Posted by Mteto NyatiManaging Director, Microsoft South Africa
After an exhaustive five-month process examining and analysing the 683 hopefuls who had responded, Microsoft South Africa today unveiled the first small black-owned software development firms that will benefit from the company’s R475-million investment in a broad-based black economic empowerment (BBBEE) equity equivalence programme.
The four new BBBEE partners were introduced to the media today at our headquarters in Johannesburg, by me and our partners at the government’s Trade and Industry Trade and Industry Ministry.
Empowerment is one mechanism South Africa employs to redress the imbalances of South Africa’s apartheid legacy. Because we at Microsoft South Africa believe that empowerment should be linked more effectively to the development of skills and growing local businesses, we entered with the blessing of government into an Equity Equivalence programme. The investment directly addresses key challenges facing the government and South Africa – namely creating jobs, developing enterprises, building the local software economy and developing scarce technology skills. This deal should elevate Microsoft South Africa from a Level 4 to a Level 2 Black Economic Empowerment (BEE) contributor, which benefits all who do business with us, as well as our image and good standing when dealing with government in business.
We’re satisfied that our choices not only meet the letter of BEE, but also the spirit thereof. I wish to give a salute to every applicant who submitted themselves to this intensely competitive process in which only a handful would be successful.
The journey is not yet over and there are numerous opportunities for the other aspiring companies to continue working with Microsoft in various ways. In this light, we will be starting the next RFP process in June this year. Should these companies be interested, Microsoft would like to work with them in the areas in which they succeeded well in the selection (due diligence) process, and possibly invite them to join Microsoft ISV programme.
At the start of the process, we made it clear that this wasn’t a one-off. We’d like to grow several companies through this process, if we can. Market conditions change and we feel it’s in everyone’s best interests if we continue to engage with potential candidates who might meet the criteria. The more companies we can grow through this process, the better for the software industry as a whole.
Microsoft, its advisors and venture capital backers Vunani will do extensive planning with Microsoft and our selected partners over the next four months, and then decide on the investment requirements to close the gap between the companies’ current business models and what is needed to take them to the next level. We foresee the marketing and due processes of business execution towards growth commencing within the next six months.
When this process started, we had little insight into the potential partners. But we did identify high-growth areas in South Africa and other emerging markets, such healthcare, education, security, software plus services and mobility, where we saw the biggest opportunity of success for incumbents.
Each and every single company that we’ve announced here today is black-owned in terms of the provisions of the BBBEE Act. We’re extremely comfortable that our choices not only meet the letter of BEE, but the spirit thereof. We’re specifically not excluding or favouring anyone, and look forward to growing black skills in the software development sector through this programme.
We remain 100 percent committed to our existing partner channel, and to making their Microsoft lines of business as profitable as possible for them. The fact is that this programme is growing the channel in an underserved niche, and will ultimately result in a far greater volume of business for our partners, who will have opportunities to work with these new partners. We’re not giving smaller slices of pie here, we’re making the size of the pie bigger for everyone.
With this deal, Microsoft is taking a high-risk, high-reward approach, by striving to create a new model for entrepreneurship. The size of the deal – R472 million – makes it the biggest deal of its kind by an IT company in SA. By selecting local black-owned companies with potential, and helping them become significant players who create software that the market wants, we hope that the market will come to associate BBBEE with real entrepreneurship, job creation, business/enterprise development and skills enhancement.
I invite you to follow this first-of-its-kind seeding process with us, and will provide an update a few months from now, when we are ready to truly take these companies to the international marketplace! In the meantime, additional information can be accessed via www.microsoftbee.co.za.