Umgeni Water and Minister of Water & Sanitation and another v Sembcorp Siza Water (Pty) Ltd

Umgeni Water, a statutory water board, supplies bulk water to municipalities and to Sembcorp Siza Water (Pty) Ltd (Siza), a private company appointed by the Ilembe District Municipality under a long-term concession agreement to perform municipal water services in a defined area. For the 2015/2016 financial year Umgeni Water proposed, and the Minister of Water and Sanitation approved, a bulk water tariff increase of 37.9% for Siza, while municipal customers were subject to an increase of only 7.8%. The justification advanced was to eliminate alleged cross-subsidisation and because Siza was a private, non-municipal customer. Siza challenged the differentiated tariff on review under PAJA. The KwaZulu-Natal High Court set aside the tariff decision, holding that there was no lawful basis to differentiate between Siza and municipalities. Umgeni Water and the Minister appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs. The SCA amended the High Court order to review and set aside Umgeni Water’s decision to impose the increased tariff on Siza and the Minister’s approval thereof, ordered that pending lawful redetermination Siza must be charged the same tariff as other water services providers, and directed Umgeni Water and the Minister to pay costs jointly and severally.

The case affirms that tariff-setting by water boards is administrative action subject to PAJA review and clarifies the rationality standard applicable to differentiated public utility tariffs. It confirms that private entities performing outsourced municipal functions cannot be treated differently from municipalities solely because of their private status, reinforcing constitutional accountability in public service delivery and the limits of cost-recovery justifications.