Saying no to R47 million

Most people would not believe their luck if they were offered R47 million for an idea which they shared with their company that was then turned into a successful product.

Not so for Nkosana Makate, who shared his idea for a Please Call Me-type service with his boss, Phillip Geissler, at Vodacom in 2001.

Geissler promised Makate compensation for his idea, but it is hard to believe that the Vodacom executive envisaged paying Makate R47 million.

This is, however, the amount which Vodacom CEO Shameel Joosub came up with after considering all aspects of the protracted battle between Vodacom and Makate.

To understand why Makate dismissed what is seen by many as a tremendously generous offer, it is necessary to look at what happened over the last eighteen years.

Makate’s original idea

Makate’s initial proposal to Vodacom was for a service he called Buzz, which would allow a user without airtime to dial a phone number and give a “missed call”.

While it was a good concept, his idea was not technically possible, since a call could only mature to ringing state if the user had credit.

Ari Kahn, who patented “Please Call Me” on behalf of MTN, said Makate’s proposal did not progress beyond an idea.

“Even skilled engineers at Vodacom could not reduce it to practice, and inventions are required by law to be reduced to practice,” Kahn said.

Vodacom did, however, develop an SMS-based service which is now known as “Please Call Me” to bring this idea to life.

The problem with an idea

The problem with an idea is that it is just that – an idea. It enjoys no intellectual property protection and cannot be copyrighted.

The path from an idea to a patent and ultimately a commercial product is cumbersome and expensive, which is why very few ideas ever reach the product stage.

Kahn and MTN did the hard yards with Please Call Me, which include reducing their idea to practice and filing a patent disclosing all the steps and methods required to deliver a working solution.

After that, MTN enjoyed IP protection and they launched a commercial Please Call Me product well before Vodacom.

Vodacom has even admitted that Please Call Me was invented and subsequently patented by MTN before Makate came up with the idea.

R47 million for an idea

After the Constitutional Court ordered Vodacom to compensate Makate for his role in the creation of the Please Call Me service in 2016 the big question was – how much?

Makate initially asked for R20 billion, but has now changed this figure to R10.26 billion before interest is added.

This figure, Makate explained, is 5% of the R205 billion which his team calculated Please Call Me earned Vodacom from 2001 to 2020.

He selected a period of 20 years for revenue share because the Please Call Me idea was patentable, and if patented, it would have been protected for 20 years.

After considering the matter as instructed by the Constitutional Court ruling, Joosub ultimately offered Makate R47 million.

He used four models for his determination – a forward-looking model from 2001, an employee model, a TWL model, and a revenue share model.

He then averaged the two highest models – forward looking (R51.5 million) and revenue share (R42.2 million) which produced an award of R46.85 million (rounded up to R47 million).

Makate dismissed R47 million offer

Makate dismissed Joosub’s offer, saying “the amount that the CEO has determined is shocking and an insult”.

Many people criticized Makate’s decision, especially if you consider that R500,000 is the highest amount Vodacom has ever paid for an idea that helped the company.

The problem is, however, that Makate and his team expected a settlement in the billions rather than millions.

Makate’s initial demands, even if they were based on incorrect assumptions and unrealistic numbers, still created an expectation which is hard to forget.

Many people view R47 million for an idea as tremendously generous, and multiple times higher than what companies like Vodacom and FNB typically pay for great ideas.

Back to court

While there are strong views related to the Please Call Me case, it is once again the courts which will decide on whether the R47 million was a fair offer.

Makate approached the Gauteng High Court to review and set aside Joosub’s R47 million offer and disclose how much money Vodacom made through Please Call Me since 2001.

He argues that Joosub acted “manifestly irregularly, unreasonably, irrationally, unfair, unjustly, and inequitably”.

Vodacom is opposing Makate’s application and maintains that it negotiated in good faith with Makate and his team.

This is an opinion piece.

Now read: The most Vodacom has ever paid for an idea

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Saying no to R47 million