Lesotho pushes for better terms in key water deal with South Africa

Lesotho is preparing to renegotiate a decades-old water-sharing agreement with South Africa, a deal that contributes about 10% of the kingdom’s economy.

Officials say talks could start as early as April, giving the small, landlocked nation a rare chance to press for improved terms with its much larger neighbor. 

The agreement underpins the Lesotho Highlands Water Project (LHWP), a $3.1 billion infrastructure program that provides South Africa with water while generating royalties for Lesotho.

Completed in stages since the 1990s, the project has long supported Lesotho’s development, funding schools, roads, and other public projects. 

Lesotho officials now say the compensation framework, designed more than 35 years ago, no longer reflects current economic realities.

“We have to go back and look at the impact of compensation,” said Natural Resources Minister Mohlomi Moleko.

“If you give somebody compensation, you don’t want their life to be worse off. It has to be higher. So we are going to revisit that.”

South Africa’s Department of Water and Sanitation did not immediately respond to requests for comment. 

The negotiations come as South Africa struggles with a water crisis worsened by aging infrastructure and climate pressures.

The LHWP, which includes major dams such as Katse, supplies Gauteng, the country’s economic hub, with essential water.

Lesotho’s officials view this dependence as leverage in talks over royalties and compensation.

Royalty system under review 

At the heart of the discussion is a 50-year framework set to expire in 2044.

Currently, royalties are calculated based on South Africa’s cost savings, before transitioning to a system largely tied to water volumes.

Since the Katse Dam’s completion in 1996, Lesotho has supplied about 780 million cubic meters of water annually, earning roughly $220 million in royalties. 

A new dam and transfer tunnel, under construction in 2023, will increase annual supply above one billion cubic meters.

“These dams could have been built in South Africa,” Moleko said.

“The review will assess whether the terms reflect the value we provide.”

Officials want to ensure Lesotho benefits fairly as the project grows.

Strategic importance for Southern Africa 

The outcome of the talks will have implications beyond Lesotho’s borders.

By securing a steady water supply for Gauteng, the LHWP is central to South Africa’s industrial and economic stability.

Both countries face pressure to find a balance that supports infrastructure investment while fairly compensating Lesotho for its contribution. 

As negotiations approach, observers say the review could redefine the financial and strategic balance of one of southern Africa’s most important water corridors.