Shuttleworth bid: SA could face ruin

Jun 11 2013 22:35

Pretoria - Billionaire entrepreneur Mark Shuttleworth's bid to have South Africa's exchange control system declared unconstitutional could have a devastating effect on the country, the SA Reserve Bank (Sarb) said on Tuesday.

Jeremy Gauntlett SC, for the Sarb, argued that the order sought by Shuttleworth in the North Gauteng High Court in Pretoria was "the most radical court order imaginable".

"He quite deliberately decided to attack the heart of the scheme and seeks to bring down the pillars of the temple," said Gauntlett.

"If the applicant succeeds in striking down Section Nine of the Currency Act and declaring all orders and rules unconstitutional, there would be no inhibition on removing capital from this country at all.

"Section Nine is the heart of the exchange control system and he wants to knock [it] down."

Gauntlett said Shuttleworth claimed it was in the interest of all South Africans to destroy the entirety of the exchange control system in the country.

Financial refugee

"He couldn't get his money out of the country. Now he wants to pull the whole system down. Why should this financial refugee, living on the Isle of Man, speak on behalf of the entirety of South African society?"

Apart from his constitutional challenge to the exchange control system, Shuttleworth wants the court to set aside the levy of more than R250m he had to pay to get some of his assets out of the country in 2009, and to order the Sarb to return the money.

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

Shuttleworth has blamed the existing system of exchange control in South Africa for "forcing" him to emigrate in 2001.

He had assets worth over R4.27bn in South Africa when he emigrated, but he transferred the assets out of the country in 2008 and 2009, each time subject to the payment of a 10% "exit charge".

The government abandoned the levy a year after Shuttleworth moved the remainder of his assets out of the country.

Gauntlett argued that Shuttleworth's application on the levy should be dismissed because he had attacked the wrong decision-maker, as the Sarb was only carrying out a decision announced by the finance minister during a speech in Parliament in 2003.

He said the minister's decision was authorised by statute, and the primary reason for the levy was to dissuade capital flight out of the country and not to raise revenue.

Swift action

He said the context was that foreign exchange reserves were vulnerable, and that few countries were able to look at a flight of capital comfortably. If a crisis developed overnight there would be the need for swift action.

"There are sophisticated economic forces at work, and there's a need for fast action for the purpose of protecting the currency. There's nothing wrong with such a legislative scheme."

If you have to engage the public before you make a regulation, all regulations in the country could be struck, Gauntlett said.

"When you control foreign exchange, you cannot conceivably say: 'Let's put up a billboard somewhere and consult the public.' You cannot do things that day because people will take their money and go."

He said these were the realities of how legislatures worked.

"This argument is nonsense on stilts. It was decided it [the 10% exit levy] was no longer needed, but that may change," Gauntlett said.

Judge Francis Legodi reserved judgment.

Follow Fin24 on Twitter, Facebook, Google+ and Pinterest.

sarb  |  mark shuttleworth



Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Company Snapshot

We're talking about: MINI BUDGET

Finance Minister Malusi Gigaba has laid bare South Africa's economic woes. Visit our Mini Budget Special for all the action.

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

Are you participating in #BackFriday sales?

Previous results · Suggest a vote