SAR, Vol 13 No 4, August 1998
THE WORLD BANK AND THE LESOTHO DAM
BY LORI POTTINGER
Lori Pottinger is the Southern Africa campaigns director for International Rivers Network in Berkeley, California. More information on this project and IRN's other Southern Africa campaigns is available at: www.irn.org.
Water, or a lack of it, is a key issue for southern Africa's future development and even its political and social stability. The region now faces chronic shortages, and conflict over shared water sources threatens to intensify in the coming decades if current trends are any indication. Sustainable water management is therefore one of the most important issues in the region today.
South Africa has taken a number of innovative steps in the management of its water resources, including clearing thirsty alien vegetation from watersheds, implementing urban water conservation pilot projects that cut local water use up to 30 per cent, and adopting a new water law that, among other things, outlaws private ownership of water resources and recognizes environmental needs for water as well as human ones. At the same time, however, the government has moved forward with new dams that are environmentally and socially controversial, and could even set back efforts to further reduce water use.
Next year, construction is scheduled to begin on the second of five dams that comprise the massive Lesotho Highlands Water Project (LHWP), which will transport Lesotho's water, called "white gold" by project developers, to South Africa's industrial Gauteng province (Johannesburg area). The entire project has been mired in controversy since South Africa's apartheid government and Lesotho's military regime signed the project treaty in 1986, however. At that time, the World Bank, an influential project funder, circumvented apartheid sanctions by making Lesotho - which would have been too poor to qualify for such a loan - the recipient of the funds, a debt that South Africa was responsible to repay.
The Bank is an important funder of the second dam as well, lending legitimacy to the controversial project and claiming to "add value" to the project by lending only to mitigate social and environmental problems. On June 4, its board of directors approved a US$45 million loan for this project, the Mohale Dam.
Although the battle lines have shifted somewhat from the first dam to the second, controversy continues to swirl around Africa's largest infrastructure project - and around the Bank's role in promoting large, destructive infrastructure projects over sound water management and conservation measures. While the first dam, the 182-metre-high Katse Dam, was controversial primarily for the unresolved social and environmental problems it left in its wake, the 145-metre Mohale Dam may not be needed at all. Even project promoters like the World Bank admit its water will not be required until the year 2010, perhaps not until 2018, by which time better solutions to South Africa's growing water-management crisis may be found. Water conservation experts contend that building the dam now will send the wrong message to South Africans just beginning to grapple with the need for increased conservation and better water planning.
Controversy over the possibility that the project could be delayed by years pushed back the loan approval by half a year, but ultimately Bank staff convinced its Board of Directors that it is less costly to build Mohale now, even if the water is not needed for many years. Despite the controversy and possibly in violation of its own policies, the World Bank on June 4 approved a loan for Mohale Dam. The LHWP has also received funding from European export credit agencies, international and South African banks and various bilateral donors, including French, British and German donor agencies.
Contradictory water strategy
Many believe the project's enormous costs will reduce South Africa's ability to address other pressing water problems. Topping the list of urgent social needs is to increase the number of South Africans with access to water. Currently, millions of South Africans are without reliable, safe water: in 1995, an estimated 18 per cent of the nation's urban population lacked adequate water supply. Supplying Gauteng's waterless poor would require just 5 per cent of the water used by middle income South Africans on gardens.
The biggest obstacle to solving this problem is not increasing supply, however. Instead, the biggest obstacle is finding the money to pay for the infrastructure. According to water officials, up to 50 per cent of Soweto's water is lost through poor-quality infrastructure, for example. According to George Constantinides, the demand manager for Rand Water, spending 1 billion Rand retrofitting less efficient appliances and fixing leaky pipes would save 3 billion Rand in consumption.
Constantinides stated in March of this year that conservation measures could reduce demand by 40 per cent and thereby delay the R6.7 billion Mohale Dam "by years." Other water experts concurred. "We can get significant savings from delaying schemes," suggested Guy Preston, head of the water conservation program for the Department of Water Affairs and Forestry. Delaying Mohale Dam would mean a "conservative" R800 million savings per year, including operating costs. "We can put that money into other, more important social things," Preston said. The two have been proponents of "demand side management" measures that conserve water, such as installing water-conserving toilets and shower heads, incrementally increasing penalties for higher levels of consumption, and implementing policies to reduce waste by the biggest consumers like large-scale agriculture (which accounts for 50 per cent of South Africa's water use).
Building the project prematurely could also jeopardize water conservation efforts by altering the financial picture for Rand Water. According to a water conservation expert in South Africa who wishes to remain anonymous, "The tremendous price increase from the LHWP is undermining Rand Water's demand management programs by making them not cost-effective. In fact, they will find it necessary to subtly support wasteful water-use practices in order to generate the revenues to fund Mohale." Rand Water could be forced to sell more water, not less, to pay its portion of the project's capital costs, thus undermining its own efforts to put into place stricter demand-management measures.
The LHWP's costly dams will mean higher-priced water for South African consumers, a burden which will hit poor township dwellers the hardest. In the past year alone, the price of water for Rand Water (serving Gauteng) consumers almost doubled because of the cost of capital investments, primarily for the LHWP.
Some township residents have been working to slow the project until demand-management measures and other alternatives are examined. They believe that fixing the leaks in the townships should be a higher priority than building new supply. To that end, in May, some residents of Alexandra township filed a claim with the World Bank Inspection Panel, the independent body charged with investigating claims brought forth by project-affected people of Bank policy violations. While their efforts did not result in a project delay, the concerns they raised will be evaluated by the inspection panel in coming months.
World Bank policies mandate the examination of alternatives to projects such as the LHWP. Its policy on dams states that "[d]esign of investment programs for supplying water or energy should consider demand management as well as supply options." But internal project documents imply such policies have been set aside in planning the LHWP. "[A]s important as demand side management in the water sector is," states the April 30, 1998 Project Appraisal Document, "there is no specific reference in the project to such measures, nor is there a legal requirement in the loan for the RSA [Republic of South Africa] to implement such policies, since this is a loan to [Lesotho-based project authorities] LHDA."
Nonetheless, without a touch of irony, the Bank appraisal report states that "the LHWP is one of the very few successfully implemented projects in the world aimed at regional water management." But water planners in the region see it as the wrong approach at the wrong time. Steve Rothert, a water resources specialist working in Botswana for International Rivers Network, says, "The Bank is supporting a project that is not needed for many years, which sends a message that it supports supply-driven water resources management, even in one of the most arid regions in the world."
Lesotho NGOs monitoring the project's social problems recently backed down from efforts to delay the next dam, however. Political pressure to support the dam, "the only development game in town" has undoubtedly been intense. Perennially ranked by the United Nations among the world's poorest countries, Lesotho has a 50 per cent unemployment rate and almost no natural resources that can be turned into cash - except water. Indeed, Lesotho is now almost totally dependent on royalties from the LHWP to earn foreign exchange, which brings in some 40 million US dollars a year. "If you delay the project even by one year ... it'll knock six percent off Lesotho's GDP [gross domestic product] this year," said John Roome, the LHWP project manager for the Bank. "They're going to need to be compensated for this somehow."
In addition, people living in the Mohale area have already experienced significant disruption, and a project delay would just add to their woes. A local NGO representative said in June that "houses have already been destroyed by the blasting at the quarry site. Fields have already been greatly affected by the road construction and installation of power poles. Some have already given away their fields."
The dam revenues contribute to the troubled Development Fund, intended to alleviate poverty in the rural Highlands areas where the dams are built. Highlands communities have benefited from some aspects of project construction, such as roads that now connect the rural Highlands to the capital of Maseru. Temporary jobs from the project have been provided to some local people.
But important aspects of the project's poverty alleviation programs remain unsuccessful or bogged down in bureaucracy. According to Korinna Horta, an environmental economist with the US-based Environmental Defense Fund, the Development Fund has been termed "the sick man" of the project by experts working on compensation issues, and the project requirement of restoring or improving the lot of project-affected people has yet to be realized. Project authorities have made sweeping claims that they have learned how to avoid the social problems caused by the first dam, although many of those problems are still unresolved.
Income-restoration for the thousands of people affected by the first dam has been ponderously slow. In the beginning, the project emphasized training in vocational skills that were virtually unneeded in Lesotho. The program has since shifted to small-enterprise development skills. But with Lesotho's high unemployment and low per-capita income, the goal of creating a new entrepreneurial class from the farmers displaced by the project seems highly unlikely - even within the generous 15 years set by the Bank. Furthermore, suggests Horta, "The LHWP is likely to overwhelm Lesotho and determine its political economy for generations to come. The sheer size of the project diverts attention from any other possible development programs for Lesotho."
The restoration of livelihoods has been a failure in nearly all cases where significant numbers of people lose their homes and lands to dams, and has been a key point of contention in the worldwide struggle against large dams. As many as 60 million people have been evicted for the world's 40,000 large dams. The world's large dams have also inundated 400,000 square kilometres, an area larger than Zimbabwe.
There are three more dams in the LHWP scheme, so the controversy over the project promises to continue for years to come. The findings of a new group whose mandate is to assess the international record of large dams may change the debate considerably. This independent body, called the World Commission on Dams, is an unusual coalition from both sides of the dam debate, chaired by South Africa's head water minister, Kader Asmal, who previously was an opponent of the LHWP and is now an avid proponent. The commission includes representatives from dam-affected people's groups, environmental NGOs, and the dam-building industry.
The group recently had its first meeting, and is expected to issue its final report in June 2000. Dam critics believe that the establishment of the Commission vindicates their claims that large dams have had massively negative social, environmental and economic impacts. These groups have demanded that aid agencies and governments declare a moratorium on the building of large dams until the commission's work is done. "No more big dams should be built until just reparations have been provided to all those who have been affected by dams and until ruined environments have been restored," says Sadi Baron, Executive Coordinator of Brazil's Movement of People Affected by Dams (MAB). Thus far, this call has not been heeded.
As the case of the LHWP shows, the identification of "those affected" might need to be expanded beyond those people forcibly relocated for the project, to include township dwellers being asked to pay higher water bills than they can afford; those whose pipes remain leaky as public funds for water projects dries up or who must wait even longer to get water supply to their homes; and those whose "better ideas" for water management have taken a back seat to a massive engineering works whose time has not yet come.
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