Phase II of the LHWP involves the construction of: (1) The Polihali Dam, a 165 m high concrete-faced rockfill dam downstream of the confluence of the Senqu and Khubelu Rivers in the Mokhotlong district, with a reservoir surface area of 5,053 ha and a storage capacity of 2,325 million cubic metres; (2) A 50 m high saddle dam; (3) The Polihali-Katse Transfer Tunnel, a 38.2 km long, 5.2 m diameter gravity tunnel being excavated by two TBMs simultaneously - the Katse TBM (launched 15 January 2025) and the Polihali TBM (arrived July 2025, excavation commenced January 2026); (4) The Oxbow Hydropower Scheme on the Malibamatso River with 80.3 MW installed capacity and 180 GWh/year average output, currently at detailed engineering design phase; and (5) Advance infrastructure including the 825 m long Senqu Bridge, access roads, high-tension power lines, and telecommunications systems.
Main construction contracts were awarded in late October/November 2022: the Polihali Dam contract (approximately M7.68 billion) was awarded to the SUN Joint Venture (Sinohydro Bureau 8, Sinohydro Bureau 14, Unik Civil Engineering, Nthane Brothers), and the Polihali Transfer Tunnel contract (approximately M9.2 billion) was awarded to the Kopano Ke Matla Joint Venture (Yellow River Company, Sinohydro Bureau 3, Unik Civil Engineering). Construction supervision is by Metsi a Senqu-Khubelu Consultants (MSKC).
As of October 2025, overall project completion stood at approximately 48% against a planned 57%, with dam construction at 37% against a planned 50%. The project has generated employment for 16,400 skilled and unskilled workers, of whom 14,954 are Basotho. Water delivery is now targeted for financial year 2028/2029, with reservoir inundation planned for 2027. The Oxbow Hydropower Scheme is expected to be commissioned in 2030/31. Phase II will increase annual water transfer capacity from 780 million cubic metres to approximately 1,270 million cubic metres per annum.
Financing is sourced primarily through TCTA via South Africa's capital markets, supplemented by a ZAR 3.2 billion loan from the New Development Bank (NDB) signed on 21 August 2023, and contributions from the African Development Bank (AfDB) and the Development Bank of Southern Africa (DBSA).
The Lesotho Highlands Water Project (LHWP) Phase II is a multi-billion Maloti/Rand bi-national infrastructure project between the Governments of the Kingdom of Lesotho and the Republic of South Africa, established under the 1986 Treaty and the 2011 Phase II Agreement. Phase II is designed to augment water delivery to South Africa and increase hydropower generation capacity in Lesotho. The project is implemented by the Lesotho Highlands Development Authority (LHDA) on behalf of Lesotho and the Trans-Caledon Tunnel Authority (TCTA) on behalf of South Africa.
The core infrastructure components of Phase II include: (1) The Polihali Dam, a 165 m high concrete-faced rockfill (CFRD) embankment dam located downstream of the confluence of the Senqu and Khubelu Rivers in the Mokhotlong district, which will create a reservoir with a surface area of 5,053 ha and a storage capacity of 2,325 million cubic metres; (2) A 50 m high saddle dam; (3) The Polihali-Katse Transfer Tunnel, a 38.2 km long, 5 m diameter gravity tunnel connecting the Polihali reservoir to the Katse reservoir, being excavated by two Tunnel Boring Machines (TBMs) simultaneously from both ends; (4) The Oxbow Hydropower Scheme on the Malibamatso River, with an installed capacity of 80.3 MW and an average annual output of 180 GWh, currently at detailed engineering design phase with commissioning slated for 2030/31; and (5) Advance infrastructure including roads, bridges (including the 825 m long, 90 m high Senqu Bridge), high-tension power lines, telecommunications systems, accommodation and construction facilities.
Phase II will increase the current annual water supply rate from 780 million cubic metres to approximately 1,270 million cubic metres per annum, adding 490 million cubic metres per year to South Africa's Integrated Vaal River System. Water delivery is targeted for financial year 2028/2029, with reservoir inundation planned for 2027. As of late 2025, overall project completion stood at approximately 48%, with dam construction at 37% complete. The Katse TBM was launched on 15 January 2025 and the Polihali TBM arrived on site in July 2025 and began excavation in January 2026.
The Lesotho Highlands Water Project (LHWP) is a multi-phased, multi-billion Maloti/Rand bi-national project established by the 1986 Treaty between the Governments of the Kingdom of Lesotho and the Republic of South Africa. When all phases are complete, the project will deliver up to 70 cubic metres per second of high-quality water to South Africa and generate hydroelectric power for Lesotho.
Phase II has two primary objectives:
(1) Water Security for South Africa: To augment water supply to South Africa's Integrated Vaal River System (IVRS), which supports Gauteng Province - accounting for approximately 60% of South Africa's national GDP and housing 42% of the urban population. Phase II will increase the annual water transfer capacity from 780 million cubic metres to approximately 1,270 million cubic metres per annum, increasing the water yield of the Vaal River Basin by almost 15% and supporting the economic growth and livelihoods of approximately 15 million people in Gauteng and neighbouring provinces.
(2) Hydropower Generation and Revenue for Lesotho: To increase Lesotho's electricity generation capacity through the Oxbow Hydropower Scheme (80.3 MW installed capacity, 180 GWh/year average output), supplementing the existing Muela Hydropower Station which currently supplies 51% of Lesotho's energy demand. The additional flow of water from Polihali through the transfer tunnel will also increase output at Muela by approximately 30%. Lesotho also earns royalty revenue from water transferred to South Africa, receiving 56% of the calculated net benefit from water transfer under the Treaty formula.
Ancillary objectives include: provision of potable water supply and irrigation development; promotion of tourism, fisheries and other economic activities; development of remote mountain regions; and creation of employment and skills development for Basotho citizens.