Vodacom’s Please Call Me Case: Possible BEE Deal Collapse Looms for 80,000 YeboYethu Black Shareholders

The ongoing legal battle between Vodacom and Nkosana Makate, inventor of the “Please Call Me” service, could have severe consequences for YeboYethu, a Vodacom-backed investment vehicle created in 2018 to empower black shareholders. YeboYethu is preparing to approach the Constitutional Court as an amicus curiae in the case that could financially cripple their company and disrupt empowerment efforts for its 80,000 black investors.

The case, which dates back to 2008, centres on Makate’s demand for compensation for his idea. The Supreme Court of Appeal (SCA) ruled in February that Vodacom must pay Makate what could amount to between R29 billion and R63 billion. Vodacom, valued at R230 billion on the Johannesburg Stock Exchange (JSE), is now appealing to the Constitutional Court to overturn this decision.

YeboYethu’s Court Involvement

YeboYethu, established to help black shareholders invest in Vodacom, claims that such a large payout would have disastrous effects on their business. The company states in its court papers that forcing Vodacom to pay up to R40 billion in damages would stop dividend payments to its shareholders for years. This could financially paralyse YeboYethu, which currently holds 3.44% of Vodacom shares valued at R7.5 billion.

YeboYethu’s business model relies heavily on Vodacom’s dividend payouts, allowing shareholders to indirectly invest at a fraction of Vodacom’s share price. If the payments were halted, it could trigger significant financial losses and potentially lead to the collapse of YeboYethu, effectively undoing years of black economic empowerment (BEE) efforts.

In their plea, YeboYethu has highlighted the “preference share arrangements” that may be triggered by a payout of such magnitude, claiming that it could lead to the demise of YeboYethu and its investment arm. They argue that this single SCA ruling could undo the impact of years of empowerment efforts supported by the B-BBEE legislation.

The Origins of the Legal Battle

Makate, a former trainee accountant at Vodacom, invented the “Please Call Me” service in 2001. The service allows mobile users with no airtime to send a message requesting another user to call them. Vodacom adopted the idea, which became a highly successful feature, driving customer engagement and retention.

Despite the financial success of the service, Vodacom initially offered Makate a settlement of R47 million, which he rejected. The case has gone through several legal battles, with Makate consistently fighting for what he believes is fair compensation.

The Constitutional Court previously ruled in favour of Makate, stating that Vodacom was obligated to negotiate a settlement. However, delays and legal manoeuvres have dragged out the case for over 15 years, with Vodacom facing criticism for withholding information critical to the case until late into the legal process.

Makate’s Reaction

Makate expressed surprise at YeboYethu’s move to intervene at this late stage. He stated that Vodacom’s stakeholders have long been aware of the financial liability stemming from the case, and questioned why YeboYethu only now decided to get involved.

He pointed out that, as a Vodacom shareholder, YeboYethu may not be eligible to serve as an independent amicus curiae. “It does not make sense why they would apply now when the case has been in litigation for over 15 years,” Makate said.

Next Steps in the Case

The Constitutional Court has not yet scheduled a date for the hearing. However, written arguments from the involved parties must be submitted by October 17. As of now, Vodacom has declined to comment on the developments surrounding the case.

With billions of rand at stake, this case could potentially reshape not only the relationship between Vodacom and Makate but also the future of black economic empowerment through investment vehicles like YeboYethu.