Lötter N O and Others v Minister of Water and Sanitation and Others

The appeal concerned three consolidated matters arising from refusals by the Director-General of the Department of Water and Sanitation to approve licence applications under the National Water Act 36 of 1998 (NWA). In the Lötter and Wiid matters, holders of water use entitlements entered into agreements with third parties in terms of which the entitlement holders surrendered all or part of their water use entitlements, for consideration, to facilitate licence applications by the third parties under s 41 of the NWA. In each instance, the surrender and applications were expressly made subject to regulatory approval. The Director-General refused the applications on the basis that s 25 of the NWA did not permit transfers of water use entitlements between different persons and that trading in water use entitlements was unlawful. In the third matter, brought by the South African Association for Water User Associations and others, declaratory relief was sought to clarify the proper interpretation of s 25(1) and s 25(2) of the NWA, following a departmental policy shift reflected in Legal Services Circular No 1 of 2017 which asserted that transfers and trading were impermissible. The Gauteng Division of the High Court dismissed all applications, holding that water trading was unlawful and inconsistent with the purposes of the NWA.

The appeals in all three matters were upheld with costs. The order of the Gauteng Division of the High Court was set aside and replaced with declaratory orders confirming the permissibility of temporary transfers and surrenders under s 25(1) and s 25(2) of the NWA, including transfers involving third parties and compensation. In the Lötter and Wiid matters, the applicants were exempted from exhausting internal remedies under PAJA, and the Director-General’s decisions refusing the licence applications were reviewed and set aside. The Minister of Water and Sanitation and the Director-General were ordered to pay the applicants’ costs.

This judgment is a leading authority on the interpretation of s 25 of the National Water Act and clarifies that transfers and surrenders of water use entitlements, including arrangements involving compensation, are not per se unlawful. It affirms that so-called water trading is not prohibited by the NWA and that transformation, equity and public interest considerations must be addressed through the licensing discretion under s 27 rather than by denying the legality of transfers. The case provides certainty to water users, regulators and the agricultural sector, and underscores the importance of proper statutory interpretation in administrative decision-making.