BRICS funding for LHWP II
THE New Development Bank (NDP) this week approved a M3, 2 billion loan to South Africa towards implementation of the second phase of the Lesotho Highlands Water Project (LHWP).
The announcement was made on Monday during the fourth annual meeting of the NDB Board of Governors (BoG) and the 18th meeting of the NDB Board of Directors (BoD) in Cape Town from 30 March to 2 April this year.
Lesotho is an indirect beneficiary to the development since the bulk of the project infrastructure will be built in Lesotho thereby tapping into the economic benefits that come with the multi-billion maloti project.
Lesotho is a partner to South Africa in the bi-national project, which seeks to deliver water to the latter and power to the former.
The development also gives hope that actual construction works for the project will begin soon, as set timelines have in the past been missed.
The NDB was established by Brazil, Russia, India, China and South Africa to mobilise resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, complementing the existing efforts of multilateral and regional financial institutions for global growth and development.
To fulfil its purpose, the NDB will support public or private projects through loans, guarantees, equity participation and other financial instruments. According to the NDB’s General Strategy, sustainable infrastructure development is at the core of the Bank’s operational strategy for 2017-2021.
“The NDB will provide a project loan of ZAR 3, 2 billion (about US$ 220 million) to Trans-Caledon Tunnel Authority (TCTA) for the implementation of Phase II of Lesotho Highlands Water Project and financing the construction of water transfer infrastructure to the benefit of South Africa,” a statement from the bank reads.
“The project will augment the water supply in the Vaal River Basin, home to South Africa’s most economically important province, Gauteng. Three other provinces (the North-West, Mpumalanga and Free State provinces) will also directly benefit from an increased water supply.
“The project will support economic growth and foster sustainable livelihoods of people by increasing the yield of the Vaal River System by almost 15 percent in the long run, thus reducing water usage restrictions.”
The Ministry of Finance noted on its Facebook page that there were prospects for Lesotho to access direct lending from the NDP without going via South Africa.
“Lesotho is the first country in the world — which is not a member of the BRICS — to benefit from NDB loans. Prospects for direct NDP lending — without the SA channel are being discussed with the Bank,” the ministry said.
Other loans that have been provided to South Africa but with a significant impact on Lesotho include the Environmental Protection Project for Medupi Thermal Power Plant and the Renewable Energy Sector Development Project.
Lesotho imports additional electricity to meet about half of its demand from South Africa and Mozambique. Through its power utility company, Lesotho Electricity Company, Lesotho buys about 49 megawatts (MW) from Eskom in South Africa while also buying 35 MW from Mozambique to augment its local power production.
“In line with its focus on supporting clean energy in South Africa, the bank will provide a USD 480 million (about M6, 72 billion) project loan to Eskom Holdings SOC Ltd for Environmental Protection Project for Medupi Thermal Power Plant (TPP). The loan will be used to finance retrofitting flue-gas desulfurisation equipment, to make Medupi TPP compliant with South Africa’s environmental standards coming into force, thus preventing suspension of its operation.
“Medupi TPP is approaching the end of its construction and with the planned capacity of 4 800 MW, it will represent about 10 percent of the total generating capacity in South Africa. This would position Medupi TPP as a critical element of the solution to the problem with reliable electricity supplies.”
“The proceeds of the Bank’s ZAR 1, 150 billion (approximately USD 80 million) loan will be on-lent by the Industrial Development Corporation (IDC) of South Africa to renewable energy sub-projects contributing to the reduction in carbon dioxide emissions, improvement of RSA’s energy sector mix, as well as the increase of energy efficiency of the economy. The NDB loan provides IDC with attractive long-term financing for the IDC’s programme in renewables, focused on supporting private investors.
“It is planned that as an outcome of the project’s implementation not less than 500 GWh of electricity will be generated annually from renewable sources leading to savings in CO2 emissions by around 480 000 tons annually,” the bank’s statement said.