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[2019] ZASCA 133
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Umgeni Water v Sembcorp Siza Water (Pty) Ltd and Others; Minister of Water & Sanitation v Sembcorp Siza Water (Pty) Ltd and Others (358/2018; 497/2018) [2019] ZASCA 133; [2019] 4 All SA 700 (SCA); 2020 (2) SA 450 (SCA) (30 September 2019)

THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 358/2018
In the matter between:
UMGENI
WATER                                                                                              APPELLANT
and
SEMBCORP
SIZA WATER (PTY) LTD
FIRST

RESPONDENT
MINISTER OF WATER &
SANITATION                                       SECOND

RESPONDENT
ILEMBE
DISTRICT
MUNICIPLAITY                                                 THIRD

RESPONDENT
and
Case no: 497/2018
In the matter between:
MINISTER OF WATER &
SANITATION                                                           APPELLANT
and
SEMBCORP SIZA WATER
(PTY) LTD                                              FIRST

RESPONDENT
UMGENI
WATER                                                                          SECOND

RESPONDENT
ILEMBE DISTRICT
MUNICIPALITY                                                 THIRD

RESPONDENT
Neutral
citation:
Umgeni Water and Minister
of Water & Sanitation and another v Sembcorp Siza Water
(Pty) Ltd
(358/2018
& 497/2018)
[2019] ZASCA 133
(30 September 2019)
Coram:
Ponnan, Wallis, Dambuza and Mokgohloa
JJA and Weiner AJA
Heard:
21 August 2019
Delivered:
30 September 2019
Summary
:
Setting of Water Tariffs in terms of the
Water Services Act 108 of
1997
– differentiation between respondent and other purchasers
of bulk water – tariff of 37,9% set for respondent as opposed

to 7,8% for municipal customers – rationality of decision.
_________________________________________________________________
ORDER
On
appeal from
: Kwazulu-Natal Division of
the High Court, Pietermaritzburg (Mnguni J sitting as a court of
first instance):
(a) The order of the high
court is amended to read:
‘
1
The decision of Umgeni Water on 12 November 2014 proposing to impose
a tariff increase of 41,4 per cent on the cost of supply
of bulk
water to the Applicant for the financial year commencing on 1 July
2015 and the subsequent approval of a tariff increase
of 37,9 per
cent by the Minister is hereby reviewed and set aside.
2 Pending any further
determination of tariffs for the supply of bulk water Siza is ordered
to pay for bulk water supplied to it
by Umgeni Water at the same
tariff as that at which Umgeni Water supplies bulk water to all other
water services providers.
3 Umgeni Water and the
Minister are directed to pay the costs of this application jointly
and severally, the one paying the other
to be absolved, such costs to
include the costs occasioned by the employment of two counsel.’
(b) The appeal is
dismissed with costs, such costs to be paid jointly and severally by
the appellants, the one paying, the other
to be absolved and to
include the costs consequent upon the employment of two counsel.
JUDGMENT
Wallis
JA and Weiner AJA (Ponnan, Dambuza and Mokgohloa JJA concurring)
[1]
The right of access to sufficient water is provided for in s 27(1)
(b)
of
the Constitution. Section 27(2) of the Constitution requires ‘[t]he
state to take reasonable legislative and other measures,
within its
available resources, to achieve the progressive realisation of each
of these rights.’ Umgeni Water, the first
appellant, is a water
board,
[1]
established in terms
of s 28 of the Water Services Act 108 of 1997 (the Act). In terms of
s 29 of the Act, its primary duty, as
a bulk water provider, is ‘to
provide water services to other water services institutions within
its service area.’
[2]
The
municipalities receiving water from Umgeni Water are water services
authorities,
[3]
which, in terms
of s 19 of the Act, may perform the functions of a water services
provider, or enter into a contract with another
water services
provider to provide such services.
[4]
The service area that Umgeni Water serves extends along the coast
from the southern boundary of KwaZulu-Natal to the Tugela (or

uThukela) River and inland to the boundaries of the uMgungundlovu
District Municipality west of the city of Pietermaritzburg. It
is the
largest supplier of bulk water in the province.
[2]
The
respondent, in these consolidated appeals, Sembcorp Siza Water (Pty)
Ltd (Siza) is
a
water services provider within an area under the jurisdiction of the
third respondent, the Ilembe District Municipality (Ilembe).
It
purchases
bulk water from Umgeni Water. In the 2015/6 financial year, Umgeni
Water, after obtaining approval from the second appellant,
the
Minister of Water and Sanitation (the Minister), imposed a tariff
increase on bulk water supply of 37,9% for Siza, a private
entity, as
opposed to an increase of 7,8% for its other customers, all of which
were municipalities.
[5]
This
decision led to the review application in the high court. It held
that there was no lawful basis for differentiating Siza
from Umgeni
Water’s municipal customers and accordingly upheld the review
and set aside the tariff increase applicable to
Siza. The court
a
quo
refused leave to appeal. This appeal is with the leave of this court.
The agreements
[3]
In terms of s 19 (1)(
b)
(1)
of the Act, on 29 January 1999, the Dolphin Coast Transitional Local
Municipality (DCLM), the predecessor to Ilembe, concluded
a Water and
Sanitation Concession agreement (the concession agreement) with Siza.
The DCLM, as a water services authority, appointed
Siza, a private
entity, as a water services provider with the obligation to supply
potable water and sanitation services to a portion
of the DCLM’s
region (the concession area) for a period of 30 years. The concession
area lies between the Tongaat River and
the Umvoti River and
incorporates the urban areas of Zimbali, Ballito, Umhlali, Shakas
Kraal, Chakasrock, Salt Rock, Sheffield
Beach and Tinley Manor. It
also incorporates certain inland areas and informal settlement areas.
Pursuant to the concession agreement
DCLM assigned to Siza its rights
under an existing Bulk Water Supply Agreement it had concluded with
Umgeni Water.
[4]
The concession agreement contemplated that
a new Bulk Water Supply Agreement (the BWSA) would be concluded
between Umgeni Water,
Siza and DCLM. On 7 August 2000, the BWSA was
concluded. It provided for the manner in which Umgeni Water would
supply Siza with
bulk water to enable it to discharge its obligations
under the concession agreement. After the restructuring of local
government
and the dissolution of DCLM, Ilembe succeeded to the
rights and obligations of the DCLM in relation to both agreements. In
terms
of the BWSA, read with the Act and the Municipal Finance
Management Act 56 of 2003 (the MFMA), Siza purchases its water from
Umgeni
Water at tariffs determined by Umgeni Water and approved by
the Minister, and distributes this water to end users within the
concession
area. It does so in terms of a tariff determined initially
by the DCLM and currently by Ilembe, under a provision in the
concession
agreement providing that:
‘
The
determination, amendment and approval of all tariffs shall be
undertaken exclusively by the COUNCIL in accordance to all prevailing

Regulatory Provisions and the provisions of this Contract.’
[5]
The concession agreement could only have
been concluded after DCLM had, in terms of s 19(2) of the Act
considered all known
public sector water services providers which
were willing and able to provide the services in the concession area.
Thereafter,
in terms of s 19(5) of the Act, the Minister was
obliged to ensure, prior to the conclusion of the concession
agreement, that
water services were provided in an efficient, cost
effective and sustainable manner and that the terms were fair and
equitable
to the water services authority, the water services
provider and the consumer. Accordingly, it must be accepted that the
terms
of the concession agreement were approved by the Minister and
that Siza was appointed as the most suitable water services provider

in the concession area, notwithstanding the fact that it was a
private entity.
[6]
Ilembe has a duty to all consumers, or
potential consumers, in its area of jurisdiction to ensure efficient,
affordable, economical
and suitable access to water services. Outside
the concession area, Ilembe itself performs the function of a water
services provider.
It receives its bulk water supply from Umgeni
Water at R5.41 per kilolitre, as opposed to the price of R6.98 per
kilolitre that
Umgeni Water has determined for Siza.
[7]
There
was some debate in the papers about the precise nature of Siza’s
role in terms of the concession agreement. Siza described
it as a
mandate. The high court described Siza’s position as an
‘in-line function’. Umgeni Water described it
as a ‘sui
generis’ relationship between Siza and Ilembe and the Minister
described it as a statutory assignment. On
appeal Siza contended that
the court a quo correctly characterised its role, in that in
terms
of the concession agreement Siza performs statutory functions that
would otherwise have to be performed by Ilembe. It referred
to
Allpay
Consolidated Investment Holdings (Pty) Ltd & others v Chief
Executive Officer of the South African Social Security Agency
&
others
(No
2)
[6]
where the Constitutional
Court held that when a private entity performs a public function, it
steps into the shoes of the relevant
organ of state.
[8]
Umgeni
Water
accepted that when Siza distributes water, it acts as a
‘municipality’. It stated that ‘municipality’,

as read in s 42(1)
(a)
of
the MFMA, included Siza or any person to whom the provision of a
‘municipal service has been outsourced’. Umgeni
Water
also admitted that the nature of the Concession Agreement ‘is
to assign all of [Ilembe’s] rights and obligations
to Siza’.
[9]
This municipal function to distribute water
within the Ilembe concession area would, but for Siza’s
involvement, be performed
by Ilembe. The closeness of the link
between Ilembe’s constitutional and statutory obligations and
those undertaken by Siza
in terms of the concession agreement is
demonstrated by the fact that in terms of clause 14.1 of the BWSA,
read with clause 1.8
thereof, the DCLM (and now Ilembe) guaranteed
Siza’s obligations in terms of the BWSA. In terms of s 81(1)
of the Local
Government: Muncipal Systems Act 32 of 2000, Ilembe
remains responsible for ensuring that the service is provided to the
community.
Clause 14.2 of the BWSA provided that, in the event of the
concession agreement terminating, the DCLM could be substituted in
Siza’s
stead. All the rights and obligations of Siza would, in
such event, be ceded and assigned to DCLM (and now to Ilembe).
[10]
In our view, it is unnecessary definitively
to characterise Siza’s legal status. Ilembe elected to appoint
Siza as the water
services provider to discharge the duties, which it
was obliged to perform. Siza is thus performing the identical
functions to
those that Ilembe would otherwise have to perform. If
Siza stops supplying those water services, or the concession
agreement is
terminated, Ilembe (which is also the guarantor) must
supply the end users with water it has obtained from Umgeni Water. In
the
result Siza is discharging a constitutional obligation resting
upon Ilembe in the same manner and in terms of the same
constitutional
and statutory obligations as those resting on Ilembe.
Its obligations are no different from those of the municipalities to
which
Umgeni Water supplies bulk water. It is against this background
that the lawfulness of the differential tariff imposed on Siza must

be considered.
Determination
of the tariffs
[11]
Clause 10.1 of the BWSA provides that ‘Siza
shall pay Umgeni Water for bulk water supplied in terms of this
agreement, in
accordance with the tariff determined by the board of
Umgeni Water in terms of the Act as amended from time to time’.
It
also provides that Umgeni shall consult with Siza annually in
regard to any adjustments to the tariff.
[12]
The
appellants relied for the determination of the tariffs upon the Act,
the MFMA, the norms and standards prescribed by the Minister
in terms
of s 10(1) and 10(2)
[7]
of the
Act and Umgeni Water’s pricing policy. Section 34 of the Act
[8]
provides that, in exercising its powers and duties a water board
must, in a fair and transparent manner, achieve a balance between,

inter alia, striving to provide efficient, reliable and sustainable
water services, financial viability, and the needs of water
services
institutions, consumers and users. Financial viability is defined in
s 34(2) of the Act.
[9]
[13]
The
Minister prescribed the norms and standards, in respect of the
tariffs for the provision of bulk water services by promulgation
in
the Government Gazette No 39411 of 13 November 2015.
[10]
In terms of s 10(2) of the Act and Regulation 7(4), the norms and
standards may differentiate ‘on an equitable basis’

between different users and different types of water services, and
different ‘geographic areas, taking into account, inter
alia,
the socioeconomic and physical attributes of each area’.
[14]
In 2014, in terms of s 34(1)
(c)
and s 34(2) of the Act, Umgeni Water
adopted a Pricing Policy (the pricing policy) to ensure its financial
viability, which
provided for:
(a)
the pricing of section 29 bulk water supply services;
[11]
(b)
the determination of the capital and operational costs of supply;
[12]
(c)
the benchmark tariffs for each category of scheme;
[13]
(d)
the extent of cross-subsidy per annum between schemes, or group of
schemes, for any given set of tariff proposals.
[14]
(d)
the smoothing over time of tariffs where the cash flows showed that
there would need to be a significant increase in the tariff
to meet
Umgeni Water’s financial targets.
[15]
[15]
Umgeni Water conducted the Annual Bulk Water Review (the annual
review) for the years 2015/2016 in order to determine the bulk
water
supply tariffs for such period. In the “Document for
Discussion’ presented in the annual review, it was recommended

that
its municipal customers would be
subject to an increase across the board of 8.2%, while the increase
proposed for Siza was 41,4%.
After engaging with Siza, which
understandably objected to the proposed increase, Umgeni Water,
recommended the same increase for
the same reasons, in the final
annual review submitted to the Minister for her approval. She reduced
the increase for Siza to 37.9%
and the increase for the other
customers to 7,8%.
[16] The rationale for
imposing a different tariff on Siza was described in the annual
review document as follows:
‘
Siza
Water draws its sales volumes from the North Coast Pipeline only.
However based on a 8,3% tariff increase for 2016, the cross
subsidy
to Siza Water (who is not a municipal customer to UW), will be
R1.534/kl. To reduce the cross subsidy to nil, the required
tariff to
Siza Water will be R6.552/kl. Therefore, the tariff increase will
have to be 41,4% in 2016. Alternatively, the increase
can be smoothed
in
(over the next five years).’
[17]
In its letter to the Minister seeking approval for the increases,
Umgeni Water said
that, in order to break
even,
“
Umgeni
Water cannot continuously cross subsidize losses incurred in the
water supply to Siza Water which is a private entity that

continuously makes a profit on its water supply operation.’
It went on to say in
regard to Siza that:
‘…
as
far as supply of water to Siza is concerned UW has to at least break
even, since Siza Water [is a] private entity all the profits
it makes
from supplying water does not necessarily get ploughed
back into service delivery in a similar manner
as other municipal entities.
’
In
the answering affidavit, the Chief Executive of Umgeni Water said
that its ‘municipal public sector clients’ operate

various water schemes, which make it possible for Umgeni Water to
explore other avenues through which it can enable municipal customers

to break even. This was not the case with Siza. In order to break
even, Umgeni Water would no longer allow the ‘cross-subsidy’

which applied to Siza.
[18]
In her affidavit, the Minster referred to the categorisation of
entities into economic and social schemes. She stated that

‘cross-subsidisation’ is an on-going feature of water
service provisions between economic and social schemes. She referred

to the Hazelmere scheme (which supplies water to Siza, through the
North Coast pipeline), as an economic scheme as opposed to a
social
scheme. Economic schemes are expected to achieve full cost recovery
as opposed to social schemes, which are not. Only four
out of the
eight schemes operated by Umgeni Water are profitable. According to
the appellants all the others, including Siza and
Ilembe, require
‘cross-subsidisation’ as they ‘contribute to a
major portion of the shortfall’.
[19]
In summary, two reasons emerge from the above passages in the record.
The primary reason was that it was aimed at reducing
to nil what was
described as ‘the cross-subsidy to Siza’. The secondary
reason was that Siza was not a municipal customer.
The review was
properly directed at these two reasons. It is unnecessary therefore
to differentiate between Umgeni Water and the
Minister. At the
hearing, counsel for the Minister informed us that the Minister had
accepted the validity of Umgeni Water’s
reasoning without
investigating its correctness. Accordingly she accepted that if
Umgeni Water’s decision on the tariff payable
by Siza fell to
be set aside, so did the Minister’s decision.
[20]
The appellants contended that the reason
and the methodology used by it to determine the tariff increases and
the outcome were lawful
and rational and that the Minister, who is
empowered to exercise oversight in respect of and approve the tariff
increases, also
interrogated the increase in respect of Siza and
executed her functions properly in this regard. They submitted
further that, in
terms of the Act and the norms and standards, Umgeni
Water was entitled to impose the water tariffs in a manner that
differentiated
between its customers. Siza did not take issue with
this, but it argued that the proposed differentiation was irrational
and unlawful,
whereas the appellants contended that it was rational
and lawful.
The law
[21]
Although
Umgeni Water initially argued that this was purely a contractual
matter, it accepted that because the tariffs had to be
determined in
accordance with the Act, the process was essentially statutory and
subject to review as administrative action.
Siza’s
review was based on the Promotion of Administrative Justice Act 3 of
2000 (PAJA). The appellants did not address this
directly and
approached it as a rationality review based on the principle of
legality, where, generally speaking, the threshold
for a successful
review is high, and the decision is protected from review as long as
the means selected are rationally related
to the objective sought to
be achieved.
[16]
Siza’s
approach was correct. The decision was one of an administrative
nature under an empowering provision taken by an organ
of State, when
exercising a public power in terms of legislation. It had a direct
external legal effect and adversely affected
the rights of Siza and
Siza’s customers. As such it was administrative action and it
must be reviewed under PAJA.
[17]
[22]
In
National
Energy Regulator of South Africa & another v PG Group (Pty)
Limited & others
[18]
Khampepe J in dealing with the test for rationality under PAJA said:
‘
The
relevant question for rationality is whether the means (including the
process of making a decision) are linked to the purpose
or ends. . .
.
It is a natural and
inescapable denouement that the process leading to a decision ‘must
also be rational in that it must be
rationally related to the
achievement of the purpose for which the power is conferred’.
As stated in
Democratic Alliance
:
“
The
means for achieving the purpose for which the power was conferred
must include everything that is done to achieve the purpose.
Not only
the decision employed to achieve the purpose, but also everything
done in the process of taking that decision, constitutes
means
towards the attainment of the purpose for which the power was
conferred.”
Additionally, in
Zuma
Navsa ADP stated that a rationality review also covers the process by
which the decision is made. There is no reason why rationality
under
PAJA should be given a different (more restrictive) meaning. It
follows that rationality under PAJA includes an assessment
of whether
the means (including everything done in the process of taking the
decision) links to the end. Problems found in the
process used to
reach a decision can be very useful evidence or illustration of a
faulty rational link. How far that evaluation
of process goes depends
on the facts of a particular case.’
Were Umgeni Water’s
reasons rational?
[23]
The reasoning of the appellants for differentiating between Siza and
its other customers, was rejected by the high court as
irrational and
unlawful and in violation of s 6(2)
(d)
,
s 6(2)
(e)
(i),
s 6(2)
(f)
(i),
s 6(2)
(f)
(ii)
and s 6(2)
(h)
and (i) of PAJA.
[19]
The High
Court held–
‘
As
I see it, the hurdle besetting Umgeni Water and the Minister is that
the water services contract between the applicant and Ilembe
came
about as a result of the decision of Ilembe in considering how best
to serve its residents in the concession area and this
arrangement is
allowed by s 19 of the Act. It follows from this that once it is
accepted (as I do) that the applicant performs
an in line function in
the delivery of bulk water from Umgeni Water to the Ilembe and to the
water consumers of the concession
area, the fact that the applicant
is interposed in that chain of delivery is an irrelevant
consideration in deciding on such increase
and that cannot serve to
justify the imposition of a different tariff by Umgeni Water.
In
my view, the fundamental tenet which lies at the heart of this
application is that Ilembe as the guarantor of all debts owed
by the
applicant to Umgeni Water which is a committal of public funds and is
only valid because the applicant has stepped into
the shoes of the
Ilembe and acts as a public service provider instead of Ilembe to
fulfil Ilembe’s constitutional and statutory
role as a water
services provider within the concession areas which form part of its
jurisdiction. In the circumstances it seems
opportunistic on the part
of the respondents to consider the applicant's identity as a
commercial entity warranting an imposition
of a different tariff from
the municipal entities.’
[20]
[24] As set out above,
the two reasons identified by Umgeni Water in its pricing review were
to put an end to cross-subsidisation
and the fact that Siza was not a
municipality. Each will be dealt with in turn.
Eliminating
crossa-subsidisation
[25]
It is apparent from the annual review that eThekwini (75%) and
Msunduzi (15%) together account for 90 percent of the bulk water
that
Umgeni Water supplies. The reasons for this as set out in the review
were twofold. Firstly, the cost of the infrastructure
required to
supply eThekwini and Msunduzi is lower than the cost of the
infrastructure required to supply the more remote areas
within Umgeni
Water’s jurisdiction. Secondly, the volume of water supplied is
much greater in these areas, thereby greatly
reducing both the
average and the marginal cost of the supply.
Only
these two municipalities generate more revenue for Umgeni Water than
they cost to operate and supply. The result is that the
supplies of
bulk water to eThekwini and Msunduzi generate profits for Umgeni
Water, which offset the losses incurred in providing
bulk water
supplies to the rest of its supply area.
[26]
This offsetting is what Umgeni Water describes as
cross-subsidisation, which it explains
in
the answering affidavit as follows:
‘
In
order to keep schemes with higher costs and low revenue afloat,
Umgeni Water has over the years had to rely on the fact that
other
municipalities make profits in their schemes in order to sustain
Umgeni Water’s sustainability’.
On
its face this is a curious explanation. Whether a municipality makes
a profit on its water supply schemes will depend on the
tariffs it
charges its customers. This is only indirectly relevant to Umgeni at
the level of the likelihood of that municipality
being able to pay
Umgeni Water for bulk water supplied. Whether Umgeni Water’s
operations are sustainable will depend on
whether the tariff it
charges its customers generates sufficient revenue in total to cover
its total cost of operations. The record
demonstrates that this is
the position. It appears that what Umgeni Water is trying to convey
is that the two customers from which
it generates the bulk of its
revenues and profits, namely eThekweni and Msunduzi, could be charged
a lower tariff for bulk water
without such supplies being
unprofitable for Umgeni Water, but that by generating profits on
these supplies it is able to cover
the losses it makes on supplying
its remaining customers in more remote areas.
[27]
The term ‘cross-subsidisation’ as explained by Umgeni
Water is a misnomer as
is apparent from
dictionary definitions of the term. The Business Dictionary defines
it as:
‘
A
strategy where support for a product comes from the profits generated
by another product.’
The Collins Dictionary of
Business defines it as:
‘
the
practice by firms of offering internal subsidies to certain products
or departments within the firm financed from the profits
generated by
other products or departments.’
This is not the case here
because Umgeni Water has only the one product – bulk water –
that, until now, it has sold
at a single standard price. It does not
suggest that its wastewater activities subsidise bulk water prices,
so there is no question
of internal subsidies. The Cambridge
Dictionary defines it as:
‘
a
situation in which profits from one activity are used to pay for
another activity that is losing money or making less money.’
Once
again that is not the situation here because Umgeni Water has only
the one activity. Lastly, the Shorter Oxford English Dictionary
[21]
gives
the following definition of a cross-subsidy:
‘
the
financing of losses arising from one business or activity out of
profits from another, which may be deliberately increased for
the
purpose.’
When
Umgeni Water speaks of cross-subsidisation therefore, it does not
intend it to be understood in any conventional way, but merely
as an
indication that some supplies of bulk water generate profits and
others losses, and the latter are offset by the former.
It is in that
special sense that we use it in what follows.
[28]
Umgeni Water faces a dilemma. In the highly concentrated urban areas
containing the cities of Durban and Pietermaritzburg it
supplies
water at a profit. This is so across the board, even though, within
those areas of supply, there are social schemes where
there is not a
full recovery of costs. However, Umgeni Water is obliged to make
provision for bulk water supply in the far larger
areas outside those
cities but within its service area. Because of their far greater area
and far smaller populations, the average
and marginal cost per
customer in these areas is necessarily higher. Imposing tariffs to
cover the full costs of supply in those
areas would not necessarily
be feasible, as they cover rural and poorer parts of the service
area. The elimination of what it describes
as cross-subsidisation
would require it to increase tariffs to all these areas and reduce
tariffs to eTehkweni and Msunduzi, but
there is not the slightest
indication that this is feasible or that Umgeni Water has any
intention of doing it. Hitherto Umgeni
Water has applied a uniform
tariff across all areas of supply, which overall enables it to remain
profitable and financially viable.
The tariff increase imposed on
Siza involved a departure from this policy.
[29] Umgeni Water sought
to justify this departure in terms of its pricing policy. It said
that Siza had not been singled out, but
that it had adopted a
transparent policy to remove cross-subsidisation and require every
water services provider to break even
with it, that is, to pay for
its water operations costs across the board. The passage in the
pricing policy relied on in support
of this contention read:
‘
21
Financial viability and
sustainability
Umgeni Water will “strive
to be financially viable” which means it will seek as far as is
practical to recover its costs
from tariffs and fees (Water Services
Act Section 34).
Umgeni
Water will be financially sustainable by ensuring that its costs are
fully recovered through tariffs and fees with defined
fiscal support
where services cannot be provided on a cost recovery basis. (
Note:
This is consistent with DWA’s Water Policy Position, August
2013.
)’
[30]
The difficulty with this passage is that it does not support Umgeni
Water’s contentions. It does not deal with cross-subsidisation

at all. It provides a model in terms of which, on an overall basis,
from tariffs charged on all its supplies of bulk water, Umgeni
Water
will recover its costs, which is a statutory requirement. The second
sentence shows that this is to be done with ‘defined
fiscal
support’, that is, financial subsidies from outside sources,
where services cannot be provided on a cost recovery
basis. Other
provisions of the pricing policy are far more relevant to the issue
of cross-subsidisation as understood by Umgeni
Water.
[31]
The passage from the policy quoted above in para 29 appears under the
heading ‘The calculation of scheme costs and benchmark
tariffs
– policies and guidelines’
.
Reading on demonstrates that this
is not the process whereby actual tariffs are to be determined under
the pricing policy.
The following section is headed ‘The
calculation of revenue requirement and
an
average bulk water tariff
–policies
and guidelines.’ (Emphasis added.) This section requires all
revenues and costs from all activities to be
determined ‘for
the calculation of an average bulk water tariff’. These figures
are then used in a cash flow model
which determines the ‘necessary
average tariffs to achieve target financial rations and performance
indicators’.
[32]
The final relevant section from the policy follows on from the
determination of these average tariffs and is headed ‘Making

bulk water tariffs proposals to the board’. Under this section
the chief financial officer makes tariff proposals to the
board. In
doing so the chief financial officer will have available the
benchmark tariff for each scheme or group of schemes, which
is a cost
recovery tariff; the benchmark tariff for each category of schemes,
namely, economic and social schemes; the average
tariff required for
Umgeni Water to achieve its financial targets and ‘the extent
of cross-subsidy … between schemes
(or groups of schemes) for
any given set of proposals.’ Nothing in this allows for
differentiation between customers in this
fixing of tariffs. The only
distinction that is drawn is between economic schemes, where the aim
is full recovery of costs, and
social schemes, where full recovery is
not possible. There will be cross-subsidisation (as Umgeni Water used
that term) between
these two classes of schemes.
[33] Finally, the policy
deals with the determination of tariffs. It reads as follows:
‘
The
approved tariff (or tariffs for different categories or individual
schemes) will therefore determine the extent of cross-subsidisation

between schemes. While it is the responsibility of the board to make
the final tariff decision, it is the responsibility of the
CFO to
propose the tariffs.
41
Cross-subsidy
parameters for utility-wide, category-based and/or scheme-based
tariffs
The existing schemes
will be at the uniformed bulk water tariff approved on an annual
basis.
For
new schemes, where the affordable tariff is less than
a
uniformed tariff
, the board must
approve the level of cross-subsidy (expressed as a percentage of the
tariff) that is an allowable cross-subsidy
from
existing schemes
to the new economic
and social schemes.’(Emphasis added)
[34]
The contemplation therefore was that the process would lead to there
being a uniform bulk water tariff and that this might
be fixed at a
level that would involve cross-subsidisation. This would be a general
tariff. In addition there might also be scheme
category-based tariffs
or scheme tariffs relating to the only two types of scheme identified
in the policy namely economic and
social schemes. These had to be
identified so that proper account could be taken of any grant funding
or cross-subsidisation. Nowhere
in the document is there any
suggestion that one out of the seven bulk water customers who were
water services providers would
be singled out for separate treatment.
There is a single reference to ‘customer specific tariffs’,
but that appears
to relate to supplies to commercial customers rather
than water services providers. A single example of the supply of
water to
a large industrial concern, Sappi, is mentioned in the
papers.
[35]
Umgeni Water’s contention that its differential treatment of
Siza was in accordance with and justified by the pricing
policy is
not borne out by reference to the policy. In fact the contrary
emerges, namely, that a uniform bulk tariff would be formulated

applicable to all bulk water customers similarly situated. This would
allow for cross-subsidisation of social schemes and maintain
Umgeni
Water’s financial viability. The elimination of a uniform
tariff for the principal purchasers of bulk water was not
mentioned.
Nor was the elimination of cross-subsidisation as between eTehkweni
and Msunduzi, on the one hand, and Ugu District
Municipality,
uMgungundlovu District Municipality, Ilembe District Municipality,
Siza and Harry Gwala Municipality, on the other.
[36]
Leaving the pricing policy on one side nothing else suggested that
Umgeni Water had a goal of eliminating what it called
cross-subsidisation.
It fixed a uniform tariff for all its other bulk
water customers. The annual review demonstrated that Ugu District
Municipality,
uMgungundlovu District Municipality, Ilembe District
Municipality and Harry Gwala Municipality would continue to be
supplied with
bulk water at a price less than it cost Umgeni Water to
supply it. The fact that Siza also supplies water to indigent
communities
was not taken into account.
[22]
There
appears to be no reason why the other municipalities who operate at a
loss were not treated in the same way as Siza. The claim
that other
municipalities operate ‘a mix of profitable and unprofitable
water and waste water treatment plants’ that
Umgeni Water can
exploit on a management fee basis of cost plus a margin does not mean
that the bulk water supply to them is any
the more profitable. It
simply provides Umgeni Water with an additional source of revenue.
The confusion is apparent from statements
in the answering affidavit
that these schemes would ‘enable municipal customers to break
even’ and that operating these
schemes ‘allows UW to make
profits that will even out the losses incurred by loss-making schemes
within each municipal customer’.
These display a confusion of
thought between the profitability of municipal operations and that of
Umgeni Water.
[37]
Nor do the actual figures demonstrate that charging a differential
tariff to Siza would have a material beneficial effect on
Umgeni
Water’s financial situation and contribute to the elimination
of cross-subsidisation. The gross revenue earned by
Umgeni Water in
the year under review was R2.5 billion. Siza’s consumption is
1,2% of the total consumption. On a simple
mathematical calculation,
the increased tariff applicable to Siza would result in, at best, R10
million in additional revenue,
for Umgeni Water. The additional
revenue and removal of the subsidy applicable only to Siza would not
make any material difference
to Umgeni Water’s financial
viability. Nor would it assist Umgeni Water in funding the bulk water
supply to its other loss-making
customers. There is no suggestion in
the annual review that by increasing the tariff payable by Siza, the
other municipalities’
financial situation was affected at all.
The non-profitable municipalities are still not profitable for Umgeni
Water and it would
seem, are not required to be. It is only Siza that
is singled out on this basis.
[38]
No provision in the empowering legislation justifies this type of
discrimination between municipal and non-municipal water
services
providers, more particularly when they are both performing a
municipal function. Penalising Siza for its ability to generate
a
profit through its efficiency would be irrational. Siza pays the
revenue it collects on behalf of Ilembe into Ilembe's coffers.
These
fees and the tariff Siza charges are controlled by Ilembe. The
rationale behind entering into a contract with a private water

services provider under s 19(2) is that it will undertake the
function of supplying water services more efficiently than the
water
services authority is able to do. There is no question of excessive
profits being earned because the Minister is entitled
to impose
conditions concerning the overall profitability of the private water
services provider.
[39] Siza is discharging
a public function of Ilembe in a manner approved by the Minister as a
carefully balanced arrangement including
calculations as to the
returns that would be received. Although s 34 provides the powers of
Umgeni Water to set tariffs, in terms
of s 19(5) of the Act, the
Minister must ensure that the contract that Ilembe has with Siza is
fair and equitable to all parties.
A change of tariff of the nature
proposed by Umgeni Water cannot be seen as being fair to all parties,
in particular Siza and the
consumers. Siza does not have a free hand
to increase its tariffs based upon the tariff approved by the
Minister. It charges in
accordance with the tariff laid down by
Ilembe. Umgeni Water’s first reason that the differential
tariff was necessary to
eliminate cross-subsidisation does not stand
up to scrutiny. It is neither reasonable nor rational and proceeds on
an incorrect
factual premise. Furthermore there is nothing on the
evidence to suggest that Umgeni Water is indeed endeavouring to
eliminate
cross-subsidisation in relation to the beneficiaries other
than Siza. This casts doubt on the veracity of this reason and leads

to a consideration of the other reason proffered by Umgeni Water.
Siza
is a private entity not a municipality
[40] The record suggests
that this reason lay at the heart of Umgeni Water’s
determination of a differential tariff for Siza
as opposed to its
municipal customers. It was a theme struck in every presentation
leading up to the tariff determination. In considering
the 8.3%
tariff increase for 2016 the discussion document said:
‘…
the
cross-subsidy to Siza Water (who is not a municipal customer to UW)
will be R1.534/kl. Therefore the tariff increase will have
to be
41.4% in 2016.’
The
document did not discuss the cross-subsidy in relation to any other
customer even though four others were, like Siza, supplied
with bulk
water at a loss. The ground for distinction lay in the fact that Siza
was not a municipal customer. Why else did that
statement appear in
this quoted passage?
[41] This theme was
sounded again in the customer consultation presentation dated 12
November 2014. In describing the pricing policy
it read:
‘
The
new pricing policy allows for a uniformed tariff increase to be
applied to UW
current public sector
customers
and a cost recovery tariff
for the
private sector customers
.’
As
demonstrated earlier the policy does not allow for that, but it is
again significant that the line of demarcation is drawn between

public sector and private sector customers, which in reality meant
differentiating between Siza and the rest.
[42] The purported
justification carefully avoided dealing with the reason for this
differentiation. It read:
·
‘
The Base Case Tariff will no longer
allow a cross subsidy on price of Bulk Water granted to SemCorp Siza
Water.
·
Given the financial distress as a result of
higher cost drivers and negative financial outlook which leads to the
cost of capital
being higher, UW will have to eliminate the cross
subsidy previously enjoyed by Siza Water.
·
In this manner UW will have the ability to
increase the cross subsidy to the more indigent areas, as a service
delivery vehicle
of government of the day.
·
Therefore the cost incurred in providing
water to Siza will have to be recovered in full going forward, such
that UW breaks even
on the segment of supply to Siza.’
The
first and last of these are mere assertions of a fixed position. The
analysis in para 37 above demonstrates that the proposed
41.4% tariff
increase for Siza would have no significant impact on Umgeni Water’s
financial viability, contrary to the statement
in the second bullet
point. As to the third, Umgeni Water had no intention of using the
additional revenue from Siza to subsidise
‘more indigent
areas’, conveniently overlooking the indigent areas served by
Siza. The additional revenue generated
thereby would, from Umgeni
Water’s perspective, be the figurative drop in the ocean. One
is left with the bare fact that
Siza was a private sector customer.
[43] When Siza engaged in
correspondence with Umgeni Water over the proposed increase, the fact
that it was from the private sector
was highlighted. In a letter
dated 8 January 2016 the Chief Financial Officer, who was responsible
for preparing the proposed tariffs
and presenting them to the board,
explained that:
Furthermore,
the municipal customers are related parties to UW as part of the
intergovernmental structure who operate to break even
and not for
profit, whereby any margins made are ploughed back into the service
delivery system. On that premise therefore, Umgeni
Water strives to
break even with Siza Water supply by achieving a break even tariff in
the area of supply of Siza Water …’
[44]
Lastly in dealing with the correspondence there was the letter to the
Minister seeking her approval of the increased tariffs
the relevant
portions of which are quoted in para 17 above. The theme of the
letter is that Siza is a private company that makes
profits, which
are not ploughed back into the community ‘in a similar manner
as in other municipal entities’.
[45]
The conclusion is inevitable that Umgeni Water drew a distinction
between Siza and its other customers on the basis that Siza
was a
private sector company with a profit motive, while the municipalities
were public entities that ploughed any surplus from
the provision of
water to consumers back into service delivery. Was this distinction
valid? In our view, not.
[46]
We have dealt in some detail, in paragraphs 3 to 10 above, with the
precise role that Siza plays in the delivery of water services
to
customers within the concession area. In summary it performs exactly
the same function as every other municipal customer purchasing
bulk
water from Umgeni Water. It is like them a water services provider
subject to the same constitutional and statutory obligations
as the
municipalities. The fact that it is a private entity is irrelevant.
It does not alter in any way its obligations in respect
of the supply
of water in fulfilment of the constitutional guarantee referred to at
the outset of this judgment.
[47]
The elephant in the room, that Umgeni Water sought studiously to
avoid, was the difference between its treatment of Ilembe
and its
treatment of Siza. Ilembe was treated in the same way as the other
municipalities in respect of its own purchases of bulk
water. Siza
was discharging Ilembe’s functions, constitutional and
statutory, in the concession area, yet Umgeni Water was
requiring it
to do so on the basis that it should pay considerably more than
Ilembe for its bulk water. Counsel conceded that if
the concession
agreement was terminated Umgeni Water would be obliged to supply bulk
water to Ilembe in accordance with the tariff
applicable to the
municipal customers, at the tariff applied to Siza. We do not know
how practically feasible it would be to extend
or restrict the
concession area by adding an additional area or excising part of it.
However, if it were expanded, the included
area would immediately pay
for water at tariffs based on the special SIza tariff, while if it
contracted the excised portion would
pay for water at tariffs based
on the lower municipal tariff. Imposing a higher tariff on Siza was
potentially detrimental to Ilembe,
which guaranteed Siza’s
obligations to Umgeni Water.
[48] One would have
expected in these circumstances that Umgeni Water would provide a
clear explanation for the difference in treatment
between Ilembe and
Siza. It did nothing of the sort. In the founding affidavit, after
referring to some of the material set out
above, the deponent said:
‘
The
staggering price increase thus turns on SSW not being a municipal
customer. That is an artificial and contrived distinction.’
The response to this very
direct statement was as follows:
‘
I
deny the allegations in this paragraph and reiterate that the
increase is based
inter alia
on
the operating costs associated with supplying the water. The
unfortunate consequence for Siza is that it became financially
unsustainable for UW to not impose a large increase despite it
considering every other alternative and avoiding such increases in

previous financial years.’
[49]
The problem with this explanation was that Ilembe itself was in
precisely the same situation as Siza. Umgeni Water supplied
bulk
water to it at a price that did not cover the costs of supply. In
fact the principal source of that water was Hazelmere Dam,
which was
also the source of supply to Siza. Ilembe required nearly three times
as much bulk water as Siza, and its cross-subsidy,
according to
Umgeni Water’s own figures, was R3.874 per kilolitre as opposed
to Siza’s R0.599 per kilolitre. The cross-subsidy
of both the
Ugu District Municipality, which required twice as much bulk water,
and the Harry Gwala municipality was greater than
that of Siza. As
already discussed, the contention that the differential tariff
increase for Siza was necessary because it was
‘financially
unsustainable’ for Umgeni Water to continue supplying water on
the same basis as its other customers does
not bear scrutiny. The
proposition that Umgeni Water considered other alternatives to
imposing a large tariff increase on Siza
was not borne out by any
document in the review record. That reflects that from the outset the
approach was to impose a larger
tariff increase on Siza than on other
customers.
[50] Umgeni Water was
therefore caught on the horns of a dilemma. When it sought to rely on
an explanation based on eliminating
cross-subsidisation it was unable
to furnish any coherent explanation for treating Siza differently
from Ilembe or the other municipalities
that purchase bulk water from
Umgeni Water at less than the cost of supplying them. When this led
to the conclusion by Siza, accepted
by the judge in the high court,
that the true explanation was simply that Siza is a private entity
not a municipality, it had no
answer to the proposition that this was
‘an artificial and contrived conclusion’. On either basis
the reasons given
by Umgeni Water in the pricing review document for
seeking an increase in the tariff payable by Siza by 41.4%, as
opposed to 8,2%
for its other customers lacked any rational basis.
They were founded on clear errors of fact and have unreasonable
results. In
consequence the tariff increase fell to be set aside in
terms of ss 6(2)
(e)
(iii), 6(2)
(f)
(ii) and 6
(h)
of PAJA.
The management scheme
argument
[51] In its heads of
argument, Umgeni Water relied upon a different rationale for the
differentiation in tariffs. Counsel sought
to establish that there
was a material difference between Siza and the other municipal
customers. The paragraphs relied on from
the answering affidavit
referred to a ‘management scheme’ and read as follows:
‘
[72]
Of the six UW’s municipal customers, four are unprofitable or
loss-making, principally due to high costs coupled with
lower
revenues. They are uMgungundlovu, Ugu, Ilembe and Harry Gwala. Unlike
Siza, these municipal customers operate and run a mix
of profitable
and non-profitable water and waste water treatment plants.
[73] Unlike Siza, these
municipal customers operate and run a mix of profitable and
non-profitable water and waste water treatment
plants.
[74] In order to reduce
the impact and the burden of losses occurred by UW in relation to
bulk water supplied to the mostly rural
municipalities and to enable
those municipalities to break even, UW has proposed and concluded
agreements for the appointment of
UW to take over the operation and
management for all bulk schemes including their water waste treatment
plants on a management
fee basis of a cost plus margin. This allows
UW to make profits that will even out the losses incurred by loss
making schemes within
each municipal customer. A similar proposal was
tendered to Ilembe, which it has yet to accept.
[75] This then explains
why UW:
75.1 Manages Siza
differently from its municipal customers.
75.2
Imposed a lower tariff on those municipal customers that imposed on
Siza.’
[52]
The appellants are however bound by the original reasons given for
their decision. They cannot now rely upon the management
scheme as a
further reason and engage in ‘ex post facto rationalisation of
a bad decision’.
[23]
According
to Umgeni Water these agreements between municipalities and Umgeni
Water were in place at the time that the annual review
took place,
although they have not been placed before us, nor have their terms
been explained. The problem in seeking to rely on
the ‘management
scheme’ as the rationale for the increased tariff is that there
is no reference to this ‘management
scheme’ in the annual
review and it was not relied upon in such review. Nor was it referred
to in the customer presentation
to Siza. There it was said that the
differential tariff was based upon the need to eliminate
cross-subsidisation and because Siza
was a private entity.
[53]
There was no explanation why, if these schemes were relevant, this
did not appear either in the annual review or in the letter
to the
Minister asking for her approval of the revised tariffs. The Minister
based her decision on the information supplied to
her in the annual
review. She did not consider or rely upon the management scheme. It
was never canvassed with Siza at the consultation
or in any
correspondence. This apparent change in Umgeni Water’s
functions is not reflected in any of the figures presented
in the
annual review, which records that the municipalities, which it
contended it has taken over in the management scheme, are
still
making losses, in amounts similar to those in previous years. It is
clear from the annual review and the Minister’s
letter of
approval that the tariffs were based on the material in the review
document. As such, the rationale contained in the
explanation of the
new management scheme cannot be relied upon. The management scheme
played no part in the decision.
Result
[54]
The primary issue in this case was whether
there
was a rational basis for the differentiation in tariffs between Siza
on the one hand, and Ilembe and the other municipalities
on the
other, when they were performing the same function and obtaining
their bulk water from the same source. In order for there
to be
differentiation, there needed to be a rational basis therefor.
None was produced. It seems reasonably clear that
Siza was targeted because it is a private entity. There was no
rational connection
between the purpose for which the power to fix a
tariff was conferred and the exercise of that discretion.
The
decisions fixing the tariff were correctly set aside by the court a
quo.
[55]
Counsel for the Minister urged us, if we concluded that the appeal
fell to be dismissed, to remedy a
lacuna
in the high court’s order. The
problem was that the tariff increase payable by Siza was set aside,
but no tariff increase
was substituted for it. Counsel informed us
that in practice Siza has been paying the same enhanced tariff as
Umgeni Water’s
other customers. That was a sensible arrangement
and all parties agreed that we should vary the high court’s
order to provide
for it to continue until a fresh tariff
determination is made.
[56] Accordingly the
following order is made:
(a) The order of the high
court is amended to read:
‘
1
The decision of Umgeni Water proposing to impose a tariff increase of
41,4 per cent on the cost of supply of bulk water to the
Applicant on
12 November 2014 for the financial year commencing on 1 July 2015 and
the subsequent approval of a tariff increase
of 37,9 per cent by the
Minister is hereby reviewed and set aside.
2 Pending any further
determination of tariffs for the supply of bulk water Siza is ordered
to pay for bulk water supplied to it
by Umgeni Water at the same
tariff as that at which Umgeni Water supplies bulk water to all other
water services providers.
3 Umgeni Water and the
Minister are directed to pay the costs of this application jointly
and severally, the one paying the other
to be absolved, such costs to
include the costs occasioned by the employment of two counsel.’
(b) The appeal is
dismissed with costs, such costs to be paid jointly and severally by
the appellants, the one paying, the other
to be absolved and to
include the costs consequent upon the employment of two counsel.
________________________
M J D Wallis
Judge of Appeal
________________________
S E Weiner
Acting
Judge of Appeal
APPEARANCES:
For the First Appellant:
T G Madonsela SC (with him S Mahabeer SC
and C Sibiya)
Instructed by:
Strauss Daly Attorneys,
Durban
c/o
Strauss Daly Attorneys, Bloemfontein
For the Second Appellant:
K M Moroka SC (with her H M Mpshe)
Instructed
by:
State
Attorney, Pretoria
State
Attorney, Bloemfontein
For the Respondent: K J
Kemp SC (with him S Pudifin-Jones)
Instructed by:
Messrs Garlicke &
Bousfield, Umhlanga
c/o Claude Reid
Attorneys, Bloemfontein
[1]
A ‘water board’ is defined in s 1 of the Act as ‘an
organ of state established or regarded as having been established
in
terms of [the Act] to perform, as its primary activity, a public
function’.
[2]
‘Water services institutions’ are defined in s 1 and
include, inter alia, ‘a water services authority’,
a
‘water services provider’ and a ‘water board’.
[3]
A ‘water services authority’ is defined in s 1 as any
municipality, including a district or rural council as defined
in
the Local Government Transition Act 2009 of 1993, responsible for
ensuring access to water services.
[4]
A ‘water services provider’ is defined in s 1 of the Act
as ‘any person who provides water services to consumers’.
[5]
The municipalities are eThekwini Municipality, Msunduzi Local
Municipality. Ilembe District Municipality, the Ugu District

Municipality, Harry Gwala District Municipality and uMgungundlovu
District Municipality.
[6]
Allpay
Consolidated Investment Holdings (Pty) Ltd & others v Chief
Executive Officer of the South African Social Security
Agency &
others (No 2)
[2014]
ZACC 12
;
2014 (4) SA 179
(CC) paras 53-60.
[7]
Section 10 provides that–
‘
(1)
The Minister may, with the concurrence of the Minister of Finance,
from time to time prescribe norms and standards in respect
of
tariffs for water services.
(2)
These norms and standards may–
(a)
Differentiate on an equitable basis between–
(i)
different users of water services;
(ii)
different types of water services; and
(iii)
different geographic areas, taking into account, among other
factors, the socioeconomic and physical attributes of each
area;
(b)
place limitations on surplus profit;
(c)
place limitations on the use of income generated by the recovery
of charges; and
provide
for tariffs to be used to promote or achieve water conservation’.
[8]
Section 34(1) provides-
‘
In
performing its activities, exercising its powers and carrying out
its duties a water board must  achieve a balance between–
(a)
striving  to provide efficient, reliable and sustainable
water services;
(b)
optimally using available resources;
(c)
strive to be financially viable;
(d)
promoting the efficiency of water services authorities;
(e)
taking cognisance of the needs of water services institutions,
consumers and users;
(f)
taking into account national and provincial policies, objects
and developments;
(g)
acting in an equitable, transparent and fair manner;
(h)
complying with health and environmental policies; and
(i)
taking reasonable measures to promote water conservation and
water demand management, including promoting public awareness of

these matters’.
[9]
S 34(2) reads:
‘
For
the purpose of subsection 34(1)(c) a water board is financially
viable if it is able to-
(a)
repay and service its debts;
(b)
recover its capital, operational and maintenance costs;
(c)
make reasonable provision for depreciation of assets;
(d)
recover the costs associated with the repayment of capital from
revenues (including subsidies) over time; and
(e)
make reasonable provision for future capital requirements and
expansion’.
[10]
Norms and standards for setting water services tariffs, GN 1153 GG
39411 13 November 2015.
[11]
Section 4 of the Pricing Policy
[12]
Clause 26
[13]
Clause 33
[14]
Clause 40.
[15]
Clause 42.
[16]
Albutt
v Centre for the Study of Violence and Reconciliation & others
[2010] ZACC 4
;
2010 (3) SA 293
(CC
)
(
Albutt
).
[17]
Minister
of Defence v Xulu
[2018]
ZASCA 65
;
2018 (6) SA 460
(SCA) paras 47-50.
[18]
National
Energy Regulator of South Africa & another v PG Group (Pty)
Limited & others
[2019] ZACC 28
paras 48-50 (footnotes omitted).
[19]
Section 6(2), in relevant parts, reads–
‘
.
. .
(d)
the action was materially influenced by an error of law;
(e)
the action was taken—
(i)
for a reason not authorised by the empowering provision;
.
. .
(f)
the action itself—
(i)
contravenes a law or is not authorised by the empowering provision;
or
(ii)
is not rationally connected to—
(
aa
)
the purpose for which it was taken;
(
bb
)
the purpose of the empowering provision;
(
cc
)
the information before the administrator; or
(
dd
)
the reasons given for it by the administrator;
.
. .
(h)
the exercise of the power or the performance of the function
authorised by the empowering provision, in pursuance of which the

administrative action was purportedly taken, is so unreasonable that
no reasonable person could have so exercised the power or
performed
the function; or
(i)
the action is otherwise unconstitutional or unlawful’.
[20]
Judgment paras 43 to 44.
[21]
Shorter
Oxford English Dictionary 6ed, 2007.
[22]
According
to Siza’s managing director more than 50% of Siza’s
consumers were estimated to fall into the indigent community,
a
figure not challenged by Umgeni Water.
[23]
National
Lotteries Board v South African Education and Environment Project
[2011] ZASCA 154
;
2012 (4) SA 504
(SCA).