Ex Parte President of the Republic of South Africa: In re Constitutionality of the Liquor Bill (CCT12/99) [1999] ZACC 15; 2000(1) SA 732; 2000 (1) BCLR 1 (11 November 1999)

[2] The Liquor Bill was introduced in the National Assembly on 31 August 1998. It passed through various legislative stages in terms of section 76(1) of the Constitution before Parliament approved it on 2 November 1998. When the Bill was sent to the President for his assent, he declined to grant it. Instead, because he had reservations about its constitutionality, he referred it back to the National Assembly on 22 January 1999 for reconsideration. On 3 March 1999, the National Assembly resolved that “the House, having reconsidered the Liquor Bill [B 131B-98], returns it to the President”. No amendments had been effected. On 8 March 1999, the President referred it to this Court for a decision on its constitutionality. In doing so, he invoked his power pursuant to section 84(2)(c) of the Constitution, which provides that the President is responsible for “referring a Bill to the Constitutional Court for a decision on the Bill’s constitutionality”.¹

[3] On 19 March 1999 the President of this Court issued directions, attaching the President’s notice of referral, and inviting the President himself and the government of the Republic of South Africa, any political party represented in the National Assembly, any provincial delegation represented in the National Council of Provinces and any provincial government to make representations to the Court concerning the constitutionality of the Bill, and requiring any party wishing to do so to give notice of its intention, and to indicate whether it wished to lead evidence and if so the purpose and relevance of that evidence.

[4] In response, the Western Cape government indicated that it wished to be represented and to place before the Court affidavit evidence of the regulation of liquor and liquor licensing in the Western Cape, in South Africa and in comparable jurisdictions, “showing that it is not necessary to have national legislation on liquor licences for any of the purposes set out in section 44(2)”.² The Minister of Trade and Industry wished to supply evidence of the background to and history of the legislation and “why it was necessary for Parliament to legislate on these matters in the light of the requirements of section 44(2)”.

[5] Under further directions issued by the President of this Court, the Western Cape government lodged an affidavit dealing with its objection to the Bill. Thereafter, the Minister of Trade and Industry, as representative of the government of the Republic of South Africa (“the Minister”), submitted an affidavit, in response to which the government of the Western Cape submitted a replying affidavit. Both the Western Cape government and the Minister were represented at the hearing.

Presidential Referral Under Section 79

[6] Our decision requires us to consider first what the referral to this Court by the President for a decision on a Bill’s constitutionality entails. The Constitution, which subjects all legislation to review for its constitutionality, and makes any law inconsistent with it invalid,³ embodies three routes to judicial consideration of the constitutionality of legislation passed by Parliament. One is a challenge by an interested party in a competent Court under one or more provisions of the Constitution.⁴ Another is an application by at least one third of the members of the National Assembly to the Constitutional Court for an order declaring all or part of an Act of Parliament unconstitutional.⁵ The third is that invoked in the present case, namely referral by the President before a Bill becomes a statute.⁶

[7] The procedure the President invoked is not without parallel in comparable systems, though in the United States,⁷ the United Kingdom,⁸ Australia⁹, New Zealand¹⁰ and Germany,¹¹ no pre-enactment judicial procedure for testing statutory or constitutional validity exists. Comparable procedures do exist in other constitutions, though none is quite like our own. In Ireland, the Constitution¹² provides a procedure for a pre-enactment reference of certain bills to the Supreme Court by the President “for a decision” whether the Bill or any specified provision is “repugnant” to the Constitution.¹³ The French Constitution of 1958 provides for the compulsory referral of “organic laws” (that is, laws on the judiciary, the composition of parliament, finance and the procedure of the Conseil Constitutionnel), before they are promulgated, to the Conseil Constitutionnel¹⁴ “which shall decide on their compatibility with the Constitution”. In addition, other laws may be submitted before promulgation to the Conseil Constitutionnel by the President of the Republic, the Prime Minister, the President of the National Assembly, the President of the Senate, or sixty deputies or senators. A provision that the Conseil Constitutionnel declares unconstitutional “may neither be promulgated nor applied”. The French pre-promulgation procedure has a different focus and effect to that of South Africa, since no French law may after promulgation be challenged before the Conseil Constitutionnel for its constitutionality, although certain challenges may be brought before the Conseil d’Etat.¹⁵

In Canada, the Supreme Court Act imposes an obligation on the Supreme Court to give advisory opinions on the constitutionality of a federal law or proposed federal law.¹⁶ According to Hogg —

“Sometimes questions of law are referred in advance of the drafting of the legislation; sometimes draft legislation is referred before it is enacted; sometimes a statute is referred shortly after its enactment; often a statute is referred after several private proceedings challenging its constitutionality promise a prolonged period of uncertainty as the litigation slowly works its way up the provincial or federal court system. The reference procedure enables an early resolution of the constitutional doubt.”¹⁷

[8] In India, similarly to South Africa, the President may in respect of Bills withhold assent, and return them to Parliament for reconsideration in whole or part, together with recommendations. If the Bill is passed again with or without amendments, and presented to the President, the President must assent to it. However, the Indian Constitution empowers the President to consult the Supreme Court for its “opinion” about a question of law or fact “of such a nature and of such public importance that it is expedient to obtain the opinion of the Supreme Court upon it”.¹⁸ In In Re The Kerala Education Bill, 1957,¹⁹ Das CJ stated that:

“It is for the President to determine what questions should be referred and if he does not entertain any serious doubt on the other provisions it is not for any party to say that doubts arise also out of them and we cannot go beyond the reference and discuss those problems.”

[9] The procedure the President must follow when referring a Bill to this Court is set out in section 79.²⁰ In terms of section 79(1) the President must either assent to and sign a Bill passed by Parliament, or, if he has reservations about its constitutionality, refer it back to the National Assembly for reconsideration. Section 79(4) then provides:

“If, after reconsideration, a Bill fully accommodates the President’s reservations, the President must assent to and sign the Bill; if not, the President must either —

(a) assent to and sign the Bill; or

(b) refer it to the Constitutional Court for a decision on its constitutionality.”²¹

[10] Three related questions require clarification in the light of the President’s invocation of this procedure:

(a) Is the Court required to consider only the reservations the President has expressed, or can and should it direct its attention more widely?

(b) Should the Court in determining the Bill’s “constitutionality” examine its every provision so as to certify conclusively that in every part it accords with the Constitution?

(c) Does the Court’s finding regarding the Bill’s constitutionality or otherwise preclude or restrict later constitutional adjudication regarding its provisions once enacted?

[11] Section 79(5) requires a decision from this Court as to whether “the Bill is constitutional”. In terms of section 167(4)(b), only the Constitutional Court may decide on the constitutionality of any parliamentary Bill, but may do so only in the circumstances anticipated in section 79.²² The general powers of the courts in dealing with constitutional matters are set out in section 172.²³ That section requires that a Court when deciding a constitutional matter within its power “must declare that any law or conduct that is inconsistent with the Constitution is invalid to the extent of its inconsistency”. Since the Bill has not yet been enacted, it is clearly not a “law” as envisaged by section 172(1). Moreover, since the Bill as yet lacks legal force, the remedy section 172 envisages — a declaration of invalidity — is plainly inappropriate. It follows that the provisions of section 172 are not directly helpful in guiding the Court as to its role in the section 79 referral procedure.

[12] The terms of section 79 contrast with those of section 80, which empowers members of the National Assembly to seek an order that “all or part” of an Act of Parliament is unconstitutional. The contrasting wording of section 79 may seem to suggest that this Court is obliged to audit the whole of a Bill so as to determine its constitutionality comprehensively and conclusively. But this impression is countered by the fact that section 79 clearly envisages that the President’s “reservations” must be specified when he refers a Bill back to Parliament. Section 79(3)(a) requires that the National Council of Provinces participate in the reconsideration of the Bill if the President’s reservations are of a specific kind — namely if they relate to “a procedural matter that involves the Council”; while section 79(4) requires the President to assent to and sign the Bill if after reconsideration it “fully accommodates” his reservations. Both provisions entail that the President must itemise his reservations in relation to a Bill.

[13] It is moreover clear that the President is empowered to refer a matter to this Court in terms of section 79 only if his reservations concerning the constitutionality of the Bill are not fully accommodated by Parliament. If the President has no reservations concerning the constitutionality of the Bill, or if his reservations have been fully accommodated by Parliament, the referral would be incompetent. In the circumstances, the presidential power is limited under section 79(4)(b) to the power to refer a Bill to the Constitutional Court “for a decision on its constitutionality” with respect to his reservations. Section 79(5) must thus be read as subject to a comparable limitation, empowering the Court to make a decision regarding the Bill’s constitutionality only in relation to the President’s reservations.

[14] This makes it clear, in answer to the first question posed in para 11 above, that the Court considers only the President’s reservations.²⁴ Whether it may ever be appropriate for the Court upon a presidential referral to consider other provisions which are manifestly unconstitutional, but which are not included in the President’s reservations, need not be decided now.

[15] By corollary (as Mr Wallis, who appeared with Mr Govindsamy for the Minister, submitted) section 79 does not entail a “mini-certification” process. The specificity required of the President in spelling out his reservations plainly negatives the notion that this Court’s function is to determine, once and for all, whether a Bill accords in its entirety with the Constitution. What section 79 entails is that in deciding on the constitutionality of the Bill this Court must in the first instance consider the reservations the President specified when he invoked the section 79 procedure. This contrasts with the function the interim Constitution²⁵ required this Court to fulfil at the time of the adoption of the 1996 Constitution. There its task was to render a “final and binding” decision on whether “all” the provisions of the 1996 Constitution conformed with the Constitutional Principles enumerated in the interim Constitution.²⁶ The answer to the second question posed in para 11 above is therefore No.

[16] However, Mr Wallis also submitted that the President could invoke section 79 only where his reservations about a Bill went to its constitutionality “as a whole”. Mr Wallis accordingly contended that this Court, in deciding on a Bill’s constitutionality, should confine itself to questions which would result, were the Bill to be enacted, in the whole of the legislation being struck down as unconstitutional. This seems to me for two reasons to be mistaken. First, if correct, it places a fetter on the President’s powers of referral under section 79 which the provision in my view does not entail. The condition for the invocation of section 79 is that the President must have “reservations about the constitutionality” of a Bill. The provision does not state that the reservations must relate to the Bill’s constitutionality “as a whole”, and to read it as if it did would in my view unduly attenuate the duty resting upon the President in exercising power under the Constitution to scrutinise the constitutionality of legislation placed before him for assent and signature. Section 79 seems to me clearly to empower the President to refer a Bill even if his reservations relate to only a single provision in it. If this Court were to hold that any portion of the Bill relating to the President’s reservations is unconstitutional, it must follow that the whole Bill cannot be said to be “constitutional” under section 79(5).

[17] Second and equally important, the argument entails that this Court would be obliged to declare a Bill “constitutional” in terms of section 79(5) even if it concluded that material provisions in it were unconstitutional, provided only that these did not vitiate the Bill as a whole. That cannot be correct. What the President refers to this Court under section 79 is legislation in nascent form. Given that the powers accorded by section 172(1) are inapplicable, in effect this Court’s decision on the Bill’s constitutionality constitutes a finding on the President’s reservations. That decision, without being able to be or purporting to be comprehensive, must clearly encompass any provisions the Court scrutinises in fulfilment of its remit and finds unconstitutional. Section 79(5) obliges the President to sign the Bill only if this Court decides that the Bill “is constitutional”. If it withholds such a finding — whether because the legislation is unconstitutional as whole, or only in part — the President may not sign the Bill.

[18] There is however more to section 79 than only the President’s reservations. The provision envisages a series of steps, initiated by the President, in which Parliament is itself an active participant. The President can refer a Bill to this Court only after Parliament has unavailingly reconsidered it in the light of his reservations. The attitude of the National Assembly (or, where appropriate, Parliament) to the Bill’s constitutionality is therefore also a material factor in this Court’s determination, and it is for this reason that this Court’s rules permit all political parties represented in Parliament as of right to make written submissions relevant to the determination of the Bill’s constitutionality. It follows that in deciding on the Bill’s constitutionality the Court must consider the reservations of the President as well as any submissions relevant to them by any party represented in Parliament.

[19] The referral procedure in my view requires this Court to give a decision in terms of section 79(5) relating to the President’s reservations, and the submissions regarding those reservations made by parties represented in the National Assembly, and thereby to decide on a Bill’s constitutionality. However, regarding the third question posed in paragraph 11 above, even if this Court does decide that the Bill is constitutional, supervening constitutional challenges after it has been enacted are not excluded, save to the extent that this Court has in deciding the questions the President placed before it in the section 79 proceedings already determined them. In this regard, the well-established principle that a Court of final appeal will not depart from its previous decisions unless they are shown to have been clearly wrong has obvious relevance.²⁷

The President’s Referral

[20] The President stated the basis of his referral thus:

“The long title of the Bill summarises the objectives of the Bill as follows:

‘To maintain economic unity and essential national standards in the liquor trade and industry; to regulate the manufacture, distribution and sale of liquor on a uniform basis; to facilitate the entry and empowerment of new entrants into the liquor trade; and to address and reduce the economic and social costs of excessive alcohol consumption; and to provide for matters connected therewith.’

I have reservations about the Constitutionality of the Bill to the extent that the Bill deals with the registration for the manufacture, wholesale distribution and retail sale of liquor. The relevant provisions which make it clear that the Bill intends to establish a framework for the registration of the manufacture, wholesale distribution and retail sale of liquor are inter alia clauses 26; 27(a), (b), (c) and (d); 29; 30; 32; 33; 34 and 35. There are other provisions which relate generally to the process of registration or to the sale of liquor. To the extent that they apply to the registration for the manufacture, wholesale distribution and retail sale of liquor they are similarly subject to my reservation as set out below.

Part A of Schedule 5 of the Constitution, 1996 lists the functional areas of exclusive provincial legislative competence. The fifth item thereof is ‘liquor licences’. The implication of the inclusion of an item, or more properly, a functional area in Schedule 5 is that Parliament may, in terms of section 44(2) of the Constitution, 1996 only ‘intervene by passing legislation in accordance with section 76(1), with regard to a matter falling within a functional area listed in Schedule 5, when it is necessary -

(a) ...

(b) to maintain economic unity;

(d) to establish minimum standards required for the rendering of services; or

(e) to prevent unreasonable action taken by a province which is prejudicial to the interest of another province or to the country as a whole.’

If the legislation is not so necessary then Parliament may not enact legislation dealing with matters falling within a functional area listed in Schedule 5. The question as to whether this legislation is “necessary” within the meaning of this section and for the purpose set out in section 44(2)(b) - (e) is a question I am unable to answer with certainty even though I am satisfied that the purposes the legislation seeks to achieve are commendable. Whether the particular requirements set out in section 44(2) have been met has proved difficult to determine relying as they do on an assessment of legal, factual and policy considerations and in respect of which there are no constitutional or jurisprudential guidelines.

The implementation of this legislation without a clear indication of its constitutionality may be chaotic and could lead, not only to a legislative vacuum if the framework should be set aside, but also to uncertainty in respect of any actions already taken thereunder including any registrations duly granted. I am accordingly referring this matter to the Constitutional Court for a decision on its constitutionality.

In referring this matter to the Constitutional Court I am acting in my capacity as Head of State in terms of section 84(2)(c). I am accordingly taking the liberty of serving copies of this notice of referral on the Government, who will be represented by the Minister of Trade and Industry, on the Speaker of the National Assembly, on the Chairperson of the National Council of Provinces and on the Government of the Province of the Western Cape on account of its intention, duly communicated to me, to make representations contesting the constitutionality of the Bill. I am however placing the matter before you to consider how these and other interested parties may join these proceedings when the court duly considers the constitutionality of the Bill.”

The Procedural Challenge

[21] The Western Cape government challenges the manner in which Parliament adopted the Liquor Bill. As can be seen from the terms of the President’s referral, the issue he had in mind was whether the Bill was constitutionally justified under section 44(2). Questions regarding the Bill’s constitutionality were first raised, by the Western Cape government, in early 1998. It is clear that from the outset the constitutional issue present in the minds of those dealing with the Bill was not whether it set up a system of liquor licences — for they seem to have accepted that it did — but whether there was justification under the Constitution’s “override” provisions for Parliament to intervene in this area of exclusive provincial competence. The measure was introduced into Parliament and dealt with as a “Bill affecting provinces” in terms of section 76 read with section 44(1)(b)(ii) and section 44(2) of the Constitution. Submissions on the question whether the invocation of the “override” was justified were advanced on behalf of the Western Cape government during the legislative process. The President referred the Bill back to Parliament on 22 January 1999 on the basis not that there was any specific provision raising constitutional questions, but that the regulatory framework the Bill sought to introduce “deals with liquor licensing in the provinces which the Bill is entitled to do only if it is necessary” in terms of section 44(2). When the National Assembly reconsidered the Bill, the Minister of Trade and Industry defended the measure on the basis of the “national legislature’s legitimate right to intervene in order to preserve economic unity and to establish national standards”. The President subsequently referred it to this Court on the identical basis. Indeed, in his notice in response to the directions of the President of this Court intimating that he wished to submit evidence, the Minister himself alludes only to the “override” issue. The founding affidavit of the Western Cape government accordingly alludes solely to the competency question.

[22] Only in the Minister’s answering affidavit was the contention advanced for the first time that it was incorrect to characterise the Liquor Bill as a liquor licensing measure, that the matters it regulated fell in the first place within the national legislative competence, and that to the extent that it dealt with liquor licences this was incidental to its pursuit of national competencies. It was in response to this new contention that the Western Cape government in its written argument raised the manner in which the Bill passed through Parliament, averring that if the Bill was not legislation with regard to a functional area listed in Part A of schedule 5 of the Constitution, it was invalid since it was enacted in accordance with the procedure prescribed by section 76(1). Although the procedural issue was not encompassed by the President’s reservations, we are prepared to assume that the issue is relevant to those reservations.

[23] Chapter 4 of the Constitution, which establishes and regulates Parliament, specifies how statutes must be enacted by Parliament. The relevant provisions comprise the enactment of all Bills,²⁸ Bills amending the Constitution,²⁹ ordinary Bills not affecting provinces,³⁰ ordinary Bills affecting provinces³¹ and money Bills.³² In terms of section 76(4)(a), a Bill must be dealt with in accordance with the procedure in sub-section (1) amongst others if it provides for legislation “envisaged in section 44(2)”.

[24] There are three principal differences between the procedure stipulated in section 75 for ordinary Bills not affecting provinces and that in section 76. First, the latter gives more weight to the position of the National Council of Provinces. This occurs chiefly through the invocation of the Mediation Committee.³³ If one House rejects a Bill passed by the other, or if one House refuses to accept a Bill as amended by the other, the legislation must be referred to the Mediation Committee, which consists of nine members of the National Assembly and one delegate from each provincial delegation in the NCOP. Second, if the NCOP raises objections to a version of the Bill approved by the Mediation Committee in circumstances where the Bill was introduced in the National Assembly, the Bill lapses unless the National Assembly passes it again with a two-thirds majority. Third, when the NCOP votes on a question under section 75, the provisions of section 65 — in terms of which each province has a single vote in the NCOP “cast on behalf of the province by the head of its delegation”,³⁴ and in terms of which questions before the NCOP are “agreed when at least five provinces vote in favour of the question”³⁵ — do not apply. Instead, in terms of section 75(2), each delegate in a provincial delegation has one vote and the question is decided by a majority of the votes cast (the presiding delegate having a casting vote), subject to a quorum of one third of the delegates.

[25] It would be formalistic in the extreme to hold a Bill invalid on the ground that those steering it through Parliament erred in good faith in assuming that it was required to be dealt with under the section 76 procedure, when the only consequence of their error was to give the NCOP more weight, and to make passage of the Bill by the National Assembly in the event of inter-cameral disputes more difficult. It is hard to see how a challenge based on the first two differences between the relevant parliamentary procedures can invalidate the enactment of a statute. The third is however of import, since whether a provincial delegation votes corporately through its head of delegation, as prescribed by section 65, or individually by each member casting a vote, as prescribed by section 75(2), may in defined circumstances be determinative as to whether the NCOP passes a Bill.

[26] However, it is in my view unnecessary to decide this question, since the contention of Mr Trengove (who appeared with Mr Breitenbach on behalf of the Western Cape government) that if the Bill was not legislation of the kind envisaged in section 44(2) then it was invalid since it should have been enacted by the section 75(1) procedure, seems to me to leave out of account the provisions of section 76(3). This sub-section requires that a Bill must be dealt with under the procedure established by either section 76(1) or section 76(2) amongst others, “if it falls within a functional area listed in Schedule 4”. It must be borne in mind, moreover, that section 76 is headed “Ordinary Bills affecting provinces”. This is in my view a strong textual indication that section 76(3) must be understood as requiring that any Bill whose provisions in substantial measure fall within a functional area listed in Schedule 4 be dealt with under section 76.

[27] Whatever the proper characterisation of the Bill — a question to which I return below³⁶ — it can hardly be doubted that if it does not seek to trench on the provinces’ exclusive legislative competence in respect of “liquor licences”, thereby requiring justification under section 44(2), a large number of its provisions must be characterised as falling “within a functional area listed in Schedule 4”, more particularly the concurrent national and provincial legislative competences in regard to “trade” and “industrial promotion”.

[28] Once a Bill “falls within a functional area listed in Schedule 4”, it must be dealt with not in terms of section 75, but by either the section 76(1) or the section 76(2) procedure (the differences between the latter two relate only to where the Bill is introduced). The procedural point argued on behalf of the Western Cape government therefore has no merit.

The Challenge to the Constitutionality of the Liquor Bill

[29] The Bill before us is the product of a process stretching back to 1994, when the development of policy in respect of the liquor industry became a subject of the regular meetings between the national Minister of Trade and Industry and the Members of the Executive Committees responsible for economic affairs, trade and industry in each of the provinces (known as “Min-MEC” meetings). In 1996, the Department of Trade and Industry, in collaboration with provincial departments charged with economic affairs, carried out an analysis of existing liquor legislation³⁷ and researched the state of the liquor industry. In July 1997, the national government published a Liquor Policy Document and a draft Bill.³⁸ The stated objects of the draft Bill’s provisions were to address the regulation of the production, distribution and sale of liquor through restructuring the liquor industry and to control the economic and social costs of excessive alcohol consumption. Submissions were called for, and over the next year more than 350 were received. Public hearings and workshops on the policy and the draft Bill were held both nationally and provincially. The Bill was introduced into Parliament on 31 August 1998 and, as set out earlier, submitted to the President for his assent and signature which resulted in the present adjudication.

[30] In his affidavit the Minister of Trade and Industry asserts that the objectives the Bill seeks to attain include —

(a) erasing the history of the use of liquor as an instrument of control over most of the population as part of the policy of apartheid;

(b) making the liquor industry more accessible to historically disadvantaged groups.

It is evident, and relevant to a proper understanding of these proceedings, that liquor licensing has a shameful history in this country’s racial past. The manufacture, distribution, sale and use of liquor after the Union of South Africa came into being in 1910 was regulated through the Liquor Act, 30 of 1928 and Native (Urban Areas) Act, 21 of 1923 (for Africans). These statutes together prohibited the supply and delivery to or the possession of liquor by blacks (Africans, coloureds and Indians).³⁹ Blacks were allowed to be supplied or to be in possession of liquor only for “medical purposes”;⁴⁰ for “sacramental purposes”;⁴¹ or if an exemption was granted.⁴² Umqombothi or “homebrew”,⁴³ derived from sorghum, was alone treated differently.⁴⁴ Under the authorisation of a magistrate, and in an area declared as lawful for the production, brewing, sale and consumption of umqombothi, the statute did not apply.⁴⁵ The availability of liquor, especially umqombothi for Africans, was largely determined by area of residence.⁴⁶ Thus liquor acted as a means of social control since it was an offence for a black person to be in possession of liquor outside the designated areas. What is more, it is evident from the scheme of the legislation that blacks were precluded from manufacturing liquor apart from umqombothi. The latter was to be produced in stated quantities, in certain instances only, and solely for household use. The possession of liquor by blacks contrary to these provisions was an offence.⁴⁷ The period between the early 1930s and late 1950s was characterized by harassment and invasion of privacy by police enforcing these provisions. It has been recorded that in 1957, no fewer than 16,8 per cent of convictions of Africans for all offences were for statutory liquor offences such as the illegal possession of liquor and unauthorised beer gatherings.⁴⁸ In 1960 the Malan Commission of Inquiry (into the General Distribution and Selling Prices of Alcoholic Liquor) stated in its report that, although they ran the risk of being arrested, Black people could obtain liquor as they wanted through illicit channels. But because the trade was illegal, they had to pay high prices, and the liquor often reached them in adulterated form. The commission concluded that “the application of the Liquor Act is a question of impossibility in our present era.”⁴⁹ The commission also made recommendations for changes in the law. Various amendments were consequently passed, easing some of the restrictions.⁵⁰

[31] It is against the background of this history of overt racism in the control of the manufacturing, distribution and sale of liquor that the Minister contends that the provisions of the Bill constitute a permissible exercise by Parliament of its legislative powers.

[32] The Bill is divided into seven chapters: Objects and Application; National and Provincial Structures and Functions; Registration; Terms and Conditions Applicable to Sale of Liquor; Law Enforcement and Judicial Proceedings; Regulations; and General Provisions. It creates a “national and uniform administrative and regulatory framework” for the liquor industry⁵¹ through the establishment, on the one hand, of a National Liquor Authority⁵², whose task is to approve “registration” for the manufacture and wholesale distribution of liquor⁵³, and whose decisions are subject to the National Liquor Appeal Tribunal,⁵⁴ and, on the other, of provincial liquor authorities,⁵⁵ which consider “registration” for retail liquor sale and liquor sales at special events,⁵⁶ and against whose decisions appeal lies to provincial panels of appeal.⁵⁷ Within its sphere of application,⁵⁸ the Bill prohibits on pain of criminal penalty⁵⁹ the manufacture, distribution or sale of liquor unless the manufacturer, distributor or seller is registered.⁶⁰ The Bill creates a panoply of inspection, entry and enforcement powers together with attendant offences and criminal penalties.⁶¹

[33] First, the Bill divides economic activity within the liquor industry into three categories: production (which it terms “manufacturing”), distribution, and retail sales. This division, referred to in the evidence before us as the “three-tier registration system”, entails two consequences foundational to the structures the Bill seeks to erect. First, an application for registration may be made in respect of only one of the three categories. Multiple registration is explicitly excluded,⁶² and, subject to transitional arrangements,⁶³ no person registered in one category may, except for liquor sales at special events, hold a controlling interest⁶⁴ in another person registered in a different category.⁶⁵ The Minister indicates in his affidavit that these provisions are directed at addressing the concentration of economic power in the manufacturing sector in the hands of a limited number of participants, and the inter-relationships between manufacturers (including distribution depots), wholesalers, hauliers and retailers, by limiting “the excessive vertical integration” in the industry and thus at opening opportunities for new entrants to the industry, particularly “those drawn from historically disadvantaged groups”.

[34] Second, the Bill divides responsibility for these tiers between national and provincial government by effecting a division between manufacture and distribution of liquor on the one hand and retail sale, on the other. The Bill treats manufacture and distribution of liquor as national issues, to be dealt with by the national liquor authority and appeal tribunal, whose members are appointed by the Minister. Retail sales (including sales of liquor at special events) are treated as provincial issues, and are to be dealt with by provincial liquor authorities and provincial panels of appeal. For the establishment of the latter, the Bill imposes an obligation upon the provincial legislature of each province to pass legislation.⁶⁶ The national liquor authority is charged with considering whether the statutorily prescribed requirements for registration as a wholesaler or distributor have been met, and with considering the “merits” of an application, and determining the terms and conditions applicable to the registration that conform with prescribed criteria, norms and standards pertaining, inter alia, to limiting vertical integration, encouraging diversity of ownership and facilitating the entry of new participants into the industry.⁶⁷ Provision is made for objections to applications for registration.⁶⁸ The provincial liquor authorities are obliged to consider applications for retail and special event registrations.⁶⁹ The public must be enabled to lodge objections.⁷⁰

[35] The Western Cape government launches two main attacks on the constitutionality of the Bill. These are directed on the one hand against the exclusion of provincial governments from any role in the licensing of liquor manufacturers and distributors; and, on the other, against the extent of national intervention the Bill permits in the provinces’ powers to regulate retail licensing. The Province contends that it is evident from the detail and sweep of the Bill that its main aim is comprehensively to regulate the activities of persons involved in the manufacture, wholesale distribution and retail sale of liquor, and consequently that the Bill’s system of “registration” regarding all three tiers of the industry falls squarely within the exclusive functional area of “liquor licences” in Schedule 5A. The limited and strictly enumerated powers the Bill confers on provincial organs of state, which the Bill obliges the provinces to establish, do not detract from this.

[36] The province’s complaint is in essence that the Bill exhaustively regulates the activities of persons involved in the manufacture, wholesale distribution and retail sale of liquor; and that even in the retail sphere the structures the Bill seeks to create reduce the provinces, in an area in which they would (subject to section 44(2)) have exclusive legislative and executive competence, to the role of funders and administrators. The province asserts that the Bill thereby intrudes into its area of exclusive legislative competence.

[37] The Minister for the first time in his affidavit disputes the province’s characterisation of the Bill as a liquor licensing measure. Instead, he asserts, the Bill is directed at trade, economic and competition issues on the one hand and health and social welfare issues on the other. He emphasises the national importance of having a properly structured and regulated liquor industry: “The fact that one aspect of the mechanism for implementing the Government’s national policies in this regard is a system of registration of participants in the liquor industry does not”, he contends, “mean that it constitutes an impermissible trespass upon the legislative powers of provincial legislatures.”

[38] The terms of the President’s referral, and the conflicting contentions of the Province and of the Minister, require this Court to consider the ambit of national and provincial powers conferred by the Constitution and their interrelation where, as here, the national legislature is said to encroach on an exclusive provincial competence. That requires a determination of the scope of the exclusive provincial legislative competence within the functional area of “liquor licences”, which in turn requires consideration of the national and provincial context against which that exclusive competence is afforded. Whether the Bill, or parts of it, should properly be characterised as a liquor licensing measure must also be considered.

[39] The first provision of the Constitution constitutes the Republic of South Africa as “one, sovereign, democratic state”.⁷¹ The unitarian emphasis of this provision is however not absolute, since it must be read in conjunction with the further provisions of the Constitution, which show that governmental power is not located in national entities alone. That appears particularly from section 40(1), in terms of which “government is constituted as national, provincial and local spheres of government which are distinctive, interdependent and interrelated”, and from section 43, in terms of which the legislative authority is vested in Parliament for the national sphere,⁷² in the provincial legislatures for the provincial sphere⁷³ and in municipal councils for the local sphere.⁷⁴ Section 40 is part of Chapter 3. This introduced a “new philosophy”⁷⁵ to the Constitution, namely that of cooperative government and its attendant obligations. In terms of that philosophy, all spheres of government are obliged in terms of section 40(2) to observe and adhere to the principles of cooperative government set out in Chapter 3 of the Constitution.⁷⁶

[40] Governmental power is thus at source distributed between the national, provincial and local spheres of government, each of which is subject to the Constitution, and each of which is subordinated to the constitutional obligation to respect the requirements of cooperative governance.⁷⁷ The latter include the duty, imposed equally on each sphere of government, “not [to] assume any power or function except those conferred on them in terms of the Constitution.”⁷⁸ The succeeding provisions of the Constitution must be read and understood in this light. These include particularly the chapters setting out the distribution of legislative power between the various spheres of government (Chapters 4 (Parliament), 6 (Provinces) and 7 (Local Government)), and Schedules 4 and 5, which itemise the functional areas respectively of concurrent national and provincial legislative competence, and of exclusive provincial competence. They include also section 43, which determines the location of the legislative authority of the Republic, and section 44(4). The former provision accords Parliament legislative authority “as set out in section 44”.⁷⁹ Section 44(4) in turn provides that —

“When exercising its legislative authority, Parliament is bound only by the Constitution, and must act in accordance with, and within the limits of, the Constitution.”

[41] In terms of section 44(1)(a), the national legislative authority as vested in Parliament confers on the National Assembly the power inter alia —

“(ii) to pass legislation with regard to any matter, including a matter within a functional area listed in Schedule 4, but excluding, subject to subsection (2), a matter within a functional area listed in Schedule 5”.

Sections 44(2) and 44(3) provide:

“(2) Parliament may intervene, by passing legislation in accordance with section 76 (1), with regard to a matter falling within a functional area listed in Schedule 5, when it is necessary—

(a) to maintain national security;

(b) to maintain economic unity;

(d) to establish minimum standards required for the rendering of services; or

(e) to prevent unreasonable action taken by a province which is prejudicial to the interests of another province or to the country as a whole.

(3) Legislation with regard to a matter that is reasonably necessary for, or incidental to, the effective exercise of a power concerning any matter listed in Schedule 4 is, for all purposes, legislation with regard to a matter listed in Schedule 4.”

[42] The provision vesting the provincial legislatures with legislative competence is also of significance. In terms of section 104(1), the legislative authority of a province is vested in its provincial legislature, “and confers on the provincial legislature the power” amongst others⁸⁰ to pass legislation for its province with regard to —

“(i) any matter within a functional area listed in Schedule 4;

(ii) any matter within a functional area listed in Schedule 5.”

[43] Section 104(4) provides in parallel terms to section 44(3) that provincial legislation with regard to a matter that is reasonably necessary for, or incidental to, the effective exercise of a power concerning a Schedule 4 matter is for all purposes Schedule 4 legislation. Determining the place of section 44(3) in the constitutional scheme, and in particular its relationship to the exclusive provincial legislative competences in Schedule 5, is not free from difficulty. No argument concerning it was directed to us. On one approach, section 44(3) authorises an enlarged scope of encroachment on the exclusive competences by permitting national intrusion into Schedule 5 where this is reasonably necessary for, or incidental to the effective exercise of a Schedule 4 power. On another approach, section 44(3) is not directed to the Schedule 5 competences at all, but is designed to specify the ambit of national legislation covered by section 146, which regulates conflicts between national and provincial legislation falling within a functional area listed in Schedule 4. The express allusion in section 44(3) to Schedule 4 legislation may provide support for this approach. But since (as will appear) our decision in this case does not require a determination of this issue, no more need be said about it.

[44] The provinces’ concurrent and exclusive legislative powers are set out in Schedules 4 and 5:

Schedule 4

FUNCTIONAL AREAS OF CONCURRENT NATIONAL AND

PROVINCIAL LEGISLATIVE COMPETENCE

PART A

Administration of indigenous forests

Agriculture

Airports other than international and national airports

Animal control and diseases

Casinos, racing, gambling and wagering, excluding lotteries and sports pools

Consumer protection

Cultural matters

Disaster management

Education at all levels, excluding tertiary education

Environment

Health services

Housing

Indigenous law and customary law, subject to Chapter 12 of the Constitution

Industrial promotion

Language policy and the regulation of official languages to the extent that the provisions of section 6 of the Constitution expressly confer upon the provincial legislatures legislative competence

Media services directly controlled or provided by the provincial government, subject to section 192

Nature conservation, excluding national parks, national botanical gardens and marine resources

Police to the extent that the provisions of Chapter 11 of the Constitution confer upon the provincial legislatures legislative competence

Pollution control

Population development

Property transfer fees

Provincial public enterprises in respect of the functional areas in this Schedule and Schedule 5

Public transport

Public works only in respect of the needs of provincial government departments in the discharge of their responsibilities to administer functions specifically assigned to them in terms of the Constitution or any other law

Regional planning and development

Road traffic regulation

Soil conservation

Tourism

Trade

Traditional leadership, subject to Chapter 12 of the Constitution

Urban and rural development

Vehicle licensing

Welfare services

PART B

The following local government matters to the extent set out in section 155 (6) (a) and (7):

Air pollution

Building regulations

Child care facilities

Electricity and gas reticulation

Firefighting services

Local tourism

Municipal airports

Municipal planning

Municipal health services

Municipal public transport

Municipal public works only in respect of the needs of municipalities in the discharge of their responsibilities to administer functions specifically assigned to them under this Constitution or any other law

Pontoons, ferries, jetties, piers and harbours, excluding the regulation of international and national shipping and matters related thereto

Stormwater management systems in built-up areas

Trading regulations

Water and sanitation services limited to potable water supply systems and domestic waste-water and sewage disposal systems

Schedule 5

FUNCTIONAL AREAS OF EXCLUSIVE PROVINCIAL LEGISLATIVE COMPETENCE

PART A

Abattoirs

Ambulance services

Archives other than national archives

Libraries other than national libraries

Liquor licences

Museums other than national museums

Provincial planning

Provincial cultural matters

Provincial recreation and amenities

Provincial sport

Provincial roads and traffic

Veterinary services, excluding regulation of the profession

PART B

The following local government matters to the extent set out for provinces in section 155 (6) (a) and (7):

Beaches and amusement facilities

Billboards and the display of advertisements in public places

Cemeteries, funeral parlours and crematoria

Cleansing

Control of public nuisances

Control of undertakings that sell liquor to the public

Facilities for the accommodation, care and burial of animals

Fencing and fences

Licensing of dogs

Licensing and control of undertakings that sell food to the public

Local amenities

Local sport facilities

Markets

Municipal abattoirs

Municipal parks and recreation

Municipal roads

Noise pollution

Pounds

Public places

Refuse removal, refuse dumps and solid waste disposal

Street trading

Street lighting

Traffic and parking

[45] By contrast with Schedule 5, the Constitution contains no express itemisation of the exclusive competences of the national legislature. These may be gleaned from individual provisions requiring or authorising “national legislation” regarding specific matters.⁸¹ They may also be derived by converse inference from the fact that specified concurrent and exclusive legislative competences are conferred upon the provinces, read together with the residual power of the national Parliament, in terms of section 44(1)(a)(ii), to pass legislation with regard to “any matter”. This is subject only to the exclusive competences of Schedule 5 which are in turn subordinated to the “override” provision in section 44(2). An obvious instance of exclusive national legislative competence to which the Constitution makes no express allusion is foreign affairs.

[46] The list of exclusive competences in Schedule 5 must therefore be given meaning within the context of the constitutional scheme that accords Parliament extensive power encompassing “any matter” excluding only the provincial exclusive competences. The wide ambit of the functional competences concurrently accorded the national legislature by Schedule 4 creates the potential for overlap, not merely with the provinces’ concurrent legislative powers in Schedule 4, but with their exclusive competences set out in Schedule 5. Examples of concurrent Schedule 4 competences which could overlap with Schedule 5 competences include “trade” and “liquor licences”; “environment” and “provincial planning”; “cultural matters” and “provincial cultural matters” as well as “libraries other than national libraries”; and “road traffic regulation” and “provincial roads and traffic.”

[47] Whereas the Constitution makes provision for conflicts between national and provincial legislation falling within a functional area in Schedule 4,⁸² and between national legislation and a provincial constitution,⁸³ the sole provision made for conflicts between national legislation and provincial legislation within the exclusive provincial terrain of Schedule 5 is in section 147(2), which provides that national legislation referred to in section 44(2) prevails over Schedule 5 provincial legislation. This suggests that the Constitution contemplates that Schedule 5 competences must be interpreted so as to be distinct from Schedule 4 competences, and that conflict will ordinarily arise between Schedule 5 provincial legislation and national legislation only where the national legislature is entitled to intervene under section 44(2).

[48] As pointed out in the first Certification Judgment, the introduction into the 1996 Constitution of a category of exclusive powers gave the provinces “more powers”⁸⁴ than they had enjoyed under the interim Constitution. This Court found that Parliament’s power of intervention in the field of these exclusive powers was “defined and limited” by section 44(2): “Outside that limit the exclusive provincial power remains intact and beyond the legislative competence of Parliament.”⁸⁵ This Court also held that, if regard is had to the nature of the exclusive competences in Schedule 5 and the requirements of section 44(2), “the occasion for intervention by Parliament is likely to be limited”.⁸⁶

[49] It follows that, in order to give effect to the constitutional scheme, which allows for exclusivity subject to the intervention justifiable under section 44(2), and possibly to incidental intrusion only under section 44(3),⁸⁷ the Schedule 4 functional competences should be interpreted as being distinct from, and as excluding, Schedule 5 competences. That the division could never have been contemplated as being absolute is a point to which I return in due course.

[50] The constitution-makers’ allocation of powers to the national and provincial spheres appears to have proceeded from a functional vision of what was appropriate to each sphere, and accordingly the competences itemised in Schedules 4 and 5 are referred to as being in respect of “functional areas”. The ambit of the provinces’ exclusive powers must in my view be determined in the light of that vision. It is significant that section 104(1)(b) confers power on each province to pass legislation “for its province” within a “functional area”. It is thus clear from the outset that the Schedule 5 competences must be interpreted as conferring power on each province to legislate in the exclusive domain only “for its province”. From the provisions of section 44(2) it is evident that the national government is entrusted with overriding powers where necessary to maintain national security, economic unity and essential national standards, to establish minimum standards required for the rendering of services, and to prevent unreasonable action by provinces which is prejudicial to the interests of another province or to the country as a whole. From section 146 it is evident that national legislation within the concurrent terrain of Schedule 4 that applies uniformly to the country takes precedence over provincial legislation in the circumstances contemplated in section 44(2), as well as when it —

(a) deals with a matter that cannot be regulated effectively by provincial legislation;

(b) provides necessary uniformity by establishing norms and standards, frameworks or national policy;

(c) is necessary for the protection of the common market in respect of the mobility of goods, services, capital and labour, for the promotion of economic activities across provincial boundaries, the promotion of equal opportunity or equal access to government services, or the protection of the environment.

[51] From this it is evident that where a matter requires regulation inter-provincially, as opposed to intra-provincially, the Constitution ensures that national government has been accorded the necessary power, whether exclusively or concurrently under Schedule 4, or through the powers of intervention accorded by section 44(2). The corollary is that where provinces are accorded exclusive powers these should be interpreted as applying primarily to matters which may appropriately be regulated intra-provincially.

[52] It is in the light of this vision of the allocation of provincial and national legislative powers that the inclusion of the functional area “liquor licences” in Schedule 5A must in my view be given meaning. That backdrop includes the express concurrency of national and provincial legislative power in respect of the functional area of “trade” and “industrial promotion” created by Schedule 4.

[53] According to the New Shorter Oxford Dictionary, “trade” in its ordinary signification means the “[b]uying and selling or exchange of commodities for profit, spec. between nations; commerce, trading, orig. conducted by passage or travel between trading parties”.⁸⁸ Nothing in Schedule 4 suggests that the term should be restricted in any way, and the Western Cape government did not contend that Parliament’s concurrent competence in regard to “trade” should be limited to cross-border or inter-provincial trade. It follows that in its ordinary signification, the concurrent national legislative power with regard to “trade” includes the power not only to legislate intra-provincially in respect of the liquor trade, but to do so at all three levels of manufacturing, distribution and sale.

[54] The concurrent legislative competence in regard to “industrial promotion” should in my view be given a similarly full meaning as conferring on the national legislature and the provinces the power to initiate, advance and encourage all branches of trade and manufacture.⁸⁹ But the exclusive provincial competence to legislate in respect of “liquor licences” must also be given meaningful content, and, as suggested earlier, the constitutional scheme requires that this be done by defining its ambit in a way that leaves it ordinarily distinct and separate from the potentially overlapping concurrent competences set out in Schedule 4.

[55][ As Mr Trengove, relying on dictionary definitions and the judgment of Innes J in Fick v Woolcott and Ohlsson’s Cape Breweries Ltd⁹⁰ correctly submitted, a liquor licence is the permission that a competent authority gives to someone to do something with regard to liquor that would otherwise be unlawful. The activity in question, as emerges from the judgment of Innes J, is usually the sale of liquor at specified premises. It also seems to me that the term “liquor licences” in its natural signification encompasses not only the grant or refusal of the permission concerned, but also the power to impose conditions pertinent to that permission, as well as the collection of revenue that might arise from or be attached to its grant.

[56] The Western Cape government contended that liquor licences are never an end in themselves, but control and regulate the production, distribution and sale of liquor in pursuit “of yet further social, economic and financial objectives”. Accordingly, the Province contended, the authors of the Constitution must have intended the term “liquor licences” in Schedule 5A to encompass all legislative means and ends appurtenant to the liquor trade at all levels of production, manufacture and sale, and that these were intended to be reserved, outside the circumstances envisaged by section 44(2), for the exclusive competence of the provinces. This submission cannot in my view be accepted. In the first place, the field of “liquor licences” is narrower than the liquor trade. The Schedule does not refer simply to “liquor” or the “liquor trade” or the “liquor industry”. Instead it uses the phrase “liquor licences”. There is a range of legislation in South Africa regulating the liquor trade. Production, marketing, export and import of wine and spirits is regulated in terms of two important statutes, the Wine and Spirit Control Act, 47 of 1970 and the Liquor Products Act, 60 of 1989. These are primarily concerned with aspects of the liquor trade and industry, and not with liquor licensing itself. Legislation concerning the production of liquor products, including quality control, marketing and import and export of such products would fall within the concurrent competence of trade and/or industrial promotion, rather than within the exclusive competence of liquor licences.

[57] The structure of the Constitution in my view suggests that the national government enjoys the power to regulate the liquor trade in all respects other than liquor licensing. For the reasons given earlier, this in my view includes matters pertaining to the determination of national economic policies, the promotion of inter-provincial commerce and the protection of the common market in respect of goods, services, capital and labour mobility.

[58] For his part, Mr Wallis contended that the term “liquor licences” must be understood to apply only to the retail sale of liquor. But the basis of his submission that the history of liquor licensing legislation in South Africa shows that the area of application of liquor licences was not the whole field of production, distribution and sale of liquor, but only the narrower field of the supply of liquor to the public or consumers, cannot be sustained. This is apparent from the provisions of the earlier legislation, which plainly encompass also the production of liquor.⁹¹ I would in any event have grave reservations about undertaking a task of constitutional interpretation as though it depended on the prior meaning our legislation or case law attributed to any particular term.

[59] Even within the retail tier of the liquor trade, Mr Wallis sought to diminish the area the Bill occupied within the notional common terrain by contending that the province still had legislative leeway within which to exercise its exclusive competence. In so far as the Bill infringed the provinces’ exclusive competence in regard to licensing of retail liquor sales, Mr Wallis contended in reliance on a number of Canadian cases that its “pith and substance” lay in its radical restructuring of the liquor industry through the creation of the three-tier system, which enabled a variety of trade and other issues falling within Parliament’s exclusive or concurrent competence to be addressed. Against this background, Mr Wallis contended that the Bill’s system of registration was “purely incidental” to the means the Bill chose to address other, competent, issues and that its infringement, if any, on the area of “liquor licences” was accordingly permissible under the Constitution. Mr Wallis finally contended that the Minister had in any event established that the legislation was “necessary” for a number of purposes under section 44(2).

[60] It is not necessary for the purposes of this judgment to consider the utility or applicability of the Canadian “pith and substance” cases to the development of an indigenous South African jurisprudence regarding national and provincial legislative competences. It is sufficient to say that although our Constitution creates exclusive provincial legislative competences, the separation of the functional areas in Schedules 4 and 5 can never be absolute:

“Whenever a legislature’s authority is limited some rule must be adopted to address the possibility that a [single] law may touch upon subject matter [both] within and outside legislative competence.”⁹²

[61] That Schedule 4 legislation may impact on a Schedule 5 functional area finds recognition on one reading of section 44(3). Whatever its true reading⁹³ this provision was not designed to undermine the Schedule 5 competences. They retain their full meaning and effect, except where encroachment by national legislation would in fact be “reasonably necessary for, or incidental to” the effective exercise of a Schedule 4 power. Since however no national legislative scheme can ever be entirely water-tight in respecting the excluded provincial competences, and since the possibility of overlaps is inevitable, it will on occasion be necessary to determine the main substance of legislation, and hence to ascertain in what field of competence its substance falls; and, this having been done, what it incidentally accomplishes. This entails that a Court determining compliance by a legislative scheme with the competences enumerated in Schedules 4 and 5 must at some stage determine the character of the legislation. It seems apparent that the substance of a particular piece of legislation may not be capable of a single characterization only, and that a single statute may have more than one substantial character. Different parts of the legislation may thus require different assessment in regard to a disputed question of legislative competence.

[62][ In Ex Parte Speaker

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South Africa: Constitutional Court

Ex Parte President of the Republic of South Africa: In re Constitutionality of the Liquor Bill (CCT12/99) [1999] ZACC 15; 2000(1) SA 732; 2000 (1) BCLR 1 (11 November 1999)