Sunday Times

Water bill turns tap on mine bosses


● The department of water & sanitation could be on a collision course with mining firms and municipali­ties over proposed legislatio­n that provides for sentences of up to 10 years in jail or a fine of R10m for company directors or municipal managers who contravene water-use regulation­s.

The National Water Amendment Bill, gazetted by minister Senzo Mchunu late last year, provides for the prosecutio­n of company directors, municipal managers and others who manage bulk water supply.

Among other things, the bill makes liable for prosecutio­n any person who was a director of a company or a municipal manager at the time that a company or municipali­ty contravene­d water-use licence conditions — even if the person is no longer in the employ of the entity.

Legal experts said liability for noncomplia­nce with licence conditions was presently regulated under the National Environmen­tal Management Act (Nema). Under that law, directors and municipal managers could argue in their defence that they took reasonable steps to avoid breaking the law. However, the new amendment doesn’t recognise that argument.

The lawyers warn the bill could lead to a mass departure of senior officials in the water management sector.

Garyn Rapson and Sabeeha Loonat, partner and associate at Webber Wentzel, said company directors could face severe consequenc­es for transgress­ions.

“If investigat­ions result in a successful prosecutio­n, they [directors] can then either face jail or significan­t criminal fines. The amendment bill elaborates the types of fines that can be imposed on these directors, which are significan­t fines, such as recovering the amount of loss or damage to rehabilita­te or prevent damage.

“The National Prosecutin­g Authority does not need to prove that there was any intention or negligence on the part of that director. So, if a director was to be prosecuted under the proposed director liability provision, it becomes a lot easier to get a prosecutio­n through.”

Offences that could result in mining directors facing prosecutio­n include operating without a water-use licence; not complying with the conditions of a licence; or failing to provide access to any books, accounts, documents or assets when required to do so.

Rapson and Loonat said under Nema, directors could only be held liable for schedule 3 offences, which pertain to the intentiona­l or negligent pollution of a water resource.

They said at first glance it looked like the department’s intention had been to hold municipal managers to account, but the wording meant company directors were also in the firing line.

“The proposed director liability provisions under the amendment bill speak to

directors and municipal managers. So, it could have been the intention of the department to bring in these amendments to hold these municipal managers liable. However, they have also added directors which goes beyond what Nema allows.”

Mandy Hattingh, a senior associate at legal firm Herbert Smith Freehills, said on Friday that the director liability provisions weren’t new but already contained in Nema under section 34(7) which provides for director criminal liability in the case of offences listed under schedule 3 and committed during a director’s tenure.

“It is arguable that both section 34(7) of Nema and the proposed section 156A (1) of the [National Water Amendment] Bill violate a director’s constituti­onally enshrined right to be presumed innocent until proven guilty. Neverthele­ss, this provision currently still applies under Nema and has not been tested in court,” she said.

Hattingh added that in its current form, certain provisions of the proposed bill could be open to challenge.

She said the director liability clause could discourage new entrants to the market, and also discourage talent from remaining in director positions at existing operations.

“This is a reality that South Africa can illafford, especially at a time when its GDP is shrinking, and mining’s contributi­on to that GDP is also declining,” she added.

Department spokespers­on Wisane Mavasa confirmed that the proposed amendment was intended to make provision for the personal liability of directors of a business and municipal managers at the time the offence was committed.

“In most instances where companies or municipali­ties are charged for offences the accounting officer as the representa­tive of the entity the matter normally results in the company or municipali­ty reaching a plea and sentence agreement with no further personal liability of the managers involved,” she said.

“This provision aims to strengthen individual accountabi­lity throughout the process, particular­ly when direct intent or negligence can be proven.”

Interested parties had until last month to comment on the amendments.

Last year the department was forced to withdraw draft regulation­s that linked water-use licences for farmers to a minimum level of black shareholdi­ng.

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