Incubator funds directed to Algeria's technoparks

As ambitions to transition to some extent from an oil-driven economy to a tech-driven one, there is an effort to grow a culture of innovation. In January 2017 the Parliament adopted the orientation law for the development of small and medium-sized enterprises (SMEs), aimed at supporting the financing of start-ups and the development of an entrepreneurial culture. In addition to public initiatives, private companies, including telecoms operators, are working towards the establishment of an enabling ecosystem for start-ups. The expansion of incubators and an entrepreneurial culture supports Algeria’s diversification plans, with a particular focus on the development of projects in the capital and around the smart city project. However, the absence of capital-risk financing and hard access to finance need to be addressed to tap existing potential.

Global Ranking

The US-based Global Entrepreneurship and Development Institute ranks Algeria 80th out of 137 countries in its “2018 Global Entrepreneurship Index”, measuring its entrepreneurial ecosystem. The evaluation is based on 14 pillars covering entrepreneurial attitudes, abilities and aspirations. In 2017 the country ranked 73rd, outpacing the regional average in each pillar, save for risk acceptance.

Regulation

The January 2017 law includes a comprehensive framework to support the growth of SMEs in the country. It covers financing, financial backing, support for finding market opportunities as well as measures to foster innovation. However, the application decree of the orientation law consolidates the agencies of the sector, putting all responsibilities under one institution, and created the Agency for the Development of SMEs and Promotion of Innovation (Agence de Développement de la PME et de la Promotion de l’Innovation, ADPIPME) in July 2018. The newly established agency is tasked with supporting the growth of SMEs in the country by offering them training and incubation; ensuring technological transfer; providing them with the support to reach foreign markets; helping integrate them in public contracts; and support their financing with banks. Funds backing SMEs loans and financing SMEs growth are put under the ADPIPME as well. According to the Ministry of Industry and Mining, there were just over 1m SMEs were operating in the country as of the end of 2017.

Technoparks

To support the apparition of an innovative ecosystem, the government created the National Agency for the Promotion and Development of Technoparks (Agence Nationale de Promotion et de Dé veloppement des Parcs Technologiques, ANPT) in 2004. This agency, placed under the authority of the sectoral ministry, is tasked with creating and managing centres for the development of activities with an ICT focus. It registered profits of AD38m (€276,000) in 2017, its first year since its establishment, generating revenues from its data hosting, IT consulting and solutions services. In 2018 the ANPT secured a AD15bn (€108.9m) loan from the National Investment Fund for the improvement of its technoparks in Algiers, Annaba, Oran and Ouargla. The loan, to be paid back by 2030, is expected to increase both their physical and technical capacity.

The technopark of Sidi Abdellah, 30 km from Algiers, will receive AD6bn (€43.6m) of the loan, of which AD2bn (€14.5m) will be used for the construction of two towers and a second data centre. Annaba will receive AD4bn (€29m) for an infrastructure upgrade, the creation of an incubator, and physical space for SMEs. Oran, which already has its incubation centre, will receive AD2.5bn (€18.2m) for the start of the construction of its technopark. And Ouargla, a technopark which is still in an early phase, will be allocated AD2bn (€14.5m).

Growing Ecosystem

Although functioning under different models, incubators aim at providing a co-working space to start-ups for one to two years, along with personalised training programmes, access to professional networks and potential clients, as well as financing. Accelerators are similar to incubators in terms of the services that are offered, however, they typically operate over a shorter period of time. In addition, training tends to be more focused on revenue models and profitability, and there is a greater level of participation in the start-ups they support.

Sidi Abdellah hosted the first incubator, opening in 2011. By 2018 over 350 projects had matured within its confines, with at least 27 start-ups originating there. Ouargla created an incubator programme and companies such as Sylabs, TechnoBridge and IncubMe populated the landscape. Mobile operators, traditionally pioneers in incubation programmes that boost local content, later joined with the incubators ENP for Djezzy and tStart for Ooredoo, beginning in 2016. In spite of recent growth, the number of such programmes remains limited, with under 12 as of early 2018, compared to South Africa, Egypt and Tunisia which had 59, 34 and 17 programmes, respectively.

A major supporter of entrepreneurs in Algeria is INJAZ El Djazair, which has trained over 10,000 entrepreneurs since its creation in 2010. The programme enrols participants from high schools to business schools for training that lasts from a few hours to six months. “INJAZ El Djazair shows the commitment of the private sector to the development of Algerian entrepreneurs. However, it lacks the necessary mentorship and follow-up to have a long-lasting impact,” Ali Kahlane, a senior consultant in digital transformation and maturation, told OBG.

One programme addressing the lack of coaching to entrepreneurs is the first pan-African incubator in Algeria, IncubMe. The incubator, of which OBG is a partner, was launched in May 2018 by the private sector. It coaches 20-30 entrepreneurs per year for six to 18 months, providing them with housing and a stipend. The programme partners with schools, consulting firms and businesses to provide adequate training and help participants identify opportunities. IncubMe supports its beneficiaries throughout their entrepreneurial journey, from developing prototypes to seeking funding, to turning their projects into operating businesses.

Success Stories

Since 2011 Algeria has organised the Global Entrepreneurship Week, and in 2017, 38 out of the country’s 48 wilayas (provinces) participated with seminars, training and start-up weekends. Such initiatives have helped to foster a number of local innovation success stories. In March 2018 the Algerian start-up Safe Sahara won the Global Start-up Weekend Women with its product of a connected bracelet that allows underserved networks to be geolocated. The same month, an Algerian woman, Naïma Mahrez, won first prize at the UN International Telecommunication Union’s World Summit on the Information Society with a trans-Saharan fibre-optic project. In June 2018 the Algerian Digital Cluster accompanied start-ups to VivaTech, an international event in Paris. The results show the strength of start-ups lie in their attitude towards entrepreneurship. Still, the pursuit of innovation remains to be fostered and financing of start-ups is underdeveloped.

Public Funding

In a country where financial markets and equity funds are not yet mature, entrepreneurs in Algeria often have to fund themselves or resort to their personal circles. However, there are state-funded forms of support. One of the most significant public avenues available to them is the National Youth Employment Support Agency (Agence Nationale de Soutien à l’Emploi des Jeunes, ANSEJ). The agency provides loans ranging from AD100,000 (€726) to AD300,000 (€2180) to young entrepreneurs. However, funds are often dedicated to non-productive investments by beneficiaries and impact studies have yet to assess their success or shortcomings.

Although less popular than the ANSEJ, the Fund for Appropriation of Users and the Development of Information and Communication, established in 2008, was created to fund activities that promote ICT use. From an initial donation of AD5bn (€36.3m), its budget increased to AD10.2bn (€74.1m) in 2016, and the 2018 Finance Law funnelled it taxes levied on mobile network operators. However, although the fund is dedicated to tech start-ups, it has mostly funded projects of the public administration, such as the digitisation of the Ministry of Higher Education and Scientific Research.

Private Funding

Adding to the funds channelled through incubators, the private sector is luring start-ups. Since 2016 the Casbah Business Angels, a local angel investor, has supported start-ups with seed funding. In 2018 the network of angel investors vowed to put together a fund of AD10bn-15bn (€72.6m-108.9m). The same year, private insurance company Macir Vie entered the equity of established start-ups such as Nbatou.com, a local version of Airbnb, or Nkheyar.com, which is a comparison site for mobile packages and insurance products. The Oulmi Brothers, owners of the auto company SOVAC, invested in SSII Smartest Algeria, an IT solutions start-up. In September 2018 the Algerian Business Leaders Forum announced the creation of an incubator in its office, stating it would allocate €10m to finance 40 entrepreneurial projects worth up to €100,000 by the end of 2018, which could help more start-ups launch their products into the market.