Reserve Bank ordered to repay Shuttleworth R250m

By Drum Digital
01 October 2014

The Supreme Court of Appeal has ordered the SA Reserve Bank to repay Mark Shuttleworth R250 million plus interest in a case about exchange control.

The Supreme Court of Appeal (SCA) on Wednesday ordered the SA Reserve Bank (SARB) to repay entrepreneur Mark Shuttleworth R250 million plus interest in a case about exchange controls. In a statement on his website, Shuttleworth pledged to put the money, which must be repaid with interest, into a trust for Africans wishing to take on the state in the Constitutional Court.

"I will commit the funds returned to me to today by the SCA to a trust run by veteran and retired constitutional scholars, judges and lawyers, that will selectively fund cases on behalf of those unable to do so themselves, where the counterparty is the state."

The matter dates back to March 5, 2008, when Shuttleworth applied to the SARB to transfer R1.5 billion out of South Africa when he moved to the Isle of Man.

This transfer application had to be done through an authorised dealer bank, and Shuttleworth elected Standard Bank. The application was granted subject to the payment of an exit levy calculated at R165m.

A calculating error in working out the 10 percent levy led to Shuttleworth being told later that the amount that could be transferred out of the country was R1.485 billion -- to bring the exit payment to 10 percent of the total amount.

In June 2009 Shuttleworth decided to transfer his remaining assets out of South Africa. He was advised that the 10 percent levy was unlawful and challenged it, contending that aspects of the exchange regime were unconstitutional. He accepted the principle of exchange control.

Shuttleworth paid an amount of R250,474,893 under protest as the ten percent exit levy necessary for the release of his blocked assets.

He approached the High Court in Pretoria, which did not order that he be repaid but did strike down certain provisions of the Currency and Exchanges Act and the Exchange Control Regulations.

Shuttleworth approached the SCA to appeal against the High Court's refusal to order repayment, while the SARB, the minister of finance and the president cross-appealed against the orders of invalidity.

The SCA found that Shuttleworth's payment under protest indicated that the payment was not a voluntary one and that he reserved the right to seek its reversal.

The SARB's imposition of the 10 percent exit levy was set aside, and so too were the High Court's declarations of invalidity of the exchange legislation and regulations.

In a statement on his website, Shuttleworth said exchange controls had the effect of stifling the economy, particularly disadvantaging migrant workers and small businesses seeking to work outside South Africa's borders.

"Everything you buy is more expensive. South Africans are less globally competitive, and cross-border labourers, already vulnerable, pay the highest price of all -- a shame we should work to address.

"We are now considering the continuation of the case in the Constitutional Court, to challenge exchange control on constitutional grounds and ensure that the benefits of today's ruling accrue to all South Africans."

Shuttleworth said that he would use the reimbursed levy to start a trust to help people who could not afford to take on the State.

"It is expensive to litigate at the constitutional level, which means that such cases are imbalanced -- the State has the resources to make its argument, but the individual often does not.

"For that reason, I will commit the funds returned to me to today by the SCA to a trust... The mandate of this trust will extend beyond South African borders, to address constitutional rights for African citizens at large, on the grounds that our future in South Africa is in every way part of that great continent."

-SAPA

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