While most South African tech companies avoided the brunt of the effects of the global wave of large-scale retrenchments, some had no option but to follow suit – resulting in 5% of local software developers being retrenched in the past 12 months.
The shifting tech landscape also led to salary growth stagnating for local developers.
This is according to the 2024 South Africa Report: State of the Software Developer Nation, compiled by OfferZen, the developer hiring marketplace.
The report, now in its fifth year, provides an in-depth analysis of the trends and challenges facing software developers and companies hiring software developers in SA.
The study is based on a survey of over 5 000 local software developers and the company’s own research.
It states 2023 was another difficult year for SA’s ICT industry, as it continued to weather the impact of tech retrenchments and the global economic downturn.
The number of local developers retrenched in the past 12 months was double the number of developer retrenchments in 2022.
Salary band growth and annual increases slowed down for local developers, as companies no longer need to compete for the best IT talent, reveals the report. It also shows a reduction in annual salary increases.
“In 2023, developer salary bands did not grow as much as they have grown in previous years – from 6.3% for seniors in 2023, to 3% now,” explains OfferZen co-founder Philip Joubert.
“Considering inflation, many developers are essentially experiencing a reduction in purchasing power. More than half the software developers who were retrenched worked at companies with fewer than 50 employees. Developers working at corporates have been fairly well insulated from these cuts.”
The balance of power in the tech job market has shifted in favour of companies, and signs of this pressure are evident on developer hiring trends, comments Joubert.
In its 2022 report, OfferZen uncovered the fierce fight among local and multinational corporations for highly-skilled local software developers, propelled by the huge demand for IT skills.
At the time, software developers were among the most sought-after talent, as companies continued to take their operations online, as a result of the big shift brought about by COVID-19.
However, from the last quarter of 2022, hiring activity across most industries declined by 6% month-on-month, including the tech sector, according to CareerJunction Employment Insights.
Software development had been one of the most in-demand professions globally over the last decade, but the market has since declined.
In 2023, the IT sector was superseded by the need for business and management professionals and finance professionals – with demand for software developers witnessing the biggest decline in the IT sector.
“Software development jobs have seen the biggest decrease in labour demand since 2019,” according to CareerJunction Employment Insights.
The shift in IT hiring came amid huge declines in hiring activity at the world’s biggest technology companies, as job posts closed faster than new hiring positions were opened.
The ongoing slowdown in the tech industry prompted large-scale job cuts, including at multinationals Amazon, Google, Meta, Google parent company Alphabet, Salesforce, X (formerly Twitter), Microsoft, Spotify, Cisco, IBM and SAP.
Many of these tech companies benefitted from increased demand for their services during the pandemic lockdowns, but as customer behaviour returned to pre-pandemic times, some witnessed declining demand for services and dropping share prices.
“I believe the South African impact is a combination of global instability – venture capital (VC) funding drying up – and a temporary slowdown in some tech projects,” states Joubert.
“SA has a completely different tech ecosystem from the US. Silicon Valley runs almost entirely on VC funding. That means companies are dependent on access to venture capital for their survival. With VC funding now being less than a third of what it was at the peak in Q4 2021, many start-ups are unable to raise enough new capital and have to do layoffs.”
While the number of open roles is still down compared to 18 months ago, most signs are pointing to a slow but steady recovery in SA’s tech sector over the next year, he adds.
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