Water rights for sale again

Until a Constitutional Court ruling on 15 March 2023, the transfer of a water use entitlement or selling a water use entitlement was temporarily put on hold. The Director General of the Department of Water and Sanitation (DWS) had refused the transfer of the water use entitlements.

But in its ruling on March, the Constitutional Court decided that the Water Act does not prohibit charging another person a fee.

In essence, the Court held that no provision in the Water Act prohibits the charging of a fee for water use entitlements. (The ruling was appealed but dismissed with costs.)

Agrisell spoke to advocate Martiza Uys and Johan Enslin about this.

Adv Uys is currently completing her PhD in water rights and Enslin is the director of iwula, a water management specialist company.

Was it previously (before the ruling in Minister of Water and Sanitation and Others v Lotter N.O and Others on 15 March 2023) not possible to transfer or sell water rights?

MU: In terms of the National Water Act (NWA), the transfer of water rights within Irrigation Districts had always been possible with the approval of the Irrigation Board. In other areas (for example outside any regulated area), the permanent transfer of water use rights is expressly provided for in section 25(2), by a process of surrendering a water right by one owner in favour of the water use license applications (WULA) in respect of the receiving property.

JE: It was possible to transfer or sell water rights as the NWA allowed for this. The selling of water rights was placed on hold due to the mentioned court proceedings and until its conclusion.

What does this ruling mean in simple and practical terms? 

MU: The process of transfer may continue as before, and as set out in the applicable legislation. 

The court made it clear that the Minister may not regulate water by circumventing the express provisions of the NWA, in the way he has attempted to do.

He is bound to act strictly by the law but is again trying to change the provisions of the NWA relating to water use license applications to fit political policy.

What is the process during which water rights can be purchased?

MU: If it is a section 25(2) transfer (outside an 'Irrigation District'), then the buyer submits a water use license application (WULA) to the responsible authority. This is done by way of the eWULAAS, an electronic WULA process. Supporting documents must be submitted electronically, including the seller's surrender of his rights. This process is burdensome and frustrating.

However, if it is within an "Irrigation District", it happens quickly (often within a few days) by complying with the Board's requirements. If the Board has no objection, the List of Rateable Areas (LRA) is amended and the contract sum (usually kept in an attorney's trust account) may be paid over. 

How is the value/fee determined? 

MU: Compensation is market-related and must be agreed between the parties.

Can a time limit be set - e.g. usage rights for 5 years?

MU: If in terms of section 88(5), the Board can be requested to transfer the rights for a specific period. But if it is an application under section 25(2), the seller's water rights are permanently surrendered and the license is being issued for as long as the responsible authority decides (max 40 years). Please note: a permanent water right could be surrendered in favour of a limited water use entitlement. If the parties want to do a transfer for a limited time, they must use the process of section 25(1), which makes provision for temporary transfers.

What happens to the rights when a farm is sold? 

MU: Water rights are attached to the land and go with the land unless the parties contractually agree that the seller may keep the water and transfer it to another piece of land. Should the seller be unsuccessful in transferring the water to another piece of land, it will remain on the property and pass to the buyer.

JE: A water right/authorisation will always stay connected to a property unless the agreement was temporary. In that case, the right may be transferred back to the original property as per the agreement between buyer and seller.

Any factors that license holders (or those wanting to obtain water use licenses) should consider?

MU: Section 25(2) is a slow and burdensome process where politics may interfere with the discretion of the responsible authority. Use a good lawyer or skilled consultant and persist. Do not allow the department to revenge the court decision by being unreasonable and requiring more than the law allows.

JE: Don't try -  as a farmer - to apply. It can cause hernias! Use a reputable water management company.

Water rights increase land value tremendously and are an incentive to regulate water use in SA. It takes time to obtain a Water Use Authorisation (WUA), so have patience. 

Lastly, much excitement about the government's proposed water rights vs race-shareholding bill. Any comments on that?

MU: This is just another attempt by the DWS to sidestep the NWA, by amending the statutory law by unlawful and illegal policy.