Assessing the impact of layoffs on Africa’s IT talent

While much of the news around tech layoffs has focused on US giants like Amazon, Microsoft, Google, Oracle, Meta and Twitter, dismissals are also happening closer to home.

Since December, Chipper Cash, an African cross-border payments business and one of Africa’s few tech unicorns, has laid off about 150 staff, with the brand’s engineering team taking the biggest hit. Similarly, Wave, a Francophone Africa fintech with services in Senegal and Ivory Coast, laid off roughly 15% of its team in June 2022. And in January this year, Naspers, the South African multinational Internet, technology and multimedia company, announced it would cut around a third of its corporate staff in response to a changing macro environment, according to a spokesperson. The company will also reduce staff across central functions as part of efforts to realign a focus on specific areas of the business.

This instability across the market is also affecting hiring. According to CareerJunction’s latest Employment Insights, which outlines supply and demand trends in the online job market, there was a 6% month-on-month decline in hiring activity from November to December 2022 in several sectors, including tech.

What this means for the tech skills landscape in Africa and globally, according to Arthur Goldstuck, CEO of South African technology research and strategy organisation World Wide Worx, is that the large percentage of layoffs that targeted business support roles, like marketing, sales and middle management, don’t equate to a flood of available tech talent to quell shortages. “What we’re seeing in many organisations is a rebalancing of staff after an exuberance of over-hiring,” he says. “So it’s important we observe any hype around massive layoffs in context.”

In South Africa, and across Africa more broadly, IT skills shortages remain a far bigger concern than broad global layoffs, Goldstuck continues.

Michael Page Africa

Furthermore, Paul Newman, operating director for Michael Page Africa, believes that South African businesses were more limited during the pandemic and couldn’t over hire, so as a result, they don’t have teams weighed down with too many people. “The skills shortage in the market prevented over staffed teams,” he explains, which acted as a stabiliser for the local industry. Yet Goldstuck and Walker see there’s still the underlying issue of demand for custom software development, AI, cybersecurity and data science skills.

Root cause of layoffs

Statements issued by household brands and others regarding layoffs may vary in their wording, explaining several natural drivers for layoffs, but according to Goldstuck, two major reasons stand out.

First, tech firms have experienced declining revenue as demand for tech products and services slumps—a by-product of the pandemic causing a lot of over-hiring due to spikes in demand for online services. Mark Walker, associate VP for sub-Saharan Africa at IDC, agrees. What we saw during Covid-19, he says, is many semi-mature technologies were forced to mature fast, and it would be unrealistic to expect this rate of growth to continue. As a result, many tech firms had to hit the breaks.

Google’s CEO, Sundar Pichai, also summarised the harsh realities in his letter informing Googlers about its layoffs: “Over the past two years, we’ve seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today.”

World Wide Worx

The second reason, according to Goldstuck, has to do with expectations around a coming recession, which will drive further declines in revenue, meaning that some of the industry’s biggest brands are bracing for further belt tightening. While some have blamed artificial intelligence (AI) for the staff downsizing, Goldstuck is sceptical. “One can bet that were profits still climbing and stock market valuations still breaking records, we wouldn’t be seeing these layoffs,” he says. “In fact, we’d be seeing the opposite. More AI engineers would be hired.” He adds that “big bad bets” made on overhyped tech, like Meta going all-in on VR, are also reasons for the need to downscale. In January, for example, Microsoft shut down its industrial metaverse team, leaving nearly 100 employees without jobs. “This doesn’t necessarily mean they don’t have any faith in the metaverse or concepts around the metaverse,” says Walker. “It’s case of over investing. These technologies haven’t matured enough yet to justify the spend. If the global economy was booming, things might be different.”

Layoffs putting DEI efforts at risk

This upswing in retrenchments across technology companies, irrespective of specific roles or skillset, is also hampering the efforts of diversity, equity and inclusion (DEI) departments to boost underrepresented groups like women, certain minority groups and those in their mid-careers, which layoffs disproportionately affect. While DEI should remain important factors in hiring, Walker notes that companies with tight budgets and lean mindsets will look more at skill and ability, and how they can hire the least amount of people to get the job done. “Unfortunately, if you stop making money, things like diversity and inclusion stop being important,” says Walker.

For Pabi Mogosetsi, Universum’s country manager for South Africa, it’s important tech businesses remember that DEI, company culture and corporate values go hand-in-hand as they feed into each other since the worth of the organisation is in its people. “If layoffs disproportionately affect a certain demographic or ethic group, it’s likely there will be some negative ripple effects across the organisation,” she says. So she stresses transparency. There have been a few cases where employees only found out they were retrenched when their emails or access cards stopped working. “You need to remember you’re dealing with people,” she says.

Universum

According to Mogosetsi, businesses have to accept there will be a sense of loss, a dip in morale and even apprehension among individuals left behind. So employers need to over communicate with employees, she says, and make sure everyone’s expectations are aligned so teams feel like they can be productive and contribute to the next phase of change.