Review of Prerequisites and Arrangements for Impoundment of Mohale Reservoir
LOAN 4339
BACKGROUND
The Lesotho Highlands Water Project (LHWP) transfers water from the high-rainfall highlands of Lesotho to the Gauteng region, the water- short economic heartland of South Africa. Phase 1A is complete and operational and phase 1B is nearing completion. The Project is a joint initiative of Lesotho and South Africa and is supported by a loan from the World Bank of $36 million.
A covenant under the above loan requires that, prior to impoundment of Mohale Reservoir, certain resettlement and compensation should be completed, provision made for response to reservoir-induced seismicity and measures implemented for the management of downstream compensation releases, including but not limited to altering the operating regime releases and/or mitigating any adverse downstream impacts.
The Project is now ready for impoundment of the Mohale Reservoir but the loan covenant is not fully satisfied. The recent Bank supervision mission (Sept 9-16) felt unable to recommend impoundment in view of the reputational risk to the Bank for failure to enforce safeguard policies. The project authorities however feel that failure to impound will have significant technical, operational, environmental and financial implications that the Project and the Parties can ill afford.
This document summarises the agreement reached between the Minister for Finance of the Government of Lesotho and Vice President, Africa Region of the World Bank with respect to the circumstances and arrangements for impoundment of Mohale Dam.