South Africa’s next tech hub: Johannesburg or Cape Town?

Joe Svetlik

Thursday 15 June 2017

According to a new OfferZen report, Johannesburg’s higher salaries are challenging Cape Town’s dominance as South Africa’s tech hub.

Challenging the dominance of ‘Silicon Cape’

When it comes to South Africa’s technology industry, you might assume Cape Town is the beating heart. After all, it’s long been feted as such – earning the nickname Silicon Cape. But according to new data, software developers are being lured away by higher salaries in Johannesburg.

Joburg has a lot going for it. It’s the largest city in the country and is already South Africa’s legislative centre, thanks to it housing the Constitutional Court. It’s also located in the Gauteng region, which enjoys excellent weather all year round (unlike Cape Town’s rather unpredictable winters).

Most importantly, it’s scheduled to house a tech incubator from French Tech soon.

But then Cape Town is no slouch. Known as the digital gateway to Africa, it’s so far been the centre of South Africa’s thriving tech scene. Plus beaches, safari parks, Table Mountain and more all provide a fantastic lifestyle for anyone working in the area.

So which city will emerge as South Africa’s next tech hub?

In-demand jobs

The good news for software developers is they are some of the most in-demand professionals in the country. According to OfferZen, the average developer’s monthly salary is around R39,298, though developers with unique skills can earn more than R90,000 a month – that’s about five times the average monthly salary.

It seems the more experience developers have, the more they stand to earn in Johannesburg compared to Cape Town. A developer with between four and six years’ experience will earn on average R3,056 more working in Joburg than Cape Town. Those with more than six years’ experience earn R5,689 more.

Overall, senior developers – i.e. those discussed above – earn up to 10 per cent more in Johannesburg compared to their equivalent positions in Cape Town. However, the opposite is true when it comes to junior developers.

The OfferZen data says that junior developers – defined as having between zero and one year’s experience – earn 38 per cent more in Cape Town. But the difference is significantly less stark when you account for cost of living; Cape Town residents pay around 10 per cent more for daily expenses like rent and travel. So while they might earn a higher absolute salary, their purchasing power is only slightly above their equivalents in Johannesburg.

Explaining the differential

How do we account for the differential? According to OfferZen co-founder Philip Joubert, most large corporates and banks have their headquarters in Johannesburg and offer a higher salary ceiling to more experienced developers.

“The majority of South African tech startups are based in Cape Town, and being cash-strapped usually can’t afford senior salaries that match those of larger corporates,” Joubert says. “In Cape Town, it’s not unusual to see a developer taking a pay cut to join an exciting startup they believe in.”

The picture is clear: Cape Town is the younger, more vibrant scene, but Joburg is where the money is. And with developers lured to Johannesburg by the promise of higher salaries, Cape Town’s reputation as South Africa’s tech hub is under threat.

Cape fear?

Cape Town will remain popular with startups, for the time being at least. According to the 2017 Savills Tech Cities report, it ranks just below fellow startup hubs New York and San Francisco in terms of quality of life. It was the only African city mentioned in the report, and is responsible for giving birth to 59 per cent of South Africa’s startups. It’s also home to the tech incubators and of course those all-important venture capitalists who fund the majority of these tech projects. That kind of scene won’t disappear overnight.

But this downplays the importance of remote working. Using the right device, developers and other staff can work from anywhere, checking in with Skype calls when meetings are needed. With the spread of remote working now inexorable, many would jump at the higher salaries and lower living costs of Johannesburg. Naturally it helps to be based inside a thriving tech scene, especially when starting your career. But those with more experience – and, some might say, more wisdom – are finding Johannesburg’s allure hard to resist, and not just because of the year-round sunshine.

The city that will emerge as the centre of South Africa’s tech scene depends on what you believe employees value more: vibrancy and buzz, or lower cost of living and higher salaries. It’s going to be a close call.