Achieving 7 percent growth in non-oil sectors is Algeria’s short-term economic objective and the strategy that relies largely on the country’s industrial strength. Heading these efforts is Abdesselam Bouchouareb, minister of industry and mines, who has several tools at his disposal.
To strengthen the new approach to growth, the Ministry of Industry presents a roadmap for growth and structural opportunities. “We want to boost collaboration within and between activities likely to support a move towards higher-value market segments” Bouchouareb said. The two main performance indicators are employment and balance of payments.
Growth activities cover: energy, which includes renewables. The country wants to evolve from supplier of crude oils to producer and exporter of refined products, chemical and petrochemicals, and digital industries. The country’s strategic structural activities include steel and metal industry.
$13 billion production stimulus
The first measure taken by Bouchouareb targeted public sector organizations. These companies have been transformed into 12 independent industrial groups recognized and trusted by major global firms, such as: Massey Fergusson, Liebehrr, Sampo, General Electric, Alstom, Renault, Deutz, Mercedes Benz, ZF and more. Following are some noteworthy examples of restructured industrial groups.
Algeria Mechanical Group (AGM) aims to reach $1 billion turnover by 2020, from $600m currently. It operates in mechanical subcontracting, construction, agricultural machinery, and industrial equipment. Over the last three years the company has been operating at highly integrated levels with Ferguson, with eight industrial partnerships amounting to $470m investment and new projects proposed to American partners.
Algeria Chemical Specialities (ACS) is a smaller group that aims to produce the raw materials needed to substitute imports and become an incubator for start-ups. It has already started to do so by investing in grassroot companies. The group has six operational segments and is exporting glass, paint, raw materials, cardboard, waste re- cycling and hygiene and pharmaceutical products.
“We are witnessing increasing foreign investor interest in health care and agriculture,” said Dr. Ismael Chikhoune, chief executive of the U.S.-Algerian Business Council. The pharmaceutical industry is among the country’s most vibrant sectors with investments of $1.12 billion and more than 400 million units produced locally. Growth in this sector builds on strong partnerships with foreign pharmaceutical companies.
Five years from now, Algeria is expected to cover 100 percent of its medication needs, standing today at 61 percent. And Saidal is the leader in the manufacture of generic products and seventh in sales. It is 80 percent state-owned and floated in the Algiers Stock Exchange. It focuses on bio-technology and runs the only bioequivalence center on the continent.
Mines, an untapped resource
Algeria wants to double this sector’s added value in 2017. The total amount of investments projected for the next five years is around $15 billion, according to the minister of industry, whose strategy relies on the processing of mineral products, iron, zinc, lead, marble, non-ferrous alloys, granite, salt, aggregates, gold and tungsten deposits. The Algerian Geological Service Agency (AGSA) and its U.S counterpart—U.S. Geological Services (USGS)—are working on a strategic cooperation agreement that will help to better assess this mineral potential.
Public group Manal comprises nine companies and undertakes mineral surveying, prospecting, development and extraction. The main one is Somiphos, which specializes in phosphate with a turnover of $95 million. The company wants to capture part of the international fertilizer market with Indonesian partner Indorama.
The Office for Mining and Geological Research also part of the group in charge of prospecting, exploration and development. Messaoud Houfani, Manal’s chief executive, explained, “The country is 2,380,000 square kilometers and remains largely unexplored. There are numerous geological formations and therefore a range of metals and minerals. We have identified several structures of interest and deposits to be explored. We support partnerships, particularly with U.S. companies that have the technical know-how and experience prospecting for new deposits.”
Algeria has gold deposits in the Hoggar Mountains, along with tungsten deposits and potential diamond resources that Manal wants to explore further with technological partners. “We want to start preliminary exploration. USGS can help us undertake focused aerial mapping in order to look for these diamonds and kimberlites.” He confirmed that all projects will start production by the end of 2017 and into 2018.
Agriculture: A strategic priority
Agriculture contributes around 10 percent of GDP in Algeria, which recorded a sector growth rate of 6.84 percent in 2015.
Several investments are under development, including the U.S.-Algerian joint venture El Firma El Asria (“the modern farm”), a $300 million investment covering 20,000 hectares with an annual production potential of 245 million liters of milk, 10,000 tons of red meat and 100,000 tons of animal fodder. The expected impact is 1,500 direct jobs and the transfer of technological knowhow.
Chikhoune said, “Our trade missions have resulted in several successful joint ventures over the past two years. We take U.S. companies to Algeria and set up meetings with officials and companies. They discover hidden potential and are surprised at Algeria’s development level.”
The private sector, a stable force
The Algerian private sector accounts for 80 percent of GDP, creating two out of every three jobs, and acts as a stable economic force.
Many success stories could be mentioned here—some with unusual trajectories—but all have economic patriotism as a common denominator. We have spoken to them.
“In 1992, Algeria was bankrupt. Economic liberalisation had started at the same time as terrorism was rising. I decided to move back from Switzerland and start my own business,” said Abdelouahab Rahim, chief executive of Arcofina. He worked in pharmaceuticals and insurance, and purchased the Alger Hilton hotel from Korea’s Daewoo. He secured a lease for 75 hectares adjacent to the hotel from the state, and worked to build the Algeria Business Centre tower there before getting involved in web-based technologies.
In 2006, he signs a franchise agreement with the French chain Carrefour, which through its real estate subsidiary Dahli launched Alger Marina Bay, a major development that changed the seafront of the capital. Arcofina created 3,500 direct jobs, and twice this number indirectly.
Ali Boumediene started off by importing and distributing household appliances in 1992. In 1997, the young director was invited to South Korea by Samsung. “While walking around their factories, I discovered a different world. Their knowhow and precision fascinated me.” Back in Algeria, the company was launched in 2001. In two years, manual insertion becames automated and the company slowly started to export to Europe, receiving ISO certification for its products and establishing a sub-contracting partnership with LG Electronics.
Bomare Company is the leading manufacturer of electronics in Algeria. Its brand of mobile phones, Stream System, ranks second on the Algerian market. It has an exclusive contract with Blue Vision for distributing its products (TV, smartphones and tablets) in the Spanish and Portuguese markets, at 250,000 units over five years for $50 million.
The Algerian brand will next expand to France, Germany and the Ivory Coast. Exports account for 15 to 20 percent of the company’s turnover. Boumediene wants to increase this share to 30 percent in 2017 and reach a 70 percent value-added ratio. “We have put everything in place to compete internationally among industrial sub-contractors. We have expert knowledge of the technology.” In 2015, Bomare Company recorded a turnover of $42 million.
Geir is the national leader in security and perimeter protection. “We secure state institutions, including all public and private banks in Algeria,” explained chief executive Noureddinne Yebdri.
Geir’s knowhow revolves around the supply of fire doors, access control systems, armored doors, windows and bank counters, as well as hospital structures such as hermetic bridges for clean and radioactive rooms, operating theaters and emergency room access. Economically, Geir’s protection systems are 80 percent Algerian. Its electronic technology is imported from Germany, the United Kingdom and the United States.