Lesotho Highlands Water Project Phase II is under construction and comprises the Polihali Dam, a transfer tunnel to Katse and associated water-transfer and hydropower infrastructure. It will increase water deliveries to South Africa and support revenue, electricity and regional development in Lesotho. The project remains at S4B (Construction/Implementation). A May 2026 TCTA credit update gives the latest estimate of ZAR 53.3 billion. Using the latest official SARB rate available at the research cut-off - ZAR 16.8560 per USD on 24 July 2026 - this equals approximately USD 3.162 billion.
Phase II of the binational Lesotho Highlands Water Project includes construction of the 165-metre Polihali Dam, a saddle dam, a transfer tunnel of about 38.2 km connecting the Polihali reservoir to Katse, access roads, bridges, power and supporting infrastructure. The water-transfer component is for South Africa's Vaal River System, while hydropower and associated development benefits accrue to Lesotho under the bilateral treaty and Phase II agreement.
Increase the assurance and volume of water supplied to South Africa's major economic and population centres; generate revenue and hydropower benefits for Lesotho; support potable water, irrigation and ancillary development; promote growth in remote mountain regions; strengthen regional water security; and implement the treaty-based cooperation between Lesotho and South Africa.