One can’t talk about Algeria without mentioning its role as energy leader. With 70 percent of its population under the age of 35, the largest country in Africa, the Mediterranean Rim and the Arab world has more than enough energy to channel and to sell. But at what price? Since 2014, oil prices have plummeted by as much as 50 percent.
The country indicators may be struggling, but spirits are high. For every $1 drop in the median price of a barrel, $600 million worth of revenue evaporates from the country’s coffers every year. For the 18th-largest producer in the world, these drops in the price of oil could mean a catastrophe, as more than $80 billion of Forex reserves have been lost in the last two years. Nevertheless, Algiers absorbed the loss and refused to cut its development programs or social policies.
Its growth potential and stability make the nation a noteworthy case in the MENA region. But with 97 percent of its GDP derived from hydrocarbons, how does the country manage?
Amid difficulties and adverse circumstances, it’s a matter of resilience. If you see an obstacle as a barrier instead of a launch pad, you don’t see Algeria clearly. “To manufacture remains a difficult commitment” said Ali Boumediene, chief executive of Bomare, a leader in electronics manufacturing.
“It’s not easy at the beginning. But from beginning to end, we’ve learned the ropes of the job in this environment. Our determination has become greater, as our ambition and expertise continue to grow,” said Boumediene, who manufactures Algeria’s second largest brand of mobile phones.
The private sector contributes around 80 percent of the GDP and pushes to invest in new niche positions and state monopolies like aviation, or even hydrocarbons.
“We are in a country of free trade, but the economy is mainly under state control. If you want to do business you don’t need authorization unless you produce or manufacture something. To have that authorization isn’t easy. So it means there are very few of us,” said Abdelouahab Rahim, chairman of Arcofina Holding.
“In Algeria, we believe in the virtues of pragmatism and common sense, and we affirm that the economy of our country and its laws guarantee proper business conditions for any operator,” said Abdelaziz Bouteflika, President of Algeria.
Everything is possible
Alger Marina Bay, the future business district on the outskirts of the capital, is taking shape on 75 hectares at Pins Maritimes, in an alluring project that will completely change the eastern face of the city. Abdelouahab Rahim intends to make this seaside urban complex a landmark attraction that includes an aquatic park and a marina able to hold up 700 boats, restaurants, boutiques, a shopping mall, upscale apartments and hotels. The entrepreneur strives to make it the greatest real estate project in the Maghreb region. “Alger Marina Bay is proof of what we are capable of doing,” he said. To re-launch productive investment and growth, Arcofina creates 3,500 direct hires and 500 jobs a year.
Now, what about the crisis? Algerian entrepreneurs don’t complain about it. Their biggest nightmare is bureaucracy and the informal economy; the whole of the private sector suffers from it, although it remains dynamic and the greatest supplier of jobs, as it continues to absorb an ever-growing working force.
A new model for growth
At less than 50 dollars a barrel, income is shrinking. Today, black gold doesn’t generate more than 21 billion dollars in net profit a year for Sonatrach, the national hydrocarbons company.
The energy transition cannot wait any longer. Even as the largest gas producer in Africa and 9th largest in the world, the country foresees $60 billion of investment in the next 14 years in solar and wind power. In addition to environmental benefits, this has a lot to do with saving and stockpiling some 300 billion cubic meters of natural gas between now and 2030 to prepare for future domestic consumption.
The state plans to put foreign investors in competition with each other to build large-scale electrical infrastructure. Diplomatic efforts are ongoing to service the economy, and are already playing a role in negotiations to aid stability in the continent. Algeria can count on its army as one of the best prepared and best equipped in the region. Its experience in the fight against terrorism and radicalization makes it a key partner for the United States and the rest of the world.
Along the Trans-Saharan road, Algeria will become an economic engine on the continent and a platform for exports to Africa. It will complete its part of the continental highway in 2018, when 9,500 kilometers of road will link six African countries. A massive project for a mega-port will add to this powerful development: El Hamdania, the largest port on the Mediterranean Sea, will connect Algeria to Africa, Southeast Asia and the Americas.
Our entrepreneurs dream with their eyes open. They know that there are no economic miracles. They know the importance of private investment, and they’ve come to believe in the boom of their capital investments.
Outlook on Algeria
- Strategic opening on the African market
- Top-notch transportation network
- Low energy costs
- 40 million consumers
- Active SME fabric
- Investment incentive policy
- Qualified labor force
- Political stability
- The 51/29 law
- Legal instability
- Repatriation of dividends
- Real Estate deficit
- The informal sector