Industrial Zone (Pty) Ltd v MEC for Economic Development, Environment, Agriculture and Rural Affairs, Gauteng and Another

Industrial Zone (Pty) Ltd sought to develop two properties in Denver, Johannesburg, for light industrial purposes. A stream crossing both properties rendered much of the land undevelopable. Industrial Zone applied for environmental authorisation under section 24 of the National Environmental Management Act 107 of 1998 (NEMA), proposing to divert the stream along the southern and western edges through a grass-lined channel with weirs. It included two alternatives: (1) diversion through a cement-lined canal, or (2) leaving the stream undisturbed with a 30-metre buffer zone and building a bridge over it. On 13 December 2016, the Head of Department granted authorisation subject to the second alternative (no diversion). Industrial Zone appealed to the MEC under section 43 of NEMA, arguing the development was not economically feasible without stream diversion and that diversion would rehabilitate the polluted stream. The MEC dismissed the appeal. Industrial Zone then sought judicial review under PAJA.

• Whether the decisions of the Head of Department and the MEC constituted 'administrative action' under section 1 of the Promotion of Administrative Justice Act 3 of 2000 (PAJA)
• Whether Industrial Zone waived its right to challenge the refusal to adopt its preferred alternative by including multiple alternatives in its Basic Assessment Report
• Whether the decisions adversely affected Industrial Zone's rights and had direct external legal effect
• Whether the decisions were irrational under PAJA section 6
• Whether the decisions were unreasonable under PAJA section 6
• Whether an extension of time under section 9 of PAJA should be granted for the challenge to the Head of Department's decision

The application for extension of time under section 9 of PAJA was granted, extending the period to 25 November 2021. Leave to amend was granted. The main review application was dismissed. The applicant was ordered to pay the costs of each application, including the costs of two counsel where two counsel were employed.

The insertion of alternative proposals in a Basic Assessment Report under the Environmental Impact Assessment Regulations, 2014 does not constitute a waiver of the right to challenge an administrative decision to refuse the applicant's preferred alternative. Such a decision constitutes administrative action under PAJA where it adversely affects the applicant's property rights and has direct external legal effect. A decision to refuse environmental authorisation for activities that would interfere with natural environmental features (such as stream diversion) is rational where it is connected to NEMA's environmental protection purposes and the information before the decision-maker, even if it imposes economic costs on the applicant. Such a decision is reasonable where it falls within the range of options available to a reasonable decision-maker balancing environmental protection against economic development, particularly where the proposed activity would itself constitute substantial environmental interference.

The court noted that even if Industrial Zone's claim that the alternative was included at the Department's insistence were accepted, there were no primary facts alleged to support this proposition. Moreover, such insistence would have been unlawful and reviewable, as Regulation 3 of Appendix 1 makes clear that applicants can either propose alternatives or propose no alternative and explain why. The court also observed that the refusal to interfere with the environment by substantially reconfiguring a natural feature will rarely lack rational contact with NEMA's objects and purposes, unless inaction would cause net environmental harm or the decision was tainted by irrelevant motives. The court commented that it would be contrary to NEMA's purposes to hold that including alternatives means waiving the right to challenge their adoption, as this would discourage honest and forthright applications examining all feasible and reasonable alternatives, thereby stunting deliberation over environmental authorisations.

This case is significant for South African environmental and administrative law because it clarifies that: (1) Including alternative proposals in a NEMA environmental authorisation application does not constitute a waiver of the right to challenge a refusal to adopt the applicant's preferred alternative; (2) A decision to grant environmental authorisation subject to an alternative the applicant considers unacceptable constitutes 'administrative action' under PAJA that adversely affects rights and has direct external legal effect; (3) The legal framework under NEMA and the Environmental Impact Assessment Regulations requires consideration of all feasible and reasonable alternatives, and applicants should not be discouraged from providing full and honest assessments; (4) Environmental authorities have wide discretion to refuse to authorise activities that would interfere with natural features, even where such refusal imposes economic costs on applicants; and (5) The distinction between rationality and reasonableness review under PAJA, particularly in the environmental context where decision-makers must balance environmental protection against economic development.