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A Big Tech Talent War Threatens Kenya’s Startups

Startups

Oct. 26, 2021, 10:42 a.m.

When Lori Systems was launched in 2016 in Nairobi, Kenya, as a road carrier’s response to Uber, local software engineers competed to join the company. Nairobi’s startup scene has expanded, and Lori co-founder Junk Road Homau has quit his job at Google in New York, believing in the potential of technology to hedge bets on Africa and solve continental problems.

Three years later, Microsoft announced that it would open the African Development Center (ADC), an engineering hub with sites in Nairobi and Lagos. He promised to spend $ 100 million to partner with a local university to develop a curriculum to “build a talent pipeline.”

“Everyone was happy to see these big tech companies coming to the continent,” says Homau, who speaks at Lori’s office. “It has been confirmed that the sacrifice of tech entrepreneurs five years ago is correct.”

But shortly after Microsoft entered the Kenyan market, local start-ups felt a pinch of their existence. The high-tech heavyweight division has begun aggressive adoption with the aim of playing the role of 500 software engineering in the two ADC hubs by 2023. Small businesses in the region, such as Lori, Cellulant, and Twiga Foods, who invested and trained young engineers, were quickly overpriced.

“Microsoft’s entry has changed the dynamics of the software engineer market overnight,” said Caine Wanjau, chief technology officer of Twiga Foods, an inter-company supply platform. “The company liked what they saw [in Kenya]. Not only software engineers but also product managers and designers are still actively hiring. “

Twiga Foods faced the dual challenge of recruiting and maintaining. The company lost four employees to Microsoft, and the high-tech heavyweight division removed the best candidates from the market, making it difficult to hire new talent.

Lori Systems also suffered a loss. During the pandemic, the company sought to retain staff by emphasizing employee equity and the level of growth and responsibility of start-ups compared to large companies, says Homawoo.

“In the end, we lost six employees because of a salary offer that we couldn’t match,” he points out. “These weren’t just for Microsoft, but Microsoft has consistently been the most active in poaching from the continent’s top tech companies, and everyone has experienced it.”

According to Microsoft, ADC’s goal is to create opportunities for engineers to “do meaningful work from their home country, rather than looking away from another country.” He said more investment increased the number and feasibility of local start-ups, but not.

“Ecosystem impacts are the driving force of our industry, and we see the same in Kenya,” said Jacquengale, managing director of ADC. He points to Microsoft’s presence in Israel and India as an example of how Microsoft has helped local start-ups.

For a local engineer, getting two to three times the salary is great, but for a local start-up, things get harder. “

But when the tech group recently announced that it would hire 2,500 new workers in Israel, Haaretz Newspapers warned that expansion could jeopardize the growth potential of Israeli companies. In addition to the “serious shortage” of employees, local businesses are struggling to “compete with the deep pockets of Microsoft and other giants.”

The problem is similar in Kenya. Daniel Yu, founder, and CEO of Sokowatch, a platform that supplies to unofficial retailers in Africa, found a junior engineer in Nairobi, unlike when he launched the company in 2015. It says it will cost a lot. This is stunting and is most affected by early-stage startups.

“For local engineers, it’s great to get two to three times the salary. [paid by big tech]But for local start-ups, things get harder, “he says.

According to Yu, many start-ups have moved their engineering bases to places such as Eastern Europe because they have found better engineers at lower prices. “This is really disappointing, as African engineers will eventually have to work on building technology for the African market,” he says.

“Because individuals are sitting on the continent, it’s a permanent brain drain, but their work benefits foreign companies,” Yu adds.

The supply of new engineers needs to meet or exceed demand in order to change the trend. Nigerian entrepreneur and former managing director of FinTech Unicorn Flutterwave, Iyinoluwa Aboyeji, said governments need to secure a talent pipeline, especially at technology hubs such as Kenya.

“To enable start-ups to survive and thrive, we need to tackle challenges at the ecosystem level, which means governments need to be more careful about education,” says Aboyeji.

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Rwanda is an example of a country investing in technical education and apprenticeship for young people, he said. “It must be a collaboration between the government and technology companies, where the government provides the infrastructure and technology to design the curriculum, and the continent has 100,000 young trained computer scientists instead of 4,000 each year. We need to be able to start offering, “adds Aboyeji.

Earlier this month, Google announced that it would invest $ 1 billion in Africa over the next five years to ensure faster and cheaper access to the Internet. Meanwhile, Microsoft plans to develop a mentorship program with university partners and hold marketability workshops for students. Amazon Web Services supports acceleration programs for South African businesses.

Such initiatives mean that Big Tech not only extracts from the ecosystem but also benefits the entire ecosystem, Yu says. But it’s also a wise business move. As tech giants are competing to become the cloud service providers of choice for local businesses, they need to show that they are helping the market rather than exhausting it.

Meanwhile, tech companies must be aware of the turmoil they cause as they expand in Africa, Homawoo says. Even in a wealthy city like San Francisco, Big Tech has influenced the real estate market and kicked out locals.

“It is irresponsible for them to enter the African market without learning from past experience,” he says. “If there is already great inequality and they do not anticipate it, the potential impact on the workforce, talent and the cost of goods can be detrimental.”

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