There’s currently some sort of unspoken sentiment formed around the idea that tech startups may be better equipped than most to withstand the economic downturn fuelled by the ongoing global pandemic.
However, considering the developments that have accompanied the last few weeks, it could be said that those sentiments may be placed. Even the biggest tech companies are proving just as vulnerable, making the “necessary” tough calls to mitigate the impact of COVID-19 on their businesses.
Those necessary tough calls have generally taken the form of layoffs, salary cuts, and furloughs — all geared towards survival.
For example, in Silicon Valley, the very heart of the tech world, three marquee San Francisco tech companies — Uber, Airbnb, and Lyft — which embodied a new generation of mega billion-dollar startups, have, in the last few days, cut thousands of jobs in response to the coronavirus pandemic and shelter-in-place orders.
Elsewhere, it’s pretty much the same look; hard-hit tech startups around the world are increasingly turning to layoffs, pay cuts, and furloughs with survival in mind.
On the African continent where partial/total lockdown orders were in place and are still in place in several countries, businesses have taken some serious hit. And even tech startups have not been spared as they look to trim costs amid diminishing growth prospects.
So far, a number of African startups have announced layoffs. Some have placed their staff on indefinite unpaid leave while others have announced salary cuts exclusively, or in addition to job cuts.
While some of these measures have been announced publicly, there are possibly many others that may have gone unnoticed because they seem to have been kept under wraps.
In any case, here’s an attempt at keeping up with where all the “announced or confirmed” layoffs, pay cuts, and furloughs are happening among startups in Africa.
Nigerian digital lender, Renmoney, may have kicked off the wave of African startup layoffs as far back as March 28 when it cut over 300 employees loose.
In an email from the company’s CEO, Kieran Donnelly, the mass layoffs were attributed to “a strategic change in how we conduct our business”.
The startup had blamed it on the adoption of new technology that rendered many of its staff redundant but some would say Renmoney also had the fallout of the pandemic in mind.
The members of staff affected were direct sales agents whose jobs involved working on the field to make sales. It seems a strategic decision by Renmoney as the startup will not have to pay the salaries of up to 391 direct sales agents stuck at home because of the lockdown that was in place at the time. It also signals a shift in the startup’s business model after the lockdown is lifted.
Last month, one of South Africa’s most recognised fintech startups, Yoco, announced that it is downsizing significantly in an attempt to survive the cash crunch triggered by the economic impact of the coronavirus pandemic.
Yoco, which claims over 150 employees on its payroll, issued a statement declaring that it is adjusting its team size in light of the current economic realities. The startup, which describes itself as South Africa’s largest independent payment card payments provider, also confirmed to WeeTracker that the entire leadership team has already agreed to a salary reduction.
One of the first indigenous movie streaming platforms in Africa, iROKOtv, announced that, as from May 2020, 28 percent of its employees will be put on an indefinite unpaid leave of absence — a furlough, in other words.
In a blog post published by the company’s founder and CEO, Jason Njoku, it was revealed that iROKOtv would also be slashing salaries. The pay cut would affect 16 percent of the company’s staff. iROKOtv has offices in Lagos, London, and New York.
Interestingly, as per Njoku’s comments, iROKOtv was actually flying high during the early stages of the lockdown. But things changed before long.
The CEO said the tough call was made with survival in mind in light of new realities that have hit home since the pandemic bomb exploded, coupled with the “naira devaluation” born from the economic crisis in Nigeria connected to the plunge in oil prices.
After laying off over 400 developers in Septemeber 2019 due to placement struggles and issuing a voluntary exit offer to unplaced developers in February 2020, Andela announced last week that it was letting go of 135 employees across four locations — Nigeria, Kenya, Uganda, and the United States.
Andela CEO, Jeremy Johnson, described the move as a tough but necessary call for the survival of the software engineering talent outsourcing company.
According to him, Andela’s clients had been hit by the economic uncertainties triggered by the pandemic, and attrition is almost inevitable. Hence, the need to cut costs, since growth is now in jeopardy.
Andela has since given further updates on its plans for the future, hinting at going remote fully and opening up placement opportunities to non-employees.
According to WeeTracker’s sources, the layoffs had something to do with both the well-documented “Okada ban” in Lagos, Nigeria, and the harsh economic realities that have materialised since COVID-19 happened.
Responding to the claims, OPay has since confirmed to WeeTracker that the Okada ban did force layoffs in its bike-hailing division, Ride.
The company, however, maintains that some of the ORide employees were not cut loose and were absorbed into other business units of the company — especially since the bike-hailing unit is being converted into a two-wheeler logistics business called OExpress and new business units have since been launched.
OPay also admitted to adjusting the number of employees on its books and their paychecks due to the pandemic.
“OPay had to exercise reasonable wage reduction, layoffs, and other cost control measures (like many other companies). We adopted this early which enabled us to grow gross margin even during the pandemic and lockdown,” a representative of OPay told WeeTracker.
The startup also revealed that some Chinese staff who had been laid off are, indeed, stuck in Nigeria because of the restrictions on travel. OPay wouldn’t place a number on the proportion of staff that was affected by the job cut.
TechAdvance is a Lagos-based payment application development company that raised USD 1 Mn in the second half of 2019.
11. The hardest decision I have ever had to make in my life isn’t shutting down a non-performing company like I have done a few times; but rather letting go of high performing & dedicated staff because that’s what the data told me to do.
— Edmund Olotu (@pyjama_ceo) April 8, 2020
In a tweet dated April 8, Founder and Chief Innovation Officer, Edmund Olotu, that his company has had to downsize. He pegged the decision to let go of some members of staff on data which has dictated that the startup’s headcount be reduced if it is to get through the uncertainties of the times.
NOTE: This post will be updated subsequently as we come upon more information on African startups that are firing, furloughing, and cutting pay because of the economic downturn triggered by COVID-19. Do you know of any such startups? Feel free to drop a note at [email protected]