Vodacom has made an “immaterial” provision with respect to its legal dispute with erstwhile employee Nkosana Makate in the “Please Call Me” matter — where he is demanding a multibillion-rand payout — in a sign that SA’s largest mobile operator is confident in the strength of its case.
In February, the mobile operator filed an application for leave to appeal against the Supreme Court of Appeal (SCA) judgment that it must make a new offer to Makate.
Vodacom argued in its application for leave to appeal to the Constitutional Court that the SCA judgment and order were “fundamentally flawed”.
“We believe that there is merit in vigorously defending ourselves against this,” said Vodacom group CFO Raisibe Morathi on Monday.
“This case has been going on for many years and we believe that fair compensation should be done to close the matter. But of course in the instance where we find ourselves, with the SCA finding, there is merit for us to continue to appeal and take the legal route to the levels where we can be able to settle this, or close out this matter.
“So, the appeal is really a commercial, as well as a fairness consideration,” she said.
To account for the ongoing matter, a provision in the group’s financial statements has been recorded, but the group insists that this is only a small amount.
“It is an immaterial amount. Given the legal issues around this ... we’re not in a position to give an exact amount,” said Morathi.
“All we can say is that the provision is a very small number. It’s an immaterial number and we continue to challenge the matter in court and are awaiting the process for the Constitutional Court.”
In accounting, provisions allow companies to account for probable future expenses or losses in a reporting period, even if the exact amount or timing is uncertain. This creates a more accurate picture of a company’s financial performance.
The SCA earlier ordered the company to make a new offer to Makate, who has been fighting for recognition and remuneration for his idea, which he said he gave to Vodacom in exchange for a share of the revenue.
The appeal court found that CEO Shameel Joosub made a mistake in limiting the duration of the contract to five years and that he should have taken into account the actual duration of the Please Call Me service, which is 18 years, according to Makate.
Joosub had determined that Makate was entitled to 5% of the Please Call Me revenue for five years, amounting to R47m. Makate challenged Joosub’s determination on several grounds, such as procedural unfairness, nondisclosure of documents, incorrect calculation of Please Call Me volumes, incremental revenue, effective rate and contract duration.
The latest judgment sees two possible increases to Makate’s potential payout. The minority judgment of the SCA would raise Makate’s compensation to about R186m, while the majority judgment would entitle the inventor to a minimum amount of R29bn.
As Vodacom puts it, “the range of the possible compensation outcomes in this matter is very wide”.
The company has said that if the majority ruling was upheld, it would be potentially destabilising to its operations and might sully SA’s image as an investment destination.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.