Please Call Me’s Kenneth Makate giving Vodacom a R29 billion headache

Vodacom confirmed that a Supreme Court of Appeal (SCA) majority judgment would entitle Please Call Me’s Kenneth Nkosana Makate to R29 billion if Vodacom’s appeal is unsuccessful.

Vodacom released its annual results for the year ended 31 March 2024, which revealed a strong performance for the telecoms giant.

The company recorded revenue of R151 billion, up 26.4% from the previous year, positively impacted by the acquisition of Egypt.

Therefore, if the Please Call Me case achieves a SCA majority judgement in Makate’s favour, Vodacom would have to pay him almost 20% of their 2024 financial year revenue.

The legal battle between Vodacom and Makate, a former employee, started in 2008.

Makate, a former trainee accountant at Vodacom, brought the idea for a pre-paid mobile network service allowing users with no airtime to request calls from users with credit to his manager at the time. 

This concept later became Vodacom’s successful “Please Call Me” (PCM) product.

Makate argued that Vodacom agreed to compensate him for the idea, while Vodacom disagreed. The case went all the way to South Africa’s highest court, the Constitutional Court.

In July 2014, the Gauteng High Court ruled that Makate had proven the existence of a contract. However, Vodacom was not bound by that contract.

Makate appealed the High Court ruling, but the High Court and the SCA turned down Makate’s application for leave to appeal.

In 2016, the Constitutional Court found in Makate’s favour that an agreement existed and that Vodacom should negotiate reasonable compensation with Makate. If negotiations failed, Vodacom’s CEO Shameel Joosub would decide the amount.

Negotiations between Makate and Vodacom failed, after which Joosub offered Makate R47 million. He rejected this offer.

The case returned to court. In February 2024, the SCA ruled that Makate is entitled to 5% to 7.5% of the revenue derived from PCM over an 18-year period, starting in 2001. 

On 27 February 2024, Vodacom applied for leave to appeal the SCA judgment to the Constitutional Court. Makate is opposing Vodacom’s application.

Vodacom is challenging the SCA’s judgment and order on various grounds, including –

• The SCA ignored the evidence placed before it on the computation of the quantum of compensation payable to Makate
• The SCA issues orders that are legally unenforceable

To put Vodacom’s contingent liability related to the Makate matter in context, the SCA majority judgment would entitle him to a minimum compensation amount of R29 billion.

This is far higher than Joosub’s offer of R47 million and the minority judgment of the SCA of R186 million.

“Consequently, the range of the possible compensation outcomes in this matter is very wide,” Vodacom said.

The amount ultimately payable to Makate remains uncertain and will depend on whether the Constitutional Court grants Vodacom leave to appeal.

“Vodacom is continuing to challenge the level of compensation payable to Makate, and a provision immaterial to the financial statements has been recorded,” the telecoms giant said.