1. Trading Of Water Use Entitlements In Terms Of The National Water Act, 1998 Presenter: PF Pretorius Director: Water Abstraction & Instream Use September 2006

2. LEGAL FRAMEWORK Section 25(2) facilitates trading of water use entitlements by:  prospective seller(s) surrendering an entitlement  prospective buyer applying for licence under section 41 which is subject to considerations under section 27  The surrender only becomes effective when the licence application is approved Section 26(1)( ) empowers the Minister to make regulations relating to transactions in respect of authorisations to use water A policy for dealing with trading transactions has been developed (Effective since February 2001) and expanded to facilitate trading between sectors and WMAs (September 2004)

3. DWAF’S WATER TRADING POLICY Circumstances under which a transaction may be permitted The same water resource must be involved The transfer must be physically and technically possible The transferred water can be for any other land or purpose Trading can take place within and between water use sectors such as Agriculture, Forestry, Domestic/Industrial, Mining, etc.

4. DWAF’S WATER TRADING POLICY Conditions subject to which a transaction may take place Lawfulness of surrendered water use must be verified Socio-economic impact of surrendered use i.r.o workers and tenants must be addressed in terms of section 27 of NWA The quantity of the surrendered water may be reduced to cater for:  difference in assurance of supply between existing and prospective use  limitations in conveyance capacity of distribution systems  transportation and/or evaporation losses  reduction in allocable water from the resource

5. DWAF’S WATER TRADING POLICY Conditions continued (1) No reduction for meeting the Reserve will be applied if the downstream quantity and quality of the resource will remain intact. Such reduction will be addressed when compulsory licensing is called for All the relevant factors under section 27 of the NWA must be considered and compared with the impact of surrendered use before the licence is granted The payment of water use charges in respect of the surrendered water use may be a condition of the licence

6. DWAF’S WATER TRADING POLICY Conditions continued (2) The obligation to pay compensation to the transferor for the water use may on request be made a condition of the licence (section 29(2) of the NWA) DWAF must be indemnified against payment of compensation if the sale is prohibited or set aside in cases where a claim has been lodged against the land with the relevant Land Claims Commissioner

7. WHY TRADING OF WATER IS IMPORTANT IN IWRM No additional water resources need to be developed for the issuing of new licences Promotes financial sustainability of joint ventures/schemes/projects Promotes shift from low to high value use of water (beneficial use) Can accommodate sectors with growing demands within current water availability in stressed catchments Non-riparian or “dry” land can gain equitable access to water historically reserved for use on riparian land

8. ADDRESSING BEE THROUGH WATER TRADING The redressing of gender and equity imbalances by the reallocation of water entitlements through the free market system, is not readily achievable, because a willing buyer and willing seller must be found The development of regulations in accordance with section 26(1)( ) may be considered, to address section 27 equity considerations in water use trading. However, if these are too restrictive, trading will be hampered BEE issues can be effectively addressed by: Custodian departments supporting the buying of water entitlements through the section 25 trading mechanism Custodian departments supporting the acquisition of land with water allocation DWAF subsidising water trading to support BEE

9. CHALLENGES Trading between Sectors, usually away from Agriculture Provincial Departments of Agriculture must be consulted Cost-benefit studies must be conducted High-level decisionmaking (DG) Trading between Provinces or WMAs Consider transfer in respect of Provincial Development Growth Strategy Issue short term licences, which can revert back to Province on review High-level decisionmaking (DG) Preventing the transfer of water away from land earmarked for restitution DWAF should notify Lands Claims Commissioner of intending sale of water entitlement Sale can then be prohibited of set aside through the provisions of the Restitution of Land Rights Act, 1994

10. TRADING STATISTICS From April 2001 to March 2006, the following water trades have taken place SectorNumberHectaresWater (million m 3) 1Within Agriculture36833 419379.52 2Agriculture  Municipal12892.60 3Agriculture  Mining21801.62 4Agriculture  Golf Course development 22402.16 5Agriculture, between Provinces (EC  NC) (Included under 1) 141 16611,73 TOTAL37334 128385.90

11. TRADING STATISTICS Annual volume of trading licences issued Financial year Volume of licences (million m 3 )