The decision by the New Development Bank to finance the second phase of the Lesotho Highlands Water Project ties in well with Finance Minister Tito Mboweni's call for the bank to fund more infrastructure projects in Southern Africa.
This is according to a statement from Ministry of Finance after the close of the bank's fourth annual meeting in Cape Town this week.
"The infrastructure in Southern Africa is interconnected and, therefore, our approach to the funding of projects in Southern Africa should take this into account," Mboweni had said on the first day of the meeting.
Three of the five new projects approved for funding by the NDB - also referred to as the Brics bank - are South African. The shareholders of the bank are the five BRICS members, Brazil, Russia, India, China and South Africa.
The five new projects bring the NDB's project portfolio to more than $9.2bn.
The three new South African projects approved by the NDB are for Eskom, the Industrial Development Corporation (IDC) and the Trans-Caledon Tunnel Authority (TCTA).
In line with its focus on supporting clean energy, the NDB will provide a $480m project loan to Eskom for an environmental protection project for the Medupi Thermal Power Plant.
As for the IDC, the proceeds of a R1.150bn loan from the NDB will be used to make loans to renewable energy projects to reduce carbon emissions, improve SA's energy mix and increase the energy efficiency of the economy.
Furthermore, the NDB will provide a project loan of R3.2bn to the Trans-Caledon Tunnel Authority for the implementation of the second phase of the Lesotho Highlands Water Project and the financing the construction of water transfer infrastructure.
It is expected that Gauteng, North-West, Mpumalanga and the Free State will benefit from the resulting increased water supply, said Treasury.
The NDB funding of these three South African projects is separate from the loan agreements signed with Eskom and the Development Bank of Southern Africa after the opening of the annual meeting on Monday.
The sovereign-guaranteed loan of $180m to Eskom will be used for a renewable energy integration and transmission augmentation project. The project will integrate a total of 670 MW of renewable energy into Eskom's grid.
The $300m loan agreement – without a sovereign guarantee - signed between the NDB and the Development Bank of Southern Africa is for a greenhouse gas emissions reduction and energy sector development project.
According to the Ministry of Finance, one of the other major outcomes was an in-principle agreement to expand the membership of the bank beyond the founding members.
"Negotiations in this regard are ongoing, with an announcement on the way forward expected by the end of the year," the ministry said.
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