Vukani Mngxati, CEO of Microsoft South Africa. (Photograph by Lesley Moyo)
South Africa’s prospects for economic growth and employment creation lie in building the small, medium and micro enterprise (SMME) value chain.
This is according to Microsoft South Africa CEO Vukani Mngxati, who was a guest on ITWeb TV. He also discussed heading up the big tech company’s local operations, artificial intelligence (AI) and cloud adoption, and upskilling at scale.
The emergence of generative and agentic AI tools and solutions, coupled with digital skills limitations, have exacerbated fears that this will fuel the country’s dire unemployment figures.
South Africa’s official unemployment rate reached 31.4% in the fourth quarter of 2025, based on the recent Quarterly Labour Force Survey conducted by Statistics SA.
Young people (15-34 years) remain vulnerable in the labour market, with the fourth quarter results showing the unemployment rate increased by 0.1438 of a percentage point to 43.8% during this period.
Mngxati believes SMME development is the key anchor for vibrant economic participation.
“The catalyst for growth and jobs in any nation, especially in SA, is building SMMEs.
“If you build SMMEs in numbers, it will result in change. There are statistics that say the next billionaires will come from the world of AI. If we enable our people now, skill them and help them to build companies in this area, we are going to positively impact the unemployment rate in South Africa.
“As we transition in the world of AI, more opportunities are being created for people who understand this world. That’s why it’s also very important that we get our people to really learn and understand the tech, so they can be able to participate in opportunities that are becoming available.”
From a Microsoft SA perspective, the CEO said as part of its black economic empowerment programme, the company has ring-fenced funds to build and enable SMMEs.
“We identify organisations in SA that are owned by young people and women, and are largely black-owned, and we inject investments in those companies. We train them, certify them and make them part of the Microsoft ecosystem, so when we have work, we then invite them to partner with us to execute those pieces of work.
“Let’s build the SA we want by supporting our SMMEs in the regions where they belong, in the regions where people grow up, because when you do this, then we create real impact for local folks.”
It is well-known that SA has a digital skills gap, with government, organisations and industry commentators calling for enhanced skills development for the country’s digital future.
South Africa has a multitude of digital skills initiatives rolled out through partnerships between private sector tech firms and government, as well as training and skills development agencies.
Despite this, the skills gap continues to be a deepening crisis, amid digital transformation acceleration.
Addressing the widening skills gap must start with the country’s leadership recognising the structural shortages, Mngxati stated.
“We must create a narrative that says: ‘The digital skills gap in SA is as bad as having the diesel price go up by 11 bucks [R11].’ As leadership, we need to understand what this gap means for South Africans, because it is a significant risk for our people.”
He believes three areas are of importance in achieving the country’s upskilling aspirations. “You can’t enable others if your glass is empty, so the point is that it starts with leadership. We must get leaders in our country to be enabled to talk about this in the right way, so that people in charge or responsible for our country can help shape the drive to digitise our economy and enable our people.
“The second part is to enable people through the right skilling programmes, so that we can democratise skilling. It cannot be just a privilege of those who have means. It must reach the people of the high school where I graduated [in Ixopo]. For example, those kids who are finishing primary and high school must get the same skills that my children are getting in Johannesburg. If we get that right, we will move in the right direction.
“Finally, we must measure it. We need to be clear about what we want to achieve and by when. We can’t just say we are skilling but there is no clarity on what you want to be achieving and at what point.”
“We run companies; we are clear about what we want to achieve by when. It’s the same thing we need to do around enabling our people and ensuring our people aren’t left behind.”
In January, the software giant announced strong financial results for the quarter ended 31 December, driven by accelerating demand for AI and cloud services, with revenue rising 17% to $81.3 billion.
Mngxati said positive gains are also being witnessed in AI and cloud adoption on the local front. “These two technologies, in my mind, are transformational and where the future is going to come from.
“There are other technologies…there is no AI without security. The more you enable AI capabilities in organisations, the more you create vulnerabilities, so cyber security becomes a critical enablement for AI.
“The last part is data because data has to be governed well and managed properly, so that you can make use of the tools that will be used to consume the data and make the right calls from an AI standpoint.”
