The Trans-Caledon Tunnel Authority (TCTA) raised R15.45 billion from six local banks, including DBSA, in May 2021, as part of its mandate to raise and manage funding for the Lesotho Highlands Water Project (“LHWP”), including the construction of Phase 2. This followed the raising of R6.5 billion in 2018 from three local banks. The loans contribute to:
The LHWP augments the Vaal River System (VRS) which supplies water to 45% of South Africa’s population in Gauteng municipalities including Johannesburg, Ekurhuleni, Tshwane, Rustenberg in the North West; as well Govan Mbeki Municipality (Secunda, Evander, and Bethal) in Mpumalanga. The Vaal River System also supports 60% of the South African economy, including:
The long-term outlook for the VRS is that water requirements are outstripping the available water resources and there is a need to assure water security for the several provinces dependent on the VRS.
The transactions are an investment in an impactful project that contributes to social and economic development. Apart from the direct benefit of additional water supply for the VRS, the LHWP-2 is anticipated to contribute and maintain a total of R244.4 billion (in 2018 constant prices) GDP and Sustain 544 586 new job opportunities, of which just over 214 570 will be for unskilled workers; thereby significantly contributing to South Africa’s job creation, according to a Technical Due-diligence Report prepared by consulting company called WSP for the benefit of Development Finance Institutions lenders.
The loans are all denominated in local currency and therefore do not have foreign currency exposure and have maturities of between 5 and 20 years. They will be repaid through water tariffs charged by the Department of Water and Sanitation on the Vaal River System water users.
The TCTA's repayment obligations under the LHWP are covered by an explicit South African Government Guarantee as required by the Treaty on the Lesotho Highlands Water Project. The details of the loan agreements are provided in table 1 below.
TABLE 1: LOAN AGREEMENTS DETAILS
Lender |
Loan Type |
Purpose of the loan |
Loan Amount |
Effective Date |
Final Repayment Date |
ABSA |
Long-Term Loan |
Refinancing of existing debt |
R1,000,000,000 |
27 May 2021 |
31 March 2026 |
DBSA |
Long-Term Loan |
Capital Expenditure |
R2,500,000,000 |
27 May 2021 |
30 April 2045 |
DBSA |
Long-Term Loan |
Capital Expenditure |
R3,000,000,000 |
27 May 2021 |
30 April 2045 |
Investec |
Long-Term Loan & Revolving Credit Facility |
Refinancing and/or Capital Expenditure |
R1,500,000,000 |
25 July 2018 |
25 July 2036 |
Investec |
Long-Term Loan |
Refinancing and/or Capital Expenditure |
R1,650,000,000 |
27 May 2021 |
30 May 2036 |
Nedbank |
Long-Term Loan |
Capital Expenditure |
R2,000,000,000 |
27 May 2021 |
27 May 2031 |
Rand Merchant Bank |
Long-Term Loan |
Refinancing and/or Capital Expenditure |
R3,800,000,000 |
27 May 2021 |
27 May 2026 |
Standard Bank |
Long-Term Loan & Revolving Credit Facility |
Refinancing and/or Capital Expenditure |
R4,000,000,000 |
27 July 2018 |
27 July 2033 |
Standard Bank |
Long-Term Loan |
Refinancing and/or Capital Expenditure |
R600,000,000 |
27 May 2021 |
30 April 2027 |
Standard Bank |
Long-Term Loan |
Refinancing and/or Capital Expenditure |
R900,000,000 |
27 May 2021 |
28 April 2028 |