Can you sell your water use entitlement to a neighbour?

“With all attention being on Covid-19, people have forgotten that large parts of our country are still suffering from a prolonged drought. The drought and our suffering economy has made me look into selling my water use to a neighbour who urgently needs it and is willing to buy such from me and which money I could really use. However, I’m not sure whether I can in fact sell my water use to him. Is this possible?”

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.

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 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. 

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.

Should this case 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.

August 17, 2020

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