South African Diamond Producers Organisation v Minister of Minerals and Energy N.O. and Others

The South African Diamond Producers Organisation (SADPO), a voluntary association representing diamond producers and dealers, challenged section 20A of the Diamonds Act 56 of 1986, as amended by the First and Second Diamonds Amendment Acts 29 and 30 of 2005. Before the 2007 amendments, SADPO members had developed a business practice at "tender houses" where unpolished diamonds were offered on anonymous tender to South African licensed dealers with assistance from unlicensed foreign "experts". Section 20A, which came into operation on 1 July 2007, prohibited licensees from being assisted by non-licensees during the viewing, purchasing or selling of unpolished diamonds at any place except at diamond exchange and export centres (DEECs). SADPO contended this practice was lawful pre-amendment and that section 20A unconstitutionally deprived them of property and limited their freedom to choose and practice their trade. The High Court declared section 20A unconstitutional as infringing sections 22 and 25(1) of the Constitution. The respondents appealed to the Constitutional Court.

• Whether section 20A of the Diamonds Act arbitrarily deprives SADPO's members of property in violation of section 25(1) of the Constitution
• Whether section 20A violates the right to choose one's trade, occupation or profession freely as enshrined in section 22 of the Constitution
• Whether the tender house practice was lawful before the amendments
• Whether there was a deprivation of property in the form of loss of market value of diamonds and limitation on business practices
• Whether section 20A regulates only the practice of a trade or also limits the choice of trade
• Whether section 20A is rationally related to a legitimate government purpose

1. The late filing of the notice of appeal and the notice of cross-appeal is condoned. 2. The cross-appeal is dismissed. 3. The appeal against the declaration of invalidity of section 20A of the Diamonds Act 56 of 1986 succeeds. 4. The declaration of invalidity is not confirmed. 5. The order of the High Court is set aside and replaced with: "The application is dismissed. No order is made as to costs." 6. There is no order as to costs in this Court.

For there to be deprivation of property under section 25(1), interference must be "substantial" - meaning sufficiently extensive to have a legally relevant impact on the rights of the affected party. Speculative or unproven losses in property value do not constitute deprivation. Property holders do not have a legally protectable interest in conducting sales according to particular business practices or in obtaining specific values determined by particular market conditions, as markets are inherently regulated spaces where government regulation necessarily impacts obtainable prices. Changes in regulatory conditions that alter business strategies but do not remove core ownership rights do not constitute substantial deprivation. Under section 22 of the Constitution, legislation that regulates only the manner in which a trade is practiced, without creating legal or effective barriers to choosing that trade, does not limit the "choice" element but only regulates "practice". Such regulation of practice is constitutional if rationally related to a legitimate government purpose. Prohibition of unlicensed assistance in diamond trading except at state-run DEECs is rationally related to the legitimate purposes of monitoring diamond movement and promoting local beneficiation.

The Court noted it was unnecessary to decide whether diamond dealer licences constitute "property" for purposes of section 25, as even assuming they are property, there was no deprivation. This question was left for determination in a more appropriate case. The Court acknowledged that Shoprite held licences may in some instances be considered property, with the majority comprising two judgments based on different reasoning, but declined to pronounce on which approach should be preferred. The Court proceeded on the assumption that the tender house practice was previously lawful, noting that whether it was lawful pre-amendment was not relevant to determining the matter. The Court noted that business adapts to new regulation and creates new practices, and markets are ever-changing with fluctuating values, making it difficult to assess losses attributable to specific regulatory changes at particular points in time.

This judgment is significant for clarifying the application of sections 22 and 25(1) of the Constitution in the context of economic regulation. It provides important guidance on: (1) the test for deprivation under section 25(1), emphasizing that interference must be "substantial" and have a "legally relevant impact" on property rights, and that speculative or unquantified losses do not constitute deprivation; (2) the distinction between limitations on the "choice" versus the "practice" of a trade under section 22, clarifying that effective barriers (not just formal legal bars) to choosing a trade may limit choice, but mere regulation of business methods constitutes regulation of practice; (3) the rationality standard applicable to regulation of trade practice, affirming the deferential approach from Lawrence and Affordable Medicines; (4) the principle that changes in market conditions or regulatory frameworks that affect business profitability or preferred business strategies do not necessarily constitute deprivation of property; and (5) that property holders do not generally have a legally protectable interest in conducting sales according to particular practices or obtaining specific values. The case demonstrates the Court's reluctance to interfere with legislative regulation of economic activity where legitimate government purposes are rationally pursued, even where such regulation may disadvantage particular business interests.