The Lesotho Highlands Water Project is vital for South Africa, which is overhauling its dilapidated infrastructure to end a water crisis challenging the continent’s most-industrialised nation.

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Lesotho is seeking to open talks with South Africa over royalties and compensation for a water-sharing deal that accounts for about 10% of its economy.

The nation, encircled by South Africa, sees talks starting in April, Lesotho’s Natural Resources Minister Mohlomi Moleko said in an interview. South Africa’s Department of Water and Sanitation didn’t immediately respond to requests for comment on the talks.

The negotiations over the 1986 accord will weigh on the R53 billion Lesotho Highlands Water Project. The conduit is vital for South Africa, which is overhauling its dilapidated infrastructure to end a water crisis challenging the continent’s most industrialised nation.

“We have to go back and look at the impact of compensation,” Moleko said. “If you give somebody compensation, you don’t want the person’s life to be worse off. It has to be higher. So we are going to revisit that.”

Lesotho officials say the terms no longer reflect current economic conditions or development priorities.

At the centre is a 50-year compensation framework expiring in 2044: royalties are currently tied to South Africa’s cost savings before shifting to a system based largely on water volumes.

The project has expanded well beyond its original scope. Since the completion of the Katse Dam in 1996, Lesotho now supplies about 780 million cubic metres of water annually, earning about $220 million (R3.8 billion) in royalties.

A new dam and transfer tunnel under construction since 2023 will push supply above 1 billion cubic metres.

“These dams could have been built in South Africa,” Moleko said, adding that the review will assess whether returns adequately benefit the nation.

The plan is critical to water security in South Africa’s Gauteng economic hub, giving Lesotho leverage as it pushes for revised terms.