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23 - 29 July 2013
Issue 524
41618
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SHUTTLEWORTH LOSES CASE AGAINST SA RESERVE BANK
| ‘Financial refugee’ Mark Shuttleworth loses court appeal for SA Reserve Bank to return R250 million of his money – but judgment could result in parliamentary review of the country’s ‘antiquated’ exchange control system by STAFF REPORTER
SOUTH African IT billionaire Mark Shuttleworth has failed both in his court bids for the SA Reserve Bank to return R250 million of his money and to have South Africa’s exchange control system declared unconstitutional. The High Court in Pretoria on Thursday dismissed Shuttleworth’s application to strike down the whole of Section 9 of the Currency and Exchange Act and all of the Exchange Control Regulations as unconstitutional. Shuttleworth, who now lives on the Isle of Man, said the exchange control system forced him to leave the country in 2001 as he could not carry out his entrepreneurial and philanthropic ventures. The expat entrepreneur had to pay over R250 million in order to get some of his assets out of South Africa. He argued that the money should be returned to him, because he had paid a 10 percent “exit charge,” when moving his R4.27bn worth assets abroad in 2008 and 2009. Government abandoned the levy a year after Shuttleworth moved the remainder of his assets out of the country. Shuttleworth’s fortune is now split between tax haven the Isle of Man and the UK mainland. However, he is still a South African citizen and his money is used to invest in start-ups in South Africa, and his charities continue to support funding and fellowships to social innovators. Judge Francis Legodi dismissed
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the businessman’s application for the Reserve Bank to return his money. He said the purpose of the 10 percent “exit charge” was to to maintain South Africa’s macroeconomic limit health by limiting the outflow of funds, to promote financial growth and stability. The judge however granted an order declaring Section 9(3) of the Currency and Exchanges Act as well as certain portions of the Exchange Control Regulations unconstitutional. Section 9(3) gives the President not only the power to amend or suspend any part of the Currency and Exchanges Act, but also the power to amend or suspend any other Act of Parliament. In his judgement, Legodi identified that various aspects of the exchange control regime inhibit the right to free trade, impede internet transactions and infringe the right to privacy. Democratic Alliance MP and Shadow Finance Minister Tim Harris said that the High Court’s decision to declare certain sections of the Currency and Exchanges Act unconstitutional opened a door for a parliamentary review of the country’s “antiquated” exchange control system. Harris said he would write to the chairman of the Standing Committee on Finance, Thabadiawa Alfred Mufamadi, to ask that it urgently convene public hearings on exchange controls with a view to amending the Currency and Exchanges Act of 1933 and making
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MARK SHUTTLEWORTH has lost his case against SA’s exhange control system, but parties such as the DA find merit in his argument
recommendations about overhauling the associated regulations. Harris commented, “Although Shuttleworth did not win his case overall, he has achieved a significant victory in shedding light on the need to overhaul our exchange controls. Judge Legodi suspended several declarations for twelve months to correct the legislation. This is Parliament’s chance to play its role as South Africa’s legislating body by conducting a full review of the
legislation and regulations.” Prior to the court case, Reserve Bank legal representative Jeremy Gauntlett SC was outraged that Shuttleworth claimed it was in the interest of all South Africans to destroy the entire exchange control system. “He couldn’t get his money out of the country. Now he wants to pull the whole system down. Why should this financial refugee speak on behalf of the entirety of South African society?”
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