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Following the study, the construction of the permanent solution will commence in 2019-20 and will be undertaken across two years.
The Victor Harbor Horse Tram has been out of operation for six months due to the unsafe nature of the Causeway.
During the peak season the suspension of the horse tram services was costing the City of Victor Harbor council approximately $6000 per day.
Temporary repairs have been ongoing on the Victor Harbor landmark to enable the popular horse-drawn tram service to be reinstated following its closure earlier this year.
City of Victor Harbor Mayor Moira Jenkins said it was hoped the horse tram would resume operation in the next fortnight.
"We are waiting for engineering clearance form the state government before the horse tram can return," Dr Jenkins said.
"The $20 million for the Causeway is fabulous news for not just Victor Harbor, but for the whole Fleurieu Peninsula and I thank our Member for Finniss David Basham and the Premier.
"This money will enable the Causeway to continue for another 150 years."
Dr Jenkins said the investment into Victor Harbor by the state government sends a message to the business sector.
"This investment by the government proves that it is worth investing in Victor Harbor. We have a lot of potential and we are very pleased that the state government has recognised this.
"Victor Harbor is open for business and this is a clear message to business in this state and all around the country."
Premier Steven Marshall said his team had worked constructively with local Member David Basham and City of Victor Harbor Mayor Moira Jenkins on solutions to preserve the history of the Causeway and the horse tram service.
"The government is being proactive on protecting a unique tourist icon that is important to he south coast and to South Australia," he said.
Mr Basham compared the Causeway to one of Australia's most recognised attractions.
"As a tourism draw card, the Granite Island causeway is as important to South Australia as the Sydney Harbour Bridge is to New South Wales," Mr Basham said.
"It's been key piece of tourism infrastructure in our State for more than 150 years and along with the historic horse-drawn tram, it's the jewel in the Fleurieu Peninsula's tourism crown. Tourists from everywhere come to Victor Harbor to visit Granite Island and experience the famous horse-drawn tram.
"The Causeway has been in desperate need of major repairs and an upgrade for many years."
"So many local businesses in Victor Harbor and on the Fleurieu Peninsula region rely on tourism to make money and create local jobs.
"A permanent solution which secures the future of the Granite Island causeway will also secure our local tourism economy and give the wider community confidence in the future of our region.
"Once the study is complete, work on a permanent solution will commence in 2019-20 and be undertaken over two years. This is a tremendous outcome for the Fleurieu Peninsula, and I'm proud to be part of a Marshall Liberal Government committed to regional communities."