In biggest layoff in African tech industry, Andela dismisses 420

Tuesday morning, at about 9:10, the management at Andela summoned an impromptu meeting of all Andelans – as many of the more than 1,500 young men and women now call themselves. Only a few in the crowd had any idea what the meeting was about.

“We were informed that the partners have reached a decision to let go 420 Andelans; 250 from the Nigerian and Ugandan offices and 170 in Kenya, they told us that an email has been sent to everyone to know what their status is,” a source who was among those affected by the decision told BusinessDay. “We had no idea this was going to happen.”

The Andela announcement is arguably the biggest layoff of any tech startup in Africa.  Majority of those affected were junior engineers, plus a few staff

“I have lost some of my friends,” another engineer who was not affected by the decision told BusinessDay.

Jeremy Johnson, CEO, and co-founder of the company described the move as part of a shift in strategy in which the company focused on identifying high-potential talent on the African continent, train them in software development (with a heavy emphasis on remote work and soft skills) and then place them as full-time distributed engineers.

“We saw an opportunity to build a business while investing in talent creation across Africa, and that’s exactly what we did,” he noted in a statement.

As part of releasing the 420 junior engineers, the company which in January received $100 million in fresh funding from investors, will close the D0 program in Nigeria, Kenya, and Uganda. The D0 (Developer at level 0) program will now be focused in Rwanda, where Andela recently opened a pan-African hub. The D0 program is a simulation and apprentice stage in which talent is just joining the program. Talents that qualify from this stage move on to D1, the first stage of partner readiness, and on till D5.

Tech talents, especially software engineers, are in very short supply on the African continent. Chika Nwobi, the founder of Decagon, a Nigerian-based firm which like Andela trains recruits talents and train them to become software engineers, estimates that Nigeria has about 6,000 software engineers, representing close to 0.00003 percent of the country’s population.

“This would mean that India, Poland, and Ukraine are all doing 100 times better than us at converting talent to software engineers to meet the growing global demand for software engineers,” he said.

To train one person to become a software engineer, Andela spends around $20,000 (N7,200,000) for six months before placing them to work on partner projects. Currently, the company has over 1,500 engineers. Some of the firm’s partners include Mastercard Labs, Viacom, GitHub, and SeatGeek. The engineers’ sign contracts to work for two years, but they are expected to stay for four.

After years of training, an average engineer could earn between $30,000 to $40,000. A senior source in the company told BusinessDay in 2018 that foreign companies account for more than 80 percent of outsourcing service the company does. Companies in Nigeria and Africa make up a little fraction of Andela’s outsourcing revenues.

A tech CEO who pleaded anonymity to speak freely, told BusinessDay that most Nigerian companies shy away from employing engineers from Andela because even though they are well trained, they come at a very steep price. According to him, the price of one software engineer could be as high as N12,000 per hour, which translates to N96,000 for 8 hours a day.

“Do the math for a 22 working day just for 1 engineer,” he said. “Find out how many companies are willing to pay N125 million for 5 engineers.” He, however, noted employing Andela engineers is still cheaper for companies abroad.

Data from glassdor.com reveals that the entry-level salary for a software engineer in the United States is $85,000 per year. At $40,000, Andela’s engineers come as a bargain for foreign companies. Nevertheless, the firm faces increasing competition from different parts of the world.

“Some of us felt something was wrong because the junior engineers could sit in the office for months and not go out in the field,” said the source in Andela. “A significant number of the Python developers were affected too.”

Andela’s CEO said in his Medium statement that the firm has partnered with innovation hubs like Co-creation Hub in Nigeria, iHub in Kenya, and Innovation Village in Uganda to help connect the developers who were affected with opportunities in their local ecosystem. The company has also identified over 60 companies who are looking to hire top quality junior engineering talent.

“Also, these hubs will offer impacted engineers the opportunity to use their co-working spaces free of charge for the next three months,” Johnson said.