For 16 years, Nkosana Makate has waged a relentless legal battle against Vodacom in what has become one of South Africa’s most drawn-out court cases. Dubbed the "Please Call Me" case, it has made its way to the Constitutional Court not once, but twice. Despite being offered a R47m settlement in 2019, Makate rejected this and therefore remains unpaid, with telecommunications company Vodacom in 2024 appealing a R29bn judgment against them.
Ross Kudo, commercial lawyer
At the heart of this protracted saga lies litigation financing, an arrangement where often anonymous external backers fund legal cases, expecting a healthy return on investment, usually at significant cost to the other parties involved.
Litigation funding allows individuals without funding to pay for lawyers and access justice, but as is the case with Makate, has also played a significant role in extending his court battle’s duration far beyond what is reasonable.
Background
In 2000, Makate, then working at Vodacom, suggested a service in which consumers without airtime could contact friends and request a return phone call, with the service launching after competitor MTN launched a similar service.
In 2023, the Supreme Court ordered Vodacom to pay Makate between 5% and 7.5% of the Please Call Me service's total revenue over 18 years. This equates to between R29bn to R63bn with such an enormous payout potentially burdening hundreds of thousands of people: including Vodacom shareholders, pension funds, and the telecommunications firm’s Black Economic Empowerment (BEE) investors. Meanwhile, Makate’s payday remains uncertain.
Global practice
The dangers of litigation funding extend far beyond a single case. Such a practice, which is entrenched within the US, and common in Australia and the UK creates incentives to prolong disputes, prioritises the highest possible monetary payouts over reasonable resolutions, and reshapes the justice system into a battlefield where lawyers and funders emerge as the ultimate victors and ordinary litigants lose out.
Globally, litigation financing has evolved into an investment asset class, alongside stocks, government bonds and precious metals. Private backers earn a return on their investment as they take a substantial cut of the payout when the judgment is made. In the United States, third-party legal funding has thrived for over 20 years.
Call for regulation
The massive growth in litigation funding in recent years is leading to increased calls in many countries such as the US, UK, Netherlands and others for regulations to be introduced to avoid predatory litigation and other abuses. Often it is not clear who is funding the litigation with much funded by offshore entities raising concerns about other countries or unknown parties with opaque motives interfering in the judicial system.
The model may provide access to justice for those who might otherwise be unable to afford it, but it comes at a cost, with the winners being investors and lawyers rather than ordinary litigants.
Matters which could be resolved through mediation instead collapse into protracted legal cases as lawyers, paid by the hour, have little incentive to compromise to reach a reasonable conclusion. Cases that could have been settled out of court add to an already overburdened court system and create a litigious society allowing consumers to sue corporations for minor infractions, ultimately increasing the costs of doing business.
It is something South Africa must avoid.
Makate’s case illustrates these concerns. Had he been self-funded, the R47m settlement offered by Vodacom might have been accepted as a generous resolution. Instead, buoyed by external funding, the legal saga continued for another five years.
While the Supreme Court’s R29bn judgment in Makate’s favour has drawn headlines, Vodacom’s November appeal to the Constitutional Court underscored the absurdity of the sum. Social media posts have expressed ordinary people’s astonishment at the duration of the case and Makate’s refusal of the R47m offer.
In South Africa, litigation financing remains a nascent but growing phenomenon. The "Please Call Me" case, funded by the little-known Sterling Rand, a firm mentioned in a single media article without a website or presence, has become its most prominent example. The article estimates Sterling Rand’s costs at R5m, reflecting the scale of investment litigation funders are willing to make for high-stakes cases.
No limits
Additionally, in South Africa when lawyers take cases on a contingency basis — where fees are only payable upon a successful outcome — they are legally capped at claiming no more than 25% of the awarded payout. However, in South Africa, litigation funders operate without such regulatory constraints and can potentially claim a substantial portion of the payout, often leaving the claimant with a disproportionately small share of the settlement.
Alarmingly, international litigation funders are eyeing South Africa as fertile ground for class-action lawsuits.
Kaamilah Paulse 24 Apr 2024
System under strain
South Africa’s judiciary is sadly already grappling with delays and inefficiencies. Civil cases, including medical negligence lawsuits, have stretched resources thin, diverting attention from critical priorities like combating crime.
For example, in seven of the country’s nine provinces, health departments now spend more on settling negligence claims than on actual healthcare services—a chilling indicator of systemic abuse – leaving less money for sick patients.
The potential growth of litigation financing threatens to exacerbate these pressures. Class-action lawsuits now funded by litigation financiers, often orchestrated by litigation lawyers and their backers, could clog the courts with cases that drag on for years.
Alternative to litigation
There is an alternative, which is mediation, allowing parties to find a middle ground and settle. This allows claimants to access justice and payouts more quickly rather than making lawyers and finance backers rich at their expense.
In South Africa, class-action lawsuits and other funded cases could further strain the country’s overburdened courts, prolonging disputes and diverting resources from urgent criminal and civil matters. The health sector’s struggles with negligence claims — and earlier abuses involving the Road Accident Fund — serve as cautionary examples of what can happen when systemic vulnerabilities are exploited.
As South Africa grapples with these challenges, the "Please Call Me" case offers a vital lesson: the pursuit of justice must be balanced with efficiency and fairness. Litigation financing, while valuable in ensuring access to courts, must not become a tool for perpetuating disputes for years and enriching anonymous private equity funders at the expense of claimants and the judicial system.
*The views expressed in this article are solely those of the author.
