‘Race quotas’ for water hammers confidence – but government says farmers have it all wrong

The Department of Water and Sanitation has moved to again clear up confusion around its so-called ‘race quotas’ for water licences in South Africa – as the latest Agribusiness Confidence Index sticks to the worst levels seen since Covid-19.

After a 5-point decline to 44 in Q1 2023, the Agbiz/IDC Agribusiness Confidence Index (ACI)
was unchanged in the second quarter.

The ACI level in the first two quarters of this year is the lowest since Q2 2020, when Covid-19 lockdown restrictions were first implemented.

Notably, the second quarter reading marks the third consecutive quarter below the neutral 50-point level, implying that agribusinesses remain downbeat about business conditions.

Intensified geopolitical tensions, unfavourable draft water regulations, persistent episodes of load-shedding, rising interest rates, poor road conditions and ongoing weaknesses in municipal service delivery were the key factors survey respondents cited as their prime concerns, the Agricultural Business Chamber of South Africa (Agbiz) said.

The draft water regulations, published for comment in May, were a sore point.

Agbiz chief economist said that, with all the other issues facing the sector, “the recent draft water regulations are an example of policy missteps that South Africa would do well to avoid.”

According to the draft regulations, certain enterprises applying for water use licenses to take or store water will, in the future, have to allocate shares of up to 75% to black South Africans for such water use licenses to be granted.

The prescribed minimum black South African shareholding requirements of 25%, 50%, or 75% required for a water use license to succeed depends on the volume of water abstracted or stored or the area covered.

The proposals immediately drew the ire of farmers and agricultural groups in South Africa, who warned that implementing the so-called ‘race quotas’ would be catastrophic for agriculture and threaten food security.

However, the department has disputed this framing of the regulations, saying that they do not apply to water licences that have already been issued and their renewals – only new applications.

After engaging with agricultural groups over the ‘confusion’ surrounding the proposals, the department issued another statement stressing this point.

“The transformation requirements categories as envisaged in the current review of regulations are only applicable to applications for new water use licenses and are not applicable to renewal of existing water use licenses, nor to the water use applications which will arise out of compulsory licensing,” it said.

Currently, 98.5% of available water resources in South Africa are already allocated. The department said the transformation requirement categories would only apply to water use license applications for the remaining 1.5%.

The department indicated that it would be willing to consider suggestions for amendments to the draft regulations to clarify this issue and encouraged concerned parties to make submissions.

Read: ‘Race quotas’ for water in South Africa – department clears up confusion