Shuttleworth loses exchange control case, gains a few points along the way

Mark Shuttleworth has lost his bid to have the South African Reserve Bank pay back some R250-million (US$24.5-million) that he says he had to set aside to get his money out of the country in 2009.

The South African born Ubuntu founder and tech billionaire also failed in his bid to have the legal provision providing for the imposition of the levy declared unconstitutional.

Shuttleworth blames the system for forcing him to leave South Africa in 2001, claiming that it made it impossible for him to conduct his entrepreneurial and philanthropic ventures.

At the time of his emigration, Shuttleworth had R4.27-billion in South Africa, but transferred the assets out of the country in 2008 and 2009, paying a 10% levy each time. Shuttleworth’s wealth is now split between the UK mainland and tax haven the Isle of Man.

According Judge Francis Legodi, who presided over the case, the 10% levy could not rightfully be considered harmful.

“The idea of such discouragement cannot be said to be bad and an unconstitutional policy,” he said, adding that if the wealthiest people in the country were allowed to take out their money every time there was a crisis, “it could have a devastating effect on the country as a whole”.

He did however gain some critical mileage in having the process for drawing up exchange control rules declared unconstitutional. The Gauteng North High Court judge presiding over the case struck down a rule which allowed the president to veto any regulation or act inconsistent with the one currently governing exchange controls.

Legodi said the provision should never have been on the books for so long and had the potential to “unravel the healing wounds of the past”.

“This can never again happen in a constitutional and democratic South Africa,” Legodi said.

“… Clearly no president in the living Supreme Law of the land [the Constitution] can ever wish to act as it is envisaged in section 9(3).

“This does not even need a programme of liberalisation of the system of exchange controls as envisaged by the minister of finance,” he added.

A number of other exchange control measures were also declared unconstitutional, including one that allows officials to enter homes and businesses to inspect books without a document.

While the various measures have been struck down, Business Day reports that Legodi has suspended the declaration of unconstitutionality of the regulations for 12 months. This is so that the president, the Reserve Bank and the finance minister can correct the cause of unconstitutionality.