Many South Africans are closely watching the South African Reserve Bank’s (SARB’s) Constitutional Court case against billionaire entrepreneur Mark Shuttleworth.
The case seeks to ascertain whether certain aspects of exchange control regulation are constitutional or not and whether individuals can bring a challenge to the constitutionality of a particular regulation, Andrew Wellstead, head of tax at Norton Rose, told CNBC Africa.
It has the potential to set a precedent, Wellstead adds.
“The commercial sector has been complaining about exchange controls for a long time as it has been seen as an inhibitor of trade especially cross border trade – this case will reveal what the Constitutional Court feels about exchange controls.”
Shuttleworth’s legal team told the Constitutional Court that the minister of finance was supposed to pay back their client’s money.
This is after Shuttleworth, in 2009, paid a near 250 million rand exit charge under protest as part of the required 10 per cent imposed on applicants seeking to export their capital out of South Africa.
The lawyers representing the Ministry of Finance argued that the proposed trust fund that Shuttleworth wants to set up to finance similar legal challenges should not be viewed as a matter of public interest.
“Mr Shuttleworth has no other interest other than the recovery of the money he was made to pay,” said the opposing legal team.
Shuttleworth, through Standard Bank, applied to the South African Reserve Bank for permission to transfer over 2.5 billion rand of his funds out of South Africa.
The Reserve Bank granted permission but charged Shuttleworth a 10 per cent exit fee of the amount he wanted to transfer.
Shuttleworth’s legal team argued that the imposing of the exit charge was unlawful as it was calculated to raise revenue as stated in the Currency and Exchanges Act, adding that certain procedures ought to have been followed.
The Minister of Finance and the Reserve Bank argue that regulation of the Exchange Control Regulations authorises such conditions on the export of capital in order to protect South Africa’s external balance of payments saying the exit charge was such a condition.
Shuttleworth argues that the Exchange Control Regulations, as a whole, are inconsistent with the rule of law, not authorised by legislation, and in conflict with the Constitution.
He further says, a number of specific regulations are unlawful, either because they were not lawfully made or are in conflict with certain provisions in the Bill of Rights.