium (LMC), assisted by the Electricity supply Board of Dublin, Ireland and by TP O’Sullivan & Partners of GB, as sub-consultants for infrastructure and Coopers & Lybrand, a firm of London Chartered Accountants & Auditors, (represented by Stan Webster and Chris Williams) as financial/economic consultants. OSC was supervised for most of the study by me and my staff, while Lesotho was assisted by the New York firm of consultants Tippetts-Abbett-McCarthy-Stratton (TAMS) as Study Supervisor. The latter appointment was funded by the United Nations Development Programme (UNDP), which used the World Bank as its agent. This was the start of the World Bank becoming involved again, which continued in one form or another throughout the project. Various officials from the Bank visited from time to time during the course of the studies, but two visited regularly and worked almost full-time on it: Johann-Georg Renkewitz, a German financial analyst, and Charles Morse, an American civil engineer, who used to be in charge of procurement at the Bank, until his retirement. Both proved themselves dedicated and impartial analysts. The brief for the consultants had been drawn up during a series of meetings in Maseru and Pretoria, late in 1982, involving Mr. De Baulny, a French hydrologist in the service of WEMIN, Lyle Hixenbaugh of TAMS, the Lesotho Study Supervisor designate, Masupha Sole, and Reatile Mochebelele, both Engineers at WEMIN, apparently under training by Hixenbaugh. At that time, there was a flurry of meetings between the parties. For one of these, I had to travel from Bloemfontein to Maseru in a Cadillac from the Government Garage. That was the only vehicle available where I could stretch my one leg, being in plaster after a knee operation.

As already mentioned, the previous study did not identify a single layout to be studied. Thus the first stage was to identify this single layout. The first stage also had to establish whether there were any insurmountable environmental, legal or socio-economic barriers, and whether it would be worth the cost for the two Governments concerned. In 1983, I recruited Hans Pettenburger, who in the meantime had left Water Affairs for the private sector. He had to open an office in Maseru as Permanent Representative of the RSA delegation on the JTC. The feasibility study at last started in August of that year. At some stage during the study, about 1985, something or another happened that led to a re-organization at WEMIN, when Reatile Mochebelele became Principal Secretary to that Ministry, and a LHWP Unit was established under the leadership of Sole, which became the Lesotho Supervisor, assisted by TAMS. Hixenbaugh was replaced by Eric Cole of the same firm. It is perhaps interesting, or better: shameful, to note that in those days Black people were only allowed in some restaurants in the major cities, referred to as “international restaurants”. When the Basotho engineers mentioned had to come to Pretoria for discussions, one had to be very careful to select a suitable restaurant to invite them to, so as to avoid embarrassment!

In December 1983, a joint Stage 1 Report was produced recommending a three phase project, to deliver an ultimate 50 m3/s, as regulated by three dams, with two separate transfer tunnels through the Malutis, one of those equipped with a hydro-electric power station. Both transfer tunnels were to end in a single tail-pond, whence a single delivery tunnel would convey the water to the Liebenbergsvlei River. RSA had earlier studied a project, using Ninham Shand as consultants, to regulate the water of the Orange River below the border with Lesotho, and conveying this to the catchment of the Vaal River. During the discussions on the Stage 1 Report, the RSA delegation indicated that in its opinion, the optimum layout had not been identified. This was confirmed by Colin Carter, who was shown an advance copy of part of this paper, when he wrote: “In the 28 layouts analysed in detail, the one finally selected was not even conceived. The Katse dam site was identified, but only a western delivery system was considered, with canals etc. in the lowlands. When, after the report had been hastily delivered, I was given it to review, I pointed out that Katse captured the Bokong River from the high rainfall western side (which Pelaneng did not), and Soai, at lower altitude, added only the Matsoku from the drier east, and that the northern delivery route had been found to be better than the western in all cases.” The RSA delegation also insisted that a rational way be found for the price of water the Republic would have to pay to Lesotho, seeing that previous attempts at reaching an agreement, had stumbled on that issue. It was proposed to Lesotho, and accepted, that this Orange-Vaal Transfer Scheme (OVTS), as it was called, would be brought up to the same standard of accuracy as the LHWP report, and that the difference in net benefit (capital investment costs and future operating cost present valued to 1983 values of the respective schemes) between the two projects would be used as a measure of the benefit of the LHWP, which could be divided between the two countries. In view of the multi-purpose nature of the LHWP, the comparison was evidently to be made with a LHWP for water delivery only. It is clear from the physical circumstances that the difference between the LHWP and the OVTS could be substantial: the Highlands of Lesotho are not only closer to the Vaal, but also much higher than the OVTS, so that in the latter case, pumping would be required, while the LHWP could be a net producer of energy. The RSA delegation also pointed out that the OVTS could easily produce 70 m3/s, considered about the maximum that could reasonably be transferred to the Vaal, without jeopardizing the Orange River Project, while the LHWP proposals at the time were for a substantially smaller amount. This would mean that, at a later stage, the RSA would have to implement a smaller scale, and thus costlier OVTS. As a result, the Lesotho delegation insisted that further phases to the LHWP be investigated, to bring that total also up to 70 m3/s. This required a major extension of the original brief, and resulted in the so called Stage 2A reports of April1984, one dealing with the study of the proposed LHWP layout, and the other with the OVTS. In order to measure the financial difference between the two alternatives, where they have such different cash flows, a single discount rate had to be used in the calculations. This issue had been dealt with before in the negotiations between the DWA and Eskom in connection with the Drakensberg project, where I served on a committee of the Department of Finance and the Reserve Bank to establish a suitable discount rate. The same 6% discount rate was accordingly agreed to. These two reports showed that the benefit, at 1983 price levels, expressed as a present value in 1985 would be, for money values of the time, an enormous  R 1 900 million, which benefit could be divided between the participating countries. It also confirmed that a project, entirely within Lesotho, would be more economic than a first phase LHWP followed by a smaller OVTS. On the basis of this, and after the two Governments gave the go-ahead, it was decided to proceed with, what was called Stage 2B. By that time, literally thousands of different layouts or variants of these layouts had been compared with each other. Dams can be built almost anywhere in the narrow valleys of the highlands. The criteria governing selection are thus: the quantity of water flowing at the site, the lower down, the more water; the length of the transfer tunnel; the head available for hydropower; the storage capacity of the site, the best ones being below the confluence of two tributaries, each branch offering some storage capacity.

The threat to the project in connection with the security concerns mentioned earlier was not the only one to be overcome. In 1983, during the major drought, the dams on the Vaal River, and those on the Komati and the Usutu, which supplied water to the Eastern Highveld ran virtually dry. The only water available was that pumped from the Tugela into Sterkfontein dam, which could be let out to the Vaal Dam. In order to get that water to the power stations and SASOL, the DWA and ESKOM built a project consisting of seven low weirs in the Vaal River, starting in the Vaal Dam basin near Villiers, and ending at the Grootdraai Dam near Standerton. Each of these weirs was equipped with electric pumping stations to pump the water in stages in an upstream direction. A geologist, David George, worked on that project, and as a result, came forward with a proposal to do a similar scheme as an alternative to the LHWP, consisting of 32 weirs, starting at the confluence between the Vaal and Orange Rivers, ending at the Vaal Barrage, from where it could be put into the Rand Water Board system. He prepared a report which seemed to indicate that this would be a cheaper solution than the LHWP. Even if it were found to be the case after a thorough and costly investigation of a large number of weir sites, there would be the major problem of the effluents of the Witwatersrand not being able to find their way to the sea, being pumped back all the time. To Mr. George’s chagrin, the DWA refused to look further into his proposal.

In June 1984, the Cabinet appointed Mr. Braam Raubenheimer, a retired Cabinet Minister, to head a team which would broadly look at all the possibilities of increasing the supplies to the Pretoria-Witwatersrand-Vereeniging area, including the George proposal and further phases of the Tugela-Vaal Project. This report was completed in June 1985, and recommended both a first phase of the LHWP and a further phase of the Tugela-Vaal.

In October 1985, Messrs Tromp, Laburn and Bruinette of a group calling itself SAFPROD (South African Project Development) that was looking at possible projects in the Homelands and Neighbouring States came to see the DWA. They came up with a preliminary proposal, the first phase of which would involve the Caledon River. Knowing Lesotho’s embargo on any such scheme, this proposal proved to be not worth pursuing, notwithstanding some political pressures being exerted.
The LMC – OSC studies were completed in December 1985 and resulted in a joint report by the two consultants dated April 1986, entitled: Lesotho Highlands Water Project – Feasibility Study.  The report was signed by Berndt Hecker on behalf of LMC and by Robin Mackellar on behalf of OSC. It consisted of a Main Report, accompanied by an Album of Drawings, and 10 supporting reports dealing with the following subjects: Hydrology; Geotechnical and Construction Materials; Environmental and Social Impacts; Topographic Surveys and Mapping; Management and Manpower; Legal; Infrastructure; Design; Project Cost; Economic and Financial Appraisal.

The layout as proposed in the report differed in some respects with the one that was ultimately used in the Design Phase. Most attention had been given to Phase I, which was divided into two Sub-phases. Briefly, as the first Sub-phase (IA), a 155m rock fill dam at Katse on the Malibamatso would yield 16,9 m3/s transported via a 48 km machine bored tunnel to the Sentelina head pond on the Nqoe River and from there to a 110 MW power plant, from where it would discharge in the Tlhaka tail pond on the Hololo River. Both ponds would be created by major dams. From Tlhaka the delivery tunnel would convey the water to be discharged in the Ash River, to find its way via the Liebenbergsvlei River to the Vaal Dam. Sub-phase IB would consist of the 153 m high dam at Mohale on the Senqunyane River, connected by tunnel to the Katse Dam. This would yield 10,1 m3/s, conveyed by the same system to Thlaka. From there a second delivery tunnel would convey the water to the Ash River. As an interesting aside: the maps showed that river as Asrivier, which was translated by the consultants as Ash River. During a visit to the Bethlehem Town Council, the Mayor pointed out that this was a mistranslation. It should have been Axle River, named after an incident when somebody’s axle broke while crossing the little stream (As having both meanings in Afrikaans). Because a substantial investment was to be made in the transfer tunnel to accommodate the second Sub-phase, the RSA Study Supervisor insisted on the two sub-phases to be agreed on by the two Governments in their entirety.

Phase II, with a capacity of 28 m3/s, would be a 182 m high dam below the confluence of the Semena and the Senqu at Mashai, with the water being pumped upstream into Katse, with the Phase IA conveyance being doubled. Phase III would be a 155m high dam at Tsoelike and a pumping station to Mashai. The total capacity of these three phases was estimated at only 63,6 m3/s, which means that a further dam lower down would have to be introduced at Ntoahae to make up the shortfall. Because of the long time in the future that this was required, the exact details of the latter were not required.
Not dealt with in the Feasibility Report was a possible revision to the proposal just described, that was brought to my notice by Colin Carter, of Ninham Shand, whose paper I already mentioned in the opening paragraphs. He was of the opinion that it would be worth investigating doing away with the Sentelina head pond, and connect the hydro station directly to the transfer tunnel. He had asked the late Mike de Witt to carry out some surge calculations, which looked promising. The idea was put before Bruno Graber, head of the hydro division of Eskom, whose calculations confirmed the viability and economic benefits of the proposal. They were studied later by the design consultants, and eventually adopted. Apart from the benefit of doing away with the cost of the head-pond, substantial additional energy can be generated, because the full head of the Katse reservoir will be available. I do not know of any other case where the headrace of a power station would be some 48 km long! Imagine the momentum of a 48 km long column of water, 4,05 m in diameter, weighing some 618 000 tons flowing at 2,1 m/s  having to stop abruptly when the wicket gate of the hydro station suddenly shuts during a power outage! Doing away with the head-pond could possibly have made the hydro component economic, because the feasibility study showed that the rate of return on that investment was insufficient to meet World Bank criteria. This change also resulted in the tail-pond being shifted from Thakkar to Meal, a site on the Hollo River. The presence of hydropower necessitated that the transfer tunnel be of a larger diameter than required for water transfer alone, because of the reduced head available to drive the water. This means that in the coming design studies, a “water-only” design had to be produced as well, in order to determine the cost allocation between South Africa and Lesotho. Because this “water-only” design would never actually be constructed, cost allocation to the hydropower function was complicated. It was simple to allocate the power station and the tail-pond dam to hydropower, not so the rest. A particular physical feature of the tunnel system, the cost of which could be accurately determined, was also allocated to hydropower. Further studies of the hydrology would also be required, because the parties could not agree on a mutually acceptable hydrology, even if the Stage 2B hydrology had been accepted for optimization purposes. As will be seen when the Treaty is discussed, that was an important outstanding issue. The report also dealt with the social and environmental impacts, the main one being the loss of some 4 000 ha of arable land and 18 700 ha of grazing. 1365 people were to be resettled. In this paper, these issues are dealt with only briefly, not because they are less important, but because they are less within my expertise. They often became the subject of heated debates between the Parties, because of the huge costs associated with them, and because it was often difficult to decide which of these costs, to be borne by the RSA water user, were due to the Project, and not to the laudable desire of the Lesotho Government to improve the lot of its people.

THE TREATY
Originally, the South African delegation proposed a bi-national authority along the lines of the Itapúa binational between Brazil and Paraguay for the construction of the 12 600 MW Itapúa hydropower project. Lawyers even produced preliminary legal documents for this idea. However, this was not acceptable to Lesotho (and probably also not by the international organizations concerned with the project). The reason was that South Africa’s economy and financial muscle is so vastly larger than Lesotho’s, and that the project was too large relative to Lesotho’s economy. It was thus decided to create two parastatals: the Lesotho Highlands Development Authority (LHDA) to carry out the works in Lesotho, and the Trans Caledon Tunnel Authority (TCTA) for those within the RSA. However, because the South African water consumer would have to pay most of the cost of the project, even the parts within Lesotho, it was absolutely necessary that the South African authorities would have full insight into and approval powers of what was going to be done in Lesotho. This was solved by an agency called the Joint Permanent Technical Commission (JPTC), with equal representation by the two countries. Obviously, the representation by the SA delegates was far more important, because of the financial consequences. All decisions of the Commission were to be reached by consensus, while provision was made for referring disputes to higher levels, and eventually to binding arbitration. Apart from the monitoring and advisory powers of the Commission, it also had veto powers regarding decisions of the two Project Authorities for certain issues described in the Treaty, such as funding plans, operation plans, designs, tender procedures etc. Each country had to bear the cost of its own delegation. The Commission was co-chaired by the RSA and Lesotho. I was appointed as the RSA Chairman.

A draft Treaty had been prepared at technical level, which was extensively reviewed by the legal divisions of Water Affairs and Foreign Affairs, assisted by experts, such as the late Professor Vorster from the University of Pretoria and Professor Thomashausen of the University of South Africa. A top legal official of the World Bank, Mr. David Goldberg, who happens to be a South African, was also involved in vetting this draft on behalf of the Bank. Some anxiety was experienced in the ranks of the South African officials involved when, for the second time in the history of the Project, there was a coup d’ état in Lesotho. Throughout the Project cycle, there were numerous changes in the political and administrative top-structure of the Ministries involved on the Lesotho side. Even in South Africa, a fair number of Water Affairs Ministers had to be briefed ab initio.

Discussions at Ministerial level had now to be entered into. One of the issues to be resolved at that level was the division of the benefits of the Project between the two participating nations. At the technical level, only a 50/50 division could be recommended, lacking reasons for recommending differently. The Lesotho delegation at the meeting advanced the argument that their country’s needs were so much greater, and that the construction phase would make use of their country’s roads and other infrastructure and services. In the end, a 56-44 division in favour of Lesotho was accepted at political level. The RSA study consultant had insisted that some of that benefit would flow to Lesotho as a consequence of the workings of the SACU (Southern African Customs Union) agreement between SA, Lesotho, Botswana, Namibia and Swaziland. This stipulated that the share of any of the latter four countries would be determined by the value of the goods entering their country, not only the goods entering from beyond the Customs Union area, but also those entering from South Africa. It was calculated that some R275 million would accrue to Lesotho as a result of the importation of cement, steel, etc. from South African sources, in addition to their share from normal trade. This monetary transfer would not take place if the RSA were to implement the OVTS, the difference in cost of which formed the basis of the benefit calculations. At the technical level, South Africa insisted that this amount was to be considered as part of Lesotho’s benefit. Lesotho resisted this, which caused a dispute for a while. The two parties met at the Parliamentary offices in Cape Town on 18 March 1986, under the Chairmanship of the RSA Deputy Minister of Foreign Affairs, Mr. Miller. Also present was the then Minister of Trade and Industries, Dr. Dawie de Villiers, one time Springbok Rugby Captain, who was in charge of the SACU agreement. As is often the case with politicians when dealing with technicalities, they arrived unprepared and at the last moment. However, in the case of Lesotho, this was not so. They “innocently” asked the Minister whether he agreed that the Project should not cause a change to the SACU agreement. When he started to agree with the Lesotho delegation, I requested an urgent adjournment of the meeting to be able to put the Minister in the picture, pointing out that he was about to dish out a further R275 million of benefits to Lesotho. It must be remembered that these were 1985 price levels, when the US$ was worth R2, and that it formed a substantial portion of the R1 297 million estimated share of Lesotho. That country eventually gave in on that issue. The Lesotho delegation had noticed who was responsible for that caucusing, because Mr. Sole told me afterwards that his Minister had said to him: the one with the glasses should have been on our side! Because the OVTS would not be constructed, nor a purely “Water-only” Project, the cost of the actually constructed LHWP would not affect the royalty payments. Therefore the comparison is to be made between the OVTS as designed in 1984 and the theoretical “Water-only” scheme with the same yield. It was agreed that Lesotho’s share of the benefits would be paid in the form of a capital related Royalty, plus a per m3 sum for water delivered along the agreed projected demand curve, and a further lower per unit sum for water delivered in excess of the demand curve. These moneys would be regularly adjusted for inflation. In addition to the SACU and Royalty payments, Lesotho would receive benefits from the repayment by the RSA of concessionary finance, obtained by Lesotho for meeting certain water related expenditure, at normal commercial World Bank rates. Some additional income would also arise from taxes. The World Bank estimated that all these revenues would correspond to 5% of Lesotho’s GDP, and 14% of annual public revenues. The Bank insisted that a development fund be created for channelling the Project income to development-orientated programs. As already mentioned, with the lack of agreement on the hydrology to be used to determine the projected water flows to the RSA and the other outstanding issues relating to the layout, a number of protocols had to be added to the Treaty to describe exactly how these Royalties were to be paid as soon as the Project was commissioned. This resulted in a substantial stack of documents. The Treaty also stipulates that all loans and credits for the water transfer part are to be guaranteed by the RSA, that international tenders are to be called for, without discrimination against SA, and that 50% of the design work had to be allocated to RSA consultants. It is interesting to note that Lesotho interpreted the latter stipulation as that this would also be the maximum SA participation, regardless of the fact that foreign consultants were appreciably more expensive than local ones, and that the RSA would have to bear those extra costs. It was also stipulated that Lesotho would not be allowed to raise certain taxes on materials, etc. that could increase their share in that way. At the insistence of Lesotho, the Treaty also made provision for future increases in electricity prices, over and above normal inflation, because this would affect the OVTS yardstick more than the LHWP. As required by the RSA, the Treaty also made provision for the recalculation of the Royalties in the case where further phases after 1B were not to be implemented, in which case, the RSA would have to implement a follow-up OVTS to meet their demand. This would obviously reduce the net benefits to be shared. For obvious reasons, depending on the country which were to cancel the next phase, the reduction in the size of the Royalties will differ. As many as possible of the outstanding issues were dealt with in the Treaty, but nevertheless, provision had to be made for disputes to be resolved at the first instance by the JPTC, followed by the Parties and ultimately by arbitration by an arbitrator appointed by each of the Parties, and a third arbitrator, appointed by the two other arbitrators, who would act as president of a tribunal. If such arbitrator could in turn not be agreed upon, it was provided that the President of the International Commission on Large Dams (ICOLD), a body in which both countries had faith, would appoint such arbitrator. The irony of this is, that 8 years later, I, who became Chief delegate of the RSA to the JPTC when the Treaty became effective, was elected as President of ICOLD for a period of three years from 1994 to 1997! One stipulation of the Treaty, which was not to our liking, was that the LHDA was also to be entrusted with general development work, such as irrigation, water supply, tourism, etc. It was felt that the organization would have its hands full with the various phases, as they would be required over time. Several so-called protocols, which were only signed in Cape Town on 28th March 1988, were an integral part of the Treaty documentation:

• Royalty manual describing how these were to be calculated
• SACU manual dealing with the effect of the Project on SACU flows.
• Cost apportionment between Lesotho and the RSA
• Supplementary arrangements, including cost related payments, concessionary finance, insurance and starting date for Royalty payments
• Application to the Project of taxation in Lesotho

The RSA Cabinet agreed to the LHWP on 24 September 1986, with an announcement following on 29th. I was privileged to in person have presented several submissions to the SA Cabinet in the course of the studies. A red-letter day for the Project was 24 October 1986, the day of the signing of the Treaty in Maseru by the RSA Minister of Foreign Affairs, Pik Botha, and his Lesotho counterpart, Colonel Thaabe Letsie, a member of the Military Council, which had taken power from the civilian government some time before. Typical of such occasions, the stage was filled with diplomats, high defence force officers and other dignitaries, while the engineers and others who did the work, were relegated to the journalist benches. On 28 November of that year, interested parties were briefed during a whole day symposium at the CSIR conference centre.
Shortly after the signing, the LHDA was established on 16 November 1986 by order of King Moshoeshoe II, while the establishment of the TCTA required an amendment of the South African Water Act. The delegates to the JPTC were appointed with Reatile (Chicks) Mochebelele leading the Lesotho delegation and I the RSA one. Letlafuoa Molapo was the second member of the GOL delegation. South Africa’s was Tiny Krige of the DWA, with Claus Triebel his alternate. Pettenburger remained the Permanent Representative in Maseru. He was later assisted by Allan Davies, a senior DWA engineer. Steps were immediately taken to recruit a suitable international candidate to lead the Secretariat. The first incumbent was not a success and was succeeded by Charles Mwakalumbwa who served with distinction to this day. A specialist in finance, Johann Claassens was recruited from Theron & du Toit of Bloemfontein, later incorporated into Coopers and Lybrand Chartered Accountants and Auditors. The EU financed a technical assistance contract to assist the Lesotho delegation. This contract was awarded to Lahmeyer International, who sent Dr Johannes Meyer, a member of their staff, who stayed there for several years, and acted as the third Lesotho representative on the Commission.  Masupha Sole was appointed as CEO of the LHDA, the Board of which was under the Chairmanship of the Principal Secretary of Water, Mining and Energy. From March 1988, supervising responsibility for the LHWP passed to a new Ministry called:  Ministry of Lesotho Highlands Water and Energy Affairs. At some stage, Lesotho wanted to appoint the Minister to the chairmanship of the LHDA Board, which caused discomfort on the RSA side, and they subsequently dropped the idea. The TCTA was basically a Water Affairs undertaking with the Deputy Director-general, Mr. GCD Claassens as CEO and the Director-general, Mr. GJ du Plessis as Chairman of the Board, which also consisted of members of the Water Affairs staff, as well as Mr. Dale Hobbs, Chairman of the Rand Water Board. The first Board Meeting took place on 1 January 1987. The TCTA appointed a Hungarian specialist tunnel engineer, Frank Kubisch, as Technical Manager to help oversee the consultants. On the financial side they were assisted by Tim Store of Deloitte and Touche, later succeeded by Kobus Breedt. To assist the LHDA, Acres, a consulting engineering firm from Canada, was given a Technical Assistance Contract (TAC), funded by the World Bank. Acres was represented by a Mr. Willet, who did not last long, and was succeeded by Bob Witherell as Technical Manager. Acres offered their Mr. Jonker as Deputy Chief Executive to Mr. Sole, but this was not accepted by LHDA. They wanted to appoint a local candidate, which caused some anxiety in the SA ranks because of the candidate’s lack of experience for such a major appointment. An Irishman, Paul Bermingham, of Coopers and Lybrand, was appointed as financial manager under a Technical Assistance: Accountancy, contract. Later, an expatriate engineer, Mr. Röhrbach, was appointed Deputy Chief Executive Engineering and Construction, while similar posts were created: one for the Environment, Public Relations and Human Resources and one for Finance/Accounting, Administration and Legal Services.

ENGINEERING PROJECT
It was also the start of, what was called the “Engineering Project”. Consultants for a number of engineering design tasks were selected. LHDA put out requests for proposals from international firms. For its 50% of consultants, the DWA called a meeting of all the larger firms with expertise in the field of dam design and construction, hydrology, engineering geology and tunnel design and construction. They were asked to determine among them which staff with the necessary knowledge in the various fields could be made available to the Project, and on that basis, determine among themselves the share each firm would have in the Consortium. This initially caused some consternation, some of the firms obviously wanting to have all or the major share. In the end, it worked so well, that after the completion of the Project, they stayed together to bid for other work, also in other parts of Africa. In South Africa’s case, the consultants were paid on a time basis, as recommended at the time by the engineering organizations, which was the usual modus operandi at the time. All this resulted in four groups of consultants being appointed:

1. Lesotho Highlands Consultants (LHC) for the Katse Dam and the 45 km Transfer Tunnel, consisting of the European group SCGB with as members Sogreah (France), Coyne et Bellier (France) and Sir Alexander Gibb & Partners (GB) as members and the South African group HWDC, consisting of Ninham Shand, Knight Piésold, Keeve Steyn, MJ Mountain, SRK and VKE.
2. Sir Alexander Gibb and SOGREAH for the Hydropower Station and the Tail pond Dam. Lahmeyer MacDonald Consortium (LMC), consisting of Lahmeyer (Germany) and Mott MacDonald (UK) were appointed later for the detail design and construction supervision.
3. Lesotho Highlands Tunnel Partnership (LHTP) for the 15 km Delivery tunnel South (the stretch of tunnel on Lesotho territory), consisting of Lahmeyer and MacDonald, and the South African group Highlands Delivery Tunnel Consultants (HDTC), consisting of Ninham Shand, VKE, Keeve Steyn and SRK.
4. HDTC as above for the 22 km Delivery Tunnel North (the stretch of tunnel in RSA territory.

All designs were reviewed by appropriate international panels of experts, which were conveyed at critical points during the design phase.

In addition, various consultants were appointed to design the advance infrastructure such as the upgrading of the Southern Access road from Thaba Tseka to Katse, the Bridge over the Malibamatso River below Katse, the Northern Access Road from Pitseng to Katse, the Advance Construction Camp facilities at Katse, Butha Butha, Fouriesburg and Clarence and upgrading of border posts and various existing roads leading to the sites. A design contract was also awarded to GH Marais and Partners for transmission lines and substations to the various sites. The Northern access road was a major civil engineering feat of its own, consisting of three major tarred mountain passes, over 100 km long and including the massive and spectacular Malibamatso Bridge. HIC (Highlands Infrastructure Consultants) a consortium of Ninham Shand, BKS and Van Wijk and Louw did the design work. A major stumbling block arose in connection with these required advance works. Who would foot the bill if, after these works were completed and something happened (politically or otherwise) that prevented the rest of the work even commencing? Here, the Development Bank of Southern Africa (DBSA) came to the rescue. To the relief of all concerned, they agreed to fund these advance works. The names of Dr Brand and Mr. Richter ought to be mentioned here.

Contracts were awarded for all these facilities and they were completed on time for the main contracts to start. Providing further details about all this, however important, is beyond the scope of this paper. One aspect perhaps deserves mention. Normal practice in the RSA was for the Consulting Engineer who designed a project, to also do the supervision of the construction. LHDA insisted on competitive bidding for the supervision of the Northern Access Road contracts. The northern part was awarded to OJG, a consortium of O’Dwyer of Ireland and Jeffares & Green of the RSA to supervise the contractor (LTA). The former firm was involved in the supervision of a number of the other infrastructure contracts as well. For the southern part, the designer was also involved in the supervision of the Contractor (Dumez of France), but this time in consortium with the French firm BCEOM. The Malibamatso Bridge contractor (LTA) was supervised by the designer (HIC).

Immediately after the Project had been announced there was a flood of prospective contractors, suppliers of machinery and supplies of all sorts wanting to speak to those involved in the Project. The Chief Executive of the LHDA, Masupha Sole and I were invited to prepare a paper about it and present it to the Institution of Civil Engineers in London. The presentation took place on 10 February 1987, and was attended by a large audience, no doubt also due to the fact that the Channel Tunnel was also on the programme of the ICE meeting. A French contractor was keen to make use of the opportunity that our stay in Europe offered to show a tunnel boring machine to Sole, who had never seen one, and I was invited along. We were put up at the prestigious Hotel Georges V in Paris before flying by light plane to Grenoble, and from there by road to Gap, to visit the “Aménagement de Buech” near there. At a later occasion (June 1989), I was fortunate to be invited to visit the Channel Tunnel on the French side. When the British side heard about that, Dodo Claassens, the CEO of the TCTA and I were invited to visit the British side as well. Both were most impressive visits!

Early on in the life of the LHDA, it became clear to the RSA delegation on the JPTC that it would not be easy to limit the size of the bureaucracy of that organization. This subject often led to hot-under-the-collar discussions, considering that most of the staff bill was for the account of the South African water user, while there was little incentive for the Lesotho side to limit expenses.

A substantial Environmental Action Plan was devised, consisting of a Rural Development Plan, a Compensation Plan, a Natural Environment and Heritage Plan and a Public Health Plan. While all these were no doubt laudable, it was extremely difficult to ward off initiatives that were barely or not at all related to the Project, especially with international agencies such as the World Bank, the UNDP, the EU being all in favour of such initiatives, and at the time not exactly in favour of the Regime governing South Africa. It was also the time when such factors became very prominent all over the world. Worth special mention was the compensation plan. Because there is no land available in Lesotho to replace the land lost to the Project, it was decided to compensate households losing arable land with an equivalent volume of food crops and grain for 15 years. Fodder lost will be provided to local grazing associations for 5 years. The loss in the later years will be capitalized at 6%/annum and paid out in cash.
During the Engineering Project, a lot of attention had to be paid to arrange for finances for the Project. A Working Group: Finance was called into being to coordinate the various Ministries, Departments, Central Banks, Development-Agencies etc.  After calling for bids, Standard Chartered Merchant Bank of the UK (later called Chartered West), together with the Standard Bank of South Africa and the Standard Merchant Bank were appointed as financial adviser, entrusted with drawing up a financing plan. Strangely enough, the Bank used a chemical engineer, Dr David Smith, for that purpose. It was remarkable to notice how much these financial institutions get paid for relatively simple financial analyses, on a Lotus spreadsheet! According to the Treaty, the LHDA was supposed to arrange for the financing of the construction, while the RSA was supposed to guarantee the debt, and eventually to repay it. This meant that financiers were not really looking at the credit worthiness of LHDA, but of that of South Africa. The trouble was that many overseas financial institutions and governments were loath to be seen to assist South Africa with finance. Fortunately, the World Bank declared itself prepared to act as lender of last resort, and had indicated that it was prepared to put up a sum of the order of US$100 million. Compared to the massive amounts required, this was a drop in the ocean, but nevertheless very important, and without which the Project would not have been able to get off the ground. Clifford Chance, a very expensive firm of London lawyers was given the task of drawing up the so called “Trust Instrument”, which proved to be a document full of legal jargon, such as “these presents”, meaning the document being read! The international banks did not want to accept a direct RSA guarantee and a very complex security structure had to be devised to satisfy the banks. In place of a direct RSA guarantee, RSA had to sign a Dead of Undertaking and a Trust Instrument was created where all loans ranked pari passu with the World Bank loan. Law Debenture in London was appointed as trustee and RSA had to pay all loan repayments directly into an international trust account from where Law Debenture distributed the money to the respective lenders, thus creating distance between RSA and the Banks. The Trust was to be domiciled in the UK and governed by English law. All these arrangements were very expensive and that was the price RSA had to pay under the previous political dispensation. I was fortunate to accompany a number of South African delegations to London and Washington, consisting of high level staff of the Department of Finance (Christo Roets), the Reserve Bank (Dr Chris Stals and John Postmus), Credit Guarantee, the Industrial Development Corporation (Dirk van Staden) and Water Affairs (the successive Directors-general). A number of international banks were also present at some of these meetings, as well as credit agencies from countries such as Britain, France and Germany. In the eventual contract documents, prospective contractors had to indicate the credit they could arrange as part of their tender. It was the intention to raise as much as possible of the required finance in this way. The LHWP was seen as an opportunity by RSA to attract and secure international finance. To maximize the opportunity a very complex tender evaluation system was devised which included a whole range of bonuses and penalties to encourage contractors to maximize their financing proposals. Much to the concern of the engineers the tender evaluation process provided that the successful tenderer would not be determined necessarily on the lowest cash price, but by the tenderer that proposed the most advantageous financing package. To determine this most advantageous funding proposal the future debt service payments were calculated in respect of each tenderer and present valued to determine the lowest financed price, after the bonuses and penalties were taken into account. Because open international tendering was a requirement given the need for foreign funding and the technical complexity and enormous scale of the project, RSA also had to make sure that South African contractors would be involved in the project through incorporation into the international Joint Venture which would be formed. To ensure RSA participation a maximum of 35% of any tender could qualify for RSA export credit through CGIC (Credit Guarantee Insurance Company) at favourable interest rates. For a participation of 10% of the tender price, there was a 1% interest rate subsidy. This was gradually increased until a maximum of 6% at 35% participation. This ensured that it would be beneficial for an international contractor to include a South African contractor for at least 35% of the tender value. This strategy worked very well and South African contractors formed part of all the successful tenders. Substantial loans had to be raised by the TCTA on the South African market. Crucial to the success of the financial arrangements was that, as already mentioned, the World Bank agreed to a clause stating that all loans would be pari passu with the World Bank loan, meaning that each of the lenders had an equal claim in case of default. Normally the WB insists on always having first preference. Because it was almost unthinkable that the RSA would default on WB loans, which would totally destroy the country’s credit-worthiness, this clause reassured the other lenders. Another important point to note in connection with the financing was, that the RSA authorities decided to start charging water users at an ever increasing price per unit of water, as soon as construction of the project started, thus reducing financing charges, and reducing the price shock when the new supplies commenced. To mention figures that applied at the time would not mean much for to-day’s reader, seeing that 1US$ was worth about R2, and that a high rate of inflation since 1985 would distort figures even further. It may be of interest to note here the assumptions of inflation rates made for the financing plan: (actual average CPI figures in brackets) 1989: 15% (14,7%); 1990-91: 16% (14,8%); 1992-93: 15% (11,8%); 1994-95: 14% (8,8%); 1996: 13% (7,3%). Foreign inflation: 6%. Obviously, the financial advisors could not have foreseen the political developments of the nineties! On 26 March 1986, a major so-called donor’s conference took place in Maseru, to drum up the support of wealthier countries.

A number of contracts were awarded for site investigations, including exploratory drilling, test adits, rock mechanics tests, etc. Hydraulic model investigations were carried out at the Pretoria and Stellenbosch laboratories of the CSIR, at the University of the Witwatersrand and at the Sogreah laboratories in Grenoble, France. During the Engineering Project, it was also found that a concrete arch dam at the Katse site would be the most appropriate. Studies were also carried out comparing a higher dam, so that the water could push up further in the valley, resulting in a shorter transfer tunnel. This resulted in a 185 m high dam, the highest in Africa, with the transfer tunnel length reducing to 45 km. Because there was some doubt that the hydropower part of the Project would be completed on time for water to be delivered, a by-pass arrangement at the power station was designed, and eventually implemented.

Design work on the advance infrastructure had in the meantime advanced such that contracts could be awarded, the three most important ones being two contracts for stretches of the Northern Access Road and the contract for electricity supply. The first official opening of any part of the Project was in December 1988: the bridge over the Malibamatso below Katse, part of the Southern Access was opened with the necessary ceremony. In the meantime, the Orange Free State Provincial Administration upgraded the road from Fouriesburg to Caledonspoort, the main border post for access. They also improved some other roads affected by the Project, and constructed a by-pass at Ficksburg. The South African Railways improved the facilities at Fouriesburg station to be able to handle the cement traffic. The Department of Public Works arranged for the building of a new bridge at Ficksburg and for improvements to the border post there and at Caledonspoort. The Project had a marked effect on the Free State towns and villages close to the Border. Ficksburg expected substantial spin-offs. The town council went out of their way to lay on contacts with the project authorities. They invited me to address their Chamber of Business and even asked me to officially open their new pumping station at their Meulspruit water works. The Ficksburg by-pass obviated the need for the project traffic to pass straight through their town and was of permanent benefit, Ficksburg being the busiest border post in South Africa. Clarens was probably most affected, often against their desire. The little town had only a small population and was starting to get known for its artists and as a holiday destination for the Rand population. The town council would have preferred it to stay that way. That was impossible, the place being the centre of the Delivery Tunnel (North) works. Houses for the senior staff were erected in the village itself, while a new area was developed for the contractors. A number of good quality new houses were also built at the township of Kgubetswana. Clarens also benefited from a new water supply scheme and sewage treatment works.
In the meantime, Lesotho insisted on the upgrading of certain of their roads which was, in the opinion of the RSA, not strictly necessary for the Project. In this, they were supported by the World Bank and other international instances, and with SA not always being in a strong negotiating position, they were agreed to after consultation with higher authority. Here it should be recalled that the Lesotho Government used the argument that the Project would use their country’s roads was advanced to get a larger share of the Royalties. During discussions at JPTC level, I often warned my counterparts that attempts by Lesotho to unreasonably maximize their advantages at the expense of the RSA could lead to future phases of the Project being abandoned, because little financial benefit might be left for our country.

During the process leading up to tenders for the main works being called, there was a lot of jockeying. At some stage, Vincent Bray of the Cement Producers Association warned that Anglo Alpha had received a call from the Lesotho Principal Secretary, Trade and Industry, Mr. Sebatane, saying that they wanted the cement producers to meet a Mr. Burdin of France. Sebatane had said that the RSA Government was going to finance the rail spur to Maputsoe, together with Lesotho. This, while the improvements at Fouriesburg were already on the go! There was also the case where it was learned that the Lesotho National Development Corporation wanted to give the monopoly for quarrying to somebody. Needless to say that these ideas were strongly resisted by the RSA. A more serious threat to the Project occurred when Lesotho wanted to impose royalties on quarried material. They wanted to do this in spite of the stipulations of the Treaty. The Lesotho authorities also wanted to apply a withholding tax on the salaries of expatriate staff working on the Project. Unfortunately, the wording of the Treaty in this respect was not unequivocal. This led to a conflict between the Parties, which was not yet resolved when my association with the Project terminated in August 1991. Similarly, no agreement had been reached on the exact hydrology to be used for the Royalty payments and the timing of further phasing of the Project, notwithstanding a number of protracted studies. The reason for this was that the adopted hydrology had a marked effect on these payments. While the SA side was happy to arrive at a hydrology as close as possible to the true one, it appeared as if the hydrologists used by Lesotho were bending over backward to find as much water as possible. Difficulties with the issuing of labour permits for expatriate staff members were also experienced. At one stage, representatives from a major South African contractor came to see me in my office about a visit they had received from a certain Mr. Bam, who told them that he could arrange for participation in the work if paid a certain sum. They were assured that the JPTC had full insight in the tender process, and that they would be wasting their money. All sorts of fancy offers for financing were also received, some promising substantial commissions. The LHDA later proposed to appoint this Mr. Bam on their staff, which was vetoed by the RSA delegation on the JPTC. At one stage it was learned that Lesotho wanted to establish a Central Buying Organization, through which all purchases for the Project should flow. They even tried to get the DBSA to support such a proposal. No need to say that this idea was smothered at birth. At one stage, Mr. Sole appointed a Moscow trained PRO, a Mr. Moleleki. Needless to say that this appointment caused some misgivings in security circles in the RSA! As it happened, he was fired not long after. Ironically, he later became the Minister responsible for the Project.

The replacement of housing affected by the access roads and other facilities caused some difference of opinion. LHDA had called for tenders to build replacement housing immediately next to the roads. The prices quoted were unreasonably high, and the RSA felt that it would be better for all concerned, and especially for the affected local people, to give them money and let them rebuild in their traditional way. There were probably too many vested interests at stake for the Lesotho side to accept this alternative.

The World Bank insisted that Namibia, as a State riparian to the Orange River, give their agreement to the Project. The RSA argued that it did not, as such, have any influence on Namibia, seeing that two major dams lower down the Orange River could take care of all the demands that the latter country could make. When Namibia was contacted about this issue, the authorities there initially wanted to use their consent as a means of maximizing their share of the waters of the river. In the end, a satisfactory solution was found. I later learned that in 1985, Lesotho had notified the UN Governing Council for Namibia, at the time the body mandated by the General Assembly to govern the territory, and that the Council had expressed no objection. Before notifying the Council, the Lesotho Government had consulted SWAPO.

For contractual purposes, the part of the Project within Lesotho was divided into four main components:

• Katse Dam
• 45 km Transfer Tunnel and 15 km Delivery Tunnel South
• Muela Power Station and Dam
• 22 km Delivery Tunnel North


For each of these components, tenderers had to show their suitability, technically and financially, to handle these major undertakings. Criteria to be met were laid down in the documentation. Thirty-seven international consortia registered, eight of whom had South-African partners, altogether 64 contractors from 21 countries. The relevant documents were handed to the prospective contractors on 16 October 1989. The closing date was 20 April 1990. The tender evaluation was completed in August 1990, with award following in December 1990. The tendering process for the South African side lagged by three months.
For the works within Lesotho, two Tender Evaluation Committees (TET), consisting of internationally recognized experts were established. The RSA delegation insisted on having a member of its choice on these committees. The late Mr. Roby Myburgh, well known to Water Affairs staff, agreed to serve.
One of the tenderers for the Katse Dam was the well-known US firm of Morrison- Knudsen in consortium with a Japanese firm. When the tenders were opened, they proved to be vastly more expensive than other tenderers. One day, I was called to Foreign Minister Pik Botha’s office. He said that Mr. Lawrence Eagleburger, the Assistant Secretary of State of the United States had called to request that Morrison-Knudsen be given another opportunity to tender. He had already contacted the Lesotho Government, and they had agreed. Mr. Botha said that Eagleburger was very high-up in the US Administration, and that relations with the USA were extremely important to SA. I replied that it was unthinkable to reopen the tenders, that all control would be lost, and that the European contractors and their Governments would object most strongly. I said that, if Eagleburger’s request were to be met, I would resign from all involvement with the Project. That was the end of the matter.
The main tenders were eventually awarded as follows:

• Katse Dam to the Highlands Water Venture (HWV) consisting of Impregilo (Italy), Bouygues (France), Hochtief (Germany), Stirling (UK), Kier (UK) with the SA firms Concor and Group 5.
• The 45 km Transfer Tunnel and the 15 km Delivery Tunnel South to the Lesotho Highlands Project Contractors (LHPC) consisting of Spie Batignolles (France), Balfour Beatty (UK), Ed Zublin (Germany), Campenon Bernard (France) and the SA firm LTA.
• The 22 km Delivery Tunnel North to HMC Tunneling Venture consisting of Hochtief (Germany), Marti-Inter (Switzerland) and Concor (SA)


The latter contract was awarded by, and under the supervision of the TCTA. The contract for the 72 MW Muela hydropower station had not been awarded when I left the Project, because of difficulties in raising the necessary finance. Apparently, the World Bank was of the opinion that the Internal Rate of Return was not high enough to meet their standard of a minimum of 8% pa. For interest’s sake, it can be mentioned that LHPC under the name of Muela Hydropower Project Contractors (MHPC) was awarded the tender, but without participation of South Africa’s LTA. This was clearly before 1994!
After the Katse Dam contractors had started mobilizing, as a bolt out of the blue, a diamond mining venture called Swiss Bourgh demanded that all work be stopped. They had obtained a concession to mine diamonds in the reservoir area of the Katse Dam. A Mr. van Zyl of that firm demanded R80 million to halt an intended court action if the work was not stopped, or his demand met. Apparently, Swiss Bourgh had obtained these mining rights from the Ministry of Water, Mining and Energy, the same Ministry responsible for the LHWP, after it was already known that the area would be flooded. It was decided to ignore these demands, and continue with the contracts. The case eventually landed in the Lesotho courts, and was lost by Swiss Bourgh.

In August 1991, I was promoted to the post of Director-general of the Department of Public Works, and reluctantly had to give up my association with this great project. I was given a memorable farewell at the Lesotho Sun Hotel in Maseru on 9 August 1991, ending a 21 year involvement! At the time of writing, the crystal clear waters of Katse and Mohale are issuing from the delivery tunnel near Clarens, a sight to behold. The Project was selected by the South African Institution of Civil Engineers as the Project of the Century! When I first became involved in the Project, the Orange River Project was being implemented. How much better it would have been for all concerned, if the development of that river had started within the highlands of Lesotho. An initial dam at a place like Katse could have served to regulate the full length of the river, until the demand required further dams. The higher upstream storages could then be used for the purpose it is used now, the lower ones taking over their original function. The dams in the narrow valleys are subject to far less evaporation losses, and the geology is such, that little loss of capacity due to sedimentation would occur. Unfortunately, the politics of the era made such rational solution virtually impossible!