How a Lesotho water project is caught between U.S. and China, with locals paying the price
Pascalinah Kabi
This investigation was produced with support from Bertha Foundation Impact Fund.
The U.S. is unhappy with Lesotho, a landlocked kingdom entirely surrounded by South Africa, for its decision to award major construction contracts in its flagship water infrastructure project to Chinese firms, an investigation reveals.
Washington saw the move as a sign of deepening Chinese influence in a strategically important project, triggering a sharp backlash and one of the harshest trade penalties Lesotho has ever faced.
Lesotho’s Minister of Trade, Industry and Business Development, Mokhethi Shelile, said the Lesotho government was “disappointed” when it received communication over the Chinese dominance in the water project from Washington.
“Yes, we were quite disappointed that it was seen in that light,” Shelile said in an exclusive interview with Water Journalists Africa on 23 July 2025 in the capital, Maseru.
He added: “It’s not a proper approach by those that are concerned to complain about a fair process that was followed by the Lesotho Highlands Water Project to select a contractor on a competitive bidding basis.”
Shelile emphasised that he does not understand why the U.S. would raise objections to such a process.
Repeated attempts, dating back to 29 July 2025, to obtain a comment from the U.S. Embassy in Maseru were unsuccessful. On 12 August 2025, Public Relations Officer Jessica Tesoriero responded: “My apologies for not responding sooner. We refer you to the U.S. Trade Representative.”
Lesotho plays a vital but often overlooked role in the region: it supplies clean water to South Africa’s economic engine—Gauteng Province, which includes Johannesburg and Pretoria.
This cooperation is anchored in the Lesotho Highlands Water Project (LHWP), a multi-billion-dollar, multi-phase infrastructure partnership between the two countries. In return for transferring water to South Africa, Lesotho receives royalty payments and hydropower to meet its domestic energy needs.
The project is currently in Phase II, which includes the construction of a major new dam in Polihali, located in Lesotho’s remote Mokhotlong district. The dam is expected to begin transferring water in 2028.
In 2022, the Lesotho Highlands Development Authority (LHDA), the agency overseeing the project, awarded two of its largest infrastructure contracts—together worth more than M17 billion (over $900 million USD)—to joint ventures dominated by Chinese state-owned enterprises.
One contract, valued at M7.68 billion ($435 million), was awarded to SUN, a joint venture of two Chinese companies called Sinohydro Bureau 8 and Sinohydro Bureau 14, South Africa’s Unik Civil Engineering, and Lesotho’s Nthane Brothers.
SUN later subcontracted China’s Kunming Engineering, along with two South African firms and one from Lesotho. The construction of the Polihali dam is being supervised by Matla a Metsi, a joint venture involving companies from Lesotho, South Africa, and France.
A second contract, worth M9.2 billion, was awarded to Kopano Ke Matla, a joint venture made up of China’s Yellow River Company, Sinohydro Bureau 3, and South Africa’s Unik Civil Engineering. This contract covers construction of the Polihali transfer tunnel, designed to carry water between the new Polihali Dam and the existing Katse Dam.
One of the losing bidders for the tunnel contract was the Afcons–Murray and Roberts Joint Venture, which included the American firm Brierley Associates. According to LHDA records, Brierley Associates is the only U.S.-based company to have submitted a bid in Phase II of the project.
Water Journalists Africa can reveal that the decision to award major construction contracts to Chinese firms has drawn criticism from the United States. According to highly placed government and royal family sources, the U.S sees China’s growing influence in the Lesotho Highlands Water Project (LHWP) as concerning—particularly in light of the substantial financial support the U.S. has provided to Lesotho over the years.
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Lesotho’s Minister of Trade, Industry and Business Development confirmed in an exclusive interview that the government received communication from the U.S. expressing unease over the dominance of Chinese companies in the LHWP.
According to the U.S. Foreign Assistance website, Lesotho first received U.S. funding of $2.1 million in 2001. The highest allocation came in 2008, with $364 million, followed by $347 million in 2024. In 2025—the year widely seen as the hardest hit under Trump’s aid cuts—by mid-year, Lesotho had received only $25 million. This is based on data from a website accessed by this journalist, which was last updated on 31 July 2025.
The top funded sectors, in descending order, are HIV/AIDS; Developmental Food Aid and Food Security; General Health; Unallocated or Unspecified; Government and Civil Society; Education; Level Unspecified Education; Basic Health; Conflict, Peace, and Security; Operating Expenses; and Water Supply and Sanitation.
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Under the HIV/AIDS portfolio, the now-cancelled USAID programs had played a transformative role in Lesotho’s response—shifting from an era marked by high death rates and tens of thousands of HIV-positive orphans to one where free prevention of mother-to-child transmission services helped break the cycle of infection.
The U.S. also funded Lesotho’s first Millennium Challenge Account Compact, which significantly upgraded the country’s health infrastructure, including construction and refurbishment of facilities such as the Nazareth Health Centre.
"There are clearly tensions between the two largest economies. The U.S. is number one, and China is number two—and catching up quickly,”
Mokhethi Sheliledi, Lesotho’s Minister of Trade, Industry and Business Development. Tweet
The compact also supported legal reforms such as the Lesotho Land Act of 2010, granting women equal land rights. Additionally, the U.S. has invested in strengthening Lesotho’s security sector, underscoring the depth and breadth of the bilateral relationship.
Against this backdrop, the dominance of Chinese companies in a project of such strategic importance appears to have triggered diplomatic unease. This concern reportedly contributed to the U.S. government’s decision to impose a 50 percent tariff on goods from Lesotho—the highest rate among targeted countries, even higher than the one levied on China.
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Reflecting on this fallout, Lesotho’s Minister of Trade, Industry and Business Development, Mokhethi Shelile expressed disappointment over the U.S. administration’s complaints, stating that it was unfair to criticise a lawful and transparent tender process carried out under the Lesotho Highlands Water Project.
“I am disappointed personally that we cannot agree that the process that was transparent had to be that way. There were no favours done for the Chinese contractors,” Shelile said.
On 23 July 2025, Minister Shelile told Water Journalists Africa that contracts under the Lesotho Highlands Water Project are awarded based on merit and an open international bidding process, not on the country of origin.
“Companies from around the world are welcome to submit tenders, and they compete on several factors. One is whether they can actually do the job, another is whether they can complete it within the required timeframe, and finally, whether they can offer a good price.
“At the end of the day, much to our surprise—and perhaps discomfort for some of us—the major contracts were won entirely by Chinese companies. Who should we blame for that? It’s not fair for others to complain about a process that was transparent and competitive,” Shelile said. “It was one of those things I really did not understand why it had to become an issue.”
He said he was disappointed that the U.S administration has taken a hard stance on Lesotho for works that were awarded in a fair and transparent manner.
“I am disappointed personally that we (Lesotho and U.S) cannot agree that the process that was transparent had to be that way. There were no favours done for the Chinese contractors,” Minister Shelile said.
The 50 percent tariffs have dealt a heavy blow to Lesotho’s textile industry, with manufacturers warning that the once-thriving sector is now on the brink of collapse.
Among them is Nien Hsing Group, which produces Levi’s jeans for the U.S. market. Nien Hsing Group has been hit hard by the U.S. tariffs, with American buyers halting orders amid ongoing uncertainty. The company’s Administration Director, Ricky Chang, said the company only had confirmed orders up to the end of July 2025.
Chang candidly suggested that Lesotho may be an unintended casualty in the broader geopolitical tensions between the United States and China.
“But talking about the political front, well, when it comes to the influence of countries, particularly of this joint economy, one cannot separate the economy from the politics, even the military. It’s all linked,” Chang said told Water Journalists Africa on 13 June 2025.
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Over a month later, in separate interviews, when asked whether Lesotho feels caught between the two superpowers, Minister Shelile responded: “I think so.”
“There are clearly tensions between the two largest economies. The U.S. is number one, and China is number two—and catching up quickly. It’s normal for those at the top, when they see the inevitable coming, to find ways to stay there,” Shelile said.
He added that Lesotho remains “a non-aligned country,” a stance it has maintained “for the longest time.”
But on the ground, the consequences of this geopolitical tug-of-war are already being felt. TZICC, a textile factory that once supplied major U.S. retailers including JCPenney, Walmart, and Costco, has laid off more than a thousand workers due to the impact of U.S. tariffs.
From the now-silent factory floor, where sewing machines once hummed to meet American deadlines, Compliance Manager Rahila Omar expressed workers’ deep frustration. When asked what she believed former workers would do if they came face-to-face with Trump, Omar replied without hesitation: “They would beat him.”
These workers earned monthly minimum wages ranging from $150 to $168—wages they relied on to support their families, buy groceries, and pay school fees.
Meanwhile, in March 2024, Prime Minister Samuel Matekane’s administration attempted to bring in U.S.-based Astra Energy to fund Phase II of the project without following proper administrative procedures. It remains unclear whether the Joe Biden administration pressured Lesotho to include Astra Energy in an effort to boost American involvement in the water project.
In a secret recording from March 7, 2024, obtained by Uncensored News/Public Eye, Astra Energy representatives noted that their meeting with the Lesotho Highlands Development Authority (LHDA) had been arranged by Minister of Natural Resources, Mohlomi Moleko.
The representatives admitted it was “unusual” for Astra Energy to offer unsolicited funding to the LHDA, explaining that Matekane’s administration had approached the company to see if it could “put money together” for the hydroelectricity component of the project.
Lesotho’s Minister of Trade, Industry and Business Development, Mokhethi Shelile, has disclosed that Chinese officials warned his country not to take actions that could harm China’s interests in its ongoing tariff dispute with the United States.
In an exclusive interview with Water Journalists Africa on 23 July 2025, Shelile said: “In fact, the Chinese embassy (officials), they came to my office and said we appreciate that you are talking to the US. We support that very much, but as you continue with your discussions, we will appreciate it very much that you do not do anything that is going to prejudice us as China.”
Shelile described the request as “fair” and emphasised that Lesotho remains open to dialogue but not at the expense of damaging relations with key partners.
“We are available to be persuaded to vote for certain things,” he said. “But where we will not go, it is where we are expected in our decision to hurt or prejudice any other partner, whether it is the UK or the U.S or China.”
When asked whether this placed Lesotho in a difficult diplomatic position, Shelile acknowledged the tension but reiterated his understanding of China’s stance.
“Yeah, but I think it is a fair request from them to say go and do your talking, but don’t come back here or agree with them when they say we should be levied more tariffs or something like that.”
Attempts to obtain a comment from the Chinese embassy in Maseru were unsuccessful by the time of going to print.
Meanwhile, minister Shelile further explained that the Chinese position mirrors an understanding reached among member states of the Southern African Customs Union (SACU), who agreed to engage in individual negotiations with the U.S. while avoiding actions that could negatively affect fellow members.
“We as SACU members, we now found ourselves having to go and negotiate individually, not as a SACU. Guys, go ahead, but don’t do anything that is going to be messing us up, okay? Then we agreed on that.”
Shelile’s comments come in the wake of revelations that the United States imposed a 50 percent tariff on Lesotho exports in response to the awarding of major construction contracts—worth over M17 billion (approximately $900 million)—to Chinese firms under Lesotho’s flagship water infrastructure initiative, the Lesotho Highlands Water Project (LHWP).
Though the tariff was later eased to 15 percent on August 1st, the fallout laid bare just how vulnerable small nations like Lesotho are to the crosscurrents of global power struggles.
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China’s economic influence in Lesotho
(source: Lesotho’s Ministry of Finance and Development Planning)
China has supported Lesotho through a mix of loans and donations, funding six major infrastructure projects:
Excluding the two convention centre projects, the remaining were loan-financed. The Ministry of Finance’s Public Debt and Aid Department reports that Lesotho repaid a total of M350 million ($20 million) on these loans between 2008 and 2025.
China has also donated infrastructure such as the National Assembly building and Maseru Regional Hospital, further deepening its development relationship with the mountain kingdom.
U.S. aid to Lesotho: focus on health and food security
By contrast, U.S. assistance has largely come in the form of grants, with a focus on health, food security, and governance. According to the U.S. Foreign Assistance website:
The top U.S.-funded sectors include:
This investigation was produced with support from Bertha Foundation Impact Fund.
