Microsoft unveils S.African empowerment deal

JOHANNESBURG  - Microsoft South Africa, a unit of the world's largest software firm, will invest 475 million rand ($69 million) in four black-owned software firms to meet black economic empowerment (BEE) rules.
The deal is in place of selling a stake to black investors, as most foreign and local firms in Africa's biggest economy have to do.
"One of the metrics we will be using to measure our success is in how many countries are these companies selling their products," South Africa managing director Mteto Nyati said in an interview on Tuesday.
"After the end of the seven-year period, we want them to be in Russia, China, Brazil, etc," he added.
BEE is designed to widen ownership of the South African economy, which is still mainly in white hands 17 years after the end of apartheid.
A number of global and local firms have sold portions of their local units to black investors to meet the regulations.
But Microsoft has opted to invest in local businesses because, as with other U.S firms, it cannot sell a stake in its South Africa unit for regulatory and other reasons.
Some BEE deals have been criticized by unions and opposition politicians who say they benefit a small group of politically connected black businessmen to the exclusion of the vast majority of poor black South Africans.
When asked whether opting to invest in local firms as opposed to selling a stake to local black investors, Nyati said the chance of this deal succeeding was very high.
"They are partnering people with experience and expertise and Microsoft is committed to making this work," he said, adding that Microsoft was investing into the country rather than selling shares.
"If we can make it to be successful and make sure that other companies are doing the same, we will be able to address the key challenges facing South Africa, largely youth unemployment," said Nyati.
Microsoft said the four firms were involved in public heath software, consumer applications for mobile phones, security solutions and software integration.
"For years, we have been growing organically, where our pace of growth was largely constrained by finances and access to markets," Anujah Powell, chief executive of Chillisoft, one of the selected partners, said.
Microsoft aims to select more companies before the end of this year, depending on market conditions.