South African Diamond Producers Organisation v Minister of Minerals and Energy N.O. and Others (CCT234/16) [2017] ZACC 26; 2017 (10) BCLR 1303 (CC); 2017 (6) SA 331 (CC) (24 July 2017)

75 Reportability
Constitutional Law

Brief Summary

Constitutional Law — Diamonds Act — Constitutionality of section 20A — The South African Diamond Producers Organisation challenged the constitutionality of section 20A of the Diamonds Act 56 of 1986, which prohibits unlicensed assistance in the sale of unpolished diamonds. The High Court declared section 20A unconstitutional, finding it infringed on the rights to trade and property under sections 22 and 25 of the Constitution. The respondents contended that the section was necessary for regulating the diamond trade and promoting local beneficiation. The Constitutional Court held that section 20A does not constitute a deprivation of property and does not limit the right to choose a trade, thus upholding the validity of the provision and dismissing the High Court's declaration of invalidity.

Comprehensive Summary

Summary of Judgment


1. Introduction


These were constitutional confirmation proceedings in terms of section 172(2)(a) of the Constitution, arising from an order of constitutional invalidity made by the High Court of South Africa, Gauteng Division, Pretoria. The High Court had declared section 20A of the Diamonds Act 56 of 1986 unconstitutional to the extent that it infringed rights protected by sections 22 and 25(1) of the Constitution.


The applicant was the South African Diamond Producers Organisation (SADPO), a voluntary association representing interests in the diamond producing and dealing industry. The respondents cited were the Minister of Minerals and Energy N.O., the Department of Minerals and Energy, the Minister of Finance, the Department of Finance, the South African Diamond, Minerals and Precious Metals Regulator, and the State Diamond Trader. In the Constitutional Court, only the first, second, and fifth respondents participated; the sixth respondent (State Diamond Trader) indicated an intention to abide.


Procedurally, the matter came before the Constitutional Court because a High Court order declaring legislation invalid has no force unless confirmed by the Constitutional Court. In addition, the fifth respondent noted an appeal under the Constitutional Court’s rules against the High Court’s judgment, and SADPO noted a cross-appeal limited to the High Court’s costs order. Both sides sought condonation for late filings.


The general subject-matter concerned the regulation of the trade in unpolished diamonds, and specifically the constitutionality of section 20A, which restricts assistance by non-licensees during certain transactions involving unpolished diamonds, except at designated diamond exchange and export centres (DEECs).


2. Material Facts


The diamond trade in South Africa is regulated by the Diamonds Act and regulations issued under it. The Act controls, among other things, the possession, purchase, sale, processing, local beneficiation, and export of diamonds, including the premises and processes through which unpolished diamonds may be traded and exported.


Before amendments took effect on 1 July 2007, some SADPO members (licensed dealers) had developed a practice at licensed premises whereby unpolished diamonds were offered for sale on an anonymous tender basis to other licensed South African dealers. Non-licensed “experts”, often foreign, would attend and assist licensed purchasers on behalf of prospective foreign buyers. The sale itself was concluded between the producer or licensed dealer and the licensed South African purchaser. Premises where this practice occurred became known as “tender houses”.


Whether the tender house practice was lawful under the pre-amendment regime was disputed between the parties, with SADPO contending that it was lawful and the respondents contending that it was unlawful and exploited a regulatory loophole. For purposes of deciding the constitutional issues, the Constitutional Court regarded that dispute as not determinative, and proceeded on the assumption that the practice had previously been lawful.


The First and Second Diamonds Amendment Acts introduced significant changes to the regulatory scheme, including the establishment of the Regulator and the State Diamond Trader, restructuring of licensing, and establishment of DEECs intended to facilitate and centralise the buying, selling, and exporting of diamonds. The impugned provision, section 20A, was inserted into the Act. In substance, it prohibits a licensee from being assisted by a non-licensee during the viewing, purchasing, or selling of unpolished diamonds at any place where unpolished diamonds are offered for sale under the Act, except at a DEEC, and prohibits authorised sellers from allowing such assistance.


SADPO’s constitutional complaint, as framed in the Constitutional Court, relied on allegations that section 20A harmed its members’ interests by limiting the tender house model and thereby affecting pricing outcomes. SADPO contended that producers and dealers were unable to realise “full market value” for unpolished diamonds without non-licensee (including foreign) assistance, alleging a 30% reduction in value or returns after section 20A’s implementation. The respondents disputed the factual basis for this alleged loss, including whether it reflected market value or an erstwhile commission opportunity, and contended that the provision served legitimate regulatory purposes connected to monitoring and compliance.


3. Legal Issues


The central legal questions were whether section 20A:


(1) arbitrarily deprived SADPO’s members of property in breach of section 25(1) of the Constitution, and


(2) violated SADPO members’ right under section 22 of the Constitution by limiting the right to choose a trade, occupation, or profession freely, or by impermissibly regulating the practice of that trade.


The dispute entailed a combination of constitutional legal standards (the proper tests under sections 25 and 22), the application of those standards to the regulatory measure, and an evaluative assessment of whether the measure resulted in sufficiently weighty interference to engage constitutional protection. The Court treated the asserted economic impact (the alleged 30% loss) as material only insofar as it could support the threshold constitutional requirement of a substantial interference amounting to “deprivation” under section 25(1), or an effective limitation on choice under section 22.


A further procedural issue concerned condonation for late filing of the notice of appeal and notice of cross-appeal, and the cross-appeal raised a discrete question concerning the costs order made by the High Court.


4. Court’s Reasoning


Condonation and jurisdiction


The Court held that its jurisdiction was engaged because the matter involved confirmation proceedings under section 172(2)(a) (and the Court referred to confirmation proceedings in terms of section 167(5)). It granted condonation for the late filing of the fifth respondent’s notice of appeal, emphasising the minimal delay, a satisfactory explanation related to filing requirements, the absence of prejudice, and the public importance of a case involving invalidation of legislation.


It also granted condonation for SADPO’s late cross-appeal. The Court accepted that the cross-appeal was governed by rule 16 (rather than rule 19, which pertains to leave-to-appeal applications), that the delay was not significant, and that no prejudice was shown. The interests of justice favoured allowing the costs-related cross-appeal to be entertained.


Section 25(1): deprivation of property


The Court applied the approach articulated in First National Bank of SA Ltd t/a Wesbank v Commissioner, South African Revenue Service; First National Bank of SA Ltd t/a Wesbank v Minister of Finance, which structures the section 25 inquiry by asking whether the interest is property, whether there is a deprivation, and if so whether it is arbitrary (with further steps if required).


The Court identified the relevant “property” as (a) the physical diamonds owned by producers and dealt in by dealers, and (b) the diamond dealer licences (assuming, without deciding, that licences could qualify as property). SADPO’s argument was that section 20A interfered with ownership entitlements by preventing the tender house price-forming mechanism and thereby depriving members of value and of preferred business operations.


On the diamonds, the Court accepted that corporeal movables such as diamonds are property for purposes of section 25. The decisive question, however, was whether section 20A caused a deprivation. Drawing on Mkontwana v Nelson Mandela Metropolitan Municipality, Offit Enterprises (Pty) Ltd v Coega Development Corporation (Pty) Ltd, and Tshwane City v Link Africa, the Court emphasised that a deprivation requires substantial interference or a limitation of such magnitude that it has a legally relevant impact on the affected party’s rights. The mere fact that regulation may affect market conditions or value does not, without more, establish deprivation.


Applying that standard, the Court held that SADPO had not shown a substantial interference. The alleged 30% reduction in value was found to be vague and speculative, with no empirical proof establishing that any reduction resulted directly from section 20A, nor clarity on whether the alleged figure concerned market value as opposed to lost commission opportunities. The Court also highlighted practical difficulties in quantifying loss by comparing market prices over time in a shifting and regulated market.


Beyond the evidentiary deficiency, the Court reasoned that section 20A did not remove the right to sell diamonds or require proceeds to be surrendered. It regulated the manner in which sales could occur by restricting non-licensee assistance outside DEECs, while leaving producers and dealers free to sell and to pursue the best price within the regulated market. The Court treated the asserted “right” to conduct sales through a particular business practice, and the asserted expectation of a particular price level or pricing method, as not constituting the kind of entitlement whose limitation, in this context, amounted to a constitutionally cognisable deprivation. On this basis, the Court concluded that there was no deprivation of property in the diamonds, and therefore no infringement of section 25(1).


On licences, the Court referred to Shoprite Checkers (Pty) Ltd v MEC for Economic Development, Eastern Cape, acknowledging that licences may in some circumstances qualify as property, but it found it unnecessary to decide that question because SADPO’s case failed at the deprivation stage. The Court held that section 20A did not remove the core entitlements ordinarily associated with dealer licences (buying, selling, importing, exporting). At most, it restricted being assisted by non-licensees outside DEECs, which the Court characterised as a business strategy or practice rather than a legal entitlement conferred by the licence itself. The Court distinguished the situation from Shoprite, where a regulatory change removed a previously conferred legal entitlement. It rejected the notion that changes in regulatory conditions that affect preferred strategies necessarily amount to deprivation of property.


As to diamond exchange certificates, SADPO argued that previous holders had suffered harm because diamond exchanges were abolished and replaced with trading house licences. The Court held that this complaint was not properly directed at section 20A, because section 20A neither abolished the certificates nor created the replacement licensing category. The Court therefore found no section 25 limitation attributable to section 20A.


Section 22: freedom of trade, occupation, and profession


The Court set out the two components of section 22: the freedom to choose a trade, occupation, or profession, and the permissibility of regulating the practice of that trade by law. Relying on Affordable Medicines Trust v Minister of Health, the Court explained that different levels of scrutiny apply. A measure that negatively impacts the choice element must be justified under section 36, while a measure that merely regulates practice (without negatively affecting choice) need only satisfy rationality and must not violate other rights.


The Court held that section 20A did not impose a formal barrier to entering or remaining in diamond producing or dealing, nor had SADPO shown that it created an effective barrier by rendering participation so undesirable or unprofitable as to constrain choice. Section 20A was characterised as regulating how licensees may conduct transactions, permitting assistance either by licensed persons outside DEECs or by non-licensees at DEECs. On that basis, the Court found that section 20A regulated the practice of the trade rather than limiting the choice of trade.


Because the provision was treated as practice regulation, the Court applied the rationality test, as endorsed in Affordable Medicines (and traced to S v Lawrence, S v Negal, S v Solberg). The Court identified the purpose of section 20A, drawing support from legislative materials referred to in the judgment, as prohibiting unlicensed assistance in order to advance legitimate objectives, including promoting local beneficiation, tightening regulation and eliminating unlawful activity, and ensuring compliance with the Kimberley Process Certification Scheme, particularly through monitoring and recording the movement of unpolished diamonds.


While SADPO argued that other provisions could achieve beneficiation and monitoring and that section 20A added nothing, the Court held that this line of argument was inconsistent with rationality review, which does not ask whether the measure is optimal or whether less disruptive alternatives exist. The Court considered it plausible and rational that centralising export processes through DEECs and limiting unlicensed participation outside those centres would facilitate monitoring and reduce the risk of illegal transactions by ensuring that participants outside DEECs are known to the state through licensing. The Court concluded that section 20A was rationally related to legitimate government purposes and therefore did not infringe section 22.


Costs


The Court applied the principle in Biowatch Trust v Registrar, Genetic Resources in addressing costs in constitutional litigation. It declined to confirm the High Court’s costs order and, because SADPO’s cross-appeal concerned costs only and the main constitutional challenges failed, the cross-appeal was dismissed. The Court made no costs order in the Constitutional Court, and replaced the High Court’s order with one dismissing the application with no order as to costs.


5. Outcome and Relief


The Constitutional Court granted condonation for the late filing of both the notice of appeal and the notice of cross-appeal. The cross-appeal on costs was dismissed.


The appeal against the High Court’s declaration of invalidity succeeded. The Constitutional Court did not confirm the High Court’s declaration of constitutional invalidity of section 20A of the Diamonds Act 56 of 1986, with the result that section 20A remained in force.


The High Court’s order was set aside and replaced with an order dismissing SADPO’s application, with no order as to costs. The Constitutional Court likewise made no order as to costs.


Cases Cited


South African Diamond Producers Organisation v Minister of Minerals and Energy N.O. and Others (CCT234/16) [2017] ZACC 26; 2017 (10) BCLR 1303 (CC); 2017 (6) SA 331 (CC).


South African Diamond Producers Organisation v Minister of Minerals and Energy N.O. [2016] ZAGPPHC 817.


Saidex (Pty) Ltd v Minister of Minerals and Energy [2011] ZASCA 102; 2011 JDR 0593 (SCA).


Head of Department, Department of Education, Limpopo Province v Settlers Agricultural High School [2003] ZACC 15; 2003 (11) BCLR 1212 (CC).


S v Mercer [2003] ZACC 22; 2004 (2) SA 598 (CC); 2004 (2) BCLR 109 (CC).


First National Bank of SA Ltd t/a Wesbank v Commissioner, South African Revenue Service; First National Bank of SA Ltd t/a Wesbank v Minister of Finance [2002] ZACC 5; 2002 (4) SA 768 (CC); 2002 (7) BCLR 702 (CC).


Mkontwana v Nelson Mandela Metropolitan Municipality [2004] ZACC 9; 2005 (1) SA 530 (CC); 2005 (2) BCLR 150 (CC).


Offit Enterprises (Pty) Ltd v Coega Development Corporation (Pty) Ltd [2010] ZACC 20; 2011 (1) SA 293 (CC); 2011 (2) BCLR 189 (CC).


Tshwane City v Link Africa [2015] ZACC 29; 2015 (6) SA 440 (CC); 2015 (11) BCLR 1265 (CC).


Shoprite Checkers (Pty) Ltd v MEC for Economic Development, Eastern Cape [2015] ZACC 23; 2015 (6) SA 125 (CC); 2015 (9) BCLR 1052 (CC).


Affordable Medicines Trust v Minister of Health [2005] ZACC 3; 2006 (3) SA 247 (CC); 2005 (6) BCLR 529 (CC).


S v Lawrence, S v Negal, S v Solberg [1997] ZACC 11; 1997 (4) SA 1176 (CC); 1997 (10) BCLR 1348 (CC).


Biowatch Trust v Registrar, Genetic Resources [2009] ZACC 14; 2009 (6) SA 232 (CC); 2009 (10) BCLR 1014 (CC).


Legislation Cited


Constitution of the Republic of South Africa, 1996 (sections 22, 25(1), 36, 167(5), 172(2)(a)).


Diamonds Act 56 of 1986 (as amended), including section 20A.


First Diamonds Amendment Act 29 of 2005.


Second Diamonds Amendment Act 30 of 2005.


Electronic Communications Act 36 of 2005.


Mineral and Petroleum Resources Development Act 28 of 2002.


Rules of Court Cited


Rules of the Constitutional Court: rule 16 (including rule 16(2)); rule 19.


Held


Section 20A of the Diamonds Act 56 of 1986 did not effect a deprivation of property for purposes of section 25(1) because the interference relied upon by SADPO was not shown to be a substantial interference with ownership entitlements, and the alleged economic harm was not established on the papers in a manner capable of grounding constitutional engagement.


Section 20A did not limit the section 22 right to choose a trade, occupation, or profession; it regulated the practice of diamond dealing and producing. The regulation satisfied the rationality standard because it was rationally related to legitimate governmental purposes, including improved monitoring of unpolished diamond transactions and compliance objectives.


The High Court’s declaration of invalidity was not confirmed. The High Court’s order was replaced with dismissal of the application and no costs order. No costs order was made in the Constitutional Court, and SADPO’s cross-appeal on costs was dismissed.


LEGAL PRINCIPLES


The section 25(1) enquiry requires, at minimum, identification of property, determination whether there has been a deprivation, and (if necessary) assessment of whether deprivation is arbitrary, as structured in First National Bank of SA Ltd t/a Wesbank v Commissioner, South African Revenue Service; First National Bank of SA Ltd t/a Wesbank v Minister of Finance.


A deprivation under section 25(1) is established only where there is substantial interference with property rights or entitlements, meaning interference of sufficient magnitude to have a legally relevant impact on the rights of the affected party, consistent with Mkontwana v Nelson Mandela Metropolitan Municipality, Offit Enterprises (Pty) Ltd v Coega Development Corporation (Pty) Ltd, and Tshwane City v Link Africa.


Regulatory changes that affect the manner in which property is sold, or that alter market conditions influencing value, do not without more constitute a deprivation. A property holder does not ordinarily have a constitutionally protected entitlement to a particular business practice, a preferred pricing mechanism, or the continuation of favourable regulatory conditions.


Under section 22 of the Constitution, a distinction is maintained between regulation that limits the choice of a trade and regulation of the practice of a trade. Measures impacting choice attract section 36 scrutiny; measures regulating practice are constitutionally permissible if rationally related to a legitimate governmental purpose and do not infringe other rights, as articulated in Affordable Medicines Trust v Minister of Health (with rationality traced to S v Lawrence, S v Negal, S v Solberg).


In constitutional litigation of this kind, costs are approached in light of Biowatch Trust v Registrar, Genetic Resources, and the Court may decline to make adverse costs orders where appropriate to constitutional justice and fairness.

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South African Diamond Producers Organisation v Minister of Minerals and Energy N.O. and Others (CCT234/16) [2017] ZACC 26; 2017 (10) BCLR 1303 (CC); 2017 (6) SA 331 (CC) (24 July 2017)

Links to summary

Heads of arguments

CONSTITUTIONAL
COURT OF SOUTH AFRICA
Case CCT 234/16
In the matter
between:
SOUTH AFRICAN DIAMOND
PRODUCERS
ORGANISATION
Applicant
and
MINISTER OF
MINERALS AND ENERGY
N.O.
First Respondent
DEPARTMENT OF
MINERALS AND ENERGY
Second Respondent
MINISTER OF
FINANCE
Third Respondent
DEPARTMENT OF
FINANCE
Fourth Respondent
SOUTH AFRICAN DIAMOND,
MINERALS
AND PRECIOUS
METALS
REGULATOR
Fifth Respondent
STATE DIAMOND
TRADER
Sixth Respondent
Neutral
citation:
South
African Diamond Producers Organisation v Minister of Minerals and
Energy N.O. and Others
[2017] ZACC 26
Coram:
Mogoeng CJ, Nkabinde ADCJ, Cameron J,
Froneman J, Jafta J, Khampepe J, Madlanga J,
Mhlantla J,
Mojapelo AJ, Pretorius AJ and Zondo J
Judgments:
Khampepe J (unanimous)
Heard
on:
11 May 2017
Decided
on:
24 July 2017
Summary:
Diamonds Act 56 of 1986 —
constitutionality of section 20A — section is constitutional
Section 25 of the
Constitution — right not to be deprived of property arbitrarily
— deprivation analysis — no
deprivation by section 20A —
interference not substantial
Section 22 of the
Constitution — right to choose trade, occupation or profession
— no limitation on choice by section 20A
— rational
regulation of practice
ORDER
On appeal from the High
Court of South Africa, Gauteng Division, Pretoria:
The
following order is made:
1.
The late filing of the notice of appeal and
the notice of cross-appeal is condoned.
2.
The cross-appeal is dismissed.
3.
The appeal against the declaration of
invalidity of section 20A of the Diamonds Act 56 of 1986, made
by the High Court of South Africa,
Gauteng Division, Pretoria,
succeeds.
4.
The declaration of invalidity is not
confirmed.
5.
The order of the High Court is set aside
and replaced with the following:

The application is dismissed.  No
order is made as to costs.”
6.
There is no order as to costs in this
Court.
JUDGMENT
KHAMPEPE J
(Mogoeng CJ, Nkabinde ADCJ, Cameron J, Froneman J,
Jafta J, Madlanga J, Mhlantla J,
Mojapelo AJ,
Pretorius AJ and Zondo J
concurring):
Introduction
[1]
These are proceedings in terms of section
172(2)(a)
[1]
of the Constitution for the confirmation of an order of
constitutional invalidity of section 20A of the Diamonds Act
[2]
(Act), granted by Van der Westhuizen AJ in the High Court of
South Africa, Gauteng Division, Pretoria (High Court).
The
High Court declared section 20A to be unconstitutional insofar
as it infringes on the rights of persons embodied in sections 22
[3]
and 25(1)
[4]
of the Constitution.
[5]
[2]
The first, second and fifth respondents
(respondents) oppose the confirmation of the High Court’s
order of constitutional
invalidity.  The fifth respondent noted
an appeal in terms of rule 16(2) of the Rules of this Court against
the whole of the
judgment of the High Court, and joint submissions
were made on behalf of the respondents.  The fifth respondent
has also applied
for condonation for the late filing of the notice of
appeal.
[3]
The applicant noted a cross-appeal against
the costs order handed down by the High Court.  The applicant
has also applied for
condonation of the late filing of its
cross-appeal.
Parties
[4]
The applicant is the South African Diamond
Producers Organisation (SADPO), a voluntary association whose aims
include the streamlining
of the diamond producers’
industry and acting in concert with other structures in the diamond
industry.  Its members
include diamond producers and diamond
dealers.
[5]
The first to sixth respondents are: the
Minister of Minerals and Energy N.O., the Department of Minerals and
Energy, the Minister
of Finance, the Department of Finance, the South
African Diamond, Minerals and Precious Metals Regulator
(the Regulator),
[6]
and the State Diamond Trader,
[7]
respectively.
[6]
The State Diamond Trader, the sixth
respondent, has filed a notice of intention to abide the decision of
this Court.  Only
the first, second and fifth respondents
participated in the proceedings in this Court.
Background
[7]
The diamond trade in South Africa is
regulated in terms of the Act and regulations published under it.
The purposes of the
Act include controlling the possession, purchase,
sale, processing, local beneficiation and export of diamonds.
[8]
The Act regulates, amongst other things, the possession, sale,
purchase, import and export of unpolished diamonds; the premises

where the sale and purchase of unpolished diamonds may take place;
and the processes to be followed in order to export unpolished

diamonds.
[8]
Before the Act was amended in 2007,
[9]
a number of SADPO members, who were licensed dealers, had developed a
mode of operation at their licensed business premises.
[10]
In terms of this practice, unpolished diamonds from local
producers were offered on an anonymous tender basis to other South

African licensed dealers for purchasing parcels of unpolished
diamonds on offer.  Non-licensed “experts”, who

attended on behalf of prospective foreign buyers, “assisted”
the licensed purchasers.  The experts were themselves
often from
abroad.  The ultimate sale was concluded between the producer or
licensed dealer and the South African licensed
purchaser.  This
mode of operation allegedly not only assisted in determining the
correct “international” market
value, but also enabled
local producers to mingle with prospective foreign purchasers.
The result was that a prospective
foreign purchaser was already lined
up, should the decision be made that parcels purchased be exported
and sold on.  The business
premises upon which this mode of
operation took place became known as “tender houses”.
The term “tender
house” is not used in the Act, and no
specific provision is made for this practice.  Those who
participated in this
practice submit that it is simply a business
practice that evolved within the industry.
[9]
Whether the conduct of business at the
tender houses was lawful is the subject of dispute between the
parties.  While SADPO
takes the view that this practice was
lawful, as the pre-amendment Act did not prescribe the manner in
which unpolished diamonds
had to be bought and sold, the respondents
argue that this practice has never been lawful and exploits a
loophole in the regulatory
framework in order to allow unlicensed
persons to participate in the diamond trade.
[10]
The First and Second Diamonds Amendment
Acts came into operation on 1 July 2007.  They amended
the Act in material
respects, including by providing for: the
establishment of the Regulator;
[11]
the establishment of the State Diamond Trader;
[12]
the restructuring of the licensing regime;
[13]
and the establishment of diamond exchange and export centres
(DEECs).
[14]
[11]
The Amendment Acts inserted section 20A
– the impugned provision – into the Act.  This
section provides:

(1)      No licensee
may be assisted by a non-licensee or holder of a permit referred to
in section 26(e) during
the viewing, purchasing or selling of
unpolished diamonds at any place where unpolished diamonds are
offered for sale in terms
of this Act, except at a diamond exchange
and export centre.
(2)        No holder
of a diamond trading house licence referred to in section 26(f) or
any person
authorized in terms of this Act to sell unpolished
diamonds may allow the assistance prohibited in subsection (1).”
[12]
Aggrieved by certain of the amendments,
SADPO approached the High Court to have various provisions of the
Act, as amended, set aside.
In the High Court
[13]
Initially, SADPO raised various
constitutional issues relating to a number of amendments to the
Act.
[15]
These were ultimately narrowed down to relate only to section 20A
of the Act.
[16]
[14]
SADPO argued that section 20A offends
against sections 22 and 25 of the Constitution.
[17]
On the section 25 challenge, SADPO argued that the prohibition
on unlicensed assistance in section 20A deprived
SADPO’s
members of their property – the right to receive full market
value for the unpolished diamonds they owned –
without
sufficient reason.
[18]
On the section 22 challenge, SADPO argued that section 20A
is arbitrary and deprives members of their right to
conduct their
business in the manner they deem fit.
[19]
Further, SADPO argued that there is insufficient reason for
section 20A; there is no rational connection between section 20A

and a legitimate government purpose; and section 20A goes much
further than necessary to achieve the legislative purpose.
[20]
[15]
The respondents argued that the High Court
was bound by the decision of the Supreme Court of Appeal in
Saidex
[21]
to find that the tender house practice had always been unlawful.
If this practice was unlawful pre-amendment, SADPO’s
members
could have accrued no legally protectable rights through the tender
house practice.  The respondents further argued
that no property
was deprived through the alleged loss of income, and that in any
event there was no arbitrariness.
[22]
Further, section 20A does not limit the freedom of choosing a
trade or occupation and in any event is not arbitrary.
[23]
According to the respondents, the rationale for section 20A was
three fold: first, to promote local beneficiation
of South
African diamonds; second, to tighten the regulation of unpolished
diamonds and eliminate illegal practices that were taking
place in
the diamond trade; and third, to ensure compliance with the Kimberley
Process Certification Scheme.
[24]
[16]
The High Court held that it was not bound
by the decision in
Saidex
and that the business of tender houses was not unlawful
pre-amendment.
[25]
The Court went on to consider the mischief section 20A was
intended to address.  It held that the first object
– the
promotion of the local beneficiation of unpolished diamonds –
is sufficiently addressed in sections 59, 59A and 59B

of the Act, which provide for the State Diamond Trader.
[26]
The Court held that the second object was premised on the view that
the tender houses were unlawful (hence necessitating
amendment by
section 20A).
[27]
However, the High Court found that tender houses were lawful
pre-amendment, rendering this aim nugatory.  The High Court
also
appears to have accepted the argument that the monitoring of the
movement of unpolished diamonds from South Africa is
adequately
dealt with in numerous sections of the amended Act, and that
section 20A is unnecessary for this object.
[28]
[17]
The High Court held that section 22 of
the Constitution “warrants the freedom of choosing of a trade,
occupation or profession
and thereby obtaining the maximum benefit
and advantage accruing therefrom within the four corners of the
law”.
[29]
As a result, it held that prohibiting assistance other than at DEECs
constitutes a limitation of the rights entrenched in
section 22.
[30]
The Court also accepted that there was a deprivation of property,
which it held was “irrational, arbitrary and
disproportional”.
[31]
It held that the respondents had failed to discharge their onus to
prove the limitations justified in terms of section 36
of the
Constitution.
[32]
[18]
The High Court declared section 20A of
the Act to be unconstitutional insofar as it infringes on the rights
embodied in section 22
and also declared the arbitrary
deprivation in terms of section 25(1) of the Constitution of the
rights accrued by persons
who perform the functions of tender houses
to be unconstitutional.
[33]
The Court also ordered that, pending confirmation of the declaration
of invalidity, the respondents be interdicted from implementing

section 20A, and ordered the six respondents to pay the costs of the
application.
[34]
In this Court
[19]
The matter was then referred to this Court
in accordance with section 172(2)(a) of the Constitution for the
confirmation of
the order of constitutional invalidity.  As
explained above, the respondents appeal against the entire judgment
and order
of the High Court.
Applicant’s
submissions
[20]
First, SADPO argues that section 20A
allows for the arbitrary deprivation of “the rights” of
those SADPO members
who are producers of diamonds, who had conducted
business as tender houses, and who were holders of diamond exchange
certificates.
SADPO argues that producers
have
been
deprived of the right to realise the full market value of the
diamonds they own as a result of the prohibition on unlicensed

assistance.
[35]
This right forms part of their
ius
disponendi
(right to alienate their
property).  Additionally, dealers have been deprived of their
right to receive full market value for
their diamonds when selling,
as they can only market to local licensees.
[36]
Similarly, previous holders of diamond exchange certificates have
been deprived of the right to sell to the export market.
The
Amendment Acts abolished diamond exchanges; under the new regime,
previous holders of diamond exchange certificates may apply
for a
trading house licence under section 26(f).  SADPO argues
that the trading house licence affords far fewer rights
than the
diamond exchange certificate did, as a trading house can only market
to a local licensee; no foreign assistance is allowed;
and trading
house licensees may no longer export.  Further, SADPO submits
that the alleged deprivations are arbitrary as the
law does not
provide sufficient reason for the deprivation.
[21]
Second, SADPO submits that section 20A
infringes the rights of its members under section 22 of the
Constitution in that
it limits their right to choose and practise
their trade freely, without sufficient reason or a rational basis
having been shown
by the respondents.
[22]
Third, on the cross-appeal on costs, SADPO
submits that the High Court should have awarded costs “including
the costs of two
counsel” (as opposed to simply ordering
costs).  In addition, SADPO argues that the High Court should
have ordered that
the costs be paid by the respondents jointly and
severally.
Respondents’
submissions
[23]
The respondents argue that there is no
legal right from which the practice of tender houses arose.  The
practice of tender
houses was illegal, and therefore could not have
produced anything close to a legal right.  As a result, SADPO’s
members
do not have protectable rights in terms of section 25(1)
of the Constitution.
[24]
The respondents further submit that the
purpose of section 20A is to prohibit assistance by unlicensed
persons in the dealing
of unpolished diamonds.  They had
identified the practice of tender houses as unlawful, which resulted
in the prohibition
in section 20A.  The “nuisance”
sought to be dealt with was unlicensed persons assisting local
licensed dealers
when viewing and buying unpolished diamonds in South
Africa, and the resulting export of unpolished diamonds to these
“experts”
whose identities remained unknown to
government.
[25]
On the challenge based on section 22
of the Constitution, the respondents submit that the opportunity to
earn an additional
30% from the tender house practice has no basis in
law.  They also submit that, even if that opportunity is a
legally protectable
right, government has the power in terms of
section 22 to regulate the trade of a diamond dealer.
[26]
The respondents submit that section 20A
is intended to play an important role in the regulation of trading in
unpolished diamonds.
They state that the purposes of
section 20A are: to promote the local beneficiation of South
African diamonds; to tighten
the regulation of the diamond trade and
eliminate illegal activities that were occurring in the diamond
trade; and to comply with
the Kimberley Process Certification
Scheme.  As a result, the respondents submit that there are
legitimate purposes behind
section 20A, and that that section is
rationally related to those purposes.
[27]
In the event that this Court decides that
section 20A does limit any of SADPO’s members’
rights, the respondents
submit that any limitation is reasonable and
justifiable in terms of section 36(1) of the Constitution.
Issues
[28]
This matter raises two principal issues—
(a)
whether section 20A of the Act arbitrarily
deprives SADPO’s members of property, as envisaged in section
25 of the Constitution;
and
(b)
whether section 20A of the Act violates the
right of SADPO’s members to choose their trade, occupation or
profession freely,
as enshrined in section 22 of the Constitution.
[29]
I deal with each of these issues below.
Though much is made of it in the papers, the issue whether the tender
house practice
was lawful before the Act was amended is not relevant
to determining the matter.  I proceed on the assumption that the
practice
was previously lawful.
Preliminary issues:
jurisdiction and condonation
[30]
As these are confirmation proceedings in
terms of section 167(5) of the Constitution, this Court’s
jurisdiction is necessarily
engaged.
[31]
The fifth respondent has applied for
condonation of the late filing of its notice of appeal.  The
notice was filed one day
late, on 28 September 2016.  The reason
for the delay was that, when the candidate attorney attempted to file
the notice on
27 September 2016, the Registrar quite properly
declined to accept the document as there was no proof of agreement
between
the parties for service by email; nor was there
acknowledgement of receipt from all of the respondents.  The
defect was remedied
and the notice was filed on the following day.
This explanation is satisfactory and the delay is minimal.  This
matter
engages important constitutional issues and involves a
declaration of invalidity of a legislative provision.  Moreover,
there
has been no prejudice to the applicant, particularly as service
was effected timeously.  It is in the interests of justice
that
condonation be granted.
[37]
[32]
The applicant has applied for condonation
for the late filing of its notice of cross-appeal.  The
applicant states that it
assumed that it had 10 days after the date
of the fifth respondent’s notice of appeal to file its
cross-appeal, as an application
for leave to cross-appeal in terms of
rule 19 of the Rules of this Court must be filed within 10 days of
the filing of the application
for leave to appeal.  In this
instance, however, there was no application for leave to appeal filed
in terms of rule 19, as
the notice of appeal was lodged in terms of
rule 16, which does not require an application for leave to appeal.
Rule 16 does
not specify time-limits for the noting of a
cross-appeal.  The applicant notes that the reference to an
appeal in rule 16
may include a cross-appeal, which would mean that
the notice of cross-appeal was required to be lodged by the same date
as the
fifth respondent’s notice of appeal – 27 September
2016.  The applicant therefore requests condonation for
the late
filing of the notice of cross appeal to the extent necessary.
[33]
The applicant’s cross-appeal is in
effect an appeal against the order of the High Court, and is
governed by rule 16.
The time periods in rule 16 therefore
apply, and the notice was required to be filed by 27 September 2016.
The applicant’s
notice of cross-appeal was filed on 14 October
2016 – two and a half weeks late.  Again, the delay is not
significant,
and there has been no prejudice to the respondents.
Given the narrow issues raised by the cross-appeal, which deals
only
with the costs award, it is in the interests of justice that
condonation be granted.
The challenge based on
section 25
[34]
Section 25(1) provides that “no
one may be deprived of property except in terms of law of general
application, and no
law may permit arbitrary deprivation of
property”.  In order for there to be an infringement of
section 25(1),
(1) the thing in question must be property; (2)
there must be a deprivation; and (3) the deprivation must be
arbitrary.
[38]
The test was enunciated by this Court in
FNB
:

(a)
Does that which is taken away from FNB by the operation of section
114 amount to ‘property’
for purpose of section 25?
(b)
Has there been a deprivation of such property by the Commissioner?
(c)
If there has, is such deprivation consistent with the provisions of
section 25(1)?
(d)
If not, is such deprivation justified under section 36 of the
Constitution?
(e)
If it is, does it amount to expropriation for purpose of
section 25(2)?
(f)
If so, does the deprivation comply with the requirements of
sections 25(2)(a) and (b)?
(g)
If not, is the expropriation justified under section 36?”
[39]
[35]
SADPO argues that the property rights in
issue are twofold: the ownership of the
diamonds
won by the producers and bought and sold by the dealers; and the
ownership of the diamond dealer
licences
and concomitant ownership of their businesses.
[36]
In relation to the diamonds, SADPO contends
that producers and dealers are deprived of 30% of the market value of
the diamonds they
sell, because section 20A prohibits a key part of
the price-forming mechanism – unlicensed expert assistance.
Without
this assistance, producers and dealers are unable to obtain
the prices they were previously able to obtain, and suffer a loss of

30% compared to the prices they were previously able to obtain.
On SADPO’s argument, this constitutes interference
with their
members’
ius disponendi
which, they argue, includes the right
to obtain the highest possible price for that property.  In
relation to the licences,
SADPO contends that diamond dealers have
been deprived of property in that the activities they were previously
entitled to engage
in under their licences have been limited.
[37]
The test laid down by this Court in
FNB
requires us to ask, first, whether the
things at issue here constitute property; second, whether there has
been a deprivation; and
third, whether the deprivation is contrary to
section 25(1) (in that it is arbitrary).
[40]
SADPO’s contention is that its members have been deprived of
(1) 30% of the value of the diamonds they purchase and
sell; and (2)
the right to engage in activities they were previously entitled to
engage in in terms of their licences.  When
approaching the
FNB
enquiry on these facts, there appear to be two possible ways to
approach the first two legs of the test (“property”
and
“deprivation”).
[38]
On one approach, we could proceed on the
basis that the “property” in issue is the diamonds and
the licences, and then,
at the “deprivation” stage of the
enquiry, consider whether what has been taken away from licensees
(30% of the previous
market value, and the entitlement to engage in
business in a particular way) constitutes a right or interest worthy
of protection,
and is substantial enough that its removal constitutes
“deprivation”.  From there, if there is a
deprivation of
property, we would proceed to the arbitrariness
analysis.  An alternative approach would be to begin by
enquiring what it
is that has been taken away (30% of the previous
market value, and the entitlement to engage in business in a
particular way),
and consider whether those “rights” or
interests constitute “property” for the purposes of
section 25.
Only if those rights or interests constitute
property would we move on to the next stages of the test.
[39]
The former approach is preferable in this
instance.  The “property” at issue here is the
ownership of the diamonds,
and the ownership of the licences
(assuming the licences are property).  That ownership brings
with it certain rights and
entitlements.  SADPO alleges that
these include the interests it seeks to protect on behalf of its
members.
[40]
Below, I consider the ownership of the
diamonds
won by the producers and bought and sold by the dealers and the
purported ownership of the diamond dealer
licences
in turn, in order to determine whether section 20A permits the
arbitrary deprivation of property.
Ownership of
diamonds
[41]
The ownership of a corporeal movable object
has long been recognised as property, both under common law and for
the purpose of section 25.
[41]
That SADPO’s members hold constitutionally protectable property
in the physical diamonds they buy and sell is uncontroversial:
the
diamonds are clearly property for the purposes of section 25.
[42]
The more complex question is whether
section 20A deprives producers and dealers of ownership of their
diamonds.  The deprivation
enquiry was first encapsulated by
this Court in
Mkontwana
:

Whether
there has been a deprivation depends on the
extent
of the interference
with or limitation
of use, enjoyment or exploitation.  It is not necessary in this
case to determine precisely what constitutes
deprivation.  No
more need be said than that at the very least,
substantial
interference
or limitation that goes
beyond the normal restrictions on property use or enjoyment found in
an open and democratic society would
amount to deprivation.”
[42]
[43]
The Court in
Mkontwana
thus did not delineate the precise ambit of what constitutes
“deprivation”, but noted that a substantial limitation,

beyond the normal expected restrictions on property, would constitute
deprivation.
[44]
This Court again had occasion to comment on
the deprivation analysis in
Offit
.
It affirmed that there must be a “substantial interference”,
and developed the enquiry:

Our
jurisprudence is clear that the physical taking of property is not
required to constitute a deprivation, and it suffices for
one or more
of the entitlements of ownership to be impacted upon.  Whilst
direct or physical interference is not necessary,
the impact must be
of
sufficient magnitude to warrant
constitutional engagement
.  A
court must give consideration to the extent to which the use and the
enjoyment of land have been diminished.”
[43]
[45]
The Court in
Offit
rejected an argument that the continued threat of expropriation,
which could have a negative effect on the market value of the

property, was sufficient to constitute a deprivation of property as
envisaged in section 25(1).
[44]
[46]
This Court also had occasion to consider
its approach to the deprivation analysis in
Link
Africa
.
[45]
Dealing with section 22 of the Electronic Communications
Act,
[46]
which permitted electronic communications network service licensees
to enter onto municipal land and install and maintain communications

infrastructure, the Court set out the enquiry as follows:

Does
section 22 inflict a deprivation?  This
depends
on the extent of the intrusion
in the
property or limitation of its use or enjoyment.
There
must be interference with property that is significant enough to
‘have a legally relevant impact on the rights of the
affected
party before deprivation of property under section 25 is
established’.”
[47]
[47]
In that case, it was held that there was no
deprivation, as it had not been shown that Link Africa’s
intended actions amounted
to substantial interference with the City’s
infrastructure:

In
this court the City has equally shown no harm. . . .
There is no iota of evidence that installing Link Africa’s

electronic communications network damages or impairs City
infrastructure.  Nor is there any evidence that it could cause
harm or prejudice to the City or its people.  Precisely put, the
City has provided no evidence that Link Africa’s

installation of fibre-optic cables is beyond normal restriction of
use and enjoyment of the property where the cables are
installed.”
[48]
[48]
This Court’s approach to the
deprivation enquiry may be summarised thus: there will be a
deprivation only where the interference
is “substantial”
– meaning that the intrusion must be so extensive that it has a
legally relevant impact on the
rights of the affected party.
[49]
In order to consider whether there has been
a deprivation in this instance, we must consider what it is that
section 20A takes
away from producers and dealers.  As
explained above, SADPO contends that producers and dealers are
deprived of 30% of the
market value of the diamonds they sell.
This constitutes interference with their members’ right to
alienate their property,
which they argue includes the right to
obtain the highest possible price for that property.
[50]
Does section 20A interfere with
producers’ and dealers’ right to alienate their diamonds
in a legally relevant
way?  Surely not.  The first hurdle
for SADPO is that the deprivation analysis requires an enquiry into
the extent of
the interference with the right in question.  Even
assuming that the involvement of an unlicensed foreigner is necessary
to
determining, and thus obtaining, the full market value of
unpolished diamonds, on the facts before the Court it is impossible
to
quantify the “loss” SADPO’s members have
suffered as a direct result of section 20A.  SADPO argues
that the price of diamonds has dropped by 30% since the presence of
unlicensed persons has been prohibited by section 20A.
As
a result, it contends that producers and dealers are deprived of 30%
of the value of their diamonds.  The respondents,
however,
allege that the 30% referred to is actually the lost commission
opportunity, rather than the fair market value of the
diamonds.
Nothing in the way of empirical evidence for this alleged drop in
price is included in the papers.  SADPO’s
argument on this
score is vague and speculative.  As was the case in
Link
Africa
, no loss has been proved.
It is not clear how the Court can, in the circumstances, make a
finding that there has been interference
to the extent that
constitutes a “deprivation”.  It is not even clear
on the facts whether the interference has
any impact on the value of
SADPO’s members’ property at all.
[51]
Further, an attempt to calculate the
alleged loss in value is beset by the difficulty of locating the
point in time at which the
“loss” is to be measured.
Measuring the extent of the loss entails comparing the price of
unpolished diamonds
at a past point in time, to the price sometime
after the amendments were effected.  But which future price are
we to use for
purposes of comparison?  Should this be the price
directly after the amendments were effected?  The price a year
later,
once the market has adapted to the new regulations?  The
price at the time papers were filed?  In any market, business

adapts to new regulation and creates new business practices around
that regulation.  A market is an ever-changing place, with
the
market value of goods similarly fluid.  It is not possible to
consider the effect of section 20A as though the market
would
not otherwise have changed.  Again, it seems it is not possible
on the facts before us to assess whether the interference
in question
is sufficiently substantial to constitute a “deprivation”.
[52]
Moreover, even if the loss were proved to
our satisfaction, there would still be no deprivation, as no legally
protectable interest
or entitlement is removed by section 20A.
Producers and dealers are still permitted to sell their diamonds, and
to realise
full market value for them.  Section 20A does
not prohibit sale, nor does it require that a portion of the proceeds
be
donated to the state.  What is limited is the way in which
producers and dealers are to conduct sales – not the right
to
sell itself.  Producers and dealers still have the same right as
before to obtain the highest possible price for the diamonds
they
sell.  What has changed is (1) the
manner
in which they may alienate their diamonds; and (2) the market
conditions that determine what the
highest
price
will be, as producers and dealers
are no longer entitled to obtain the assistance of unlicensed persons
when determining the price
of their diamonds, except at a DEEC.
[53]
The limitation on the manner in which
producers and dealers may alienate their diamonds is not sufficiently
substantial to constitute
a “deprivation” of property in
those diamonds.  Producers and dealers do not generally have a
legally protectable
interest in conducting a sale according to a
particular practice.  And, a market is an inherently regulated
space, and prices
obtainable in that market are necessarily impacted
by government regulation.  A property holder does not generally
have a
legally protectable interest either in obtaining a specific
value for his goods, or in valuing his goods according to a
particular
method.
[54]
As a result, the limitation imposed by
section 20A clearly does not constitute a substantial
interference with licensees’
rights of ownership in their
diamonds, and there is no deprivation of property.
[55]
In the result, the test laid down in
FNB
has not been met: diamond producers and
dealers have not been deprived of property in their diamonds and
there is accordingly no
infringement of section 25(1).

Ownership”
of licences
[56]
SADPO also submits that its members are
deprived of property in their diamond dealer’s licences.
[57]
Do these licences constitute “property”
for the purposes of section 25?  This Court in
Shoprite
held that licences may, in some
instances, be considered property.
[49]
In that case, the majority
[50]
held that a grocer’s wine licence is property.  However,
it is not necessary to answer this question in this matter.
[51]
Assuming that the licences in issue do constitute property, I am
nevertheless of the view that there is no deprivation.
[58]
SADPO contends that diamond dealers have
been deprived of property in that the activities they were previously
entitled to engage
in under their licences have been limited.
Again, the question is whether there is a substantial interference:
is the
extent of the intrusion such that it has a legally relevant
impact on the rights of the affected party?
[59]
How does section 20A interfere with
dealers’ licences?  These licences entitle dealers to buy,
sell, import and
export unpolished diamonds.  None of those
entitlements is removed by section 20A.  What is removed
(assuming the
tender house practice was previously lawful) is their
entitlement to be assisted in these activities by unlicensed
foreigners at
locations other than a DEEC.  This entitlement was
never subject to a licence, but was rather a business practice that
grew
up in relation to the permissions granted in terms of the
licence.  This may be contrasted to the situation in
Shoprite
,
where a legal entitlement previously conferred by the licence in
question was removed.
[52]
[60]
What SADPO seeks to protect is their
members’ interest in conducting their business in terms of
their licences according to
a particular preferred strategy.
There can be no deprivation in a change of regulation that alters the
strategies licensees
are entitled to pursue in the course of
conducting licensed activities.  Favourable business conditions,
including favourable
regulatory conditions, are transient
circumstances, subject to inevitable changes.
[61]
It cannot be that, every time a government
decision or regulation makes a particular business strategy unlawful,
persons who preferred
to conduct their business in accordance with
that strategy have been deprived of property.  As explicated
above, a market
is an inherently regulated space, and it cannot be
that any alteration to the way in which market forces play out
constitutes a
deprivation of property.  To the extent that the
licences in issue are in fact property, the limitation imposed by
section 20A
is not substantial, as it does not have a legally
relevant impact on the rights of the affected party.
Diamond exchange
certificates
[62]
SADPO also argues that holders of diamond
exchange certificates have been deprived of property.  The
argument is that, because
the First and Second Diamonds Amendment
Acts abolished diamond exchanges and replaced them with trading house
licences, previous
exchange licensees who paid R500 000 for
their licences have been deprived of property.  SADPO argues
that the trading
house licence affords far fewer rights.
However, it is not clear how the rights of these licensees are
affected by section 20A
in particular.  If the complaint is
with the change in the licensing regime, the attack should have been
brought against the
relevant provisions.  Section 20A
neither abolishes diamond exchange licences nor establishes trading
house licences.
[63]
In the result, there is no limitation of
the rights of SADPO’s members under section 25 of the
Constitution.  The
order of invalidity based on section 25
of the Constitution cannot be confirmed.
The challenge based on
section 22
[64]
Section 22 provides:

Every
citizen has the right to choose their trade, occupation or profession
freely.  The practice of a trade, occupation or
profession may
be regulated by law.”
[65]
Section 22 comprises two elements: the
right to
choose
a trade, occupation or profession freely, and the proviso that the
practice
of a trade, occupation or profession may be regulated by law.
Though both the “choice” of trade and its “practice”

are protected by section 22,
[53]
the level of constitutional scrutiny that attaches to limitations on
each of these aspects differs.  If a legislative provision

would, if analysed objectively, have a negative impact on choice of
trade, occupation or profession, it must be tested in terms
of the
criterion of reasonableness in section 36(1).  If, however,
the provision only regulates the practice of that
trade and does not
affect negatively the choice of trade, occupation or profession, the
provision will pass constitutional muster
so long as it passes the
rationality test and does not violate any other rights in the Bill of
Rights.
[54]
In that case, there is no limitation of section 22 and no
section 36 analysis is required.  As this Court
held in
Affordable Medicines
,
“restrictions on the right to practise a profession are subject
to a less stringent test than restrictions on the choice
of a
profession”.
[55]
[66]
The first question, then, is whether
section 20A imposes restrictions on the choice of a trade,
occupation or profession, or
only on its practice.  This Court
has not yet laid down specific guidance for determining when a
legislative provision “is
likely to impact negatively on the
choice” of profession, trade or occupation, as opposed to
simply regulating the practice
of that trade, occupation or
profession.  However, some guidance may be sought from
Affordable Medicines
,
the leading judgment on the interpretation of section 22.
[67]
In
Affordable
Medicines
, this Court held that a law
requiring medical practitioners who wished to dispense medicines to
obtain a licence, did not have
the effect of influencing negatively a
person’s decision whether to become a medical practitioner.
This was because
the provision did not purport to regulate entry into
the medical profession, nor did it affect the continuing choice of
practitioners
as to whether to remain medical practitioners or
not.
[56]
It merely regulated the specific circumstances in which medical
practitioners may, if they choose, dispense medicines
.
The Court further held that
it was “difficult to fathom” how a person who has chosen
to pursue a medical profession
could be “deterred from that
ambition by the requirement that, if, upon qualification, he or she
wishes to dispense medicine
as part of his or her practice, he or she
would be required, among other things, to dispense medicines from
premises that comply
with good dispensing practice.”
[57]
[68]
Clearly, then, a law prohibiting certain
persons from entering into a specific trade, or providing that
certain persons may no longer
continue to practise that trade, would
limit the choice element of section 22; in these cases there is
a
legal barrier
to choice.  This would be the case where, for instance, a
licence is necessary to conduct a particular trade, and that licence

is withdrawn.  However, one may also conceive of legislative
provisions that, while not explicitly ruling out a group of persons

from choosing a particular trade, does so in effect, by making the
practice of that trade or profession so undesirable, difficult
or
unprofitable that the choice to enter into it is in fact limited.
[69]
These provisions must also fall within the
ambit of provisions that limit choice, as they create an
effective
limit
on choice.  Indeed, this
Court in
Affordable Medicines
seems to have taken into account both the fact that the legislation
in issue did not present a legal barrier to entry into the

profession, and that it did not impose an effective limit on that
choice in that it would not “deter” persons from
entering
into the profession.
[70]
On this understanding of what it means to
limit choice for the purposes of section 22, does section 20A
limit the right
of SADPO’s members to choose their trade,
profession or occupation?  No.  Not only does section 20A
not impose
a formal legal bar to choosing to practise the trade of
diamond dealer or producer, but no case has been made out that
section 20A
presents an effective bar to choosing to practise
these trades.  All section 20A does is prohibit licensees
from being
assisted by unlicensed persons when viewing, purchasing or
selling unpolished diamonds, except at a DEEC.  Producers and
dealers
are still able to obtain assistance if they so wish, but that
assistance must either be rendered by a licensed person (outside a

DEEC) or, if they specifically seek the assistance of a person who is
not licensed, this assistance may be rendered only at a DEEC.
This
cannot, without more, render trading as a diamond producer or dealer
so unprofitable as to obviate choice.
[71]
Accordingly, the freedom to choose one’s
trade, occupation or profession is not limited by section 20A.
The impugned
provision simply regulates the practice of the trades of
diamond producing and dealing.
[72]
The next question is then whether
section 20A regulates these trades within constitutionally
permissible limits.  The
test is one of rationality.  This
test was first proposed in
Lawrence
[58]
in the context of section 22’s predecessor, section 26
of the Interim Constitution.  In that case, this Court
stated
the test as follows:

The
requirement that the measures be justifiable in an open and
democratic society based on freedom and equality means that there

must be a rational connection between means and ends.  Otherwise
the measure is arbitrary and arbitrariness is incompatible
with such
a society.”
[59]
[73]
The rationality test was also accepted in
relation to section 22 of the Final Constitution in
Affordable
Medicines
, where the Court rejected the
suggestion that a reasonableness test applied.
[60]
The Court held that the standard for determining whether the
regulation of the practice of a profession falls within the
purview
of section 22 is whether the regulation of the practice of a
profession is rationally related to a legitimate government
purpose
and does not infringe any of the rights in the Bill of Rights.
[74]
The rationality standard is aimed at
achieving a proper balance between the role of the legislature on the
one hand, and the role
of the courts on the other.
[61]
As this Court held in
Affordable
Medicines
:

The
rational basis test involves restraint on the part of the Court.
It respects the respective roles of the courts and the
Legislature.
In the exercise of its legislative powers, the Legislature has the
widest possible latitude within the limits
of the Constitution.
In the exercise of their power to review legislation, courts should
strive to preserve to the Legislature
its rightful role in a
democratic society.  It is this guiding principle that should
inform the test for determining whether
legislation that regulates
practice but does not, objectively viewed, impact negatively on
choice, passes constitutional scrutiny.”
[62]
[75]
This means that the question is whether
there is a rational basis for section 20A; whether another
measure may have been more
effective, or less disruptive, is not
relevant.  In
Lawrence
,
this Court held that legislation should not be set aside by a court
as infringing economic freedom “simply because it may
consider
the legislation to be ineffective or is of the opinion that there are
other and better ways of dealing with the problems”.
[63]
[76]
Is there a rational basis for section 20A?
First, we must look to its purpose.  Some guidance is found in
the preamble
to the Second Diamonds Amendment Act, which introduced
section 20A.  It provides that the Second Diamonds
Amendment Act
seeks, amongst other objects, “to prohibit
assistance to licensees by non-licensed persons at any place where
unpolished
diamonds are offered for sale”.  Section 20A
achieves this object, by prohibiting unlicensed assistance at all
places where unpolished diamonds are offered for sale, with the
exception of the DEECs.  This does not, however, assist in

ascertaining the purpose of section 20A –
why
this prohibition was put into effect.
[77]
The respondents submit that the prohibition
on assistance from unlicensed persons in places other than the
state’s DEECs serves
two key purposes: promoting local
beneficiation of unpolished diamonds, thereby regulating the diamond
trade in the public interest;
and ensuring that the movement of
unpolished diamonds is properly monitored and recorded, in
furtherance of the country’s
obligations under the Kimberley
Process Certification Scheme.  That these were the purposes
sought to be achieved by the First
and Second Diamonds Amendment Acts
is clear from the Memorandum on the Objects of the Diamonds Amendment
Bill that was published
at the time the amendments were first
proposed.
[78]
These are clearly legitimate government
purposes, and SADPO does not argue that they are not.  Its
complaint, however, is that
section 20A does not achieve these
purposes; as a result, it is irrational.  On local
beneficiation, SADPO argues that
this purpose is sufficiently
achieved through other provisions of the Act.  On monitoring, it
argues that the previous system
provided for adequate monitoring of
unpolished diamonds, and that section 20A adds nothing to the
system that was already
in place.
[79]
This argument is unsustainable.  It is
not difficult to imagine that creating a one-stop shop, in the form
of state-run DEECs,
for exports of all unpolished diamonds, and
prohibiting unlicensed persons from being involved in trade except at
these centralised
locations, is rationally related to the legitimate
purpose of monitoring the movement of unpolished diamonds.  The
more involvement
unlicensed persons are permitted to have in the
process of buying, selling and exporting unpolished diamonds, the
greater the risk
of illegal transactions going unnoticed.  It is
plausible that it would be easier for the state to control and
monitor diamond
trading if all persons who engage in the trading
process outside the DEECs are at least known to the state through a
licensing
process.  Based on this purpose alone, section 20A
is not irrational in the manner in which it seeks to regulate the
trade of diamond producing and dealing.  As a result, there is
no limitation of section 22 of the Constitution, and the
order
of invalidity based on that section cannot be confirmed.
[80]
Accordingly, I decline to confirm the
declaration of invalidity and uphold the appeal of the first, second
and fifth respondents.
Costs
[81]
According to
Biowatch
,
[64]
no costs ought to be awarded.
[82]
As I decline to confirm the High Court’s
order, including its order on costs, it follows that SADPO’s
cross appeal
on costs fails.
Order
[83]
The following order is made:
1.
The late filing of the notice of appeal and
the notice of cross-appeal is condoned.
2.
The cross-appeal is dismissed.
3.
The appeal against the declaration of
invalidity of section 20A of the Diamonds Act 56 of 1986, made
by the High Court of South Africa,
Gauteng Division, Pretoria,
succeeds.
4.
The declaration of invalidity is not
confirmed.
5.
The order of the High Court is set aside
and replaced with the following:

The application is dismissed.  No
order is made as to costs.”
6.
There is no order as to costs in this
Court.
For the
Applicant:
J L Gildenhuys
instructed by Cranko Karp & Associates Inc
For the First, Second
and Fifth Respondents:

I A M Semenya SC and T J Machaba instructed
by
Mkhabela Huntley Adeyeke Inc
[1]
This section provides:

The
Supreme Court of Appeal, the High Court of South Africa or a court
of similar status may make an order concerning the constitutional

validity of an Act of Parliament, a provincial Act or any conduct of
the President, but an order of constitutional invalidity
has no
force unless it is confirmed by the Constitutional Court.”
[2]
56 of 1986, as amended by the First and Second
Diamonds Amendment Acts 29 and 30 of 2005, respectively.
[3]
Section 22 provides:

Every
citizen has the right to choose their trade, occupation or
profession freely.  The practice of a trade, occupation
or
profession may be regulated by law.”
[4]
Section 25(1) provides:

No
one may be deprived of property except in terms of law of general
application, and no law may permit arbitrary deprivation
of
property.”
[5]
South African Diamond Producers Organisation v
Minister of Minerals and Energy N.O.
[2016] ZAGPPHC 817
(High Court judgment).
[6]
The Regulator
is an entity established in terms
of section 3 of the Act.  Its objects are to ensure that the
diamond resources of South
Africa are exploited and developed in the
best interests of the people of South Africa; to promote
equitable access to and
local beneficiation of South Africa’s
diamonds; and to ensure compliance with the Kimberley Process
Certification Scheme
(see section 4 of the Act).
[7]
The State Diamond Trader is an entity established
in terms of section 14 of the Act.  The objects of the
State Diamond
Trader are to promote equitable access to and
local beneficiation of South Africa’s diamonds (see section 15
of the Act).
One way in which it does this is to acquire
unpolished diamonds from producers and supply them to local
beneficiators.
All producers are required, in terms of section
59B of the Act, to offer the unpolished diamonds they produce in a
particular
cycle to the State Diamond Trader, who may purchase up to
a specified percentage of those diamonds and supply them to local
beneficiators.
[8]
See the preamble to the Act.
[9]
The First and Second Diamonds Amendment Acts 29
and 30 of 2005 came into effect on 1 July 2007.
[10]
These premises were either the business premises
of a licensed diamond dealer or a licensed diamond exchange.
[11]
Section 3.
[12]
Section 14.
[13]
Section 26.
[14]
Section 59(b).  This section provides that
the Regulator shall establish DEECs, which shall facilitate the
buying, selling,
export and import of diamonds.  Section 48A
provides that all unpolished diamonds intended for export purposes
must first
be offered for local sale at a DEEC in the prescribed
manner.  Previously, diamonds could be exported through diamond
exchanges,
run by diamond exchange licensees.  The DEEC alters
this position, and is intended to be a “one-stop shop”
for
the export of unpolished diamonds.  Any producer who
exports unpolished diamonds must export from a DEEC and pay the
relevant
export duty. Temporary licensees may also purchase and
export unpolished diamonds at the DEEC and pay the relevant export
duty.
[15]
Challenges were initially raised to sections 19,
20
,
20A, 48(a), 59, 59A and 59B
of the Act, as amended.
[16]
High Court judgment above n 5 at para 6.
[17]
Id at para 7.
[18]
Id at para 38.
[19]
Id at para 43.
[20]
Id at para 8.
[21]
Saidex (Pty) Ltd v Minister of Minerals and
Energy
[2011] ZASCA 102
; 2011 JDR 0593
(SCA) (
Saidex
).
The applicants in that case had sought an interim interdict to
preserve their rights under the Act pending the finalisation
of
SADPO’s application to have certain provisions of the Act
declared unconstitutional.  The Court held that the
requirements for an interim interdict had not been met, as no
prima
facie
right to conduct the tender
houses had been established, and held that the practice was
unlawful.
[22]
High Court judgment above n 5 at para 45.
[23]
Id at para 46.
[24]
Id at para 27.
The Kimberley Process
Certification Scheme is an international certification scheme for
the international trade in unpolished
diamonds, negotiated in the
Kimberley Process.  It aims to eradicate the circulation of
conflict diamonds.
[25]
High Court judgment above n 5 at paras 21-5.
[26]
Id at paras 29 and 40.
[27]
Id at para 31.
[28]
Id at paras 41-2.
[29]
Id at para 47.
[30]
Id at para 48.
[31]
Id at para 49.
[32]
Id at para 50.
[33]
Id at para 51.
[34]
Id.
[35]

Producer” is defined in section 1 of
the Act as “any person entitled to win or recover diamonds in
terms of sections
19, 25 and 27 of the Mineral and Petroleum
Resources Development Act”.  These sections of the
Mineral and Petroleum Resources Development Act 28 of 2002
deal with
prospecting rights, mining rights and mining permits respectively.
[36]

Dealer” is defined in section 1 of
the Act as “the holder of a diamond dealer’s licence
contemplated in section
26(a)”.  This licence entitles
the holder to “carry on business as a buyer, seller, importer
or exporter of
unpolished diamonds”.
[37]
Head of Department, Department of Education,
Limpopo Province v Settlers Agricultural High School
[2003]
ZACC 15
;
2003 (11) BCLR 1212
(CC) at para 11 and
S
v Mercer
[2003] ZACC 22
;
2004 (2) SA
598
(CC);
2004 (2) BCLR 109
(CC) at para 4.
[38]
First National Bank of SA Ltd t/a Wesbank v
Commissioner, South African Revenue Service; First National Bank of
SA Ltd t/a Wesbank
v Minister of Finance
[2002]
ZACC 5
;
2002 (4) SA 768
(CC);
2002 (7) BCLR 702
(CC) (
FNB
)
at para 46.
[39]
Id.
[40]
In
FNB
id,
this Court set out a sliding scale for determining whether a
deprivation of property is arbitrary: the standard can range
from
rationality, to something more akin to proportionality, depending on
the circumstances.  At paras 65-6, this Court
held:

In
its context arbitrary, as used in section 25(1), is not limited to
non-rational deprivations, in the sense of there being no
rational
connection between means and ends.  It refers to a wider
concept and a broader controlling principle that is more
demanding
than an enquiry into mere rationality.  At the same time it is
a narrower and less intrusive concept than that
of the
proportionality evaluation required by the limitation provisions of
section 36.  This is so because the standard
set in section 36
is reasonableness and justifiability, whilst the standard set in
section 25 is arbitrariness.  This distinction
must be kept in
mind when interpreting and applying the two sections.
It is
important in every case in which section 25(1) is in issue to have
regard to the legislative context to which the prohibition
against
arbitrary deprivation has to be applied; and also to the nature and
extent of the deprivation.  In certain circumstances
the
legislative deprivation might be such that no more than a rational
connection between means and ends would be required, while
in others
the ends would have to be more compelling to prevent the deprivation
from being arbitrary.”
[41]
This Court in
FNB
above n 38 at
para 51 held that “ownership of a corporeal movable must –
as must ownership of land – lie at
the heart of our
constitutional concept of property”.
[42]
Mkontwana v Nelson Mandela Metropolitan
Municipality
[2004] ZACC 9
;
2005 (1)
SA 530
(CC);
2005 (2) BCLR 150
(CC)
at para 32.  My emphasis.
[43]
Offit Enterprises (Pty) Ltd v Coega
Development Corporation (Pty) Ltd
[2010] ZACC 20
;
2011 (1) SA 293
(CC); 2011 (2) BCLR 189 (CC)
(
Offit
)
at para 41.  My emphasis.
[44]
Id at para 44.
[45]
Tshwane City v Link Africa
[2015]
ZACC 29
;
2015 (6) SA 440
(CC);
2015 (11) BCLR 1265
(CC) (
Link
Africa
) at paras 166 73.
[46]
36 of 2005.
[47]
Link Africa
above n 45 at para 167.  Footnotes omitted.  My emphasis.
[48]
Id at para 172.
[49]
Shoprite Checkers (Pty) Ltd v MEC for Economic
Development, Eastern Cape
[2015] ZACC
23
;
2015 (6) SA 125
(CC);
2015 (9) BCLR 1052
(CC) (
Shoprite
)
.
[50]
Comprising the judgments of Froneman J and Madlanga J.
[51]
This is because I do not consider the question of whether the
licences constitute property to be of relevance to determining
the
matter: even assuming they are property for the purposes of section
25 of the Constitution, there is no deprivation.
To decide
whether the licences here are property would require an analysis of
whether the conditions set out in
Shoprite
as underlying a
finding that the licence was property, have been met.  But,
although the majority in
Shoprite
above n 49 did find that
the licence in issue there was property, the two judgments
comprising the majority on this issue based
their findings on
different reasons.  To determine whether the licences here are
property would require the Court to decide
which approach to the
enquiry – that set out in the judgment of Froneman J, or
that in the judgment penned by Madlanga J
– is to be
preferred.  That is an important issue, on which we have had
the benefit neither of the parties’
views, nor those of the
High Court.  As this is not a case where the question whether
the licence is property has any impact
on the outcome, it is not an
appropriate matter for this Court to pronounce authoritatively on
which of the two approaches to
determining when a licence
constitutes property set out in the judgments comprising the
majority in
Shoprite
, ought to be preferred.  This must
be left for a more apposite case.
[52]
Compare
Shoprite
above n 49 at paras 74-6, where
Froneman J held that grocer’s wine licences had conferred on
their holders certain legal
entitlements, including the ability to
sell wine and groceries on the same premises.  The relevant
regulatory changes, providing
that liquor could only be sold from
premises selling liquor exclusively, meant that holders of grocer’s
wine licences in
the position of Shoprite lost a legal entitlement.
Froneman J held that the fact that a legal entitlement was
lost meant
that there was a deprivation under section 25(1).
[53]
Affordable Medicines Trust v Minister of
Health
[2005] ZACC 3
;
2006 (3) SA 247
(CC);
2005 (6) BCLR 529
(CC) (
Affordable
Medicines
) at para 63.
[54]
Id at para 92.
[55]
Id at para 93.
[56]
Id at para 69.
[57]
Id at para 71.
[58]
S v Lawrence, S v Negal, S v Solberg
[1997] ZACC 11
;
1997 (4) SA 1176
(CC);
1997 (10) BCLR 1348
(CC)
(
Lawrence
).
[59]
Id at para 41.
[60]
The Court in
Van
Rensburg v South African Post Office
Ltd
1998
(10) BCLR 1307
(E) applied a reasonableness test.  This Court
in
Affordable Medicines
above
n 53 discusses this finding at para 81:

If
the Court intended to adopt reasonableness as a standard for
reviewing legislation that regulates the practice of a profession,
I
am, with respect, unable to agree.”
[61]
Affordable Medicines
above
n 53 at para 86.
[62]
Id.
[63]
Lawrence
above n
58 at para 44.
[64]
Biowatch Trust v Registrar, Genetic Resources
[2009] ZACC 14
;
2009 (6) SA 232
(CC);
2009 (10) BCLR 1014
(CC)
(
Biowatch
)
.