Capital isn’t the only ingredient that moves a startup from concept to success. The other is people. Without high-quality founders and the right team to support them, a venture will never move from pre-seed to the graduation of Series A.
However, much like the Great Reset taking place on the continent with investment harder to come by, a different reset has happened in the talent market. Post-COVID, African tech talent benefitted broadly from a job market favouring workers. A high-quality developer from Abuja could be based in Nigeria and work for a large US tech company that pays in US dollars.
Sounds great, right? Not too fast.
The talent market has done a 180
COVID-19 forced reluctant global employers to experiment with remote work, but they learned quickly how remote work can be used to suit their needs. Many have since returned to an in-office model, but the lessons remain. If a ramp-up in internal capacity is needed quickly, the remote talent place is always a good place to start. However, as we move into Q3 and Q4 of 2023, the talent marketplace has changed again.
The tougher macroeconomic environment has forced global employers, including tech giants like Google and Meta, to cut their workforces, with Africans bearing the brunt of these layoffs. Meta fired its entire content team in Kenya – a case that ended up in court -, while Twitter made large parts of its Africa team redundant, with some workers having only joined weeks before.
In the market, other large employers with skilled tech workers on their books have felt the pinch, with workforces reduced across sectors to cut costs. The result is a one-two punch for the ecosystem. Startups are finding it harder to raise funds, but at the same time, the local talent they need to take that next step is suddenly back on the market. The worker market has done a 180. We are now in an employer’s market.
In Nigeria, for example, the tech talents that left the country as part of the Japa wave in search of better working conditions and pay are not returning. There are exceptions, but for the majority, the journey is a hard one, and they do not want to sacrifice hard-earned gains. It’s a similar story across other markets in West and East Africa.
What has changed is that even though these skilled tech professionals now live overseas, they are open to work offered in their home countries. The problem these workers now face is that the salaries they need to live abroad are not provided by local companies, with large corporations the exception.
Even more importantly, hiring employers are dedicating more time to due diligence because they don’t want to bear the costs of a poor hire. They are also searching for candidates who have the potential to grow out of the roles they are hired for. Training internally is far cheaper than going to the market, even in a talent market that favours the employer. That means a preference has emerged for locally-based workers because these workers are easier to monitor, manage and pay than overseas candidates.
The post-COVID salary hangover has arrived
A different consequence of the post COVID-19 pro-worker talent market is that salaries increased at rates not seen in years. Local firms raised salaries, as did their international competitors. Foreign firms held the advantage because of their deep wallets and the dollar exchange rates, allowing them to increase wages quickly and even offer payment in US dollars, placing extreme pressure on tech employers in East and West Africa.
So far, in 2023, this salary bubble has burst. The salaries that tech workers expect to be paid are out of sync with what the market is willing to offer, with inflation and high-interest rates eating into employer margins. International and local employers in the tech sector are tightening their belts wherever possible.
The candidates who understand these market dynamics and how best to navigate them have the best opportunity to find employment or re-employment in the tech sector and ecosystem. For example, there were CTO roles in Nigeria that were open for months on end in 2022. Now, employers can close applications within a few weeks because they have many available candidates to choose from.
As the full effects of the interest rate cycle bear fruit in the coming quarters, competition in the tech talent market will only become more fierce. That doesn’t mean opportunities do not exist, but employers are wiser than they were 12 months ago, while tech workers must adjust to the macro dominating their respective sectors.
(Ololade Odunsi, the Talent Acquisition Lead at Founders Factory Africa).