In recent days, I’ve faced criticism and accusations from Vodacom employees, business partners and concerned individuals. Some accused me of advocating for Vodacom’s demise in my previous column, in which I argued that the company’s 25-year legal battle against Nkosana Makate must end with fair compensation for the “please call me” (PCM) inventor.
My critics claim that paying Makate the R9.4bn he is demanding and rightfully deserves would cripple the mobile operator, leading to mass retrenchments and financial ruin for entrepreneurs who depend on the company.
Some even argue — erroneously — that Makate’s PCM innovation does not generate revenue because it is free. The facts paint a very different picture.
Makate’s legal team has presented compelling evidence that PCM generated more than R205bn for Vodacom between 2001 and 2019 and continues to bring in billions annually.
In fact, Vodacom’s 2009 prelisting statement revealed that PCM facilitates 20-million SMS transactions daily, with revenue generated from return calls. Beyond callbacks, PCM also earns money through advertising. Promotional messages are displayed with the notifications.
Additionally, Vodacom has exported the service to 19 countries, including Safaricom Ethiopia, which adopted it in 2023.
What makes Makate’s claim reasonable is that he is only demanding 5% of the revenue from first hour return calls in South Africa. He is not demanding anything from the remaining 23 hours of the day.
Makate has not even included revenue from advertising or the international markets where PCM has been introduced in his claim. This narrow scope means his demand is far from an existential threat to the company’s finances.
Both Vodacom and its parent company, Vodafone UK, have been disclosing Makate’s potential liability in their financial statements since 2009, in compliance with IAS 37 accounting standards for contingent liabilities. These disclosures confirm that Vodacom set aside provisions ranging between R47m and R29bn, indicating that the company expected a significant payout.
Vodafone UK further acknowledged the liability in its 2016 audited financial statements after Makate won his case in the Constitutional Court. This means investors and shareholders have been aware of this potential financial obligation for years, and Vodacom’s financial planning has accounted for it.
A closer look at Vodacom’s financial statements proves that paying R9.4bn would not destabilise the company
A closer look at Vodacom’s financial statements proves that paying R9.4bn would not destabilise the company.
In 2023, the company reported a free cash flow of R18.5bn, followed by R18.2bn in 2024. It declared dividends of R14bn in each of those years and maintained cash reserves of R22bn (2023) and R23.7bn (2024).
If Vodacom were to pay Makate the R9.4bn he is demanding, it could do so by slightly reducing its dividend payouts, without touching operational funds or cutting jobs. Shareholders would still receive substantial payouts of R4.6bn in 2023 and R3.6bn in 2024, and Vodacom’s balance sheet would remain strong.
Its parent company is a global telco behemoth with vast financial resources. In 2024 alone, Vodafone held R136bn in cash and generated R57.2bn in free cash flow.
For a company of this size, settling a R9.4bn liability is entirely feasible.
If necessary, Vodafone could easily lend Vodacom the funds, given its strong international credit rating. Alternatively, it could cover the payment directly from its own reserves without any significant financial strain.
Vodafone has a record of resolving high-value legal disputes without financial distress. In 2010, it settled a R30bn tax case in Luxembourg after setting aside R55bn in provisions. In 2021, it paid R10.6bn to settle a patent lawsuit in Spain and the UK. Even Vodacom’s Tanzania subsidiary once paid 5.3bn shillings to resolve a government revenue dispute.
Given this history, Vodacom’s resistance to paying Makate, a South African inventor who has won nine court battles, is difficult to justify.
If the board mismanages this liability, shareholders have legal recourse under the Companies Act. Directors have a fiduciary duty to act responsibly and if they failed to insure against this known liability, they could be held personally liable.
The argument that paying Makate would bankrupt Vodacom is unfounded.
It has the cash reserves, provisions and parent-company backing to settle this debt without harming its operations, employees or shareholders.
Vodacom must simply stop taking advantage of slow court processes using endless litigation and instead comply with previous rulings and compensate Makate fairly.
It must just pay up and move on, for the sake of its reputation, its stakeholders, and South Africa’s faith in corporate accountability.
* Lourie is founder and editor of Tech Financials
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