• Wednesday, July 24, 2024
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Shutdowns, pay delays rock once-upon-a-darling industry

Shutdowns, pay delays rock once-upon-a-darling industry

Once a darling of investors and a beacon of opportunity, the Nigerian tech ecosystem faces a harsh reality check. After a period (2020 – 2022) of growth and funding, the sector is grappling with a downturn. Startups are shutting down, layoffs are commonplace, and salaries are delayed or slashed.

Between 2021 and 2023, the number of unicorns (billion-dollar startups) in the country grew to five, underscoring the sector’s potential. These heights have now been replaced by “down rounds, mass layoffs, bankruptcies. The global tech news is certainly nerve-racking these days,” according to Africa: The Big Deal, a data insight firm that tracks funding on the continent.

Since 2020, over 1,500 workers have been laid off, and over 22 startups have either slashed their workforce or shut down completely, according to data from layoffs.fyi, a global website that tracks shutdowns and layoffs in the tech ecosystem. Briter Bridges, a data insight firm, disclosed that over 2,500 tech employees were laid off in 2023.

This coincides with a fall in funding, with Nigerian startups raising $399.91 million in 2023, a 59 per cent decline from 2022. This reversal in fortune has not been helped by a global economic slowdown, dwindling revenues amid a falling consumer purchasing power.

The fallout has hit tech workers hard, with many facing job insecurity, financial hardship, and increased workloads with little to no additional compensation.

“People often underestimate how a failing economy can spill over into different industries, and startups are not exempted,” Emmanuel Faith, an HR consultant, said.

According to local media reports, when Medsaf, a Nigerian health tech startup, laid off all its full-time employees, some employees alleged that their salaries and benefits had not been for a while. Recently, Benita Anuforo raised a stir on X when she announced that Bloc, a Banking as a Service startup, owed her an outstanding salary of N2.74 million.

Many techies also called out their firms, albeit subtly, after Anuforo’s revelation. “A particular Tech company owes me four months. The CEO ghosted and blocked me on LinkedIn, and the HR is rather clueless. I know you’re seeing this tweet. Don’t worry, I’m not asking you for the money. Just know what you did was terrible,” tweeted @iam_xtopher.

*Tunde John, a DevOps engineer at a fintech, told BusinessDay that he dozes off at any chance he gets because of fatigue.

“I get calls at odd hours of the day. And sadly, apart from my basic salary, I have no other compensation. My pension was never remitted, neither was my tax payment, I have no health insurance, and my leave allowance was never paid,” he said.

*Timileyin Ayinde, an Artificial Intelligence data annotator, added, “I was moved to a more technical workflow, yet I received a cut in salary. If I have to take on more tasks, I should get compensation for it.”

“In some organisations, being paid at all is considered a privilege,” Jennifer Oyelade, a talent acquisition consultant, added.

According to Faith, an HR consultant, it is unethical to owe salaries, and founders should be transparent enough to communicate their businesses’ real financial state to their workers.

The reduction in tech salaries is not isolated to Nigeria, as global startups are reviewing bumper salary packages that became a thing during the COVID-19 pandemic. According to The Economic Times, salaries for Indian tech workers have fallen by 30 – 40 per cent in 2024.

In its 2023 report on the African startup space, Briter Bridges said, “We may be observing a process of reconfiguration or adjustment, which comes as a consequence of the two cash-abundant years that followed Covid-19…

“This process arguably created a generation of overpriced businesses that struggled to find an equally bullish investor market as soon as the tide turned and capital became less available and more expensive. The result? Many stagnated or were forced to downsize or shut down.”

Industry experts agree that the sector is experiencing a hard reset. Adedeji Olowe, founder of Lendsqr, added, “The world is normal, things are calmer, and reality is beginning to reset things. Tech is still great, but enthusiasm and economics are returning to normal. The market will reset, and everyone will move on.”