Water Rights: Can I sell or lease my water right on my farm?

30 May 2022

AUTHOR: LYDIA MCKAY

As a farmer you might have abundance of water on your farm that you are not utilising for your farm operation but the wine farm next door to you is in desperate need of your water due to the ongoing drought.

The legal dilemma you now face is; may you sell or lease your water right on your farm to your neighbour? Well, the good news is that this very question has been unpacked by an Appellate Division judgement delivered on 8 November 2021.

The key issue that had to be decided by the Appellate Division in the matters of C J Lötter N.O. And Another: F G J Wiid and Other: The South African Association for Water User Associations and Another V The Minister of Water and Sanitation was whether or not section 25 of the National Water Act (NWA), Act 36 of 1998, permits transfer of water use entitlement’s, from the holder thereof to a third part.

The court decided that it was not unlawful for the transfer of water use entitlement from the holder to a third party as it was not prohibited by the National Water Act.

Section 25 of the NWA stipulates that a Water Management Institution may, at the request of a person authorized to use water for irrigation under the NWA, allow that person temporarily and on such conditions as the water management institution may determine, to use some or all of that water for a different purpose, or to allow the use of some or all of that water on another property in the same vicinity for the same or a similar purpose. It is therefore clear that the leasing of water rights is permissible in terms of the NWA.

The court furthermore decided that a person holding an entitlement to the use of water is entitled to surrender such water entitlement in terms of section 25(2), to facilitate a particular license application under section 41 for the use of water. The NWA, therefore, makes provision for the surrender of water (section 25(2)) and the simultaneous transfer thereof to an applicant for a water use license (section 41). The court went further to state that in the event of the section 41 application not being successful, the surrender of the water entitlements will fall away.

In order to transfer or trade with your Water rights, temporary or permanent in nature will only be permitted where both the original and transferred water use are from the same water resource.

This process will involve the following:

• Identification of possible existing water rights;
• Negotiations with the relevant water users;
• Extensive consultation with the Department of Water and Sanitation (DWS);
• Compilation of the required contractual agreements (the purchase agreement) and other legal documentation;
• Completion of the required DWS License application forms;
• Compilation of the Water Use License Application; and
• Follow up and follow through of the application at the Department of Water and Sanitation Regional and Head Office.

A typical Water Use License Application Motivational Report would be submitted containing the required technical details to the satisfaction of the Department of Water and Sanitation. This would include the following processes:

• The assessment of impacts and management measures associated with the transfer/trading of the water rights;
• Motivation for the proposed water use and discussion of alternatives; and
• Section 27 Motivation (this is related to socio-economic aspects, redressing of past racial and gender discrimination, upliftment of communities, etc.).