Water rights: what to do when expanding an operation

Adding to a farming operation or agribusiness is not simply a matter of obtaining more land. James Brand, senior associate in environmental affairs at law firm ENSafrica, discusses the legalities involved in securing water rights on additional land, and environmental authorisation for clearing indigenous vegetation.

Water rights: what to do when expanding an operation
A water-use registration is not the same as a water-use right or entitlement
Photo: Dr Jack

Any South African farm or agribusiness that plans to expand has to consider a host of legal considerations.

Two of these are often overlooked: securing a lawful supply of water for agri-processing and irrigation farming, and receiving environmental authorisation, where required, for irrigation farming.

A water-use licence:

What it is exactly?
Many agribusinesses operate under the mistaken belief that a water-use registration is akin to a water-use right or entitlement. This is not the case.

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Anything less than a water-use licence that specifies the property description, includes the expanded area, and authorises the use of sufficient water, is likely to be insufficient for the purposes of determining a lawful water supply.

Many agribusinesses do not have a water-use licence for their existing operations, let alone for future expansion.

A study carried out in 1994 estimated that approximately 65% of South Africa’s water use was acquired through land ownership as ‘existing lawful water uses’, and this type of water-use entitlement is common in the agribusiness sector.

Until they are verified and validated, it is permissible to continue with these existing lawful water uses, but the amount of water available for use will typically be limited to the water used for operations during the period 1996 to 1998.

Future expansion
Any expansion since then, as well as any future expansion, is subject to its own water-use licence, to the extent that the water required exceeds the generally authorised volume of water available for that area.

Time frames for the processing of such applications are now regulated, and it is stipulated that securing a water-use licence will take a minimum of 300 days.

Agribusinesses are dynamic enterprises with multiple variables, and a process this drawn-out with no guarantee of a favourable outcome will clearly hold little appeal.

Sharing and selling water
It is possible to temporarily transfer water authorised for irrigation under the National Water Act of 1998, but this requires authorisation by the relevant water authorities.

This may see an agribusiness through until a water-use licence is secured. However, such a temporary transfer mechanism is available only for irrigation allocations; it is not available for water allocated to industrial uses or agri-processing.

Permanent transfers of water between parties or even between different properties owned by the same entity are generally not permissible, unless an existing entitlement has been a surrendered in support of a new water-use licence or in very limited circumstances, such as when dealing with water allocations from unconverted irrigation boards.

Both South African courts and a recent Department of Water and Sanitation (DWS) circular have made it clear that a mere contract between parties to transfer water is insufficient and would not make an otherwise unlawful arrangement legal.

The question is whether parties may sell a water-use entitlement in terms of a sale agreement, with a suspensive condition that the DWS accepts the surrender and grants a
new water-use licence in favour of the transferee.

In this regard, the National Water Act of 1998 expressly provides that a transferee may agree to pay compensation to another person in terms of any arrangement to use water, and that the DWS may make the obligation to pay compensation a condition of the licence.

The conditional nature of the sale would still give the DWS ultimate control over the water resource, in recognition of its role as the custodian of the nation’s water resources.

The High Court in the Eastern Cape Division is currently faced with this question, and clarity from the courts and the DWS on whether water can be sold in this manner would be welcome.

Environmental authorisation for clearing farmland
If it is planned to physically alter virgin soil and clear indigenous vegetation in areas above a specified size, the business owner must secure environmental authorisation in terms of the National Environmental Management Act of 1998.

This is a separate authority and process to the one described above in respect of securing a water-use licence, although it is possible to integrate the processes to save time and cost.

Failure to secure the required environmental authorisation in terms of the National Environmental Management Act of 1998 exposes the farming entity to significant fines and penalties.

So, before expanding operations, pause to consider where a lawful supply of water will come from and consider the impact on the environment.

Both these considerations and the time and cost required to secure authorisations should be added to the many other factors that are typically taken into account when expanding an agribusiness operation.

The views expressed in our weekly opinion piece do not necessarily reflect those of Farmer’s Weekly.

For more information, email James Brand at [email protected], or phone him on 079 877 7778.