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Shuttleworth targets exchange laws

Jun 10 2013 22:56


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Pretoria - Billionaire entrepreneur Mark Shuttleworth has taken the South African government to court to have the country's exchange control system declared unconstitutional.

Shuttleworth also wants the North Gauteng High Court in Pretoria to set aside a levy of over R250m he had to pay to get some of his assets out of the country in 2009, and order the SA Reserve Bank to return the money.

He further seeks an order declaring the bank's so-called "closed door policy", of insisting that the public communicate with it through the intermediation of authorised banks, unconstitutional and invalid.

Shuttleworth blames the existing system of exchange control in South Africa for forcing him to emigrate from South Africa in 2001. He says in court papers the system made it impossible to conduct his entrepreneurial and philanthropic ventures.

He had assets worth over R4.27bn in South Africa when he emigrated, but transferred the assets out of the country in 2008 and 2009, each time paying a 10% levy.

Shuttleworth currently lives on the Isle of Man and holds dual South African and United Kingdom citizenship.

His advocate, Gilbert Marcus SC, on Monday argued that the system of exchange control in South Africa was governed not by laws, but by the dictates of an organ of state which were not accessible to the public. They did not follow any constitutionally required process of promulgation and violated numerous constitutional rights.

He argued that the imposition of the levy was based on a policy decision by the finance minister and was unconstitutional because it operated as a revenue-raising mechanism without following the Constitution.

"One of the founding principles of a parliamentary democracy is that there should be no taxation without representation and that the executive branch of government should not itself be entitled to raise revenue for its operation, but should rather be dependent on the taxing power of Parliament which is democratically accountable to the tax-paying public," Marcus said.

"[The SARB] claims because the levy is only imposed on a small part of the population it does not qualify as tax," he said.

Marcus argued that the levy deprived Shuttleworth of his property without giving him the right to be heard, adding that section nine of the Currency and Exchanges Act was unconstitutional in that it gave the president unfettered legislative powers. This included the power to make retrospective laws and to amend an act of Parliament by promulgating regulations, irrespective of whether the legislation dealt with currency, banking, or exchange issues.

He argued the regulations violated the right to procedurally fair administrative action and the rights to property and free trade.

"[The regulations] set up a system of exchange control in which the crucial rules are made not by publicly accessible promulgated laws, but rather by an inaccessible system of 'in-house' rules.

"...The effect of the regulations is that the president has vested in the minister the sole power to determine the lawfulness or otherwise of every single transaction involving foreign exchange without any guidance."

The application continues before Judge Francis Legodi.

sarb  |  mark shuttleworth
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