New agricultural investment strategy sparks foreign investment deals in Algeria

In April 2016 Sid Ahmed Ferroukhi, then-minister of agriculture, rural development and fisheries, announced the upcoming launch of a Policy and Investment Promotion Roadmap, which aims to promote foreign direct investment and modernise Algeria’s agriculture sector. The pending roadmap comes amidst a number of other reforms that look to stimulate growth in the agricultural sector.

Earlier in 2016, for example, the government announced the launch of its facilitation and monitoring unit housed at the Ministry of Agriculture, Rural Development and Fisheries (Ministère de l’Agriculture, du Développement Rural et de la Pêchem, MADRP), which focuses on the provision of land concessions for farmers, processors, cooperatives, seed suppliers and other specialised operators in the sector.

Clusters Of Modernization

Algerian authorities are also looking to expand agricultural clusters and farmer cooperatives, with the aim of boosting private investment and developing economies of scale for processing, logistics and marketing activities.

“We have identified hundreds of potential agricultural clusters that are responsible for the bulk of the growth [in the sector],” Ferroukhi told local media. “It is around these poles that we need to integrate industries and services, and create better relationships among stakeholders.”

At an agricultural meeting in December 2015, he also noted the role of agricultural cooperatives in improving efficiency and productivity in the sector. With over 200,000 farms of between four and five ha spread across the country, there is ample room to increase output for smallholders, who otherwise would not have the means to afford machinery, or contract transport or marketing activities.

Joint Venture

The efforts by the government appear to be yielding fruit. The sector saw growth of 7.5% in 2015, with a total production value of AD2.9trn (€23.98bn), compared to a 1% rise in 2014. Growth is expected to continue at an average of 5% through to 2019. A number of new investment deals are also currently in the pipeline or have been recently inked. In late 2015, for example, Algerian Lacheb Group signed a memorandum of understanding with the American International Agricultural Group to invest $100m for the establishment of El Firma, a new joint venture – one of six signed between the US and Algeria in the agricultural sector in 2015 – that will conduct a range of activities including irrigation, cattle ranching and dairy farming, as well as importing seeds.

Another 80 applications for agriculture projects were submitted to the MADRP’s facilitation and monitoring unit between January and April 2016, with the majority of the planned projects focused on dairy production, cereals and hydroponics.

Push For Food Security

The bullish outlook for the country’s agricultural sector comes amidst a broader push to encourage diversification, as the low oil prices of recent years have pinched government coffers. Weakened foreign reserves made imports – 20% of which are comprised of foodstuffs – more expensive, highlighting the importance of increasing food security and economic diversification. Between 2009 and 2013, for example, food imports increased by nearly 65%, from €4.3bn to €7bn.

In addition to rising import costs, a quickly expanding population has also necessitated enhanced food security. Already home to 40m people, Algeria’s population is expected to grow by 1m annually.

The government’s agricultural reforms aim to boost output, with production of food staples such as wheat and barley expected to increase from 3.4m tonnes in 2014 to 6.9m tonnes in 2019, and irrigated land from 900,000 in 2015 ha to 2m ha in 2019. Other agricultural products, such as livestock and produce, are also expected to reach higher production levels by 2019, according to MADRP, estimating that increased local milk production could end milk imports altogether.