This week we are looking at pay cut and lay off in the African tech space.
With a huge question, what determines a successful African startup!! Funding or rapid scaling?
Big questions asked especially by first-time founders.
Let's Get to It.
The wake of the global pandemic is a set stage for weak business models to be exposed, managed failure opened up, most African tech companies having been announcing pay cut, unpaid leaves and even laying off its staff.
Examples
OPay
OPay is set to send packing many of its staff at Oride, the startup’s bike-hailing division.
iROKOtv
Film streaming startup iROKOtv has put on notice 28% of its staff who will proceed on unpaid leave this May. It will also cut salaries.
TechAdvance
TechAdvance is a Nigerian -based fintech company that raised $1m in the second half of 2019.
Renmoney
The Nigerian tech startup Renmoney sent home over 300 of its employees at the end of March citing new technological advancements.
Yoco
Fintech startup Yoco cut its staff numbers in April. The South African tech firm has also revealed that its executives had agreed with pay cuts.
Andela
Nigerian startup Andela recently lay off of 135 employees, a move the company blamed on COVID-19.
We are keen on Andela lay-offs, having the fact that this lay-off made the news last year.
CEO Jeremy Johnson comments:
“Like any venture-backed startup, our ability to attract future investment is determined by the ratio of how quickly we grow in comparison to how much we spend to achieve that growth.”
Andela has raised in different funding rounds a total of $181 million from investors, with the recent axing of over 500 staff in total with a short while means trouble in the funnels. A popular African proverb goes like this “there is no smoke without fire"
Let's take it back.
The 2019 lay-offs of junior developers, were based on these reasons as released by the company.
Sep 2019.
“Moving forward, we will be focusing D0 training efforts on our pan-African hub in Rwanda”
“The reason for this action according to the statement is because most of the talents it needed are for the more experienced. The junior engineers brought onboard are more than it could need.
“We now have significantly more junior talent than we can place.”
Nov 2019.
The pan-African software training company Andela, announced its expansion to Egypt and its hiring only senior developers. The CEO comments on this expansion “Andela builds world-class engineering teams, and we are excited to be enhancing our talent pool as we expand into Egypt. We’ve been impressed by the incredible engineering talent we’ve seen so far across the country, and we’re excited to help raise the profile of Egypt’s tech ecosystem on the global stage,” said Johnson.
Feb 2020.
According to an internal memo issued in February, Andela launched a voluntary exit program targeted at all developers who are yet to be placed. To further break this down, in lighter words, Andela was asking the Eng 1 and Eng 2 developers currently, who was yet to secure placement to leave at their own will. The voluntary exit option is being offered to Eng 1 and Eng 2 developers who were still on the bench at Andela Nigeria, Andela Kenya, and Andela Uganda.
“We have several Eng 1 and 2 currently not placed and to those we have offered a voluntary exit option,” according to reports as released by the company.
“Andela has offered a voluntary exit program to a select number of engineers across Lagos, Nairobi, and Kampala. Engineers who opt-in for the voluntary exit program will receive an enhanced package, as well as ongoing job placement support, should they require it.”
Per the internal communication, the voluntary exit program will see the engineers exit the company with a decent package that includes;
Prorated March pay
1-month pay
Accrued benefits
15 days per year of service plus 1.5-month ex gratia (under Kenyan law)
3-month medical cover
Accrued “Fellow” savings payout
Placement support
The notice also states that those who qualify for the exit scheme have to apply before March 13th. According to the memo, Andela notes that applicants will be notified of their approval or rejection between March 13th and March 17th.
May 2020
Andela axes 10% of staff across 5 countries except for Egypt and Kenya, in a bid to save $5m from the lay-off.
Andela over time has shifted its focus as a talent accelerator to an outsourcing firm. In a blog post, made by CEO Jeremy, revealed plans of adding 700 workers by end-of-year.
With the Andela repeat lay-off cycle for the third time in a short span of nine months, this seems like mission impossible.
What I think about all these layoffs, most companies are trying to dig trenches around their burn rate and extend their possibilities of fundraising by the next three quarters.
The big Andela's mission is still uncompromised, they are just trying to be a profitable business also.
The Andela issue from the people's perspective.
Interesting reads from LinkedIn