Case Note: Golden Core Trade and Invest (Pty) Ltd v Merafong City Local Municipality and Another (CCT 296/23) [2025] ZACC 27 (15 December 2025)

Case Note: Golden Core Trade and Invest (Pty) Ltd v Merafong City Local Municipality and Another (CCT 296/23) [2025] ZACC 27 (15 December 2025)

KEY FINDINGS

  • An unreviewed appeal decision by the Minister renders all subsequent municipal tariffs premised on the same impugned tariff determination unlawful.
  • Section 8(9) of the WSA constitutes a constitutionally permissible regulation of municipal tariff-setting powers.

Introduction

On 15 December 2025, the Constitutional Court handed down judgment in an application for leave to appeal and cross-appeal from the Supreme Court of Appeal (“SCA”). The applicant, Golden Core Trade and Invest (Pty) Ltd (“Golden Core”) (substituted for AngloGold Ashanti Limited (“AGA”)) appealed the SCA judgment and order insofar as it restricted the declaration of unlawfulness in respect of surcharges on the supply of water to one financial year. The first respondent, Merafong City Local Municipality (“Merafong”), cross-appealed the court a quo’s refusal to consider a constitutional challenge to section 8(9) of the Water Services Act 108 of 1997 (“WSA”).

Background

AGA’s Tautona, Mponeng and Savuka mines, located within Merafong’s jurisdiction, have produced gold since 1958, receiving bulk potable water from Rand Water for mining operations. When the WSA came into effect in 1997, all users of water services who received water from a source other than one named by a water services authority were required to apply for approval to continue receiving such supply. It defined “water services authority” as any municipality responsible for ensuring access to water services and “water services provider” as any person who provides water services to consumers or another water services institution, excluding a water services intermediary.

Merafong informed AGA that it had become a water services authority and insisted that AGA apply for approval in terms of the WSA. AGA duly applied and sought permission to continue receiving water from Rand Water at the applicable Rand Water tariffs.

Merafong granted permission that Rand Water supply water but set significantly higher tariffs than those of Rand Water for water to be provided to the mines (“the Merafong Decision”).

AGA appealed the Merafong Decision. Its main complaints were that:

  • Merafong’s tariffs were excessively higher than Rand Water’s while adding no value to or assuming any responsibility for such water supply; and
  • Merafong failed to recognise AGA’s role as a water services provider or consider its economic position.

AGA successfully appealed the Merafong Decision and the Minister:

  • overturned the Merafong Decision;
  • held that the premium was unreasonable because Merafong provided no value for the services given to AGA by Rand Water and water for industrial use is not classified as a water supply service under the WSA; and
  • directed that the parties negotiate a reasonable tariff for domestic use of water,

(“the Minister’s Decision”).

Merafong, AGA and Rand Water held several meetings, but no agreement was reached. While Merafong continued to enforce the excessive tariffs, AGA withheld the contested portion of the tariffs. Merafong then demanded that AGA pay the arrears under threat of water supply cuts which would significantly impact mining operations at the Tautona, Mponeng and Savuka mines. AGA paid the disputes surcharges under protest and without prejudice to its rights.

Litigation History

High Court I, SCA I and Constitutional Court I

AGA applied to the High Court for an order to compel Merafong to comply with the Minister’s Decision. Merafong filed a counter-application and contended that the WSA does not confer authority on the Minister to interfere with the tariff-setting powers of water services providers and, alternatively, that section 8(9) is unconstitutional. The High Court upheld AGA’s application, dismissed Merafong’s counter-application and found that (a) AGA legitimately applied to Merafong in terms of the WSA and (b) the Minister lawfully exercised her powers under the WSA.

The SCA upheld the High Court I decision on appeal and held that Merafong should have judicially reviewed the Minister’s Decision. By simply ignoring it, Merafong violated the principle of legality.

The Constitutional Court disagreed with the approach in SCA I and held that Merafong should have either accepted the Minister’s Decision as valid or challenged it in court by judicial review. Ignoring it and continuing to charge AGA the excessive tariffs amounted to self-help. The matter was remitted to the High Court.

High Court II

Golden Core replaced AGA as the applicant when it bought AGA’s mining operations. The High Court held that that the Minister’s Decision was about the excessive tariffs and not section 6 and 7 of the WSA. On this basis, the High Court held that the Minister’s Decision was ultra vires of the Minister’s powers under the WSA. It dismissed Golden Core’s review application of the Merafong Decision on the basis that it is not administrative action under the Promotion of Administrative Justice Act, 2000. On the principle of legality, it held that Golden Core could not explain the delay in launching the review and that Merafong was nevertheless empowered to impose the excessive tariffs.

Supreme Court of Appeal II

The SCA held that Merafong ought to have challenged the Minister’s Decision instead of merely ignoring it as administrative action (i.e. the Minister’s Decision) remains binding until set aside. The SCA held that Merafong abused its authority in threatening to disconnect AGA’s water supply if it failed to pay the excessive tariffs and that there was no proper explanation for the failure to review the Minister’s Decision. The SCA criticised Merafong’s approach in imposing excessive tariffs notwithstanding that the Minister’s Decision remained unchallenged. The SCA criticised the approach in High Court II and held that the Minister’s Decision was restricted to the excessive tariffs during a limited period and that the Minister did not impact tariffs imposed after the Minister’s Decision was made as the Minister does not have a “precedent-setting” power. On this basis, the SCA only held that the excessive tariffs during the 2004/2005 period was unlawful (“the Time-Restricted Order”).

Current Issues and Findings

The Constitutional Court considered, inter alia, the following issues:

  • Whether the Time-Restricted Order should be upheld; and
  • Whether the constitutional issue in relation to section 8(9) of the WSA should be determined and if so whether section 8(9) is unconstitutional.

The Time-Restricted Order

Golden Core sought an order that the Time-Restricted Order should not be limited to one year but that it should extend to all subsequent tariffs imposed after the 2004/2005 period.

The Time-Restricted Order was premised on its interpretation of the scope of the Minister’s appellate powers under the WSA. The SCA held that the original tariff determination for the 2004/2005 financial year sought to levy surcharges for industrial water use in excess of Rand Water’s charges and that the Minister’s Decision rendered those excess charges unlawful.

The Minister found that Merafong acted unreasonably by imposing surcharges where it added no value and that surcharges could not lawfully be imposed on water for industrial use. In the absence of a review and setting aside of the Minister’s decision, the unlawfulness identified in the original tariff determination necessarily tainted the subsequent tariffs which were all premised on the same tariff structure. While Merafong possessed a constitutional power to levy surcharges, there was no evidence that it added value or that the later surcharges were reasonable. The SCA’s limited declaration of invalidity thus permitted Merafong to retain revenue derived from ongoing statutory and constitutional breaches after the 2004/2005 financial year.

The reasoning in City of Tshwane Metropolitan Municipality v Lombardy Development (Pty) Ltd [2018] 3 All SA 605 (SCA) supports this conclusion. There, the SCA held that compliance with prescribed statutory procedures is a prerequisite for the lawful exercise of a municipality’s power to levy charges and that each levy imposed pursuant to a defective foundational decision is invalid. The same logic applies here: the Minister’s Decision conclusively determined that Merafong’s surcharges were unlawful because no value was added. The failure of subsequent negotiations did not cure that unlawfulness or displace the Minister’s Decision.

Consistent with Oudekraal Estates (Pty) Ltd v City of Cape Town [2004] 3 All SA 1 (SCA), Merafong was required to review and set aside the Minister’s decision before it could lawfully continue charging the excessive tariffs. Each year’s tariff built on the foundation of the original tariff determination and absent the setting aside of the Minister’s Decision, Merafong could not lawfully re-impose substantially the same surcharges in consecutive years. Although the SCA acknowledged that an administrative act remains valid until set aside, it failed to apply that principle coherently to the consecutive tariff years.

The Oudekraal principle applies whenever an extant administrative act is disregarded without being set aside. The rule of law precludes organs of state from bypassing proper legal processes or engaging in self-help. The SCA’s approach in limiting the Minister’s Decision to the life of the 2004/2005 tariffs permits Merafong to perpetuate unlawful conduct on an identical basis year after year, notwithstanding the unchanged factual premise that Merafong added no value. This undermines legal certainty, invites repeated litigation and allows Merafong to retain a substantial benefit from unlawful conduct extending over more than a decade.

In these circumstances, the Constitutional Court held that the SCA erred in confining the consequences of Merafong’s unlawful conduct to a single financial year.

Constitutionality of section 8(9) of the WSA

The constitutional challenge to section 8(9) of the WSA concerns the respective roles and functions of local and national government in the provision and regulation of water services.

Municipalities have executive authority over local government matters, including potable water supply and domestic wastewater and sewerage disposal systems, subject to national legislation. The Constitution nevertheless confers on national government the legislative and executive authority to ensure the effective performance by municipalities of their functions. Municipal powers to impose surcharges and levies may be regulated by national legislation, and national and provincial governments are expressly empowered to oversee municipal planning and service delivery.

Although municipal powers are constitutionally entrenched, they are not absolute. Limitations are permissible where they are constitutionally authorised and do not unjustifiably interfere with the role and functioning of local government. Where there is tension between spheres of government, the issue must be assessed within the broader constitutional framework of cooperative governance.

The proper enquiry is into the purpose of the legislation. The WSA establishes a national framework for the provision and regulation of water services. Its objectives include ensuring efficient, equitable and sustainable water services, promoting consumer interests, setting national norms and standards including tariff norms and confirming national government’s role as custodian of the country’s water resources.

National government’s custodial role is central to the statutory scheme. Within this framework, the Minister is required to monitor compliance with tariff norms and is empowered to intervene on appeal at the instance of a consumer.

Section 8(4) confers a right of appeal to the Minister against decisions of a water services authority. Section 8(9) gives effect to that right by empowering the Minister to confirm, vary or overturn the decision on appeal. These powers do not constitute routine tariff approval but serve to ensure compliance with national norms and standards and to protect consumers from unreasonable charges.

The Constitutional Court held that section 8(9) is constitutional because it gives practical effect to the statutory right of appeal created by the WSA and ensures enforceable compliance with national norms and standards for water tariffs. By enabling the Minister to confirm, vary or overturn municipal decisions on appeal, section 8(9) regulates municipal powers in a manner expressly contemplated by the Constitution and does not unjustifiably interfere with municipal autonomy.

Order

The SCA II order was set aside and replaced with an order dismissing Merafong’s review application. The Constitutional Court declared that all the surcharges imposed by Merafong on water supplied to Golden Core / AGA for both industrial and domestic use from 1 July 2004 were unlawful to the extent that they exceeded Rand Water’s tariffs and contravened the Minister’s Decision. Notably this extended beyond the 2004/2005 period.

The parties were directed to negotiate reasonable surcharges, if any, for domestic water use and to agree on repayment or set-off within six months, failing which the matter must proceed to mediation and, if necessary, determination by the High Court. Merafong was ordered to pay interest at the prescribed rate from 1 July 2004.