Data from relocation company, CapRelo, compares average annual wages around the world, including the average salary of software engineers. CapRelo relies on self-reported salary information supplied by workers from around the globe.
American software engineers reported an $85,000 average salary, the second highest in the world, trailing only Switzerland at $94,567. In South Africa, the average salary drops to $25,704 (R426,527 on 04/09/2020), well below the global average of $40,690 (R675,201 on 04/09/2020).
Source: BusinessTech April 2019
However, this isn’t the full story. One needs to consider not just gross income, but differences in tax and living costs.
To find a more accurate comparison, we compared various tech professional salaries in South Africa and the United Kingdom. We found that overall South Africans earn considerably less than their UK counterparts, even after taking into account tax and cost of living differences.
For instance, a Web Developer who earns R227,076 in South Africa (netting R175,508 after tax) might earn 39,311 GBP in the UK (netting 30,373 GBP after tax).
At an exchange rate of 22.04 ZAR to 1 GBP (04/09/2020) the UK salary looks much more attractive at R866,414 gross (R669,427 net).
There are significant cost of living differences, however even when these are factored in, South African web developers appear to be a bargain compared to their UK counterparts. The Economist’s Big Mac Index estimates that the Rand may be undervalued by 34.2% to 57% (July 2020). This would imply a South African salary could be adjusted upward by this percentage range to make it comparable to a UK salary in terms of purchasing parity. Even with a 50% cost of living adjustment, the South African Web Developers after tax salary appears to be R393,871 less than the UK equivalent (SA/UK = 41%). A similar calculation for other ICT roles showed South African salaries, after tax and adjusted for cost of living, were on average only 66% of UK equivalent salaries.
See the spreadsheet: ICT salary comparison. Data source: MyBroadband January 2020
This creates opportunities for South African tech professionals. Historically, many have emigrated to take advantage of these opportunities and many more were considering emigrating before COVID-19 appeared. We believe the acceleration towards remote working and distributed development practices due to the pandemic could accelerate this trend, which we explore in this post.
Are these developer wage differences sustainable? We believe not. COVID is accelerating the development of a global labour market for tech skills. We foresee that this will close the wage gap and create an opportunity for more Africans to access high-paying global tech jobs by learning to code online, through supported, self-driven learning.