Farmer in Lesotho. Credit: Angelo Moleele

By Marianne Buenaventura Goldman and Reitumetse Nkoti Mabula
MASERU, Lesotho , Sep 5 2023 (IPS)

The Role of the New Development Bank in Monitoring Project Impacts on Communities

The 15th BRICS Summit held in Johannesburg, South Africa this month has once again put the spotlight on the Lesotho Highlands Water Project (LHWP) as a shining example of multilateralism and the New Development Bank’s (NDB)commitment to financing sustainable development projects within BRICS countries and other developing countries. During the 2023 BRICS Summit, the New Development Bank and the Trans-Caledon Tunnel Authority (TCTA) signed a 3.2 billion Rands loan agreement for the implementation of Phase Two of the Lesotho Highlands Water Project (LHWP) in Lesotho. This funding complements contributions by other financiers, notably the African Development Bank (AfDB) and the Development Bank of Southern Africa (DBSA).

LHWP is a multi-phased water infrastructure project which involves construction of a number of dams in Lesotho to transfer water to South Africa, while generating hydropower for Lesotho. The entity that is responsible for implementation of LHWP in Lesotho is the Lesotho Highlands Development Authority (LHDA). The TCTA, a state-owned entity charged with financing bulk raw water infrastructure in South Africa, is responsible for financing and building the LHWP.

News of the signing of this agreement was received with some interest and enthusiasm in many quarters in Lesotho, partly because of the participation of Prime Minister Matekane during the Summit, as an observer, and largely due to the perceived benefits of this loan for Basotho. On the other hand, the news was also viewed with skepticism by civil society organisations working with communities directly affected by LHWP in light of the adverse social, economic, environmental and gender impact which communities continue to experience daily. The truth is, whilst it is laudable and important for both Lesotho and South Africa that the NDB provided this crucial financing for socio-economic development of their peoples, it is equality imperative that this development should not come at a cost to vulnerable and marginalised communities who have been forced to host this project.

The benefits for communities in South Africa are straightforward; according to the media release issued by the NDB on the 21st of August 2023, LHWP Phase II will increase the water yield of the Vaal River Basin by almost 15%, supporting economic growth and livelihoods of approximately 15 million people living in Gauteng Province, including communities in three other provinces which also stand to benefit from increased water supply. However, these benefits are not guaranteed for thousands of people and communities directly affected by this project in Lesotho.

LHWP Phase II has garnered its fair share of criticism and controversy recently, for its operations and impact on the people of Polihali, Mokhotlong. These include heavy handed police intervention against people who rightfully express dissent and protest to some aspects of the project or how it is implemented. There are also complaints about the project’s implementing authority, the Lesotho Highlands Development Authority (LHDA)’s compensation policy. These include unfair compensation amounts to communities which were based on unilaterally determined compensation rates and periods, non-payment of communal compensation which has prevented communities from developing income generating projects, and lack of developments such as provision of water and sanitation for communities.

Implementation of LHWP requires acquisition of land from local communities; it is estimated that 5,000 hectares of land will be flooded by the Polihali Dam.¹ This acquisition of land will result in significant negative impacts on the livelihoods and socio-economic status of the local populations. Communities are going to lose arable land, grazing ranges for livestock which is the main store of wealth for communities in the area, medicinal plants, useful grasses and wild vegetables which form the basis of livelihoods for communities.

Another challenge of the construction of this Dam is the required resettlement and / or relocation of communities. It is currently estimated that 270 households and 21 business enterprises will need to be relocated, mainly due to the impoundment of Polihali reservoir.² About 12 communities will be relocated, and an additional 5 communities will be required to resettle entirely, a process that will have great economic and socio-economic and cultural implications for generations to come. Regrettably, there is no livelihood restoration strategy that has been developed by the LHDA to ameliorate the plight of these communities or at least no such strategy has been shared and/or discussed with communities and their representatives.

Negative gender impacts have also been noted; women within LHWP Phase II project area are already marginalised because of cultural stereotypes and practices which prevent them from owning land. The LHWP Phase II Compensation Policy has only served to solidify and exacerbate the problem of gender inequality through its gender biased payout of compensation procedure which deprives women of compensation for land previously managed or shared. This increases their economic vulnerability and susceptibility to gender-based violence. In fact, there have been concerning news reports in recent months, of increasing number of gender-based violence cases including teenage pregnancies and girl-child school dropouts, sex work/transactional sex, sexual violation especially of young girls, and increased HIV infection prevalence. These have been linked directly to the influx of immigrant contractors and labour workers who have come to work on the LHWP, continuing a trend which was first observed during implementation of the previous phases of this project. It is worrying to note, that at this point in the of implementation LHWP Phase II, there is still no gender policy, and the implementing authority still insists on turning a blind eye to the vulnerability of women as a result of this project.

The news of the NDB providing a loan for Phase 2 of the LHWP, totaling an amount of 3.2 billion Rands (US $ 171.5 million) raises further questions on the NDB’s policies and practices concerning transparency, accountability and its environmental and social safeguards, including gender. The NDB has indicated its plans to further strengthen gender mainstreaming in all its projects in its second five year General Strategy (2022-2027). As called by BRICS civil society organisations since the start of NDB operations, the NDB needs to urgently put in place a gender policy, with support of gender specialists at the NDB to oversee that gender is integrated in all aspects of its projects, in strong partnerships with its clients such as the TCTA and the LHDA.

All eyes are on the former Brazil President, Dilma Rousseff, new President of the NDB on her ability to transform the NDB from a multilateral development bank whose track record appears to be gender neutral towards one can proactively empower women and delivering on gender equality as part of New General Strategy and operations. In a recent statement, Rousseff explained that a priority of the NDB will be to “…promote social inclusion at every opportunity we have. The NDB needs to support projects that help to reduce inequalities and that improve the standard of living of the vast communities of the poor and excluded in our countries.”

The NDB has now grown beyond the BRICS countries, and recently included new member countries such as the United Arab Emirates, Bangladesh, Egypt and Uruguay and has greater aspirations to add many more countries. Given the NDB’s expansion, it is critical that the NDB begin to live its vision of being an accountable institution for the South, by the South. The NDB should urgently put into practice its policies such as on Information Disclosure. By doing so, the NDB will enable communities to access information on projects that directly affect their lives and livelihoods. The NDB also needs to work more closely with its clients to follow through on the NDB guidelines provided in its Environmental and Social Framework. The Civil Society Forum of the NDB (South Africa / Africa), including Lesotho community-based organisations calls on the NDB to learn from past mistakes experienced during the implementation of Phase 1 of the LHWP. During Phase II of the project, the NDB and other development finance institutions such as the DBSA and AfDB should ensure that the LHDA convenes effective and timely community consultations, provide basic services such as clean water, and ensure adequate and fair compensation to all affected communities – especially women who have in the past been left behind.

During the 2023 BRICS Summit, which took place on 22-24 August, Minister Naledi Pandor of South Africa’s Department of International Relations and Cooperation underscored the need for the NDB to do outreach at the local level in terms of sharing information on the projects the NDB funds, including vital project information, including the $3 billion the NDB plans to invest in South Africa. All eyes are now on South Africa and Brazil with leadership from NDB President Rousseff and Minister Pandor to push for stronger and more inclusive development outcomes of the NDB, with women front and centre of all future NDB projects.

The LHWP Phase II is an example of the challenges faced by communities affected by large infrastructure projects with funding from Public Development Banks (PDBs) such as the NDB, AfDB and the DBSA. As the hundreds of PDBs convene at the 4th Finance in Common Summit (FICS) in Cartegena, Colombia on 4-6 September to join forces to transform the financial system towards climate and sustainability, it will be important that PDBs transform their models to be more effective in promoting positive development outcomes for communities. PDBs have been advocating to increase volumes of finance for development. Civil society across the globe are in solidarity, making their voices heard at the FICS expressing concerns that limited attention is being given to the need to shift the quality of that finance to ensure it does not exacerbate the current crises and to ensure it shifts the power in decision making. Such attention is even more needed as the current financial architecture hinders the ability of governments to protect people and the planet.

¹ https://www.lhda.org.ls : accessed on the 11th July 2023
² Ibid

Marianne Buenaventura Goldman is co-Chair, Civil Society Forum of the NDB (Africa) & Project Coordinator, Forus
Reitumetse Nkoti Mabula is Executive Director, Seinoli Legal Centre

IPS UN Bureau

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