On the 15th of March 2023, the Constitutional Court held in the case of Minister of Water and Sanitation and Others v Lotter N.O. and Others; Minister of Water and Sanitation and Others v Wiid and Others; Minister of Water and Sanitation v South African Association for Water Users Associations [2023] ZACC 09 that a water entitlement obtained in terms of the National Water Act 36 of 1998 may be transferred to a third party and a fee may be charged for the transfer. The Court was unanimous in reaching its decision. One of the questions before the Constitutional Court was whether parties may trade in water use entitlements.
During the period 1998 to January 2018, the Department of Water and Sanitation consistently allowed trading in water use entitlements. However, on the 19th of January 2018, the Department issued a circular in which it said that Section 25 does not allow trading in water use entitlements. The matter was referred to the High Court which held that on a proper reading of Section 25 of the Water Act, trading in water use entitlements was not allowed.
The matter then went on appeal to the Supreme Court of Appeal, which was split four - one. The minority agreed with the High Court conclusion. There was a clear concern that very wealthy farmers, who are largely white, have created an enclave within which a scarce natural resource is traded, thus perpetuating the imbalances of the past. The argument was that this infringes the right to equality.
However, the majority of the Supreme Court of Appeal held that the Water Act has no provision which expressly prohibits the trading in water use entitlements between private individuals.
Section 29(2) in fact provides that if a licensee has agreed to pay compensation to another person in terms of any arrangement to use water, the responsible authority may make the obligation to pay compensation a condition of the licence.
The Constitutional Court held that Section 29(2) appears to acknowledge that it is lawful in terms of the Water Act to enter into a private transaction relating to the use of water with another person and that when this is done, it is in order for such an arrangement to include the payment of compensation. Additionally, Section 29(2) permits a licensee’s obligation to pay compensation to be made a condition of the licence.
In sum, the Court saw no impediment to a fee being charged for water use under the second part of Section 25(1) or in respect of a surrender of the water use entitlement in terms of Section 25(2) in order to facilitate a Section 41 licence application by a third party.
The Court accepted that the State may now be seeking to redress the injustice brought about by the disproportionate enjoyment of water use entitlements in the past. However, the Court pointed out that the existing legislative instruments did not admit of the redress, at least not in a manner contended for by the Applicants in the matter.