A crucial victory for water rights

According to the Food and Agriculture Organization (FAO), agricultural water usage accounts for about 70% of the world’s freshwater withdrawals.

However, with our increasing population and changing climatic conditions, agricultural water usage has become a significant concern for sustainability.  In essence, what water is left in the country, for the sake of preservation, has become a national resource.  The implications of the “nationalising” of water are many, including raising questions like:

• If I sell my land, is it worth less or more now since the water does not belong to me?
• Can I transfer my water use rights to someone else, and if so at a price?

The National Water Act 36 of 1998 has caused a lot of upset since it became law, and has caused frustration and a fair amount of confusion in the agricultural sector.

It is important to note that the reasoning behind the Act was to ensure the just and equitable use of water, taking into consideration that South Africa is a water scarce country, and the drought experienced specifically in the Western Cape recently, both of which are fierce reminders to all water users, that regardless the sector, South Africa has limited water resources.

The Constitutional Courts’ judgement is a victory for agricultural sustainability and growth, and stands to benefit the agricultural sector in South Africa in various ways.

The Legal Lowdown

The Constitutional Courts’ judgement is a victory for agricultural sustainability and growth, and stands to benefit the agricultural sector in South Africa in various ways.

Refusing water rights to change hands may lead to the inefficient use of water whereas a regulated system would be more essential and beneficial in advancing and maintaining the agricultural sectors in South Africa.

Even though the Constitutional Courts decision could possibly lead to the privatisation of water trading which, in turn, opens a possibility to have a negative effect on the public, the court noted the importance of the fact that the Act does not have the intention to prohibit trading of water usage at a fee.

The constitutional court looked at the interpretation of the Act and in doing so decided that one cannot read words into the Act without first looking at its intention and without first applying its general grammatical meaning.

Background

The case pertains to the importance of the intended purpose of the Act, through grammatical interpretation as well as the conservation and management of water resources.  The Department of Water and Sanitation and other government organisations challenged the decisions of the lower court to grant water usage licences. The governmental organisations argued that the lower court failed to take into account the need to conserve and manage scarce water resources in the region, and that the licensing would have a negative impact.

The matter arises out of three similar disputes. In all three instances private agreements were concluded where one party surrendered water use entitlements, in terms of section 25(2) of the National Water Act 36 of 1998 (the Act), in order for the other parties to apply for a licence, in respect of the entitlement in terms of section 41 of the act.

The courts refused all three applications on the grounds that Section 25(2) made no provision for the transfer of a water use entitlement from one person to another, and that the Act does not permit trading in water use entitlements. This refusal led the parties to approach the High Court for a declaratory order on the meaning of Section 25(1) and Section 25(2) of the Act.

Facts of the Case

The matter arose from three similar disputes in which the parties entered into private agreements where one party surrendered water use entitlements in terms of section 25(2) of the Act in order for the other party to apply for licences in respect of that water use entitlement in terms of section 41 of the Act. The contract prices in these agreements were of a large sum ranging from R1.900 000.00 – R15 000 000.00. As previously stated, all applications were refused by the lower courts.

The High Court dismissed all three applications and held that, on a proper reading of section 25, trading in water use entitlements is not permitted as it is a discrepancy with section 2 of the Act.  This ensures that the country’s water resources are protected and to rectify the consequences of past racial and gender discrimination.

On appeal the Majority upheld the appeal, concluding that Section 25(1) and 25(2) does permit the temporary or permanent transfer of water use entitlement, from a holder to a third party.

The application then appeared before the Constitutional Court.

The Minister of Water and Sanitation and other state organisations (Hereinafter referred to as the applicants) contended that the ordinary grammatical meaning of section 25(1) of the Act did not include the transfer of water use entitlements to a third party. The applicant submitted further that wealthy farmers have created a territory in which scarce natural resources are traded, thus continuing the imbalances of the past.  This in turn supported their claim that section 25(1) is in contradiction with section 2 of the Act.

Legal Issue

The central issue in this matter is whether a water use entitlement obtained, in terms of the National Water Act, may be transferred to a third party, and if so, whether a fee may be charged.

The court identified three main questions on the matter that needed to be addressed. This being:

1. Does section 25(1) of the act permit the use of water by a person, other than the holder of a water use entitlement,
2. Is the licence application, envisaged in section 25(2), a licence application by the holder and therefore a water use entitlement and,
3. Does the Act prohibit the charging of a fee, in respect of transactions concluded, in connection with water use entitlement?

Application

Does section 25(1) permit the use of water by a person other than the holder of a water use entitlement?

The court noted that Section 25(1) is to be logically interpreted, to the effect that the management institution may authorise the holder of the water use entitlement to allow the use of some of the water on another property. This means that in the ordinary interpretation of the wording of the Act, and the most natural interpretation, would be where the holder of the entitlement allows for someone else to use the water on nearby land.

Is the licence application envisaged in section 25(2) a licence application by the holder of a water use entitlement?

The court noted the importance of departing from the plain language of the section when interpreting the Act. The court further noted that words cannot be read into statute by implication, unless it is necessary in the sense that without doing so, effect cannot be given. The court further noted that by interpreting the grammatical wording with the context  of the Act, the application for a licence envisaged in section 25(2) may be made by a third party.

Does the water act prohibit the charging of a fee in respect of transactions concluded in connection with water se entitlement?

The court noted that the Water Act has no provision which excludes the trading in water use entitlements between private individuals. The parties are therefore entitled to trade. The Act further makes provision for compensation, and it is therefore clear that money may change hands, thus meaning that the courts see no legal prohibition for the holders not to enjoy the ability to trade for large sums of money.

Conclusion

The Constitutional Court looked at the importance of interpreting the Act by looking at the plain language of the wording and meaning of Section 25 of the Act.

The court found that by looking at the general wording of the Section, it was the intention of the Act to allow for the transfer of water use entitlements as well as for parties to charge fees for the transferring of the rights.

It was further noted that even though the points raised regarding the enjoyment of water use entitlements and water scarcity are issues that should not be overlooked, the court noted that the Act cannot find application and cannot be applied by having words read into the section. One must first attempt to find application through the natural ordinary grammatical meaning of the provision before looking elsewhere.

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Written by Micaela Hermans

Moderated and approved by Wessel de Kock