Water rights may be traded

Water is a precious resource and vital to the viability of an agribusiness. The consistent availability and quality of water elevates property prices and inspire poets but its absence cause envy, feuds and ultimately, ruin. 

In South Africa with its limited water supply, water usage is regulated by the National Water Act 36 of 1998 ("NWA"). This law regulates water use to conserve, manage and develop it to the benefit of all. Water use can be authorised in a number of ways, including as a continuation of an Existing Lawful Use ("ELU", use of water that took place lawfully between 1996 and 1998), and under authority of a water-use license (WUL) issued by the Department of Water and Sanitation (DWS), explains Carin Bosman, water governance specialist.

"The water use authorisation (ELU or WUL) specifies the person who is authorised to use the water, the different types of water uses authorised, the volume of water, the source of water, the property on which it is used, and the conditions to which such use is subjected," says Bosman.

In terms of section 25 of the NWA, a person who is authorised to use water may transfer such entitlement to another person, to facilitate the application for that person's WUL.
 In 2018, the DWS placed a moratorium on such transfer in a circular letter, so group of West Coast farmers took DWS to court to challenge this moratorium. In a watershed ruling on the matter in November 2021, South Africa's Supreme Court of Appeal lifted this moratorium, which once again allows the holders of water use entitlements to transfer those entitlements to other persons.

"This decision has major significance for the agricultural sector in particular where it will allow irrigation rights to be traded," says Sarah Kvalsvig of Cullinan & Associates environmental and green business attorneys. "The legal issue was whether the wording of section 25 permitted transfers of water use entitlements from one person to another. However, the real issue was whether water rights could be traded," she explains.

The Court ruled that a person who is authorised to use water (entitlement holder) may use some or all of the water allocation for a different purpose. It also allows for a third party in the same area to use some (or all) of the water for the same or similar purpose.

"The November 2021 judgement also declared that a person who holds the water rights from a resource on a specified piece of land may surrender the right to enable a third party to apply for a right to use the water allocation on different land, in return for compensation." 

The DWS indicated that they intend to appeal the decision. Farmers who wish to use trade water are advised to contact their local irrigation board and an environmental legal advisor for guidance on the process.