SA company sues Lesotho tunnel builder for M165-million

The Polihali Transfer Tunnel intake under construction. Photo: Sechaba Mokhethi

• South African construction company Esor claims it is owed about M165-million for preparing to work on the Polihali Transfer Tunnel after receiving a letter confirming a contract.
• But the Kopano Ke Matla joint venture claims the parties had not agreed on all the terms and has refused to pay Esor.
• The case is before the Commercial Division of the Lesotho High Court.

South African company Esor Construction has launched a high court case to claim more than M165-million (M1=R1) for work on the Polihali Transfer Tunnel, part of the Lesotho Highlands Water Project.

Esor is suing the Kopano Ke Matla joint venture and its three partners, who it says accepted its tender for a M365-million subcontract.

But Kopano Ke Matla has rejected Esor’s claim, saying there is no valid agreement between the parties.

The Polihali Transfer Tunnel, part of phase two of the Lesotho Highlands Water Project, will transfer water from the Polihali Dam, which is under construction, to the existing Katse Dam. The water will then be channelled to South Africa.

The project is expected to gradually increase annual water transfers from 780-million to more than 1.27-billion cubic metres.

The Lesotho Highlands Development Authority announced in November 2022 that Kopano Ke Matla, comprising China’s Yellow River Company, Sinohydro Bureau 3 and South Africa’s Unik Civil Engineering, had been awarded the approximately M9.2-billion contract for construction of the Polihali Transfer Tunnel.

The dispute with Esor centres on whether Esor and Kopano Ke Matla concluded a binding subcontract.

According to Esor project director Len Nel’s affidavit, the parties exchanged tender invitations and revised submissions from August 2022.

Kopano Ke Matla issued a letter of acceptance on 27 January 2023.

“On or about 20 January 2023, Esor submitted its final revised tender to Kopano Ke Matla. This was followed by a letter of acceptance dated 27 January 2023, signed by both parties, thereby forming a binding subcontract,” said Nel.

The accepted subcontract amount was about M365-million.

According to Nel, the subcontract required the parties to execute a detailed subcontract agreement within 28 days, “which Kopano Ke Matla failed and refused to finalise”.

The letter, signed by Zeng Yingfeng, a representative of Kopano Ke Matla, stated that “by issuing this letter of acceptance, the contractor confirms a binding contract between the contractor and the subcontractor”.

Nel signed the acceptance on behalf of Esor on 30 January 2023.

Esor said it began preparing for the work after receiving the acceptance letter.

Nel said Esor also provided the required guarantees, sent engineers to establish the site, and ordered machinery to begin the work.

But, according to Nel, “Despite Esor’s readiness and ability to perform, the respondent [Kopano Ke Matla] persistently failed to: provide access to the work areas; approve key technical submissions; issue instructions and designs required for progress; certify or pay Esor’s payment claim; and finalise the required subcontract agreement.”

Esor submitted a payment claim of M78.9-million on 5 October 2023 for fixed and time-related preliminary and general costs.

Kopano Ke Matla rejected the claim in a letter dated 19 October 2023. It said, “There is no signed subcontract agreement between Kopano Ke Matla and Esor Construction since parties have been unable to agree on terms and conditions. Esor did not submit an advance payment guarantee. Esor did not submit a performance guarantee.”

Nel said Kopano Ke Matla’s rejection amounted to a breach of the agreement.

“Esor submitted its first payment application in accordance with the contract. Kopano Ke Matla rejected the payment claim without lawful basis, and never paid Esor any amount, notwithstanding that Esor had commenced performance and incurred substantial expenditure.

“The respondent’s repeated failures constituted material breaches of its contractual obligations and prevented Esor from carrying out the subcontract works.”

Following correspondence aimed at resolving the dispute, Esor said it terminated the subcontract on 9 February 2024 and left the site.

Esor is claiming about M165-million, excluding interest and legal costs. The claim comprises M78.9-million for preliminary and general costs, M84.1-million for alleged loss of overheads and profit, and M2-million for wasted expenditure incurred in preparing for and partially performing the underground works.

Esor’s papers say the claim for lost overheads and profit was calculated with the assistance of quantity surveyor and construction claims expert Dave Mark Buchanan Stuart.

Esor wants the court to order Kopano Ke Matla and its three partners to pay the amounts claimed jointly and severally, together with interest and legal costs.

On 10 August, Kopano Ke Matla, Yellow River Company, Sinohydro Bureau 3 and Unik Civil Engineering, through their lawyer Zurayda Mayet of Mayet and Associates Attorneys, gave notice that they intend to answer Esor’s application. Their notice states that they were served with the application on 29 July 2026.

The answering papers had not been filed at the time of publication. The matter is with the Commercial Division of the Lesotho High Court.

© 2026 GroundUp. This article is published under the GroundUp Republication Licence Version 1.0. Email [email protected] to request permission to republish.

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