At long last, clarity on whether you can transfer your water rights

08 February 2022 108
Because of the ample rain that has fallen countrywide, many dams are full, leading to cases where people do not have use for their water rights. So, it begs the question as to whether it is possible to sell your water rights to someone else? 

Water use in South Africa is regulated mainly in terms of the National Water Act, 36 of 1998 (Act). In 2020, the North Gauteng High Court ruled that section 25 of the Act did not permit the sale or transfer of water use entitlement to your neighbour or any other person.

This decision was recently taken on appeal to the Supreme Court of Appeal (SCA). In its judgment, the SCA found that a holder of an entitlement to use water, could surrender their entitlement to enable a third party to apply for a licence and receive compensation in return. 

The SCA acknowledged that section 25(2) of the Act created a mechanism for the permanent transfer of water use entitlements, allowing for one party (the entitlement-holder) to conditionally surrender his entitlement, while the other party (the prospective entitlement-holder) applies for the licence. However, if the relevant authority does not approve the licence application, the surrender is not enforceable. In doing so, the SCA confirmed that you can in fact transfer water use entitlements. 

About whether people could ‘trade’ in water, the SCA’s view was that a person could do anything that the law does not forbid and that water use entitlements could be traded. That said, the SCA did point out that the prospective entitlement-holder would still need approval for a licence in terms of the Act and that this approval by the licensing authority would hinge on the requirements of the Act. 

Should you wish to sell or transfer your water use entitlements, it will be important to take note of this judgment and make sure that your own contract and conditions align with the above requirements and includes requiring the buyer to obtain the necessary licence approvals as well. 
Related Expertise: Dispute Resolution
Related Sectors: Agriculture
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