Why Shuttleworth lost exchange control case - TechCentral

Why Shuttleworth lost exchange control case

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A R250,5m exit levy charged to billionaire Mark Shuttleworth when he transferred his assets out of South Africa in 2009 was “not inconsistent with the constitution”.

This is according to a judgment handed down on Thursday by the constitutional court.

Shuttleworth paid a R250,5m exit levy when he transferred his assets out of South Africa to the Isle of Man in 2009. The levy was 10% of the value of the assets he wanted to export.

But the billionaire, who first made the headlines when he sold his tech company Thawte in 1999 to VeriSign for US$575m, challenged the levy and last year the supreme court of appeal (SCA) ordered the South African Reserve Bank to repay Shuttleworth R250m plus interest.

However, the Bank and the minister of finance then took the matter to the constitutional court, which then decided on the matter on Thursday.

The constitutional court then overturned the the SCA ruling and also dismissed Shuttleworth’s application before the high court in Pretoria.

A media summary subsequently details the key reasons for the constitutional court’s decision in what has been described as a majority judgment.

“The court granted leave to appeal in the main appeal, finding that even though the exit charge is no longer imposed, the matter is not moot because the state could be exposed to approximately R2,9bn in potential claims if it is found that the imposition was unlawful,” reads part of the summary.

“The court further found that the exit charge was not inconsistent with the constitution. The dominant purpose of the exit charge was not to raise revenue but rather to regulate conduct by discouraging the export of capital to protect the domestic economy.”

The court further said that it granted leave to appeal in the cross-appeal “but only in respect of the attack on the constitutional validity of the section of the act that enables the making of regulations and the provision in the regulations prohibiting the export of capital without authorisation under certain conditions”.

“These provisions were found to be constitutionally valid as the broad discretionary powers granted to the Minister ensure a speedy and flexible approach to our exchange control system and are reasonably necessary to stem the outflow of capital, protect the local currency and safeguard the domestic economy.”

The constitutional court made no order regarding costs.  — Fin24

3 Comments

  1. Karen Tladi on

    I cannot help but wonder if this is ruling is so the protect the state from “other people” coming forward and challenging such.

  2. William Stucke on

    It is. It says so: “the state could be exposed to approximately R2,9bn in potential claims”

  3. William Stucke on

    “… are reasonably necessary to stem the outflow of capital, protect the local currency and safeguard the domestic economy.”

    Nonsense. The majority of developed countries – and many others – have no exchange control at all. They don’t seem to feel at risk.
    Exchange control does nothing to “protect” the currency, except for requiring law abiding citizens to fill in silly forms and justify why they are sending their own money abroad, which they are legally allowed to export large amounts of every year.

    It even applies when we receive money from abroad. It’s an unwarranted incursion into our privacy, which actively DISCOURAGES foreign investment.

    Further, many organisations who want to do business in Africa would rather choose Mauritius than RSA as their base, because Mauritius is far more business friendly. No exchange controls and low taxes.
    A lesson, there, Mr Finance Minister?