Letter to World Bank on LHWP's second dam

This letter from International Rivers and Environmental Defense urges the Bank to ensure that social and environmental problems from the first dam are resolved before approving a loan for the second dam.

Jean–Louis Sarbib
Vice President
Africa Department
The World Bank
1818 H Street, NW
Washington, DC 20433

Dear Mr. Sarbib:

We are writing to you because we are concerned that pressure to advance with the appraisal process of Phase 1B of the Lesotho Highlands Water Project will undercut the World Bank’s stated commitment to address the disturbing social and environmental problems left behind in the Phase 1A area. Another result of rushing the loan is that it does not allow sufficient time to put in place institutions and structures that could prevent a repeat of these problems in the Phase 1B area. We also must express our alarm that, despite the magnitude of the project, Phase 1B is to begin without critical scientific studies and data, including those on Instream Flow Requirements, limnology and seismicity. The latter is especially serious since earthquakes caused by filling Katse Dam continue to disrupt the lives of communities in Highlands villages.

We appreciate that Bank staff have shared project documentation with us and have briefed NGOs on several occasions. However, despite best intentions, the information contains numerous contradictions and is often based on presumed future improvement of project management on the ground, which after several years continues to be largely elusive. We would like to call your attention to the following major issues.

New IDA Credit Proposed

The social and environmental impacts of the project, including the loss of some of the country’s best arable land, are great and will be most severely felt by the people in the Highlands of Lesotho. The entire country is paying a steep price in other ways, because the project has diverted talent, resources and attention away from direct poverty alleviation efforts. In addition, the economic benefits to the country as a whole and to the Highlands communities in particular remain in doubt. The Bank is now proposing a separate IDA credit to "enhance the capacity of the Government of Lesotho to deal with the LHWP." The failure to ensure at the project’s start that the Government had adequate capacity to deal with a project of this magnitude is very disturbing and points to serious shortcomings in the way the Bank implements large–scale infrastructure operations. The proposed use of IDA funds to help the Government deal with a World Bank–funded project will crowd out needed direct investments in the social sectors, while further adding to the country’s debt burden. It would appear that the minimum the Bank could do is to offer its services to help Lesotho benefit from the project free of charge.

Institutional Capacity

The Bank requires LHDA (the project authorities) to present an action plan for institutional change at appraisal. LHDA had great difficulties in providing even a small number of replacement houses before the impoundment of the Katse Dam. With many problems in the Phase 1A area unresolved, it is difficult to see how LHDA can take on the additional responsibility for Phase 1B. The Phase 1B EIA summary states clearly that implementation of the environmental action plan (EAP) for Phase 1B will require considerable implementation skills and resources. The Bank’s November 1996 Aide Memoire questions LHDA’s commitment to a participatory approach which lies at the very heart of addressing the social and environmental problems. The UNESCO/UNDP comments on the EIA include a clear message of concern about the fact that LHDA does not seem to have learned lessons from Phase 1A, describing compensation as being "handled in a bureaucratic, slow and rigid manner" and being "painfully slow in the delivery of its services." We strongly believe that a plan of action to change the culture of LHDA is not enough: LHDA needs to demonstrate its capacity to carry out reforms before the next phase advances.

Economic Evaluation of the Project

The April 1996 World Bank Aide Memoire notes that the Bank is "required to produce an economic evaluation of any project it supports." It then lists evaluations that must be prepared for appraisal of Phase 1B, including a section on "the impact of the project on Lesotho." But it recommends that only benefits be considered since "RSA covers all project–related costs and compensates for specific costs." A simplified cost/benefit analysis in which Lesotho’s costs are zero because it chooses to ignore the project’s externalities is totally unacceptable and entirely unworthy of an institution that claims global environmental leadership. What economic evaluations have been done that include social and environmental costs of the project, such as the loss of scarce arable land?

The Development Fund

The Development Fund, which will receive water royalties and other payments to compensate Lesotho for the LHWP, is to be the "backbone" of the country’s poverty reduction strategy. According to John Roome, the task manager for the project, approximately 40 percent of its resources would be used for a macro–economic stabilization fund, which in his opinion might leave US $15–20 million a year for poverty programs. However, once the project is complete, the Government will lose customs and tax revenues related to the construction activities – now a significant component of government income – with the result that there is likely to be less money available for poverty alleviation. To compensate for this lost income, the macro–economic stabilization fund may have to increase as a percentage of the development fund, with corresponding decrease for poverty programs. What will compensate for the expected sharp fall in government revenue adequately enough to avoid a severe recession and economic crisis?

Rural Development Program

Poverty reduction efforts of the Development Fund will become even more crucial if the project’s ability to re–establish livelihoods continues to falter. Bank staff have described the RDP as the "sick man of the project," because it has failed to re–establish people’s livelihoods. The RDP’s attempts to create new income–generating opportunities have been haphazard, ill–conceived and poorly executed. The situation has gotten to the point wherein the project’s own Panel of Environmental Experts seems to think that the critical project requirement of re–establishing livelihoods may not be achievable. In their June 1996 report on the project, they write, "The global experience with conventional approaches to involuntary relocation in connection with development projects is not characterized by success in restoring, let alone improving, incomes and living standards of project–affected people. Even in cases where living standards have risen following removal, sustaining that success has proved difficult. Reasons are many for such a discouraging record . . . all of which characterize resettlement in Lesotho." While Bank staff have informed us that they have some new ideas and plans that appear promising, we believe the Bank should not proceed with funding for the second dam until there is some proof on the ground that these attempts will succeed.

Damage from Earthquakes

There have been at least 95 directly related reservoir–induced seismicity (RIS) events in the 16 months since filling commenced at Katse. These quakes have damaged houses in as many as eight villages around the reservoir, the worst damage being at Mapeleng. The families in Mapeleng who lost their homes to the earthquakes have been living in uninsulated metal sheds for 15 months now, and local NGOs do not believe they will have permanent replacement housing before the winter, although LHDA said in August that they hoped to have the housing built within six months.

John Roome informed us at a briefing in January that the Bank will not require as a condition of appraisal the replacement of houses in the village of Mapeleng. Apparently, the issue has become too problematic to resolve from Washington, because LHDA promised to move the village right after the first quakes but does not have the staff or funds to follow through. Leaving aside whether or not the village should be moved, there can be no debate over whether or not these people have been left worse off by the project and that their needs should be attended to as a condition of appraising loans for the next dam. This is keeping with the Bank’s own policy on the project. The "Lesotho: Country Assistance Strategy" (April 18, 1996) notes that participation in Phase 1B "will require satisfactory evidence of progress on the social issues in Phase 1A." The Bank would be shirking its duty as the project’s social monitor if it were to drop this case.

Compensation

The failure to ensure the quality of compensation in corn, pulses and fodder and their delivery in a timely fashion has been a severe problem for people in the Phase 1A area. For these reasons, there should have been extensive consultations with villagers in both the Phase 1A and 1B areas to obtain maximum input into the new compensation policy which is now going through what appears to be a drawn–out approval by the Joint Permanent Technical Commission. Once approved, there are to be consultations with local villagers on the compensation policy. How can affected people influence the policy once it has been approved by the highest project authority?

Land–for–Land

The land–for–land option is by far the preferred choice of affected people. NGOs in Lesotho believe that there is little if any land of reasonable quality available in Lesotho. The possibility of requesting land in South Africa’s neighboring Orange Free State has been mentioned as a possibility by the Bank. What have been the results of conversations with the Government of South Africa on this point?

Tourism and Biodiversity

The Bank’s November 1996 Aide Memoire highlights the role of tourism development as a critical issue to improve the economic impact of the project in the Phase 1B area. This contradicts the more realistic assumptions made in the EIA Summary for Phase 1B, which states that expectations for tourism are modest at best.

The Summary EIA is not the only document questioning the revenue–generating capacity of tourism. The project’s Panel of Experts refers to the plan to make the rescue of threatened species dependent on the development of an ecotourism industry as "a gamble." At stake are plants and aquatic animal species some of which exist only in Lesotho and which may become extinct as a result of the project. What resources and skills will be used to safeguard not only the endemic Spiral Aloe and the Maloti Minnow, but the other endangered aquatic species, the rare and endangered cliff–nesting bird species and the unique alpine and wetland habitats in the project area?

Planned attempts to breed the Maloti Minnow in captivity and grow the Spiral Aloe in a botanical garden may not ensure the survival of these unique and important species and other efforts are urgently called for. Clearly, the recommendation in the EIA summary that LHDA launch an environmental awareness program for local villagers – who will have to endure noise, dust and water pollution from construction, possibly lose their homes and land and may have to live with earth tremors – is rather ironic, especially as local people have not been a threat to the area’s biodiversity.

Investigation into Killing of Workers

We applaud the Bank’s decision to make the establishment of an independent commission of inquiry into the events of September 14, 1996, a condition of appraisal for Phase 1B. On that day five workers were shot to death and numerous others wounded by police forces. There have been accounts of inhumane working conditions for the Basotho workers. The results of the independent inquiry and recommendations on how to establish a fair system in which workers’ grievances can be addressed should be available before a Bank decision on Phase 1B is taken.

Instream Flow Requirements (IFR)

Despite the magnitude of the LHWP, there appears to be little or no knowledge about the river’s IFR. This is astounding given that the requirement for water releases has profound implications for the design and economics of the project. At present the terms–of–reference for an IFR study for the project are being discussed. The collection of reliable data requires about four years, but at a bare minimum two dry and two wet seasons. Should construction of Mohale Dam proceed without these data, the dam’s size may be larger than it need be, at great financial, environmental and social expense.

Limnological Studies

The Katse reservoir will be the highest, coldest reservoir in Africa. However, limnological studies to provide insight into its water quality and productivity have not yet begun. Limnological data from Katse would provide important information that could influence the design of Mohale Dam and influence decisions to proceed with further dams in the future. We don't think Mohale Dam should proceed without these studies, and request a specific timetable for their undertaking and completion.

Reservoir Induced Seismicity (RIS)

In addition to causing social disruption in villages surrounding Katse reservoir, the ongoing reservoir–induced seismicity has raised questions by scientists in South Africa about the design of Katse Dam. Geologist Chris Hartnady of the University of Capetown has written, "The 1988 LHC seismicity report erroneously used an older and inappropriate (body–wave) magnitude value of 5.9 for this event. This means that the ‘maximum credible earthquake’ (MCE) specification of 6.5 is already invalidated by the recent seismicity record." He adds, "there is no seismotectonic reason why earthquakes of size M7 or greater cannot occur there, albeit at low levels of annual probability (around 1 in 1000 or less)." The concern about the dam’s safety raise the following questions:

• The project’s 1988 "Seismic Risk Assessment" report is labeled a draft, yet seems to be the final word on the project’s seismicity. This implies it was not peer reviewed, either internally or externally, before its results were incorporated into the final design. Is this so?

• The 1988 report recommended re–assessing the dam’s seismic hazard after the first few years of monitoring. Has this been done?

• What are the seismic strengths for the transfer tunnels for both Phase 1A and 1B?

• Has an analysis of the effect of earthquakes on the dam’s intake tower been done? This is considered a "weak link" by South African scientists.

• Is there an emergency action plan in effect yet? We have been told that an Emergency Preparedness Plan is under way; this seems to be mostly to prepare for dam failure and breaching. It is not clear how far along this plan is, or how well trained the local emergency staff are. According to the industry standards established by the International Commission on Large Dams, an emergency plan should cover rescue operations, emergency emptying of the reservoir, evacuation of flood threatened areas, environmental accidents such as contamination by hazardous substances, and other emergencies. Inundation maps for downstream areas are also an important. Does Katse’s plan include all of these?

Banking on Future Progress

Bank staff have expressed confidence that many aspects of Phase 1B will be handled differently than Phase 1A, and that better–working programs and policies will be made retroactive to Phase 1A. We hope this is true, but we do not agree that the appraisal of the second dam’s loan should be based on hope. The Bank has a long history of promising improved planning and implementation based on past mistakes. Unfortunately, improvements have been inconsistent and, too often, completely absent. For this project, the Bank says "a set of concrete, monitorable performance indicators has been established to track progress on the social and environmental issues," and that "satisfactory progress" must be demonstrated on these issues before loans for Phase 1B are approved. But how is such progress measured? The project’s Environmental Panel of Experts wrote in June 1996, "To date no systematic Phase 1A monitoring has been carried out and there is no evidence that the Division has the capacity for such monitoring." And what exactly is "satisfactory progress"?

Public Relations as a Priority

The Bank has included improvements to the project’s public relations division as a condition for granting further loans — a recommendation that places PR above rehousing the villagers of Mapeleng. The following is from a letter to LHDA’s Chief Executive from Mr. Roome: "The public relations division is still not delivering the kind of service needed on a project of this nature. We have proposed that LHDA appoint, as a condition of negotiations, a PR manager acceptable to the Bank." The letter goes on to list as a condition of appraisal having the public information centers fully functional. While these requirements are not objectionable in and of themselves, in the context of the project’s long list of unsolved social problems, we believe they represent seriously skewed priorities. People in Lesotho need real solutions on the ground, not a good PR campaign.

Thank you for your time on these issues. We look forward to your response.

Sincerely,

Lori Pottinger
International Rivers
1847 Berkeley Way
Berkeley, CA 94703
(510) 848–1155

Korinna Horta
Environmental Defense Fund
1875 Connecticut Avenue, NW
Washington, DC 20009
(202) 387–3500

Antonio Tricarico
Reform the World Bank Campaign
c/o Centro Internazionale Crocevia
Via Ferraironi, 88/g
00172 Roma ITALY
+39 6 2413199

cc: Pamela Cox, Director, Southern Africa Region

John Roome, Task Manager, LHWP