Interview: Brahim Benabdeslem, vice-chairman of the Algerian Business Leaders Forum (FCE)

27 February 2017

You are vice-chairman of the Algerian employers and, as such, take the economic pulse of the country on a daily basis: can you summarize the current economic situation of Algeria and what to draw as conclusions when seeking to invest?

Algeria is the fourth largest economy in Africa after South Africa, Nigeria and Egypt. It is a market of 40 million inhabitants.

The economic situation is not easy because of the fall in prices of raw materials and especially oil. This should be more difficult next year, despite the agreement of Algiers, for whose signature the Minister of Energy played an important role. The Algerian economy is dependent on 20% of hydrocarbon exports and the fall in oil prices should lead to a fall of about 50% of the revenue. However, the World Bank's forecast is positive, as the medium-term trend is positive growth. In addition, Algeria is also a country with very little debt, and is borrowing at negative rates.

That being said, this good health of the Algerian economy from the point of view of industrial value should not overshadow its too insignificant diversification.

Moreover, from the point of view of the new indicator of diversification of the economy, Algeria ranks 29th on all the countries of Africa. This lack is today the main challenge of the country.

As early as 2015, the FCE has recommended the implementation of a number of measures to rapidly reduce the external dependence of our economy by diversifying it further by developing production in industry, agriculture and services, and improving the business climate and the business environment in general.

What do you think is the government's response to this handicap, and what can be the role of foreign investors?

The role of any government is to put in place the prerequisites for the emergence of a strong and competitive economy. This is what the government is proposing in the new economic model.

For our part, we have identified priority sectors in which the country has comparative advantages and which can form the basis of our economic diversification.

The three pillars on which this diversification should be built are agro-industry and the agriculture on which it depends, energy, including renewable energy, and finally digital. With regard to energy in particular, we have to work on the energy transition and that is what the government is doing. A call for tenders for a 4 GW solar project will soon be launched by the State.

It is a sector that will develop in the future, and private partners, especially foreign ones, will have their place.

Finally, Algeria, because of its geostrategic positioning and its infrastructure (the Trans-Saharan road linking the Mediterranean to Africa), can be the pivot of economic development that would associate Europe and Africa.

Precisely, the Algerian government announced that it has been working on a draft law on public-private partnerships for the beginning of this year. What can you tell us?

Indeed, a law on public-private partnerships (hereinafter “PPPs”) is being prepared at the level of the government and precisely at the level of the Ministry of Industry. This is a good initiative to which our organization, the FCE, fully supports and contributes to its elaboration. As you know, PPPs facilitate and encourage the implementation of infrastructure projects on time and within budget. This is very useful in continuing to provide the country with the infrastructure necessary for its development. It is all the more interesting when one knows that the financing model of these PPPs makes it possible to leave the “public money only” logic to move towards the mobilization of other financial resources at the level of the market. That being said, PPPs are not the panacea and it would be important to choose the projects that can be implemented in the form of PPPs.

What advice can you give to companies that wish to establish a successful business in Algeria, and what role can play the institution of which you are the vice-chairman?

Succeeding in Algeria is about working with the right partner. For two reasons at least, the importance of bureaucracy on the one hand, and the 51/49 rule on the other. A few words concerning the latter, which limits foreign shareholdings in companies governed by Algerian law to 49%, and which is perceived by many as a drag. In reality this is not a measure intended to dismiss foreign companies but rather to create national champions. And it should be noted that this limit of 49% does not systematically fit into a binary scheme where there would be only two partners, the second having the remaining 51%. It is much more complex than that.

It is clear that the implementation of such a rule and in a systematic way poses problems especially when it comes to investments carried out by SMEs. For more than 8 years this rule has been implemented and it may be time to assess it. We, as business leaders, believe that it is necessary to review this system in order to strengthen the attractiveness of our country.