Richard Lesser, CEO, Boston Consulting Group : Interview

Interview : Richard Lesser

What are Algeria’s main competitive advantages, and how can its potential be unlocked?

RICHARD LESSER: Algeria has many assets that it can use to become and remain a strong economic power in Africa. It is the largest territory on the continent and has abundant natural resources, a young and educated workforce and a growing internal market. The country can benefit from its favourable position at the heart of the Maghreb region, with access to fast-growing markets. In addition, its cultural heritage and diverse landscape could foster a strong tourism industry.

Still, Algeria has several challenges ahead, notably diversifying its economy and exports. The nascent but growing private sector shows strong potential to contribute to this diversification through entrepreneurship and innovation. Tackling unemployment, especially among the younger generation, also remains a high priority for policy action. Furthermore, building human capital and encouraging diversity in the labour market are key to every country’s development.

How could the impact of Algeria’s strategy for diversification be assessed?

LESSER: The fall in international oil prices in 2014 and the possibility of low oil prices ahead, if the global economy slows, has put the issue of diversification at the top of the political agenda. I understand that Algeria is already working towards this goal and that an action plan was drawn up by the government in 2017.

Algeria will face challenges during its diversification process. Providing the right support to start-ups, small, medium and larger enterprises will be critical, as well as modernising the banking sector. Further integrating downstream activities in the oil and gas industry could help Algeria to benefit more from its natural resources and provide a first step towards diversification. Meaningful action in that direction has been taken recently by Sonatrach in the petrochemicals sector. Algeria is also further leveraging its other natural resources through the development of a phosphate value chain, from mining to fertilizer production. This should have a significant impact on GDP and exports.

Lastly, the government demonstrated its willingness to invest in renewable energy with an ambitious development programme that has been in place since 2013. The country is fortunate to have unique solar energy potential, the exploitation of which should provide both environmental and economic benefits.

What can be done to improve business conditions in Africa, and what role can international firms play?

LESSER: We must recognise that business conditions vary widely across Africa’s countries, which have very different cultures and levels of development. However, some concerns are common to most emerging countries. Recurring challenges include the limited access to credit and financing; the duration and cost of legal procedures for local and international companies; and the instability of legal and fiscal rules and policies. Addressing these factors is key to improving the business environment in emerging markets.

Partnerships with international companies can help improve conditions in different ways. They can provide solutions to financing constraints by investing in local businesses, creating joint ventures and providing warranties to their suppliers. International companies can also help generate activity using their network of subcontractors and suppliers, as well as by increasing purchasing power locally through direct and indirect job creation. These partnerships also contribute to a better business environment by training the local workforce and facilitating a transfer of knowledge. Building human capital is essential, and international companies have a crucial role to play in achieving this. Lastly, international companies can help explain the needs of business to the authorities, if this is required. They can also participate in reforms and share experiences from other countries where they are active.