The multibillion-rand De Hoop Dam in Sekhukhune stands to benefit more than a million people and several platinum mines in the area, bringing to an end years of severe water shortages.
Sekhukhune district municipality mayor Dickson Masemola said the construction of the dam, which is expected to cost between R4 billion and R7 billion, would start after the sod-turning ceremony next week.
President Thabo Mbeki and Limpopo Premier Sello Moloto are expected to attend the ceremony, to be held in Greater Tubatse.
Masemola said Eskom had expressed interest in establishing a hydro-electric plant in the region once the project was complete.
"The water from the dam would be for both industrial and domestic use for people in Sekhukhune.
"It has been hundreds of years that the people here have been without water and we hope this intervention will go a long way in addressing the water problem that had characterised Sekhukhune for such a long time," Masemola said.
He said his office had developed a plan for the creation of a municipal entity, Sekhukhune Water.
"That will be a utility to carry forward the provision of water on behalf of the council," he said.
Masemola said Sekhukhune Water would manage water business efficiently and effectively to enable infrastructure expansion in order to deal with water backlogs and improve water management.
He said discussions were also at an advanced stage with the Department of Water Affairs to ensure that their schemes were transferred to the district.