It is layoff season across the tech sector and the numbers are quite frankly staggering. The majority of cuts have been in the US with Crunchbase reporting over 140,000 jobs slashed from public and private tech companies in 2022. This year 93,000 workers have already been laid off, with others like Meta reportedly planning fresh layoffs in coming weeks, despite terminating about 11,000 workers in November. The companies have blamed rising inflation, a tumultuous stock market and global economic downturns.

However, we have long predicted that the sector would eventually adjust to regular operating conditions despite a culture of VC driven over-valuations, overzealous hiring and compensation packages. The pandemic triggered unprecedented levels of growth for some tech companies, and the assumption was that this would continue. We have seen that tech companies are not immune to macro-economic challenges.

African tech companies have also had their share. According to Techcabal over 1000 African employees have been laid off in the sector, with Nestcoin, Gokada, 54gene, Kuda, Sendy, Twiga Foods, Chipper cash, Wave and Bolt, all cutting workforce.
This is in addition to salary cuts, hiring freezes, shut downs, and disclosure of record losses. Gokada’s layoffs began in November 2022, followed by another 54 staff this month. This is despite raising $5.3m in 2019 and attempting to raise $750,000 at a $10 million valuation on GetEquity, a Nigerian investment platform.

While this is dire for Nigeria’s soaring unemployment rate, it has some upsides-notably increased focus on profitability and sustainability ahead of growth. Nigerian tech companies are notorious for rushing to set up in Kenya or Ghana, without conquering markets outside Lagos. For instance, Kuda bank recently expanded to Pakistan through the acquisition of a digital banking license despite clearly struggling with its Nigerian operations as its layoffs showed.

Expansion is what VCs want and since most African tech funding is external, Western strategies (and associated over-valuations) dominate the sector.
Perhaps the “venture capital funding winter” might be the reset needed in the ecosystem to provide digital solutions that truly match the more conservative reality of Nigerian consumers?

The layoffs are affecting non-tech companies too, with McKinsey announcing plans to cut 2,000 jobs under ‘Project Magnolia’. Given its notoriety for advising its own clients on staff-reduction plans, I wonder if they will feature themselves in a case study…