Pretoria - The Lesotho Highlands Water Project (LHWP) is a “win-win mechanism” for that country and South Africa, President Jacob Zuma said on Thursday.

Speaking at a ground-breaking ceremony in Maseru to launch the R15.4 billion second phase of the LHWP, he said it provided South Africa with much-needed water, and Lesotho with infrastructure and hydroelectric power.

Phase II of the project involves the construction of the giant Polihali Dam, a tunnel to transfer the water, a pumped storage scheme and other associated infrastructure. The completion date is 2020.

The 2.2 billion cubic metre capacity Polihali Dam is to be built in Lesotho's Mokhotlong district.

Zuma said the start of the project's second phase was a “memorable landmark” in the growing bilateral co-operation between South Africa and Lesotho.

“The project represents a win-win mechanism, as it provides needed water to South Africa and creates an opportunity for the required infrastructure development and energy generation in Lesotho.”

Lesotho would also earn revenue from royalties.

“Our two governments must now ensure that this project is implemented without any further delay,” Zuma said.

On completion, Phase II will deliver an additional 15 cubic metres of water a second to South Africa's thirsty industrial heartland, Gauteng.

Water experts have warned that between now and the project's completion in 2020, the region remains vulnerable to drought, which, if severe, could jeopardise its agricultural and industrial output.