September 2015: Mark Shuttleworth and exchange control

When Mark Shuttleworth planned his ascent from the earth’s crust, he probably thought this would be the greatest non-business expense of his life. Indeed – the South African multi-millionaire has a history of smart business decisions in his repertoire, so a bit of splurging on extracurricular activities was understandable. Being forced to spend R250 million to take your own money from South Africa when you emigrate financially… well, to say that is a major loss would be a colossal understatement. In fact, his trip to space cost just two thirds of his formal emigration – making his exit from South Africa more expensive than his exit from earth’s atmosphere.

How did Shuttleworth lose his millions?

Well, although exchange control regulations are designed to keep money within South African borders, these regulations are the primary reason for Shuttleworth’s financial exit from South Africa. Financial experts have warned for years that South Africa needs to improve its financial attraction to keep its head above water – and one of the greatest attractions would be ease of financial flow. This means making it easy for non-residents to invest and disinvest as they please. You have to ask yourself – how fed-up must a person be to proceed with a financial exit that would have them squander R250M? Some strong words come to mind here, so we’ll just say ‘VERY’ and let you use your imagination.

And although Shuttleworth did contest the decision, it’s not hard to see how the whole debacle might have been avoided had exchange control laws been more forgiving. The problem with these regulations is the bureaucratic constriction and monetary barriers which make it next to impossible to run efficient and competitive international businesses or charities, let alone access your funds. Apparently Shuttleworth weighed up his options and concluded that he would lose less by leaving South Africa.

Learning from our mistakes

It’s alarming that the government seems to harbour the mistaken belief that their exchange control policies will protect us from economic crises – making them blind to the fact that these policies may end up being the root cause of South Africa’s financial ruin. These measures prevent a complementary balance of monetary supply growth, interest rates and exchange rates. Moreover exchange control inhibits the expansion of domestic organisations into other countries while also discouraging inward foreign investment. But perhaps the only thing that may convince authorities of the defunct state of these regulations is the overall expense and strain on resources – it is a tedious, time-consuming and costly job to manage the flow of assets with such an iron grip. It also relies on amicable relations between regulators and banks – something which is notoriously prickly.

Whether South Africa has learned anything from the Shuttleworth case remains to be seen. For the time being – we can only comply with all required regulations and the Reserve Banks’ approach to monetary exchange with hopeful anticipation.

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