Shuttleworth loses SA exchange laws battle

Shuttleworth loses SA exchange laws battle

Mark Shuttleworth on the International Space Station in 2002. CC image courtesy of NASA.

South African entrepreneur Mark Shuttleworth has lost his fight to get the country’s exchange control system overhauled, after the high court in Pretoria disagreed with his assertion that the current system is unconstitutional.

The South African Press Agency reports Judge Francis Legodi dismissed the billionaire’s application for the Reserve Bank to return to him ZAR250 million (US$25.2 million) he was charged in 2009 when moving money out of the country.

Shuttleworth, who owns Canonical, the company behind open source software Ubuntu, is now based in the Isle of Man, had assets worth ZAR4.2 billion (US$424 million) when he left the country.

In his ruling Legodi defended the government’s right to charge the 10 per cent “exit charge” because it prevented the outflow of funds which could have adverse consequences on the country’s macroeconomic health.

“The idea of such discouragement cannot be said to be bad and an unconstitutional policy,” he said.

“Imagine what will happen to this country if the wealthiest men and women … were allowed to take their wealth out of the country with impunity every time when the country is in economic grief or when there is a change of government or leaders in the government. It could have a devastating effect on the country as a whole.”

HumanIPO reported in June how Jeremy Gauntlett SC, representing the Reserve Bank, said a Shuttleworth victory could “pull the whole system down” and described him as a “financial refugee”.

The billionaire’s campaign does seem set to have a lasting legacy however, as Legodi ruled section 9(3) of the Currency and Exchanges Act, as well as parts of the Exchange Control Regulations, were in fact unconstitutional.

The relevant clauses gave the president the power to amend or suspend any part of the Currency and Exchanges Act whether it dealt with currency, banking or exchange.

“This provision has the potential to unravel the healing wounds of the past when laws were changed at the stroke of a pen by one individual,” Legodi added.

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

Posted in: Policy

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