Minister of Water and Sanitation v Sembcorp Siza Water (Pty) Ltd and Another

Umgeni Water, a statutory water board, supplies bulk potable water to municipalities and to Sembcorp Siza Water (Pty) Ltd (Siza), a private company operating under a long-term concession agreement with Ilembe Municipality to provide water and sanitation services in part of KwaZulu-Natal. Until 2014 Umgeni applied uniform annual tariff increases to all customers. In 2014–2015 Umgeni adopted a new costing model and imposed a substantially higher tariff increase on Siza (41.4%, later reduced by the Minister to 37.9%) while municipalities received increases of about 7.8–8.3%. Umgeni justified this on the basis of removing cross-subsidisation and because Siza was a private, profit-making entity. The Minister purported to approve the tariff. Siza challenged both Umgeni’s tariff decision and the Minister’s approval as irrational, discriminatory and unlawful. The High Court and Supreme Court of Appeal set aside the tariff decisions. The Minister and Umgeni appealed to the Constitutional Court.

Leave to appeal was granted. The Minister’s appeal was dismissed. Umgeni Water’s appeal was upheld. The orders of the High Court and Supreme Court of Appeal were set aside insofar as they related to Umgeni Water and replaced with an order dismissing the review of Umgeni’s tariff with costs. The Minister was ordered to pay Siza’s costs, and Siza was ordered to pay Umgeni Water’s costs.

The case clarifies the scope of tariff-setting powers under the Water Services Act, confirming that water boards have exclusive authority to determine bulk water tariffs without ministerial approval. It also reinforces the limited nature of rationality review in challenges to exercises of public power and cautions courts against substituting their views for those of decision-makers. The judgment has important implications for the regulation of bulk water pricing and public–private arrangements in municipal service delivery.