Software Millionaire Mark Shuttleworth To Receive $22 Million Refund From South African Reserve Bank

South African software multi-millionaire Mark Shuttleworth has reportedly been awarded R250 million ($22 million)  – with interest, by South Africa’s Supeme Court of Appeal after taking on South Africa’s Reserve Bank, following a prolonged legal battle over an exchange control regulation that imposed a 10% exit levy on assets exported on emigration.
In 1995, Mark Shuttleworth founded Thawte, a digital certificate and internet security company. He sold it 4 years later in 1999 to Verisign for R3.5 billion – roughly $575 million at the time. He was just 26.
In 2001, just 2 years after selling his company, Shuttleworth relocated to the Isle of Man in the UK, and in 2009 he decided to move all his assets – worth about $300 million at the time, along with him. But South Africa, renowned for its restrictions on capital movements (authorities usually impose a 10% exit levy on assets exported on emigration), created problems for Shuttleworth. The South African Reserve Bank slapped him with a R250 million levy ($30 million at the time) – a levy which was imposed on him by the High court in Pretoria. The bank’s authorities claimed the levy was constitutional, citing certain segments of South Africa’s Currency and Exchanges Act 9 of 1933 and claimed the levy was not an impermissible exercise of fiscal power, but was a means of controlling capital outflows and promoting macro-economic growth in the aftermath of the global financial instability of 2008.

Mark Shuttleworth

Shuttleworth, upset at having to pay an exorbitant sum to move his assets across borders, insisted that some facets of the current exchange regime were unconstitutional and subsequently launched an application at the Pretoria high court seeking repayment of his $30 million. He also tried to get the Currency and Exchange Act, the Exchange Control Regulations, and two 2003 Exchange Control Circulars declared unconstitutional and invalid.
Shuttleworth achieved some success. While the Pretoria high court refused to order the repayment of his funds, it struck down certain provisions of the Currency and Exchanges Act and the Exchange Control Regulations as unconstitutional.
Not entirely pleased with the high court verdict, Shuttleworth took the matter to the Supreme Court of Appeal, who heard his case in August.
The Supreme Court of Appeal has now ruled that South Africa’s Reserve Bank must repay the R250 million to Shuttleworth with interest, noting that the 41 year-old software tycoon paid the levy under protest. In its ruling, the Supreme Court of Appeal said:
“The SCA held that a founding principle of Parliamentary democracy is that there should be no taxation without representation and that the executive branch of government should not itself be entitled to raise revenue but should rather be dependent on the taxing power of Parliament. The Court stated that the levy raised revenue for the State in that it brought in ten per cent of the value of any capital in excess of R750 000 exported out of the country, into the National Revenue Fund. Whilst in force, it raised approximately R2.9 billion. The SCA found therefore that the levy thus fell within the category of ‘taxes, levies or duties’ contemplated by sections 75 and 77 of the Constitution.”
The SCA further ruled that “The Reserve Bank is ordered to repay the applicant the amount of R250 474 893, 50 with interest at the prescribed rate from 13 April 2012 to date of payment.”
“By paying under protest, according to the SCA, Shuttleworth sought to convey that the payment was not a voluntary one and that he reserved the right to seek to reverse that payment. The Court accordingly set aside the decision of the Reserve Bank to impose the ten per cent levy.”
Meanwhile, Shuttleworth has said he will give the entire R250 million and the interest to a trust “run by veteran and retired constitutional scholars, judges and lawyers, who will selectively fund cases on behalf of those unable to do so themselves, where the counterparty is the state”.
Mark Shuttleworth, 41, is the founder of Canonical, a UK-based privately held computer software company that markets commercial support for the Ubuntu operating system. In 2002, he became Africa’s first self-funded space tourist when he paid $20 million for an 8-day trip to the International Space station. He participated in experiments related to AIDS and genome research. He is also the founder of Knife Capital, a Cape Town-based venture capital firm that invests in South African companies.