The Star Late Edition

Delta’s state connection­s cut debt costs

- Asha Speckman Kamlesh Bhuckory

IT SEEMED yesterday morning that Vodacom senior counsel Fanie Cilliers, during his closing argument, had hit the final nail in the coffin of the case brought to the South Gauteng High Court by Nkosana Makate, who has claimed inventorsh­ip of the Please Call Me SMS service.

But when Makate’s senior counsel, Cedric Puckrin, stood up to close after lunch he dismantled much of the argument Vodacom had built up earlier.

Makate has dragged his former employer, Vodacom, to court in a bid to force the company to enter into negotiatio­ns over compensati­on for his idea.

According to him, this was part of the terms he agreed to with a senior official in the company when he was enticed to disclose his idea to Vodacom in 2000. Vodacom, he claimed, later reneged on this agreement and this led to the court case, which was heard from June to August this year. Summons was first filed in 2008.

Yesterday, Judge Phillip Coppin heard the final day of closing arguments in the marathon case.

“The authority point kills all,” Cilliers argued for Vodacom in the morning. He undermined Makate’s argument that Philip Geissler, an executive for product developmen­t at Vodacom at the time, had ostensible authority that allowed him to enter into an agreement to pay Makate for the idea once Vodacom proved its technical and commercial feasibilit­y.

Cilliers said Puckrin, for Makate, had alleged that Geissler had ostensible authority, then elected not to argue this, withdrew the argument and was now seeking to reintroduc­e it.

Ostensible authority refers to apparent authority, which was a key theme that Vodacom challenged during the trial once it had decided to abandon an earlier argument that Makate could not have been compensate­d because he had developed the idea within the course and scope of his employment even though he was employed as an accountant and not a product developer.

Cilliers argued yesterday that Lazarus Muchenje, Makate’s then direct line manager in the finance department, had conceded that he knew Geissler did not have authority to enter into a long-term revenue sharing agreement with Makate, which was what the latter had sought.

Cilliers argued that Makate had failed to provide evidence that Geissler had the authority, and that the agreement was valid as a contract and was ratified by Vodacom’s legal department and its board of directors as was required.

He also argued that the board was not aware of Makate’s agreement with Geissler, which would have been an extraordin­ary deal.

These issues were also raised by then Vodacom chief executive Alan Knott-Craig when he testified.

Puckrin argued that Makate’s invention, which allows a user without airtime to send a message to another user requesting a call back, was within his course of employment but not within his scope of work. He raised evidence that knowledge of Makate as the inventor was rife up to senior levels. He added that it was important to note that Geissler was a director of the board, which gave him certain rights.

He raised evidence about other service providers that have been paid by Vodacom without agreements being in place. Some of this evidence was lifted from Knott-Craig’s biography, Second is Nothing. Judgment is reserved. Vodacom still has to argue its case in a separate matter in which it is applying to join Makate’s funders, Stirling Rand, a litigation financing company. The aim of this applicatio­n is to hold Stirling Rand accountabl­e for all costs should Makate’s case fail.

Stirling Rand, through Johannesbu­rg law firm Wertheim Becker, is opposing the applicatio­n.

Judge Coppin raised a concern that he might have to delay his judgment on the merits of the case to consider the outcome of Vodacom’s applicatio­n. Coppin questioned why Vodacom had not sought an adjournmen­t during the trial to allow Stirling Rand to participat­e in the trial. The merits of Vodacom’s applicatio­n would have been heard then. GOVERNMENT connection­s are paying off for Delta Property Fund’s borrowing costs.

The company, which rents office space to state entities, planned to sell R350 million of three-year secured debt by the end of the month, chief financial officer Bronwyn Corbett said late last month.

Delta was seeking a yield of 6.9 percent, compared with 7.5 percent for its bank loans, she said. That would narrow the gap with Redefine Properties, which sold R425m of similar-maturity notes at 6.5 percent in March.

Out of 271 447m2 of gross lettable area Delta owned and managed locally, 55 percent was leased as office space to the government, the company said. The average rent paid by the state was 72 percent higher than by retail clients.

Office demand from stateowned companies including Eskom and Transnet would help Delta’s income grow faster than the gross domestic product, forecast to expand 2.1 percent this year, Corbett said. Government leases extending until at least 2018 accounted for 64 percent of revenue for the six months to August, she said.

“The 6.9 percent is achievable,” Geoff Noble, a portfolio manager at Grindrod Asset Management, who plans to buy Delta bonds, said last Wednesday. “Delta does have a long lease-expiry profile under- pinned by government leases, which should assist them in achieving their target rate.”

Delta had utilised 91 percent of R2.18 billion in existing bank facilities and commercial paper at the end of August, according to an earnings statement on October 29. A R180m loan with Nedbank maturing in 2017 carried a fixed rate of 7.55 percent.

Bank loans were being offered at “very aggressive rates”, Corbett said on Friday. “The banks have margins which cover their costs and therefore cannot lower their rates to debt capital market funding of 6.9 percent.”

Growth prospects remained on track amid curbs in state spending because the government still needed office space, Corbett said. – Bloomberg

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