As our electricity crisis deepens, the probability of South Africa facing a recession in 2023 has increased from 45% to 68%, according to Bloomberg (https://www.news24.com/fin24/economy/the-odds-of-a-recession-in-sa-are-increasing-20230210). Given the increased probability of a recession, it is surprising that the current sentiment about software development demand continues to be divided in South Africa. This press release shares my observations about the current software development demand in South Africa.
Software developers are being retrenched in droves internationally. Although the massive retrenchments have not reached South Africa, it raises many concerns because there is always a lag between events in the US and South Africa. So the question that is frequently raised is: “When will South African software developers experience the slow-down in demand and experience retrenchments?”
Although we are not in a recession, South African businesses are already slowing down in terms of software development demand. This is attributed to lower business productivity, increased wastage and higher operational costs that are experienced because of workarounds to avoid or reduce the impact of load-shedding. Chillisoft has chatted to customers and stakeholders in the software industry and the general sentiment is that non-software driven businesses are cautious and most CEOs are expecting a recession later on in 2023. This conservatism will translate to paying for “bread and butter” software development that has a direct impact on operations and revenue.
There is a still a high demand for senior full stack developers who have a proven delivery track record. However, the number of senior software developers that are required in a team will be reduced. Most of our customers have cut back on hiring junior developers, because the business focus seems to be on maintaining or incrementally improving current systems. Some businesses are maintaining the current status quo, while they re-strategise and redesign their software development operations, so that the workforce and infrastructure are distributed internationally. South African businesses are making the shift from predominantly employing South African developers to hiring more international developers. This strategy has been adopted to reduce risk, to ensure that software development operational hours overlap, to mitigate the risk of reduced working hours because of higher load-shedding and to counteract the high salaries that are still requested by South African developers. Intermediate developers (developers with four or more years of software development experience) are still in demand; however, businesses are not prepared to pay inflated salaries for the promise of realising potential. Businesses will continue to pay a commensurate salary for software developers who add value to the bottom line.
Businesses that are technology driven are continuing to hire aggressively because their technology platform features are directly correlated to acquiring new customers or realising a better customer experience. This is directly correlated with an increase in revenue and customer retention. The growth sectors in South Africa continue to be real estate, online shopping and the financial service sectors. These sectors are the safe and desired sectors that will offer stability and career growth for software developers. Projects that involve blue ocean product development run the risk of being suspended or deprioritised if they are not directly correlated to the business’s OKRs (objectives and key results).
In discussions with software developers, developers who have not grown their skills are aware that they may be retrenched and many of them have started looking for new jobs. These developers are paid high salaries and remain unaware of the discordance between their current salaries and the value they offer a new employer. These developers were paid well partly because they understood the business domain. In making the move to a new domain or sector, their domain-specific knowledge has little value to new employers who are in a different sector. Developers who have changed jobs every six months so as to get an increase will not be easily hired because many companies are becoming more conservative and discerning. They will not recruit an employee who may have a future payoff. The recruitment fees are high and remain unchanged in this climate, adding to the high cost of software development operations, which employers are particularly cognisant of.
South African software development businesses are predominantly business and process related. They are not largely funded by venture capital funding and are therefore more likely to be resilient in a recession. We also have strong labour laws making retrenchments a difficult and costly choice for employers, therefore I believe that we will not see massive layoffs unless it is absolutely necessary. If there are retrenchments, I believe that business owners will not retrench individuals who add value and that the last in first out principle is only applied if it suits business. This also means that businesses may use the poor economic climate as an opportunity to rectify and streamline a bloated development team (development teams grew massively during COVID, when employers hired aggressively and were able to bill customers at healthy margins).
So in a nutshell, software developers should focus on acquiring new skills, and reconcile their salary request with the maturity and depth of their skills. Their salary request must consider the current economic climate, which is in stark contrast to the pandemic tech demand climate. In this climate and in times of recession, it comes down to tangible value that you are able to add. My advice to junior developers is to continue studying and augmenting their skills with practical short courses that allows them to write production code. If they are accepted in learnerships or internships, they need to ensure they are developing practical skills and are being actively trained. Being a serial learnership student does not instil confidence in a prospective employer.
Salary increases above 10% will be heavily scrutinised, while employers will pay 10% or more increases for specialist skills.
Value is measured as quality of code, speed of delivery, ability to understand and implement a story, ability to work with minimal supervision, ability to work and deliver even under severe load-shedding and an ability to deliver under pressure.
Chillisoft is recruiting fullstack senior developers 7+ development experience who have experience in .Net, React, NodeJS and or TypesScript. Please send your CV to hr@chillisoft.co.za.
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