South Africa’s Trans-Caledon Tunnel Authority (TCTA) outlines its operational performance, financing track record and preparedness for a major institutional transition, as the country moves towards the establishment of a consolidated National Water Resources Infrastructure Agency (NWRIA).

The update was provided during the launch of TCTA’s Integrated Annual Report for the financial year ending 31 March 2025, alongside a detailed State of the Organisation and financial presentation delivered by TCTA’s Chief Executive Officer, Percy Sechemane. The briefing brought together government representatives, commercial lenders, development finance institutions, water sector stakeholders and the media, both in person and virtually.

Opening the engagement, the chairperson of the TCTA board, Precious Sibiya, described the event as more than a formal reporting exercise, positioning it as a moment of accountability and trust. She emphasised that water security remains a national priority with long-term implications for households, industry and economic stability.

“This is a point where we account to our shareholders, our funders, our partners and the citizens of the country for how we manage the resources placed in our care,” says Sibiya. “No filters, no embellishment, only a clear record of our stewardship.”

Operating in a period of reform

The 2024/25 financial year unfolded against a backdrop of increased scrutiny of infrastructure delivery, mounting concern over water security and the acceleration of institutional reform within the water sector. Sibiya noted that legislation enabling the creation of the NWRIA is now in full force, marking what she described as a “meaningful and irreversible” shift in how national water infrastructure will be governed and financed.

The Department of Water and Sanitation (DWS) is leading the transition process through five workstreams covering governance, finance, operations, information technology and human resources.

Sibiya adds, “The TCTA remains responsible for ensuring uninterrupted operations until all obligations are formally transferred. We must ensure that TCTA remains fully operational until its responsibilities migrate seamlessly to the new agency. Not a single project should be delayed, because delays are economically and socially costly.”

She added that maintaining lender and market confidence during the transition has been a central priority. “While the institution is changing, the mandate continues.”

Mandate and structural constraints

In his ‘State of the Organisation’ address, Chief Executive Officer Percy Sechemane provides a detailed overview of TCTA’s legislative position and operating model. Established initially to deliver South Africa’s participation in the Lesotho Highlands Water Project, TCTA currently functions as a special-purpose vehicle implementing water infrastructure strictly under ministerial directives.

“Unless the minister issues a directive, we can’t act,” Sechemane said. “The position of the TCTA is that we have technical authority, but limited autonomy.”

He explains that TCTA operates within a complex governance environment that requires concurrence from the Minister of Water and Sanitation, National Treasury and its own board. As a result, project initiation, funding approvals and tariff determinations require extensive coordination.

“The Minister of Water and Sanitation says ‘deliver’, the Minister of Finance says ‘watch the balance sheet’, the board expects performance, and then we still need to go to the market and raise the money,” Sechemane explains.

The forthcoming agency model is intended to resolve these constraints by creating a consolidated Schedule 2 entity with its own balance sheet, decision-making authority and long-term planning capability.

Financial discipline and audit outcomes

Despite structural limitations, TCTA reported strong financial and governance performance. The authority received an unqualified audit opinion for the year, with no findings raised by the Auditor-General in relation to performance information.

“The Auditor-General did not identify any findings related to our performance information,” Sechemane said. “That tells us we are doing what we said we would do with the money raised.”

TCTA’s Chief Financial Officer, Andisa Zinja, presented a high-level overview of the organisation’s financial position as at the end of March 2025

She confirmed that the TCTA received an unqualified audit opinion, consistent with previous years. Still, she explains that a new emphasis in the Auditor-General’s report related to a material uncertainty linked to going concern. Zinja says this disclosure does not reflect financial distress, but rather the anticipated disestablishment of TCTA in its current legal form once the Minister formally establishes the new National Water Infrastructure Agency. Until that point it remains “business as usual,” with all core functions, including project finance, treasury, and project implementation in South Africa and Lesotho, continuing uninterrupted, albeit under a future institutional structure.

Turning to financial performance, Zinja says, “TCTA’s statement of financial position largely comprises borrowings and tariff receivables, which are designed to align over the life of projects. Movements during the year were driven mainly by additional loan drawdowns to fund the Vaal River System and by increased tariff receivables and social grant funding from the government to cushion users from higher costs.”

She highlighted that borrowings linked to the Vaal River System remain the largest component of the balance sheet, reflecting its scale and the authority’s original mandate, with growth driven by Phase 2 funding requirements and higher royalty payments under the Lesotho treaty. Zinja also addresses the restatement of prior-year financials, explaining that this resulted from changes in accounting treatment under IFRS 9 relating to tariff calculations and cash flow re-estimates, which required a technical adjustment rather than reflecting operational weakness. While the restatement resulted in a reported deficit for the prior period, the 2024/25 year closed with a surplus.

She confirms that cash flows remain sufficient to support operations and project funding, with investment activities used strategically to offset debt servicing costs. On compliance, Zinja reports “significant progress in reducing irregular expenditure, such expenditure reflected procedural lapses rather than fraud, losses or failed service delivery, and the majority of outstanding matters had been resolved by October 2025.” She concludes by reaffirming the TCTA’s commitment to transparency, accountability and continuous strengthening of financial controls.

The cost of constitutional water provision

A recurring theme in the CEO’s presentation was the tension between water’s constitutional status as a basic right and the commercial realities of infrastructure funding.

“Water is enshrined in the Constitution, yet people still ask why it costs so much,” says Sechemane. “On one side, lenders look at profitability and repayment. On the other hand, communities expect affordability.”

He emphasises that water infrastructure is inherently expensive, particularly in a country where water must be transferred over long distances, often through tunnels, dams and pumping systems. Climate change has further increased uncertainty and variability.

“Production is increasingly unpredictable. Yet everyone expects water to flow when they open a tap. That contradiction defines our operating environment.”

Major infrastructure programmes

The CEO’s presentation outlines progress across several nationally significant projects.

Lesotho Highlands Water Project – Phase 2

The Vaal River System programme remains TCTA’s largest and most strategically important responsibility. Phase 2 of the Lesotho Highlands Water Project will add approximately 480 million cubic metres of water per annum to the system, supplying Gauteng and several other provinces.

“This system underpins 46 per cent of the economy and serves around 33 per cent of the population,” Sechemane says. Cost estimates for Phase 2 have increased to approximately R53 billion, reflecting scope expansion, inflation, environmental requirements and the complexity of high-altitude construction. TCTA has fulfilled all its financial obligations to the Lesotho Highlands Development Agency, which implements the project on the Lesotho side.

“We raise the funding, but construction happens in another country with a different legal framework,” Sechemane said. “That balance is not simple.”

uMkhomazi Water Project

In KwaZulu-Natal, the uMkhomazi Water Project aims to increase system yield from 394 to 608 million cubic metres per annum, supplying approximately six million people and supporting industrial growth.

The project carries an estimated cost of R27.5 billion. To mitigate tariff impacts, a blended funding model was secured, comprising 25 per cent grant funding, 25 per cent interest-free loans and the remainder from off-budget borrowing.

“To make this project affordable, the state had to come to the party,” Sechemane said.

Mokolo-Crocodile Water Augmentation Project Phase 2A

The Waterberg region’s Mokolo-Crocodile project reached financial close in May 2024, with funding secured for a R19.7 billion investment. Construction has commenced following the National Treasury’s exemption allowing procurement to proceed alongside funding processes.

The project supports power generation, mining, municipal supply and industrial development.

Berg River–Voëlvlei Augmentation Scheme

In the Western Cape, the Berg River-Voëlvlei scheme will improve drought resilience by transferring surplus winter flows to Voëlvlei Dam. Detailed design work is underway, with construction expected from 2027.

Operations, maintenance and environmental obligations

Beyond new infrastructure, TCTA plays a critical operational role. It operates the Delivery Tunnel North under the Lesotho treaty and completed a planned six-month maintenance shutdown between October 2024 and March 2025 without disrupting supply.

“We knew how critical that intervention was,” Sibiya adds. “There could be no failure.”

TCTA also manages three acid mine drainage treatment plants in Gauteng. Treatment volumes ranged between 80 and 90 per cent of target levels, with performance impacted by theft and power supply disruptions. Sechemane points to growing interest in upgrading treated mine water to potable standards as a future water security solution. He says, “We need to rethink whether treating water just to release it back into the system makes sense.”

Environmental compliance, including biodiversity offsets, was highlighted as a growing contributor to project timelines and costs. “These are not optional processes,” Sechemane explains. “Until they are completed, projects cannot be closed.”

Advisory role and funding pipeline

Under ministerial directives, TCTA also provides advisory services on projects such as the uMzimvubu and Nwamitwa dam developments, focusing on funding models and commercial viability.

Sechemane confirmed that TCTA plans to raise approximately R15 billion from the market in 2025/26 to support ongoing programmes, particularly the uMkhomazi scheme.

Sechemane clarifies, “Unless funders are comfortable, the system doesn’t work; their confidence is critical.”

Preparing for the new agency

The transition to the National Water Resources Infrastructure Agency will involve engagements with lenders, staff, labour unions, the National Treasury and the Government of Lesotho. A transaction adviser will oversee organisational design, asset migration and contractual continuity. Reassuring the financial sector, he adds, “We won’t move until funders are satisfied,” Sechemane said. “Your money has to be safe.”

Throughout the briefing, TCTA leadership repeatedly returned to the broader national stakes.

“We cannot allow water to go the way electricity did,” Sechemane warns. “Water security is now sitting much higher on the state’s agenda and rightly so.”

Despite institutional uncertainty, TCTA maintains that it is entering the transition phase from a position of operational stability, financial discipline and delivery credibility.