Supreme Court says Please Call Me idea-man should be paid up to R63 billion

The Supreme Court of Appeal ruling in favour of Kenneth Nkosana Makate effectively ordered Vodacom to pay him between R29 billion and R63 billion.

This is according to estimates in Vodacom’s court papers appealing to the Constitutional Court.

Vodacom’s calculations align with MyBroadband’s earlier estimates based on the models Makate’s legal team submitted to the Supreme Court.

Vodacom approached the Supreme Court after failing to convince the High Court that its R47-million compensation offer to Makate was fair.

Vodacom CEO Shameel Joosub came up with the amount to comply with a Constitutional Court order handed down in 2016.

After eight years of litigation, the Constitutional Court ultimately decided that whether Makate “invented” Please Call Me was irrelevant.

The court accepted the evidence from Vodacom’s product development head, Philip Geissler, that he had promised Makate compensation for his “Buzz” idea but that they hadn’t discussed an amount.

Makate had proposed a system to ring someone’s phone without airtime, sending them a missed call to indicate that you want them to call back.

According to an internal company memo, this idea was ultimately developed into Vodacom’s Please Call Me product.

Makate testified that he had asked Geissler for 15% revenue share. Geissler had promised to negotiate with him in good faith, and if they couldn’t come to an agreement then-CEO Alan Knott-Craig would decide how much to pay him.

The Constitutional Court ruling honoured this original agreement, ordering the parties to negotiate in good faith and for Joosub to act as deadlock-breaker.

During their negotiations after the ConCourt’s ruling, Vodacom offered R10 million and Makate’s team demanded R20 billion.

To break the deadlock, Joosub considered four different compensation models and averaged the top two to come up with R47 million.

Makate rejected this too, calling it an “insult”.

His team promptly returned to the High Court to argue that Joosub had made a mistake in his calculations.

As part of their argument, Makate’s team developed their own models to estimate the amount of revenue Please Call Me generated between 2002 and 2020. (There was some back and forth between Vodacom and Makate’s team before getting to that point, delaying negotiations.)

They then take 5% to 15% of that and apply different formulas to calculate interest.

On appeal, the Supreme Court upheld the High Court’s order and added that Vodacom should adopt Makate’s models for calculating the compensation owed to him, applying a 5%–7.5% revenue share.

One of Vodacom’s complaints to the Constitutional Court is the massive variance between the two amounts. Does the court want it to pay R29 billion, or R63 billion? What criteria must it apply to select a percentage?

To put those numbers in perspective, we’re talking about 15% of Vodacom’s R195-billion market cap at the lower end. At the higher end of the range, the payment would amount to nearly a third of the whole company.

The entire Vodacom group’s annual profit in 2023 was R18 billion.

Vodacom invests between R10 billion and R11 billion into its South African network every year.

Another way to contextualise the amounts is to compare them to the net worth of South Africa’s wealthiest individuals.

This shows that should the Supreme Court order stand and Vodacom pay the maximum, Makate would instantly, albeit briefly, be richer than Patrice Motsepe and Koos Bekker.

Makate would not get to keep the full amount, as his funders are getting at least 50%, and the taxman likely wants his pound of flesh too.

Even if Vodacom were only to pay the minimum, Makate would be richer than fashion and retail mogul Christo Wiese and Capitec founder Michiel le Roux.

It is interesting to note that the Supreme Court made two possible orders against Vodacom.

A panel of five judges heard the case, and they were split 3–2 in favour of the majority judgement.

Neither order favoured Vodacom, but they differed in one crucial aspect — the minority judgement didn’t find fault with Joosub’s models.

However, it agreed with the majority ruling that Joosub incorrectly calculated Makate’s compensation over five years.

It said Joosub should redo his determination over 18 years.

In its Constitutional Court papers, Vodacom said if the minority judgement were to be implemented, Makate’s compensation would’ve been about R186 million.

This was also in line with MyBroadband’s initial estimate based on the details Joosub provided in the document explaining his determination.