Can Africa solve global growing tech staff costs?

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Africa could become an exporter of digital skills, and counter a growing rise in the costs of tech personnel for startups being felt in the US, if sufficient investment is pumped into technical skills training across Africa.

In December, Disrupt Africa spoke to Tendai Mashingaidze, manager of Zimbabwe’s Muzinda hub, who argued incubators in Africa should stop chasing “big idea” startups, but rather focus on job creation and equipping entrepreneurs with digital skills.

According to Mashingaidze, by focusing on digital skills training, Africa could be unlocked as a global destination for outsourced digital skills – particularly given the high numbers of young people within the continent’s population.

“The beauty [of digital skills]is obviously that I do not have to leave my country in order to build an app for for a client sitting in Australia. With the internet  my geographic positioning becomes irrelevant and so does the economic state of my country. All I need is the skill, internet connectivity and the tools to do the job, no work permit, passport and visa needed. I now belong to another economy, the digital economy,our youth need to know this,” Mashingaidze said.

“I truly believe of all African countries […] we are positioned to become a global destination for outsourced digital skills like India, provided significant investment is made to equip the youth with digital skills.”

A recent article by venture capitalist Tomasz Tonguz, partner at Silicon Valley-based Redpoint Ventures, pinpoints a number of challenges being faced by startups in San Francisco – essentially highlighting the rocketing costs of scaling a startup in the current environment.

Tunguz finds that the single largest cost for startups in San Francisco is the cost of hiring employees.

According to Tunguz: “startups and incumbents vying for talent in the increasingly competitive job market have bid up the median wage of a San Francisco technology worker 15 per cent each year.”

He places the median wage for a technology worker at a startup in San Francisco in 2014 at US$180,000; up from US$90,000 in 2009 – pointing to the escalation in the costs of hiring digital personnel.

Compare this to research published by Africa-focused VC Savannah Fund, finding that even in the most expensive region in Africa according to their research – South Africa – the average cost of hiring a digital engineer with between three and five years experience came to little over US$45,000.

In other regions, a similarly experienced engineer can be hired for between US$12,000 (Uganda) and US$32,000 (Ghana).

Bearing in mind the that Silicon Valley-based startups are “vying for talent” despite the increasing costs of hiring, Mashingaidze may be onto something.

“African developers could absolutely offer an answer to the global demand for digital skills,” says Amanda Spann, co-founder of US-based Africa-oriented accelerator tiphub.

“The continent provides a diverse array of skilled and professional developers who can mitigate Western language barriers and timezone delays.”

While digital engineering wages in African markets as depicted by the Savannah Fund research clearly need to be stabilised – and in many cases raised; the US$180,000 Silicon Valley wages for a digital engineer working with a startup also defy logic.

Provided sufficient investment is pumped into training African digital engineers to the highest global standards, Africa’s young population may prove a goldmine for global startups looking for top talent, without having to keep up with rocketing Silicon Valley prices.

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Inspired and excited by the African tech entrepreneurial scene, Gabriella spends her time travelling around the continent to report on the most innovative tech startups, the most active investors, and the latest trends emerging in the ecosystem.

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