Microsoft in $63 million South Africa black empowerment deal

JOHANNESBURG (Reuters) - Microsoft South Africa, a unit of the world's largest software firm, Microsoft Corp MSFT.O, will invest 472 million rand ($63.15 million) in black-owned software development firms to meet the country's black economic empowerment rules.

The software company said on Friday it would use the money over the next 7 years to offer assistance to small, black-owned software businesses and help them expand across Africa, China and India.

Companies in South Africa must meet quotas on black ownership, employment and business development as part of a government drive to shift more of the mostly white-controlled economy into the hands of the black majority.

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 to meet the rules.

“We decided to do something that’s really going to benefit the country and those small, black-owned firms, which today are unknown but tomorrow will be global companies,” Mteto Nyathi, Microsoft South Africa’s managing director, said in an interview with Reuters on Thursday that was embargoed until Friday.

The investment will allow Microsoft access to small, local suppliers, and give those companies the ability to do larger deals.

“This is the first time a major multinational is willing to put both financial muscle and expertise behind the growth of the small, medium enterprises sector, as opposed to generic offering of money that is not applied to a specific outcome,” said Arthur Goldstuck, managing director of research firm World Wide Worx.

Interested companies will be able to apply for the program from Wednesday and the selected firms will be named in July.

As part of the program, Microsoft expects to select 5-10 companies, which have been operating for at least three years.

Microsoft will also train unemployed graduates who will be then hired by the selected firms.

“We want black economic empowerment to be associated with real development, job creation, business development and skills enhancement,” said Nyati.

($1=7.474 Rand)

Reporting by Gugulakhe Lourie; Editing by David Dolan and Jon Loades-Carter