AUTHORITY, ACCOUNTABILITY AND FAIRNESS: LESSONS FROM MAKATE V VODACOM

ABSTRACT

The concept of authority is crucial in corporate law, especially when it comes to determining when a company is held accountable for the actions of its representatives. A key case that sheds light on this issue is Makate v Vodacom (Pty) Ltd [2016] ZACC 13. In this significant ruling by South Africa’s Constitutional Court, the judges addressed the meaning of both actual and ostensible authority, corporate responsibility, and fairness in contracts. The case began when Nkosana Makate, who created the “Please Call Me” service, sought compensation after an oral promise was made to him by his boss. Vodacom pushed back, claiming that the boss didn’t have the authority to make such a commitment that would bind the company. However, the Court ruled that Vodacom was indeed liable, highlighting that ostensible authority can come into play when a company’s behaviour leads others to reasonably believe that a representative has the authority to act on its behalf. This ruling reinforced the idea that corporations can’t easily dodge their responsibilities just by relying on internal structures, especially when their actions have set up genuine expectations for others.

INTRODUCTION

One landmark case that continues to influence authority in corporate law today is the Makate v Vodacom. This case put the limits of fairness, corporate responsibility, and actual and ostensible authority to the test for the South African Constitutional Court. Nkosana Makate’s ground-breaking “Please Call me” concept, which transformed cell phone communication in South Africa, gave rise to the legal system. Makate refined the concept into a written memorandum and forwarded it to Lazarus Muchenje, his direct line manager[1]. Makate was assured by Mr. Muchenje that if the proposal was successful commercially, he would get remuneration from the company for his efforts. Following its implementation, the service turned into a profitable feature for Vodacom, bringing in a substantial amount of money and increasing engagement among users. Vodacom rejected accountability when Makate requested reimbursement, arguing that Muchenje did not have the requisite power to bind the business to such a contract. After being escalated through the Supreme Court of Appeal and the High Court, the case ultimately reached the Constitutional Court, which is the highest court in South Africa. The question at hand was whether the oral agreement bound Vodacom, and more especially, if the corporation could be held accountable for Makate’s superior’s commitment under the theory of Actual or Ostensible Authority.

A company is an artificial entity that operates through its officers and directors since it is incapable of acting alone. Two prerequisites under company law must be met for a contract to be binding against a business entity and have legal force behind it. To engage into a contract, the company must first have the legal ability to do so, and then the director or officer acting on the company’s behalf must have the authority for this to occur[2]. According to Section 66 (1) of the Company Law Act, it states that unless this Act or the company’s memorandum of incorporation specifies otherwise, a company’s business and affairs must be overseen by or under the direction of its board, which has the authority to exercise all of the company’s powers and carry out any of its functions[3].Depending on the corporation’s memorandum of incorporation, the clause gives the board the ability to exercise all of the company’s functions. In actuality, the board of directors is probably going to assign its authority to run the company’s operations to certain directors and officials, especially the managing director. Overall, this piece of writing will examine the authority required to sign an agreement on behalf of the company and how this decision helped the Constitutional Court define corporate law today.

MAIN BODY

Legal Framework

Corporate authority specifies the actions that may be made on behalf of the company, who can make them, and when they can act. This is essential for keeping illegal activity at bay and making sure that the business operates within the bounds of the law. There are 2 types of authority, the first one is Actual authority, which includes express and implied authority, and the second one is Ostensible authority.

In Actual authority, implied authority is the authority that is required or merely related to the carrying out of the agent’s express authority, it is not given in many words but rather results from the principal’s actions. In contrast, actual authority is expressed in many words, either orally or in writing[4]. Wherelse in Ostensible authority, it is often referred to as apparent authority or agency by estoppel, occurs when someone gives the idea that someone else is their properly appointed agent because of their words or actions, leading an innocent third party to interact with the agent in that capacity[5].

Judicial Interpretation

The primary ruling made by Jafta J determined that the High Court was right in its finding that Mr. Makate had effectively demonstrated the formation of an agreement between himself and Mr. Geissler[6]. Concerning whether Mr. Geissler had the apparent authority to finalize the contract on behalf of Vodacom, the main judgment determined that the High Court adhered to the view that Mr. Makate depended on estoppel, which, as a response to a defence of lack of authority, must be introduced in replication[7]. It stated that the High Court’s handling of the pleadings in this matter was mistaken and had merged the concepts of ostensible authority and estoppel. The primary ruling established that ostensible or apparent authority differs from an estoppel in that the former involves a scenario where a false representation suggests that the agent is empowered to act for the principal, while the latter does not constitute a type of authority at all[8]. Jafta J highlighted that while estoppel can serve as a protective measure against the argument that a party lacks actual authority, ostensible or apparent authority pertains to the authority of the agent as perceived by others[9].

Critical Analysis

For a company director or agent to enter into a binding agreement on behalf of the company, it’s essential that they hold the proper authority. The Constitutional Court reaffirmed several established agency principles regarding this authority in the case of Makate v Vodacom. In this case, the court evaluated Vodacom’s culpability by thoroughly examining South African legislation. The concepts of estoppel, actual authority, and apparent authority were carefully studied to address the problems at hand. This decision is expected to have a major impact on appeal practice in South Africa, highlighting the critical role that justice and careful analysis of the evidence have in upholding the principles of the rule of legislation.

Recent Developments

The Constitutional Court tackled the issue of power in the Makate v Vodacom (2016) case, but also the reimbursement problem that has persisted for years without an agreement.  Agreements between Vodacom and Makate began following the Court’s ruling.  But they soon encountered a problem with their payment of reimbursement.  Vodacom offered about R47 million, but Makate argues that, given the substantial revenue generated by the “Please Call Me” service, he should receive much more, alleging it is in the billions[10]. Makate’s appeal against Vodacom’s offer was re-examined by the Supreme Court of Appeal in 2020, and portions of the case were returned for additional review[11]. The ensuing talks between 2021 and 2023 continued to focus on the precise method of determining compensation, underscoring the complexity of this scenario. These incidents demonstrate that, despite the authority aspect being resolved in 2016, the Court’s ruling’s practical ramifications, particularly regarding valuing intellectual contributions in corporate settings, remain a controversial issue in South African law.

SUGGESTIONS

A significant milestone in corporate governance was reached recently when president of South Africa, President Cyril Ramaphosa signed the Company Amendment Act. The Company Act of 2008 has been significantly updated by this new law, which aims to enhance corporate governance, promote accountability, and raise business landscape productivity. An important step towards the modernisation of South African corporation law is the Companies Amendment Act. To promote a more robust and competitive company environment, it focusses on increasing transparency, strengthening corporate governance, and streamlining crucial procedures. The potential long-term benefits, such as increased investor trust, improved company practices, and enhanced regulatory oversight, are anticipated to outweigh any initial challenges associated with the implementation of these new policies.

Conclusion

The Constitutional Court’s historic decision in Makate v Vodacom (Pty) Ltd [2016] ZACC 13 has had a significant effect on corporate power in South Africa. The Court made it plain that businesses cannot avoid accountability via technicalities when their activities establish real expectations by recognising the binding character of seeming authority and stressing that fairness should govern corporate relations. The difficulties of safeguarding third persons while preserving corporate independence were highlighted by this decision, which also sparked important conversations about striking the correct balance between justice and legal clarity. The continuing legal disputes surrounding Makate’s pay are serving as an indication of the significance of unambiguous regulations pertaining to authority and responsibility in corporate governance and show that this case is not just a thing of the past. Clearer standards, whether via legislation or court rulings, might be beneficial for South African business law going ahead in order to preserve contract consistency and fairness. Makate v Vodacom is essentially a potent reminder of the judiciary’s responsibility to hold businesses responsible and to uphold the value of fairness in business law.

REFERENCE(S)

Primary sources

Legislation

• Companies Act 71 of 2008 (South Africa)

Cases

• Makate v Vodacom (Pty)Ltd (2016) ZACC 13 (South Africa)

Journal Article

• Vela Madlela & Palollo Michael, Representation of a company when contracting with another person under South African company law, 39(2) Obiter, 547-560 (2018)

Internet Sources

• Herman Moloi, Makate unwavering after apex court remits Please Call Me case back to SCA, Sowetan LIVE (July 31 2025, 13:05), https://www.sowetanlive.co.za/news/2025-07-31-makate-unwavering-after-apex-court-remits-please-call-me-case-back-to-sca/
• Gugu Lourie, ‘Please Call Me’ saga: Inventor Nkosana Makate’s compensation battle against Vodacom returns to ConCourt, The Bulrushes, (November 21 2024), https://thebulrushes.com/2024/11/21/please-call-me-saga-inventor-nkosana-makates-compensation-battle-against-vodacom-returns-to-concourt/

[1] Makate v Vodacom (Pty)Ltd (2016) ZACC 13 (South Africa)

[2] Faraouk HI Cassim et al, Contemporary Company Law, 187, 162 193 (2^nd Ed 2012)

[3] Companies Act 71 of 2008 s66(1)

[4] Faraouk HI Cassim et al, Contemporary Company Law, 187, 162 193 (2^nd Ed 2012)

[5] Faraouk HI Cassim et al, Contemporary Company Law, 187, 162 193 (2^nd Ed 2012)

[6] Makate v Vodacom (Pty)Ltd (2016) ZACC 13 (South Africa)

[7] Vela Madlela & Palollo Michael, Representation of a company when contracting with another person under South African company law, 39(2) Obiter, 547-560 (2018)

[8] Makate v Vodacom (Pty)Ltd (2016) ZACC 13 (South Africa)

[9] Makate v Vodacom (Pty)Ltd (2016) ZACC 13 (South Africa)

[10] Herman Moloi, Makate unwavering after apex court remits Please Call Me case back to SCA, Sowetan LIVE (July 31 2025, 13:05), https://www.sowetanlive.co.za/news/2025-07-31-makate-unwavering-after-apex-court-remits-please-call-me-case-back-to-sca/

[11] Gugu Lourie, ‘Please Call Me’ saga: Inventor Nkosana Makate’s compensation battle against Vodacom returns to ConCourt, The Bulrushes, (November 21 2024), https://thebulrushes.com/2024/11/21/please-call-me-saga-inventor-nkosana-makates-compensation-battle-against-vodacom-returns-to-concourt/