DEPARTMENT WATER AFFAIRS AND FORESTRY

WATER SERVICES AMENDMENT BILL: FURTHER SUBMISSIONS

1. INTRODUCTION

Your request for written submission by the Department of Water Affairs and Forestry during the Portfolio Committee meeting chaired by yourself on 8 September 2004, has reference. The topics on which further submission is required will be handled in the following order-and are -

1.2.1 The retrospective operation of the Bill in order to legalise agreements for extraterritorial activities already in existence. 1.2.2 The involvement of the Department of Foreign Affairs in the decision- making process to authorise extraterritorial activities.

1.2.3 Consultation with organised local government in the decision-making process to authorise extraterritorial activities.

2. RETROSPECTIVE OPERATION OF THE BILL

2.1 In South African law the general rule is that the retrospective operation of statutes is allowed provided that it is clearly stated in the statute itself',

2.2 A clear measure of resistance against retrospectivity is, however, perceivable not only in South African law but also elsewhere'

2.3 In the present case the purpose of the Bill is to ensure that future extraterritorial activities by water boards will be legal. If the Bill is given retrospective effect however, it will mean that by means of legislation unlawful acts of the past are legalised.

2.4 The problem however still remains that a number of agreements between water boards and foreign entities have been concluded which may, strictly speaking, be unlawful. According to South African law an unlawful agreement is null and void. This may be used by a dissatisfied party to get out of a contract.

2.5 We are therefore of the view that the concern of the Committee that existing agreements between water boards and foreign entities are to be legalised, is valid. See a proposed formulation of that incorporated in Annexure A, attached hereto, as subsections (5) and (6) with the following effect:

2.5.1 Existing agreements are validated by the Bill subject to paragraph 2.5.2 hereunder. 2.5.2 All existing agreements are to be submitted by water boards to the Minister within 90 days after the coming into effect of the Bill.

2.6 It must be noted however, that there is no more than a total of five contracts between water boards and foreign entities in existence at present and that this arrangement is only of a transitional nature-

' In Protea International (Ptv) Ltd v Peat Marwlck Milchell & Co 1990(2) SA 566 (A), it was stated that this rule originates from Roman Law (C 1.14.7). The rule is that the operation of a statute is prospective, to apply only after its enactment unless the legislator clearly expressed a contrary intention that the operation should be retrospective to apply prior to its enactment. In Director· of Public P.rosecutions: Cape of Good Hope v Bathgate 2000(2) SA 535 (C). the following appears on 568; "There is in our law a presumption against retrospectivity in that no Statute is regarded as having retrospective effect unless the Legislature has clearly and unequivocally expressed an intention to the contrary." This presumption was applied in South Africa for the first time in Curtis v Johannesburg Municipality 906 TS 308. In National Director of Public Prosecutions v Bi.isson 2002(1) SA 419 (SCA), the following dictum appears on 426: "There is a natural resistance to creating legal consequences for conduct only after the conduct has occurred." On the same page the following quotation from a judgment of the US Supreme Court is appears: "The principle that the legal effect of conduct should ordinarily be assessed under the law that existed when the conduct took place has Timeless and universal human appeal. It was recognized by the Greeks by the Romans ... by English common law ... and by the Code Napoleon. It has long been a solid foundation of American law ... ". According to L. M du Plessis in 2001 LAWSA,. Vol 25 at 345. the ground for the existence of the rule is that retrospective interference with vested rights or the creation of new obligations or the imposition of new duties by the legislative may be unfair. Legal certaintv must be ensured.

 

3. INVOLVEMENT OF THE DEPARTMENT OF FOREIGN AFFAIRS

3.1 According to the Chief State Law Adviser's Memorandum on the Drafting of International Agreements, agreements between water boards and foreign entities do not qualify as international agreements in South African law.

3.2 The relevant consequences of this are the following:

3.2.1 Such an agreement does not have to be concluded by the Executive.

3.2.2 Such an agreement does not pass through the hands of the Department of Foreign Affairs and South Africa as a country cannot be a party thereto.

3.3 If the Committee is of the opinion that the involvement of the Minister of Foreign Affairs is essential, a suitable proposed formulation has been incorporated in subsection (4) of Annexure B. This has the effect that the Minister of Foreign Affairs has to be consulted during the decision taking process to authorise a water board to perform extraterritorial activities. In practice the Minister will have to seek the views of the Minister of Foreign Affairs before she or he authorises a water board to operate outside the country,

4. CONSULTATION WITH ORGANISED LOCAL GOVERNMENT

4.1 It is clear from comments received, as well as from statements made by, SALGA during the said Portfolio Committee meeting, that the main concern is that water boards may prejudice local government and other consumers when operating abroad.

4.2 It must be kept in mind though that it will not be so easy for a water board to prejudice local government in this way as the Water Services Act contains a number of safeguards. These safeguards are the following:

4.2.1 In terms of section 29 of the Water Services Act, the primary activity of a water board is to provide water services to other water services institutions (mostly local authorities) within its service area. And service area has been interpreted to mean a service area within the Republic. Water services is a very wide concept in the Act and consists of water supply services and sanitation services. Each of these in turn consists of a number of sub-activities. \ 4.2.2 The first manner in which the primary activity of a water board is protected, is found in section 30(1) of the Act which provides as follows:

A water board may perform an activity other than its primary activity only if - (a) it is not likely to limit the water board's capacity to perform its primary activity; (b) it is not likely to be to the financial prejudice of itself, any water seivices institution, existing consumers and other users serviced by it within its service area; (c) it is in accordance with the board's policy statement, and (d) it is provided for in a business plan. 

4.2.3 Section 42 of the Act provides for ring-fencing of activities, which excludes cross-subsidising, and reads as follows:

(1) A water board must manage its primary activity and each of its other activities as separate units. (2) A water board must maintain separate and itemized financial accounts for its primary activity and each of its other activities. (3) All transactions between units of a water board engaged in different activities of the water board must he carried out on terms and conditions which could be expected to apply to similar transactions between unrelated businesses.

4.3 Both the Minister of Water Affairs and Forestry as well as the Minister of Finance will be bound by these provisions when an application for extraterritorial operation of a water board is considered. In practice the Ministers will be obliged to consult with SALGA when complying with section 30(1) (a) and (b) of the Act.

4.4 If the Committee is of the view that the involvement of organised local government has to be provided for in very clear terms, a suitable proposed formulation has been incorporated in subsection (4) of Annexure B. This has the effect that organized local government has to be consulted during the decision-making process to authorise a water board to perform extraterritorial activities. In practice SALGA's views will have to be sought and considered before a decision is made,

5 CONCLUSION

5.1 Retrospectivity.

5.1.l Legally the retrospective operation of a statute is allowed if provided for explicitly. It is however not particularly welcome in legal circles.

5.1.2 The problem of the validity of existing contracts however still exists.

5.1.3 In the proposed Annexures A and B therefore, all existing contracts are validated provided they are submitted to the Minister within 90 days after the commencement of the Bill.

5.2 Involvement of the Department of Foreign Affairs.

5.2.1 As agreements between water boards and foreign entities are not international agreements, such agreements do not pass through the hands of the Department of Foreign Affairs.

5.2.2 In the proposed Annexure B therefore, provision is made for the involvement of the Minister of Foreign Affairs in the decision taking process, but without a right to veto. 

5.3 Consultation with organised local government.

5.3.1 The primary activity of a water board being the supply of water services in its service area within the Republic, is protected by the Act in several ways.

5.3.2 Foremost is the interests of the consumers in its service area.

5.3.3 Another protection by the Act is the ring-fencing of activities which prevents cross-subsidising.

5.3.4 The Ministers are bound by these restrictions when considering an application for extraterritorial operations.

5.3.5 Although implied, the Act does not clearly provide for the involvement of organised local government in the decision taking process. If the Committee requires that this be made explicit, the proposed Annexure B provides for this.

The Department recommends the revisions shown in Annexure A. Annexure B provides possible wording should the Committee not agree with the Department's recommendation.

 

DIRECTOR-GENERAL

DATE: 30/09/04

 

ANNEXURE A

Amendment of section 30 of Act 108 of 1997

1. Section 30 of the Water Services Act, 1997, is hereby amended by the addition of the following subsections:

"(3) The Minister must, in consultation with the Minister of Finance, the Minister of Trade and Industry and the Minister of Public Enterprise and by notice in the Gazette, determine general parameters regarding— (a) the nature of the activities that water boards may perform outside the borders of the Republic, (b) the countries in which such activities may be performed: and (c) the maximum amount of capital that a water board may take out of the Republic. (4) The Minister may, on application by a water board, in consultation with the Minister of Finance, authorise a water board to perform an activity contemplated in subsection (3) outside the borders of the Republic. (5) Any agreement entered into by a water board before the date of commencement of this Act for the performance of an activity by the water board outside the borders of the Republic is hereby validated, subject to subsection (6). (6) Any agreement sought to be validated in terms of subsection (5) must be submitted to the Minister within 90 days after the date of commencement of this Act.".

Short title

2. This Act is called the Water Services Amendment Act. 20

 

ANNEXURE B

Amendment of section 30 of Act 108 of 1997

1. Section 30 of the Water Services Act, 1997, is hereby amended by the addition of the following subsections:

"(3) The Minister must. in consultation with the Minister of Finance, the Minister of Trade and Industry and the Minister of Public Enterprise and by notice in the Gazette, determine general parameters regarding— (Q) the nature of the activities that water boards may perform outside the borders of the Republic, (b) the countries in which such activities may be performed: and (c) the maximum amount of capital that a water board may take out, of the Republic. (4) The Minister may. on application by a water board, in consultation with the_ Minister of Finance and after consultation with the Minister of Foreign Affairs and organised local government, authorise a water board to perform an activity contemplated in subsection (3) outside the borders of the Republic. (5) Any agreement entered into by a water board before the date of commencement of this Act for the performance of an activity by the water board outside the borders of the Republic is hereby validated, subject to subsection 6 (6) Any agreement sought to be validated in terms of subsection (5) must be submitted to the Minister within 90 days after the date of commencement of this Act.".

Short title

2. This Act is called the Water Services Amendment Act 2004.