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Carpe diem: now is the time to invest

Article - June 27, 2012
Investors are encouraged to join the hundreds of foreign companies that have given their seal of approval to Algeria
Progressing from a Soviet-style socialist system to a restructured, productive and diversified economy, Algeria has made giant steps forward. With the liberalisation of its economy, the country offers access to a market of 37 million, and is full of opportunities for foreign investors, as pointed out by Minister of Finance, Karim Djoudi. “Because domestic demand is very strong, household disposable income has grown, which has in turn caused a sharp increase in consumption.”

Attracted by tax incentives and low labour costs, companies such as pharma giants GSK and AstraZeneca have set up shop in Algeria, followed by others in the banking, services, medical equipment, aviation, desalination and technology sectors. General Electric has recently signed a contract worth more than a billion dollars with the Algerian enterprise Sonelgaz, for the construction of a power station in El-Tarf.

German companies have been particularly active in Algeria. In the auto sector, Mercedes and Deutz work in partnership with Algerian companies Equipag and SNVI, and the former is about to start producing its own vehicles in Algerian factories. “The first Mercedes trucks will come off the production line in 2013. They will be manufactured to international standards, which is very important for us. The Germans are researching the domestic SME sector which will support the project, so all the pieces are beginning to fall into place,” says the Minister of Industry, SMEs and Investment Promotion, Mohamed Benmeradi.

Since 2007, Algeria has preferred partnerships to outright privatisation and international partners have to share technological and managerial know-how. Amin Baghli, CEO of telecoms giant SITEL, argues that the combination of Algerian assets and foreign know-how has made their partnership with Sweden’s Ericsson a success. “SITEL was set up to equip the national network, so this partnership provides an opportunity for a foreign company to work on the digitalisation of the Algerian network and at the same time leave room for local talent to participate,” he says.
German company Knauf, which makes and supplies plaster board and insulation materials for the construction industry, is now Africa’s number one exporter of such products. Since its arrival in 2006, Knauf has doubled its employees from 154 to 320. More than 3,000 people now work indirectly in the plaster industry, thanks to new technologies and knowledge transfer.

 “We organise apprenticeships in collaboration with the Ministry of Professional Education and Scientific Research. It is thus a partnership between Knauf and a public institution. There are six pilot training centres across the country where plastering skills are taught according to international standards. Now, the state recognises this trade, and young people are able to create secondary businesses following on from it, such as interior design and decorating,” explains Brahim Abdelatif, General Manager of Knauf Algeria. “We have already trained 2,000 young people.”

Meanwhile, Lafarge, one of the world’s leading cement manufacturers, has benefited from its involvement in three successive infrastructure development programmes. Mr Benmeradi describes the fiscal and legal incentives implemented to encourage private-sector investment, whether local or foreign. “The government has put in place an attractive framework to encourage investment in the wilayas in the high plateaux in the south. You can acquire land jointly with others, and you may be able to acquire land for free. You can enjoy a tax holiday for up to 10 years. You can make an investment without actually spending a cent. If you need to import equipment from abroad, it is free of customs and VAT, and you will not pay any tax on your corporate income,” says Mr Benmeradi.
“There are now private-sector businesses which are more successful than the state-owned enterprises. In the agricultural industry, the Benamor Group was one of the first to invest in production, while other similar businesses depended on imported materials. Benamor finances programmes, it has developed a network of producers, it does the harvesting, and the grading of tomato concentrate: they are an example to follow.”

IFRI, a pioneer in the drinks market, is a family success story which illustrates Algeria’s evolution. The ISO-certified company has more than 50 per cent market share, and is present in 14 foreign countries. “We benefited from the 1993 law relating to the incentive regime for encouraging investment, in order to construct our first facility for bottling mineral water in 2005. The support fund for encouraging exports helped pay the transport costs for our goods, and also the costs of participating in foreign fairs and exhibitions,” says Ibrahim Kassi, CEO, who will be present at the International Food Industry Fair in Miami in September 2012.

He concludes: “The anniversary of our independence is a historic date which marks half a century of social and economic progress. For the young, this celebration marks above all the start of a new era in which our country is positioned amongst the emerging market economies.”