Minister of Agriculture

(1) (a)           The compulsory water use condition and stipulation in the Regulation is that 25%, or 50%, or 70% enterprise ownership be allocated to black people, without provision for adequate funding and fair and free market financial principles being adhered to, which will result in failure of the Regulation.  Moreover, it could negatively impact the financial viability of especially existing small to large commercial-scale irrigation farming enterprises. This will have a far-reaching negative impact on irrigation agriculture and food production and will affect jobs in the sector..

2. At this stage, it will be premature to determine the impact of these draft regulations on the farmers and/or workers. Western Cape will suffer the most given the scale of agricultural production as a proportion to the rest of the country.
3. With the aim to transform agricultural water use the Regulation prescribes conditions on farm enterprise ownership, that 25% or 50% or 70% enterprise ownership be allocated to black people. These conditions would be applicable to new water use applications and for the renewal or amendment of all existing irrigation farming enterprises. Section 27(1)(b) of the National Water Act, 1998 (Act 36 of 1998) sets the criteria that the Department must consider "redress of past racial and gender discrimination" when assessing water use license applications. Currently, no policy is in place to address or give effect to those criteria. The assumption is that the draft regulations give effect to the legislative obligation.

2.            The WCDoA does not support the Regulation:

The prescripts and conditions to be imposed by the proposed Regulation No. R. 2022 (Department of Water and Sanitation No 3434) Gazette No 48630 dated 19 May 2023 poses a significant risk to the economy and viability of irrigation agriculture in South Africa and the Western Cape. Without provision for adequate funding and adhering to the free market financial principles embedded in the economy the Regulation will fail in its purpose or will have a devastating negative impact on the South African free market economy and food security.

The Regulation prescribes mandatory conditions and requirements that will impact on ownership shareholding of all current and future irrigation farming businesses.

To demonstrate the far-reaching impact of the regulations it is worthy to note that 62% of all available water resources in South Africa are used by an estimated existing 1,3 million ha’s of irrigation agriculture. At an average value of R600000 per ha the total market value of all existing irrigation farms in South Africa is estimated at R780 billion.

Irrigation agriculture not only creates jobs, it also ensures food security at commercial scale and serves as the socio-economic backbone in most of the rural economies. In the Berg River Catchment of the Western Cape approximately 30%, and in the Olifants, Breede, and Gouritz catchments 90% of available water is allocated to agriculture. In the Western Cape, 180000 ha of fruit orchards and an additional 70000 ha of secondary crops are being irrigated. The regulations would be applicable to all irrigation agriculture water uses and related farm businesses and enterprises.

Of specific importance are the Regulation conditions and prescripts set out in Chapter 5, Section 12, covering surprisingly only 1 page, which set farm enterprise ownership benchmarks as a condition for the renewal of existing water use, the amendment in the title of existing water use and new water use license applications.

The Regulation prescribes the condition that “the enterprise in respect of the application must allocate shares to black people in the proportions stipulated in Table 1”. This means that all existing, and new, farmers or farming businesses, will have to transfer enterprise ownership of up to 75% shareholding to black people for large farms and 25% shareholding for smaller sub-economic size farms. Only the smaller non-economic irrigation farms not exceeding 26 ha are exempt from this condition. In the Western Cape, the minimum size of an economic irrigation fruit farm is in the order of 40 to 60ha which provides livelihood to the farm owner’s family and a number of farm worker dependents with their families.

Existing irrigation farms with developed infrastructure facilities i.e., orchards, pack houses, dairies, dams, canals, pump stations, etc. are extremely capital-intensive investments and operations which are typically developed over decades. The current capital investment for the production under netting and processing facilities of an export fruit farm is in the order of R1 million per ha, meaning that the value of a 100 ha export fruit farm would be in the order of R100 million.

In addition to job creation, especially in rural areas, irrigation agriculture at a primary level has strong direct and indirect linkages to the rendering of goods and services in the secondary and tertiary levels of the economy.