Soromfe Uzomah is the head of strategic partnerships at Microsoft 4Afrika, the market development engine for Microsoft in the African continent. In this interview with Jumoke Lawanson, he talks about why and how the initiative is committed to boosting SME businesses in Africa.
How does Microsoft 4Afrika initiative help SMEs, and what type of start-ups are you interested in?
We do this in three buckets, majorly access – which is basically access to energy and connectivity; skills development because we believe that for a continent to be able to achieve its potential, it would need to invest in capacity building, and then innovation, where we help organisations that we believe have scalable and sustainable solutions to African problems, led by African founders, to begin to drive value through that. When I say start-ups, it doesn’t necessarily have to be technology start-ups. It can be somebody selling food solutions. It might be agricultural business. Some of them are doing N10million, N100million a month in revenues and are employing up to 100 people. But because access to funding is usually very difficult, owing to the fact that interest rates from banks are very high, they are not able to access funds. These types of organisations typically should be able to access venture capitals, but they have to be able to communicate their numbers in a way that these venture capitalists and angel funds will understand. So, 4Afrika has a consulting company that will come in and sit with the SME to work through their financials, operations, organisational structure and help them put together something that enables them to approach venture capitalists and access either debt or equity funding at lower cost to their business. Typically, we do this through hubs and accelerators because we find that that’s the easiest and fastest way to identify people who can actually grow.
Why is SME development important to Microsoft?
Microsoft realises that we need to make investments into the African eco-system to be able to drive businesses to a point where they can actually begin to leverage the right technology to grow. We believe that SMEs are the engine of any economy. We believe that they can drive value. In Nigeria alone, there are between 18 and 37 million SMEs, so we have to find a way to give them the support that they need to be able to grow their businesses. We can’t speak to all SMEs because it is almost impossible to have a system that allows us as a company speak to 18 or 37 million SMEs. So what we are doing across the continent is to identify critical stakeholders in the value chain for SMEs, and based on our analyses, it would typically fall into three or four categories: financial services institutions, telecoms organisations and government institutions. We try to engage with these entities, and through them provide value to the SMEs. That value could be in a number of ways, including capacity development, where we provide training content and premium Africa-related articles to them. We also find global subject matter experts, who can come and work with local experts and deliver some capacity-building for local SMEs. A simple example of that could be optimisation of operations. With regard to innovation, we invest in organisations and have invested in about 64 SMEs and have touched about 94 of them deliberately. These are start-ups that we believe have the potential to spread across the continent, and although for Microsoft, it is not so much about the dollar figure. We have done $5.1million in investment over time, but the real value for the SME is having the stamp from Microsoft that says that it believes that these organisations will scale in the long term.
What would you say is a major hindrance to SME growth in Nigeria?
The truth is that SMEs need more than finance to grow. It is true that sometimes the most pinching problem is finance, but even if you raise the money or you are given the funding, you would suddenly discover that even having the right team could be a challenge. We believe that hubs and accelerators are a holistic approach to solving that problem for SMEs.
What does 4Afrika look for in SMES?
We look for things that indicate that the business is scalable, that it addresses a huge market, that it is a sustainable business, and we also believe that you would have to leverage cloud technology because that gives the business the ability to be flexible, allows you to operationalise your capital expenses.
We also look at the team to make sure that you’re really engaging and you are committed to growing that business. We have done this with some organisations here that we are working with, such as Max, Flutterwave, My Music, Space Point and others. We have even provided innovation grants for some.