The rainy season is here – the court takes a view on the alienation of private water rights

Water use in South Africa is mainly regulated in terms of the National Water Act 36 of 1998 (Water Act). The Water Act clearly states that water is a scarce and unevenly distributed resource and that Government has a responsibility to manage water use and distribution in a sustainable way to the benefit of all users. Water is a natural resource that belongs to all people, and to achieve sustainability and equality, and to protect our water resources, Government must manage the use and distribution thereof.

The ins and outs of subject to bond approval clauses

Chapter 4 of the Water Act deals with water use. Water use is broadly defined to include the taking and storing of water, activities which reduce stream flow, waste discharges and disposals, controlled activities, altering a watercourse, removing water found underground for certain purposes, and recreation. In general, water use must be licensed unless it is listed in Schedule 1, which mainly deals with use for domestic and not commercial purposes.

The North Gauteng High Court in the case of South African Association for Water User Associations and others v Minister of Water and Sanitation and others (71913/2018) [2020]; CJ Lotter N.O. and others v The Minister of Water and Sanitation and others 42072/2018 [2020]; FGJ Wiid and others v The Minister of Water and Sanitation and others (90498/2018 [2020] recently had occasion to consider whether licensed water use can be transferred and/or sold in terms of the Water Act. In reviewing the position, the court held that trading in water is not permissible as it would allow the holders of water use entitlements to choose who the recipients of such water would be. The Water Act also does not provide any basis for allowing the holder of water use rights to sell such to a third party, as it is ultimately the relevant Minister’s responsibility to ensure that water is allocated equitably and used beneficially in the public interest.

The Court held as follows:

[43] Secondly, there is no authority in the Act, permitting the holders of the entitlements to sell such entitlements. Accepting such a construction of section 25 would result in the privatization of a national resource to which all persons must have access. Section 3 of the Act, imposes an obligation on the Minister to” ensure that water is allocated equitably and used beneficially in the public (not private) interest,”. The courts cannot accept a construction of s 25 of the Act, which impedes the Minister from discharging this obligation.

[44] Thirdly, the sale of water use entitlements by the holders thereof in private agreements, discriminates against those who cannot afford the prices or compensation unilaterally determined by the holder. Such practice maintains the monopoly of access to water resources only to established farmers who are financially well resourced. A person pays approximately R114.00 for an application to acquire a water use entitlement in terms of section 41 of the Act. In the present applications before this Court, the highest price charged for water use entitlement is R15 000 000.00.

[45] The sale of water use entitlements would frustrate equal access and keep historically disadvantaged persons’ out of the agricultural industry.

[46] Water is a scarce resource and South Africa, like most countries in the world, has over the years, not escaped the scourge and devastation of the environment as a result of drought. People, animals, crops and vegetation need water to survive.

[47] For reasons stated above, I find that on a proper construction of section 25 of the Act, the words ‘another property in the vicinity’ and ‘other land’ could mean either as owned by the holder of the water use entitlement, or by another person or third party. I further find that water trade or sale of the water use entitlements is unlawful as it offends s 2 of the Act, and is inconsistent with the spirit, purport and objects of the Bill of Rights in the Constitution.

[48] There is thus no merit in all the three applications for a declaratory order whose objective is to justify water trade. The applications for declaratory orders in all three cases must therefore fail.

Accordingly, the sale of water use entitlements by holders in private agreements would discriminate against those who cannot afford the price determined unilaterally by the holder thereof. Such a practice would therefore establish a monopoly of access to water resources by established farmers with the financial resources to purchase water use and would frustrate equal access to water and keep historically disadvantaged persons out of the agricultural industry. As such, the court found that water use entitlements cannot be sold to a neighbour or any other person.

Rumour has it that this case may be appealed. One will have to monitor whether the position changes, but for the moment water use entitlements cannot be sold to a neighbour or any other person.

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The rainy season is here – the court takes a view on the alienation of private water rights

Water use in South Africa is mainly regulated in terms of the National Water Act 36 of 1998 (Water Act). The Water Act clearly states that water is a scarce and unevenly distributed resource and that Government has a responsibility to manage water use and distribution in a sustainable way to the benefit of all users. Water is a natural resource that belongs to all people, and to achieve sustainability and equality, and to protect our water resources, Government must manage the use and distribution thereof.

The ins and outs of subject to bond approval clauses

Chapter 4 of the Water Act deals with water use. Water use is broadly defined to include the taking and storing of water, activities which reduce stream flow, waste discharges and disposals, controlled activities, altering a watercourse, removing water found underground for certain purposes, and recreation. In general, water use must be licensed unless it is listed in Schedule 1, which mainly deals with use for domestic and not commercial purposes.

The North Gauteng High Court in the case of South African Association for Water User Associations and others v Minister of Water and Sanitation and others (71913/2018) [2020]; CJ Lotter N.O. and others v The Minister of Water and Sanitation and others 42072/2018 [2020]; FGJ Wiid and others v The Minister of Water and Sanitation and others (90498/2018 [2020] recently had occasion to consider whether licensed water use can be transferred and/or sold in terms of the Water Act. In reviewing the position, the court held that trading in water is not permissible as it would allow the holders of water use entitlements to choose who the recipients of such water would be. The Water Act also does not provide any basis for allowing the holder of water use rights to sell such to a third party, as it is ultimately the relevant Minister’s responsibility to ensure that water is allocated equitably and used beneficially in the public interest.

The Court held as follows:

[43] Secondly, there is no authority in the Act, permitting the holders of the entitlements to sell such entitlements. Accepting such a construction of section 25 would result in the privatization of a national resource to which all persons must have access. Section 3 of the Act, imposes an obligation on the Minister to” ensure that water is allocated equitably and used beneficially in the public (not private) interest,”. The courts cannot accept a construction of s 25 of the Act, which impedes the Minister from discharging this obligation.

[44] Thirdly, the sale of water use entitlements by the holders thereof in private agreements, discriminates against those who cannot afford the prices or compensation unilaterally determined by the holder. Such practice maintains the monopoly of access to water resources only to established farmers who are financially well resourced. A person pays approximately R114.00 for an application to acquire a water use entitlement in terms of section 41 of the Act. In the present applications before this Court, the highest price charged for water use entitlement is R15 000 000.00.

[45] The sale of water use entitlements would frustrate equal access and keep historically disadvantaged persons’ out of the agricultural industry.

[46] Water is a scarce resource and South Africa, like most countries in the world, has over the years, not escaped the scourge and devastation of the environment as a result of drought. People, animals, crops and vegetation need water to survive.

[47] For reasons stated above, I find that on a proper construction of section 25 of the Act, the words ‘another property in the vicinity’ and ‘other land’ could mean either as owned by the holder of the water use entitlement, or by another person or third party. I further find that water trade or sale of the water use entitlements is unlawful as it offends s 2 of the Act, and is inconsistent with the spirit, purport and objects of the Bill of Rights in the Constitution.

[48] There is thus no merit in all the three applications for a declaratory order whose objective is to justify water trade. The applications for declaratory orders in all three cases must therefore fail.

Accordingly, the sale of water use entitlements by holders in private agreements would discriminate against those who cannot afford the price determined unilaterally by the holder thereof. Such a practice would therefore establish a monopoly of access to water resources by established farmers with the financial resources to purchase water use and would frustrate equal access to water and keep historically disadvantaged persons out of the agricultural industry. As such, the court found that water use entitlements cannot be sold to a neighbour or any other person.

Rumour has it that this case may be appealed. One will have to monitor whether the position changes, but for the moment water use entitlements cannot be sold to a neighbour or any other person.

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