In South Africa, the 1998 National Water Act has created two user-driven water resource management organisations, namely the Water User Association at the local level and the Catchment Management Agency at a larger catchment level. The paper investigates some challenges concerning the participation of smallholders in water resource management organisations involving also large-scale users. Specifically, the paper analyses the possible discrepancies between the needs of smallholders with regard to water and the functions of these organisations. A simple typology of needs concerning water is presented and used to classify the main problems faced by smallholders in selected case studies. In some of the cases studied, smallholders need above all funds for investment in waterworks and their operation. They are not directly affected by water resource management issue, a lack of overlap between their needs and the functions of a water resource management organisation might lead to their unsustainable presence within the organisation. In such cases, one alternative is to achieve cross-subsidization. The National Water Act calls for it, without providing specific requirement. The proposed creation of small-scale user forums in the Olifants Water Management area can be described as cross-subsidization. It might improve the internal organisation among smallholders and give them a voice. Some funds will be dedicated to forums activities, but they are not entrenched as part of the core functions of the Catchment Management Agency. This analysis shows the importance of undertaking an assessment of smallholder water related needs to orientate the public participation process.