When Lori Systems launched in Nairobi, Kenya, in 2016 as a road transport response to Uber, local software engineers rushed to join the company. The Nairobi start-up scene was growing and Lori co-founder Jean-Claude Homawoo had quit his job at Google in New York and hedged his bets on Africa, believing in the potential of technology to solve the continent’s problems.
Three years later, Microsoft announced the opening of an engineering hub, the Africa Development Center (ADC), with sites in Nairobi and Lagos. He pledged to spend $ 100 million and partner with local universities to develop a program to “build our talent pool.”
“Everyone was happy to see these big tech companies coming to the continent,” said Homawoo, speaking at Lori’s office. “It was confirmation that the sacrifices tech entrepreneurs had made five years earlier were the right thing to do.”
But soon after Microsoft entered the Kenyan market, local start-ups felt the pinch of its presence. The tech heavyweight has started an aggressive hiring wave, aiming to fill 500 software engineer positions across ADC’s two hubs by 2023. Small businesses in the region, such as Lori, Cellulant, Twiga Foods and others, who had invested and trained young engineers, quickly outbid.
“Microsoft’s entry changed the dynamics of the software engineer market overnight,” says Caine Wanjau, chief technology officer at Twiga Foods, a business-to-business sourcing platform. “The company liked what they saw [in Kenya] not only among software engineers, but product managers and designers, and even now, they are actively recruiting.
Twiga Foods faced the dual challenge of recruitment and retention. The company lost four employees to Microsoft, and it became difficult to hire new talent as the tech heavyweight pulled the top candidates out of the market.
Lori Systems also suffered losses. The company has tried to retain staff during the pandemic by emphasizing employee equity and highlighting the growth and level of responsibility of a start-up versus a large corporation, Homawoo explains.
“In the end, we lost six employees because of salary offers we couldn’t match,” he notes. “It wasn’t just for Microsoft, but Microsoft has always been the most aggressive in poaching the best tech companies on the continent and everyone has experienced it.”
ADC’s goal is to create opportunities for engineers to do “meaningful work from their home country, instead of leaving them and looking elsewhere,” according to Microsoft. He also said that greater investment increases – not decreases – the number and viability of local start-ups.
“The ecosystem effect is a driving force in our industry and we are seeing something similar in Kenya,” says Jack Ngare, CEO of ADC. He cites Microsoft’s presence in Israel and India as examples of places where the company has supported local start-ups.
But when the tech group recently announced it would hire 2,500 new workers in Israel, a Haaretz newspaper article warned that the expansion could jeopardize the ability of Israeli companies to grow. Along with a “serious shortage” of employees, local businesses are struggling to “compete with the deep pockets of Microsoft and other behemoths.”
The problem is similar in Kenya. Daniel Yu, founder and CEO of Sokowatch, a platform that helps informal retail stores in Africa source their supplies, said that unlike his company’s launch in 2015, junior engineers are now much more expensive to find. in Nairobi. This slows down growth and early stage start-ups are the most affected.
“For local engineers, it’s great to have two or three times their salary [paid by big tech], but for local start-ups, it makes it difficult, ”he says.
A number of start-ups have moved their engineering base to countries such as Eastern Europe, Yu said, as they found better engineers at lower prices. “It’s a real shame, because at the end of the day, African engineers should be working on building technologies for the African market,” he says.
“It becomes a perpetual brain drain as people sit on the mainland, but their work benefits overseas businesses,” Yu adds.
The supply of new engineers must match or exceed the demand to change the trend. National governments need to secure a talent pool, especially in tech hubs like Kenya, says Iyinoluwa Aboyeji, a Nigerian entrepreneur and former managing director of unicorn fintech Flutterwave.
“The challenge must be met at the ecosystem level for start-ups to survive and thrive, which means governments must show more determination in education,” said Aboyeji.
Rwanda is an example of a country investing in technological education and learning for young people, he notes. “This needs to be a collaboration between government and tech companies, with the government providing the infrastructure and technology designing the program, so that the continent can start training 100,000 young trained computer scientists each year, up from 4,000. », Adds Aboyeji.
Earlier this month, Google announced it would invest $ 1 billion in Africa over the next five years to ensure faster and cheaper internet access. Microsoft, meanwhile, plans to roll out a mentoring program with university partners and hold marketing workshops for students. Amazon Web Services supports an acceleration program for businesses in South Africa.
Initiatives like this mean big tech benefits the entire ecosystem rather than just extracting it, says Yu. But it’s also a smart business move: as tech giants compete to be the supplier of Cloud services of choice for local businesses, they need to show they support, not deplete, markets.
In the meantime, tech companies need to be aware of the disruption they cause as they expand into Africa, says Homawoo. Even in a wealthy city like San Francisco, Big Tech has affected the real estate market and driven out the locals.
“It would be irresponsible of them to enter the African market without learning from past experiences,” he said. “Massive inequalities already exist and the impact they could have on the workforce and the cost of talent and assets could be damaging if they don’t anticipate them.”