Labour arbitrage is a growing issue in the tech space. It refers to companies exploiting talent based on geography, offering low pay and little to no protection, simply because they can. While this practice is already widespread in foreign tech firms hiring data workers across Africa, it’s now spilling over into the local startup scene in South Africa.
South Africa is in a constant battle against high unemployment and poor economic growth. In this climate, the country is leaning heavily on startups as a potential driver for recovery. These small businesses offer innovation, job creation, and the energy needed to power economic change.
According to FFA Ventures, a thriving startup ecosystem can help in three major ways:
- It can diversify and expand the economy.
- It reduces reliance on traditional industries.
- It drives innovation by offering cutting-edge solutions.
Because startups often sit at the frontlines of technology and change, many South Africans, myself included, see them as a beacon of hope. They either employ people directly or open up access to jobs through partnerships and client work.
But here’s the problem: Not all that glitters is gold.
Startups can also be exploiters. And they often use their underdog status as a shield. A common excuse is: “This is all we can offer right now, we’re just a startup.” That statement is often used to justify paying employees little to nothing, despite the demands of the role.
In a country drowning in unemployment, this kind of reasoning is dangerous. Being desperate for a job doesn’t mean you should be exploited.
Anthony Gill said it best: “Any business worth working for will be sensitive to the opportunity costs of their best employees and will reward them accordingly.” When startups consistently undervalue talent, they lose it. And they should.
South Africa’s economic climate is tough, resources are constrained. Many people are desperate for work. But startups should not take advantage of that desperation. Fair pay is about more than meeting basic needs, it’s a form of respect. It acknowledges the value of a person’s time, skills, and effort.
Unless a startup clearly states that a role is volunteer-based or an experience opportunity, it must offer decent compensation. Anything less is exploitation.
Any business, no matter how small should recognise the cost of hiring people. If you want to build a team that stays, grows, and adds value, you have to pay them fairly. If you can’t afford that, then you’re not ready to scale.
Unemployment is a crisis. Exploiting talent should never be the answer.
By Thanduxolo Love Mtsweni
