Microsoft SA’s R475 million will help six black-owned software firms expand beyond our borders

Left to right: Jayesh Nana, CEO: iSolv Technologies; Mteto Nyati, managing director: Microsoft (SA); Mmabatho Nyaredi, MD: Mmapro IT Solutions; and Mvuzo Mtyhobile, director: BEE Transactions at the Department of Trade and Industry

Earlier in 2011, Microsoft South Africa announced a R475-million broad-based black economic empowerment (BBBEE) equity equivalence programme, aimed at growing software development companies into global companies over a seven-year period. The programme was officially launched in March 2011, when Microsoft announced four beneficiaries of the programme. In November 2011, two more companies were added: iSolv Technologies and Mmapro IT Solutions, bringing the current number of beneficiaries to six.

Designed in line with government priorities, the programme’s focus is to assist companies providing information technology (IT) within safety and security, healthcare, and education among key government priority areas for IT.

Both companies specialise in creating security products for government and private enterprise. iSolv specialises in the field of public key infrastructure, encryption and secure communication, and Mmapro provides innovative real-time mobile information and communication technology (ICT) solutions for public safety.

The initial four companies – Chillisoft, Maxxor, BUI and Home Grown Business Integrations – which provide diverse IT support services and products, spent six months doing intensive analysis of their business, and restructuring themselves to gear up for planned expansion.

Speaking at the launch of the expanded programme at Microsoft’s head office in Johannesburg, Sipho Zikode, deputy director-general of the Department of Trade and Industry (the dti), said: “This programme has the potential to boost transformation within the South African ICT sector – and it seems we are well on track to driving our shared vision of creating a strong homegrown South African software industry.”

Mteto Nyati, managing director of Microsoft South Africa, echoed this sentiment. “Most BBBEE deals in South Africa are focused toward ownership and shares, and yet people who own these shares more often share nothing with the world.

“We made the decision to take a different approach to this BBBEE deal, to ensure the world around us benefits; and with the current challenges of unemployment the country faces, more companies need to look at how these deals can be restructured to benefit broader society, and not merely individuals,” he stressed.

Nyati explained that criteria for selection were based, first and foremost, on companies being black-owned and within the IT or software development space, with a product offering that complements government priorities.

He added: “We were also looking for companies with less than 25 employees and a turnover of less than R10 million per annum.

“Our approach to technology is that it should always be innovative and set one apart from the rest, and we were looking for companies with unique products that can be expanded and diversified for an international market.

“One of South Africa’s biggest challenges is youth unemployment, and we had to look at how we could contribute toward tackling the challenge; and in most cases, the role of small businesses in addressing issues of unemployment is often overlooked, yet these are the companies that can make the most impact in creating jobs and opportunities for unemployed youth,” noted Nyati.

“When most of the bigger companies become more efficient, they reduce staff; while smaller companies are always creating jobs, and that is why there is a need to help sustain these small firms to help address current unemployment challenges.”

South Africa is home to more than 3.1 million unemployed young people aged between 20 and 29; and while small, medium and micro enterprises (SMMEs) in countries such as Brazil and Spain, among others, contribute about 80% toward gross domestic product and employment creation, South African SMMEs account for only about 45%.

“Small businesses require the support of larger companies; and for the country to realise true empowerment, there’s an urgent need to support more black-owned businesses,” said Nyati.

“It is one thing to have a product, but it’s important to sell these assets. In some instances, it may not be financial assistance that small businesses require, but networking opportunities to enable them to establish a client base that helps grow their businesses.”

Microsoft has a footprint in 120 countries, and part of this programme will allow these small businesses to benefit from networking with some of Microsoft’s clients wherever the multinational has a presence.

Nyati noted that the South African IT sector has the potential to grow, and Microsoft’s primary objective is to develop intellectual property (IP) in South Africa for export purposes. According to him, South Africa has the skills and brilliant people who constantly devise innovative products ideal for export.

Most of these small IT companies have potential to grow, however, they do not have the right support, governance policies and structures in place, added Nyati. Local trainers have been employed to help these companies improve governance structures, to guide and train them on improving governance in the local market to prepare for expansion.

The investment in the first four companies entailed assisting the companies in developing skills, and helping them recruit and hire top black talent and improve infrastructure, both IT and non-IT. Some have undertaken significant restructuring of their business to focus on the right elements within their company, and be in a position to take new products to market.

Microsoft will immediately start working with the two new partners, to establish their specific needs and to align their businesses to high-growth areas in South Africa and other emerging markets such as healthcare, education, security, software as well as services and mobility; and business areas with the greatest chance of success.

“Our commitment to the dti is that we will help these companies grow to create employment and opportunities for unemployed and skilled young people. After seven years, we will review the success of the programme and measure performance based on expansion, employment creation and product diversity, among other factors. If, by then, these companies would not have expanded across South Africa’s borders and not contributed toward job creation, we will have to be answerable,” said Nyati.

“Through appropriate funding, technical, operational and sales support, bigger businesses can play a role toward helping small business realise their potential to grow into companies that can contribute toward job creation. We believe these companies will help South Africa grow its IP beyond South African borders and grow this economy.”

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