By Nthakoana Ngatane
JOHANNESBURG – The government of South Africa and that country’s minister of water say they can’t pay Frazer Solar GmbH because that will disrupt the current and future supply of water from Lesotho, and threaten relations between the two countries.
The two have filed an intervention application in a case in Johannesburg, in which Lesotho is challenging a €50million claim by the German company.
“The Treaty is no ordinary Treaty. It is not only a Treaty between two neighbouring States but is also a Treaty which is aimed at ensuring security of water supply in South Africa. Treaties of this nature are also lodestars for how nation States across the world can, and should, engage with each other to ensure future peace and prosperity, particularly by ensuring the equitable sharing of limited national water resources for mutual regional benefit.” Says South Africa’s water minister Senzo Mchunu.
He says treaties of this nature, governing the sharing of a scarce resource across international borders, are difficult and delicate to manage because of the numerous and divergent political, social and environmental interests involved and the long timespans during which they are operational. Mchunu says bowing to Frazer’s demands threatens this cooperation.
“Royalties are paid to ensure good relations between nation States that agree to cooperate. Lesotho’s water naturally drains into the Orange River, most entering in the Eastern Cape near Aliwal North. South Africa could pump it from there to Gauteng and surrounds but the capital and running costs of this would be prohibitively high. The alternative of collecting the water in the Lesotho’s Highlands dams and ensuring it runs through tunnels, using gravity, to the Vaal River is far cheaper for South Africa.” Says Mchunu.
In the main application by Lesotho, due to be heard in Johannesburg on 10 November, the kingdom wants to set aside a court order that confirmed the arbitration decision reached in South Africa.
Based on that court order, Frazer served writs of execution and attachment notices against the kingdom’s assets in jurisdictions including South Africa, the United Kingdom, the United States of America and Mauritius.
They include the Trans Caledon Tunnel Authority, TCTA, the executing arm of the South African government in the Lesotho Highlands Water Project, which also administers and pays royalties due to Lesotho from South Africa. TCTA wants the writs of execution declared invalid and set aside.
“TCTA has set out in its founding affidavit how its failure to pay the cost related payments for the operation and maintenance of Phase 1 of the Water Project will result in third party contractors not performing work and the operation and maintenance component of the Water Project grinding to a halt – thus causing the increased risk of operational failures and the risk of the water supplied to South Africa reducing or ceasing.” Says Mchunu.
TCTA has filed its own papers in which it seeks a “declaration that Frazer is not entitled to attach or execute against TCTA’s assets, including against any money held in the TCTA’s bank account”.
Mchunu met his Lesotho counterpart, Kemiso Mosenene about the Lesotho Highlands Water Project two weeks ago, where the two agreed to fast track completion of the Phase 2, the Polihali dam, to 2027.
The minister and the government say they don’t want to disrupt the timing of the hearing, but they need to put up limited further facts relating to the impact that the execution of the writs and notice will have on Phase 2 of the water project, and how this will prevent them from progressively realising the right of access to sufficient water to approximately 20 million people living in and around Gauteng.
“Most of the water for Gauteng and parts of the surrounding provinces of Free State, North West, Mpumalanga – referred to as “Gauteng” or “Gauteng and surrounds” – including economic installations of strategic importance such as Eskom power stations and Sasol plants, is supplied from the Integrated Vaal River System “IVRS”, and without the IVRS, of which the Water Project is an important component, it would not be possible to provide an adequate and secure water supply to Gauteng and surrounds.” Says Mchunu.
The minister says the disruptions and delays to Phase 2 would also result in additional costs in the form of interest charges on loans, construction costs escalation and maintenance costs over the period of delay.
“Lenders will price their loans for Phase 2 of the Water Project based on the perceived risks associated with Phase 2. Any disruption or delay results in an increase of perceived risk and will mean investors increase the price of their loans. The net effect of the increased costs described above is that the supply of water from Phase 2 of the Project will be more expensive, and such expense will affect the availability of water and the equitable distribution of water.” Says Mchunu’s affidavit.
The respondents had until 7 November to file their intentions to oppose the intervention application, but lawyers representing the parties in the main application say they have agreed that it should be postponed on Wednesday to a later date.
Conspicuous by absence however, is South Africa’s position on the arbitration process held in its territory, that was based on an agreement that Lesotho disputes, signed by a minister who didn’t have authority.
South Africa is also silent on the revelations that German credit agency KfW Ipex Bank, which Frazer Solar claimed at the arbitration that it had agreed to finance the implementation of the project, has now denied this.
Lesotho has started a local court process to nullify the €100million alleged agreement. In that application, Prime minister Moeketsi Majoro says the court should find that (1) the decision by former minister in the prime minister’s office Temeki Tšolo to appoint Frazer Solar GmbH as a sole supplier of goods and services, and (2) to enter into a supply agreement dated 27 September 2018 – should all be declared unconstitutional, unlawful and invalid.
Majoro who was finance minister when the agreement was signed said the supply agreement purported to impose a financial commitment of M1.7billion (€100million) on the kingdom’s fiscus, 4.4% of Gross Domestic Product. He accuses Frazer of fraud.
“It was clearly the intention of the parties that the kingdom would have breached the agreement before it was even concluded, and thus entitle FSG (Frazer Solar GmbH) to launch legal proceedings as it did claim damages while FSG had not provided any products and services.” Says Majoro
He says the kingdom was purportedly bound to this financial commitment without even a veneer of compliance with the constitution of Lesotho or the applicable procurement or public finance law by a signatory who was unauthorized to bind the kingdom – being T’solo – who also allegedly made his former secretary and a personal aide of former prime minister Tom Thabane sign as witnesses.
Frazer Solar has told the media in Lesotho that Majoro perjured himself and it plans to challenge the nullification.
On the case in South Africa, Lesotho is also assisted by the African Legal Support Facility (ALSF) housed at the African Development Bank. The ALSF says it is also supporting Lesotho in other jurisdictions where Frazer Solar has sought to register the award