Tech Layoffs: Even Africa’s Best Economy Is Not Spared. When Do We Return to Equilibrium?
Ever done that math where an Error Correction statistic is introduced to determine the speed of convergence of an independent variable? Here’s a quick explanation: Sometimes, socioeconomic variables can derail from their parts after a long run or short run. The Error Correction Model— which is a theoretically-driven approach is used to directly estimate the speed at which the dependent variable returns to equilibrium after a change in other (independent) variables.
Between Q4 2020 and Q1 2022, Africa enjoyed the employment gains that accompany digital acceleration. Startups went into an employment spree and were seen making expansion moves that would also create employment. But then, everything changed when…no, it wasn’t the fire nation that attacked employment. Everything changed when cratering stock prices and inflation hit the global economy.
While recruiters had debunked the idea of a tech hiring slowdown in June last, the reality of lay-offs that followed has changed the narrative. The landscape of Africa’s employment scene has changed in recent months as traditional sectors have now become the employment lifeline for tech talents; a role that was effectively been handled by the tech ecosystem.
The effects of the catering stock price and global inflation have been relatively slow in South Africa. The best economy in Africa has seen a rather thriving sector, bolstered by a renowned consumer class and an increased desire to deal digitally. However, resilience is becoming increasingly difficult to maintain. Per reports from Career Junction Employment Insights, the global wave of large-scale retrenchments has hit SA’s tech sector, with recruitment in the local industry taking a dip during November and December.
Using information acquired from Saongroup South Africa, which collaborates with more than 5 000 of SA’s best recruiters, the CJEI analyzes the patterns in supply and demand in the online job market.
The survey claims that between December 2021 and December 2022, hiring activity increased by 3% across the majority of industries. However, from November to December 2022, recruiting activity decreased by 6% on a monthly basis in various industries, notably the technology industry. Without taking a pool test, I can tell that every tech industry player is concerned about the situation and is eager to see it end. But when? Is there any ECM model that has predicted an end to this crisis?
According to data from research firm GlobalData, the shift in IT hiring coincides with sharp drops in hiring activity at the largest technology organizations in the world. In the last two months of 2022, job postings closed more quickly than new hiring openings were created.
“The decline in hiring activity was driven by a slowdown in recruitment across the information technology, and business and management sectors, as well as the sales and admin, office and support sectors, with the IT industry seeing a 3% decline over the last two months,” says CareerJunction.
“Many IT professionals who switched employment moved into the following industries: finance, manufacturing, fast-moving consumer goods, retail and wholesale, education, and consulting and regulatory.”
CareerJunction reports that there has been a decrease in hiring for IT professionals across a number of industries, including database design, data analysis, data warehousing, software development, business administration, and data analysis. The global tech sector announced over 97k layoffs in 2022, up 649% compared to the previous year, according to consulting firm Challenger, Gray & Christmas.
Many of these tech companies benefitted from increased demand for their services during the COVID-19 lockdowns. However, while increased demands have been sustained, share prices of startups have dropped significantly, forcing these layoffs. There’s no ECM model that has predicted when the tech ecosystem returns to equilibrium, but we hope it’s sooner.