David v Goliath
Makate v Vodacom (Pty) Ltd (2016)
How does the Constitution protect individuals against the abuse of corporate power?
Background
Kenneth Nkosana Makate was employed by Vodacom (Pty) Ltd as a trainee accountant. In November 2000, he came up with the ‘Please Call Me’ idea as a means to communicate with his long-distance girlfriend (now his wife) who could not afford to buy airtime to call him.
‘Please Call Me’ allowed the cell phone user who had no airtime to send a request to a cell phone user who had airtime to call them. Makate consulted his mentor at Vodacom for advice on how he could sell this idea to cell phone service providers, including Vodacom.
Vodacom and Makate entered into an agreement that, should the idea become commercially successful, Makate would be entitled to 15% of the revenue generated by the product. ‘Please Call Me’ became a huge success for Vodacom, generating billions of rands in revenue since its launch in 2001.
Vodacom did not compensate Makate as per their agreement. Moreover, it claimed that the ‘Please Call Me’ idea had come from the CEO, and denied Makate compensation for the idea. Vodacom also accused Makate of having stolen the idea from MTN, its competitor.
Path to the Constitutional Court
In 2005, approximately four years after the launch of ‘Please Call Me’, Makate approached the High Court to seek an order directing Vodacom to comply with its obligations under the parties’ oral agreement.
In July 2014, the High Court found that Makate had established that he had an agreement with Vodacom based on a share of the revenue. The court also found that the Vodacom CEO, who claimed to be the inventor of ‘Please Call Me’, had lied under oath about being its inventor.
Makate lost the High Court case on two technical grounds: prescription and authority. The Prescription Act requires that a claim be brought within three years from the date on which a party became aware of the claim. This meant that even though Makate had successfully established his contract with Vodacom, his claim had expired as three years had lapsed.
Also, on authority, Vodacom had argued that its employees who had entered into an agreement with Makate on its behalf, had no authority to do so. The High Court found in Vodacom’s favour on these grounds. This led to Makate’s unsuccessful approach to the Supreme Court of Appeal. He then approached the Constitutional Court.
Some of the Arguments
Kenneth Makate
Makate argued that the Prescription Act limited his right of access to court by declaring that his claim had prescribed. He also argued that the Vodacom employees who had entered into an agreement with him had the authority to bind Vodacom to the agreement.
Vodacom (Pty) Ltd
Vodacom contended that Makate had not created the ‘Please Call Me’ concept. It argued that Makate had failed to establish the existence of the agreement on which his claim was based. It also said that the employees who had bound Vodacom to the agreement with Makate had no authority to do so.
What did the Constitutional Court decide?
The Court found that the contract between Makate and Vodacom was valid. Vodacom was instructed to commence negotiations with Makate in good faith to determine the reasonable compensation that should be paid to him in terms of the agreement. The parties were ordered to start negotiations within 30 days of the judgment. The Court also ordered that in the event of the parties failing to agree on reasonable compensation, the matter should be submitted to Vodacom’s CEO, within a reasonable time, for determination of the amount.
In not compensating the applicant … Vodacom associated itself with the dishonourable conduct of its former CEO… This leaves a sour taste in the mouth. It is not the kind of conduct to be expected from an ethical corporate entity.
Justice Chris Jafta
from the Makate Judgment, 26 April 2016
The stance taken by Vodacom in this litigation is unfortunate … The service had become so popular and profitable that revenue in huge sums of money was generated, for Vodacom to smile all the way to the bank. Yet it did not compensate the applicant even with a penny for his idea. No smile was brought to his face for his innovation.
Justice Chris Jafta
from the Makate Judgment, 26 April 2016
Impact and Significance
Makate gained many supporters over the course of his legal battle with Vodacom. Several called for South Africans to cancel their Vodacom contracts, and to invade and occupy Vodaworld in Midrand, Johannesburg.
Following the Constitutional Court judgment, Makate and Vodacom commenced with the negotiations ordered by the Court. Makate alleged that Vodacom did not enter into negotiations in good faith, and rejected its offer as “ridiculous and insulting”.
This unethical behaviour has permeated Vodacom’s conduct throughout negotiations with me. The CEO’s determination considers me a charity case, ignoring the fact that I have a binding commercial agreement with Vodacom.
Kenneth Nkosana Makate
17 February 2019
As of March 2020, the two parties had not reached an agreement on the compensation owed to Makate. Makate has again turned to the High Court in Pretoria to compel Vodacom to come clean on revenues it has generated from the service since it was launched in 2001. Meanwhile, Vodacom says such records do not exist. The parties continue to fight it out in court.
Vodacom offered Makate R47 million as compensation for ‘Please Call Me’, which he rejected as it only amounted to 0.023% of the revenue made by Vodacom through the ‘Please Call Me’ invention. Makate is requesting that Vodacom compensate him for 5% of the revenue made by the company which amounts to R20 billion.
