South Africa has approved the second phase of a multi-billion dollar water project in landlocked Lesotho to ensure a secure future water supply in its industrial hub, the water minister said Thursday.

The Lesotho Highlands Water Project, one of the world's largest infrastructure projects under construction, is an intricate network of tunnels and dams diverting water from Lesotho's mountains to South Africa.

"This project ... will at a projected cost of 7.3 billion rand (710 million US dollars/560 million euros) include construction of the Polihali Dam in Lesotho," Water Minister Lindiwe Hendricks told journalists in Cape Town.

Hendricks said the project was a strategic intervention to ensure the water security of the country's richest province Gauteng, which is expected to increase its water requirements by more than 30 percent in the next 20 years.

The project would augment the Vaal River System, which supplies water to 60 percent of the country's economy.

According to Hendricks the second phase of the project was chosen as an augmentation method as water could be transferred to South Africa under gravity without pumping, and was the least energy intensive option.

The first phases of the project which was first conceived in 1954, included phase 1A, which began in 1984 and began delivering water in 1998, and phase 1B which began in 1998 and was inaugurated in 2004.

While the project delivered kilometres of tarred roads and power lines and provided thousands of jobs in the largely rural tiny mountain kingdom, it came under fire from civic groups for displacing up to 20,000 people.

Critics argued the project changed once remote mountain communities by introducing AIDS, alcoholism and prostitution, and caused the loss of farming and grazing land.

The project also resulted in convictions of some of the world's largest engineering firms, after massive corruption was uncovered in 1999.

More than 12 multinational firms and consortiums were found to have bribed the chief executive of the project, who is currently serving a 12-year prison sentence.