The unjustified fear of tech layoffs – SA is not the USA

If you’re seeing all the news about tech layoffs happening in the US and you’re afraid that the same thing will happen in South Africa, we understand – it’s enough to spook anybody.

Martin Pienaar, Chief Operating Officer, Mindworx Consulting

However, there is nothing to fear. Tech recruitment in the US was at such an inflated level that it would inevitably fall, and we’re in a very different situation in South Africa. 

The first thing to understand is the reasons US tech recruitment is falling.

Advertising revenue rose rapidly at Meta and Google, and they went on a hiring binge that lasted several years. But then several major shifts happened to make them re-visit their staff requirements: Russia went to war with Ukraine, causing an economic crisis; Apple made changes to their iOS that changed the Meta and Google playing fields and a major new rival called TikTok came along. Advertising revenue dropped rapidly, and they all found themselves with too many staff. 

Recruitment also grew to unprecedented levels at companies like Netflix and Shopify, which staffed up to serve the mass customer migration to digital during Covid. They didn’t expect the boom to end as soon or as suddenly as it did, negatively impacting their revenues and leaving them with no choice but to reduce their workforce. 

A raft of new companies debuting on the US stock market pushed recruitment levels up. Then suddenly, economic recession loomed, and the only thing still rising was caution levels. These companies have had to cut back, as the prospect of recession decimated stock market values across industries. Staff of newly listed companies are often compensated with stock options to augment lower salaries, have found the value of their shares underwater, and many are now jobless. 

The second thing to understand is the vast extent to which our scenario in South Africa differs.

Our financial sector is in a growth phase, creating a massive demand for digital skills as newly launched banks, insurance companies and fintech businesses hire aggressively, and traditional banks are scrambling to stay relevant. There are two significant new banks – Tyme and Discovery – and relative newcomer Capitec is growing apace. In addition, several new payment businesses, such as Ozow, Payfast and Payflex, have raised the demand for skills. 

Consider, too, that e-Commerce in South Africa has lower penetration levels than in other markets, particularly the US, leaving lots of room for growth. With Checkers Sixty60 creating a boom in online grocery shopping, a herd effect has seen other retailers rushing to catch their lead, creating even more need for skilled technical staff across many digital job categories. 

Now add to this that our weak and steadily declining Rand has made SA a choice destination to source competent technical skills. One result of this is Amazon choosing to base its web services business here, employing more than 3,000 staff, mainly in the Western Cape. So other companies are bound to follow. 

Thanks also to the declining Rand, we are seeing an increase in international companies choosing South African business process outsourcing (BPO) partners. Gauteng is actively chasing after the leads that the Western Cape and Natal have achieved in the BPO industry. This sector will continue to grow and increase demand for skilled resources, from call centre seats to higher value roles like training robots for the automation industry, software development, systems testing and video labelling.

South Africa doesn’t have a problem with too many tech staff; on the contrary, we don’t have enough skilled workers. One reason is that our education system doesn’t pay enough attention to developing the in-demand tech skills. Add to this that not enough school learners are taking the STEM subjects that would give them the foundation to build university-level digital skills. With a limited supply of skilled resources, we will likely have a deficit of skills for the foreseeable future.

We also need to factor in that South Africa is a highly regulated employment environment and our Labour Relations Act makes downsizing onerous. For this reason, many corporates consider employment much more carefully than their American counterparts. US employees don’t have the protection of such regulation, so companies routinely overstaff to take advantage of opportunities in a competitive environment, knowing they can easily shed staff when their business requirements change.

These facts make it clear that the fear of tech layoffs in South Africa is unjustified. However, it is hurting the market. Candidates are actively looking for jobs, attending multiple rounds of interviews and assessments, and then pulling out of the process when they receive an offer of employment. They’re afraid to take the final step because of the ‘last in/first out’ principle, which is based on the lower cost of letting a newly hired employee go versus the cost of laying off a long-term employee. It’s frustrating for employers who have genuine and considered positions to offer tech staff. 

There’s a simple message: don’t be afraid. If ever there was a time and place to build your career and build your tech team, this is it.

This article was published in Ventureburn

On Key

Related Posts