THE judgment by the Constitutional Court in the case on exchange controls brought by Mark Shuttleworth will no doubt come as a relief to the authorities. They may have been worried the court would find the way the rules are made to be unconstitutional, or rule that the way the system is administered is unconstitutional.
In the event, the court ruled in favour of exchange controls and against Mr Shuttleworth. The system is safe — for now.
However, the case has served to highlight the need to take a fresh look at the exchange-control regime in this country.
The case didn’t deal with the macroeconomics of exchange controls, a subject which needs to be raised again — whether SA’s remaining capital controls, and the complex web of regulations which underpin them, still serve their intended purpose.
The case focused, rather, on the exchange-controls system, and given that the legislation governing it dates back to 1933 and that the "exit charge" rule Shuttleworth has queried dates back to 2003, it seems a good time to take another look at exchange controls.
The case concerned the 10% exit charge which Mr Shuttleworth was required to pay when he exported R2.5bn of capital in 2009. It has wended its way through the High Court and Supreme Court of Appeal to the Constitutional Court, and is by no means over yet, with the Constitutional Court having granted leave for appeal against one aspect of the case.
Whereas Mr Shuttleworth contended that the exit charge was a tax, and that the 2003 regulation imposing it should therefore have gone through Parliament as a money bill instead of just being announced by the finance minister and the Reserve Bank, the court judged it was not a tax. The court also rejected the contention that the system in terms of which banks are the authorised dealers to implement exchange controls on a day-to-day basis was unconstitutional.
The system would presumably have collapsed if the Reserve Bank itself would have had to clear the millions of foreign exchange transactions the banks deal with each year. So the Reserve Bank and other banks are safe for now.
But a review is overdue.
Mark Shuttleworth. Picture: SUNDAY TIMES
THE judgment by the Constitutional Court in the case on exchange controls brought by Mark Shuttleworth will no doubt come as a relief to the authorities. They may have been worried the court would find the way the rules are made to be unconstitutional, or rule that the way the system is administered is unconstitutional.
In the event, the court ruled in favour of exchange controls and against Mr Shuttleworth. The system is safe — for now.
However, the case has served to highlight the need to take a fresh look at the exchange-control regime in this country.
The case didn’t deal with the macroeconomics of exchange controls, a subject which needs to be raised again — whether SA’s remaining capital controls, and the complex web of regulations which underpin them, still serve their intended purpose.
The case focused, rather, on the exchange-controls system, and given that the legislation governing it dates back to 1933 and that the "exit charge" rule Shuttleworth has queried dates back to 2003, it seems a good time to take another look at exchange controls.
The case concerned the 10% exit charge which Mr Shuttleworth was required to pay when he exported R2.5bn of capital in 2009. It has wended its way through the High Court and Supreme Court of Appeal to the Constitutional Court, and is by no means over yet, with the Constitutional Court having granted leave for appeal against one aspect of the case.
Whereas Mr Shuttleworth contended that the exit charge was a tax, and that the 2003 regulation imposing it should therefore have gone through Parliament as a money bill instead of just being announced by the finance minister and the Reserve Bank, the court judged it was not a tax. The court also rejected the contention that the system in terms of which banks are the authorised dealers to implement exchange controls on a day-to-day basis was unconstitutional.
The system would presumably have collapsed if the Reserve Bank itself would have had to clear the millions of foreign exchange transactions the banks deal with each year. So the Reserve Bank and other banks are safe for now.
But a review is overdue.
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