Paul Gering - Tax Partner, PKF Durban

The “Please Call Me” matter may have been settled with Vodacom but what are the SARS implications for Kenneth Makate?

The “Please Call Me” service of Vodacom was conceived in 2000 by Kenneth Makate who at the time was employed as a trainee accountant at Vodacom.

The idea was simple but was truly impactful, it allowed prepaid mobile users without airtime to send a free text message requesting a call back.

It is common cause that the product has generated billions of rands in revenue for Vodacom since its launch.

Kenneth Makate instituted legal proceedings in the High Court, asserting that he had entered into a verbal agreement with Vodacom concerning the use of his idea. He claimed that this agreement entitled him to reasonable remuneration.

Kenneth Makate first demanded compensation in 2007, claiming he was promised payment for his idea. He initiated legal proceedings in 2008. Initially, Kenneth Makate pursued the following remedy against Vodacom in the High Court, namely for an Order directing the Defendant “to commence with bona fide negotiations to determine a reasonable remuneration payable to the Plaintiff for the use by the Defendant for the product known as “Please Call Me”.

Various legal challenges continued and finally on 4 November 2025 Vodacom’s board approved an out of court settlement with Kenneth Makate.

Both parties then withdrew all of their Appeals and abandoned their prior Judgements.

The settlement amount was not disclosed publicly, but Vodacom confirmed that it had accounted for the payout in its financial results, reporting a financial impact of approximately R874 million.

Kenneth Makate has confirmed settlement but has declined to reveal the figure.

Bloomberg Intelligence estimates that the settlement might be around R550 million.

My interest in the matter from a tax perspective was when I saw a post on “X” (formerly “Twitter”) which indicated that the tax liability would be 18% of the settlement, and I was immediately of the view that the tax liability would exceed the capital gains rate of 18%.

I am not sure what the legal fees would be in that there are some limitations in the legal fraternity on contingent fees. There are posts that Black Rock Mining which assisted in the funding of the legal process might be claiming as much as 40% of the settlement. The legal fees would be claimable against the taxable income in the year that they were actually incurred and as such would have an impact on the ultimate tax liability.

The real question for this article is whether or not SARS’ bite of the cherry will be limited to 18% on the premise that it is a capital gain or whether in terms of the application that started the process for reasonable remuneration means that the settlement would be subject to tax at the normal individual’s tax rates which, at this level, would be in the region of 45%.

If the claim was for a royalty in the region of 5% to 7% of revenue received, then the royalty would be taxed as ordinary income.

If a portion of the settlement included interest accruing over time from 2001 to 2025 when the matter was settled, then, once again, this would be subject to normal tax rates.

If what is being paid is remuneration or reasonable compensation which is another term for remuneration, then the amount would, once again, be subject to normal tax rates.

Kenneth Makate never owned copyright in “Please Call Me” and never generated the technical code required to implement “Please Call Me”.

He came up with an idea, a brilliant idea, which was implemented by Vodacom and for which he believed he was due a reward by way of remuneration.

I think that Kenneth Makate’s legal battles are not yet settled and that what he would have received could possibly constitute remuneration in terms of his initial legal application and evidence led in the matter and as such, based on what I have read, I do not think that Kenneth Makate will be successful in holding that the amount so received is capital.