Growing potential: State-backed efforts continue to increase domestic production, improve food security and reduce the import bill

On the back of significant growth over the last decade, Algeria continues to witness an increase in local agricultural production owing to efforts to modernise the sector and boost investment. While the country is still dependent on imports to ensure food-sufficiency, the government is committed to plans to intensify production and reduce the food import bill. By virtue of the 2010-14 Public Investment Programme, a total of AD1trn (€9.9bn) will be allocated to raise local production and guarantee food security, specifically to boost output of key crops, develop rural land, and strengthen human resources and technical support.

SECTOR PERFORMANCE: Agricultural output grew by an average of 7.3% a year between 2001 and 2011, up from 3.2% a decade earlier, partly due to demographic growth and the rise in demand for food, but most importantly to government programmes designed to help revitalise the sector. Indeed, launched in 2000, the National Agricultural Development Plan (Plan National de Développement Agricole, PNDA) aimed at improving overall sector performance, ensure the country’s food security, protect land and natural resources, fight desertification to make land suitable for agriculture, revitalise rural land, and mobilise the rural population to participate more fully in agriculture. The PNDA was followed in 2004 by the 10-year National Agricultural and Rural Development Plan (Plan National de Dé veloppement Agricole et Rurale, PNDAR).

More recently, the sector has largely thrived under the government’s Agricultural and Rural Renewal Policy (Politique du Renouveau agricole et rural, PRAR) launched in 2008 and under which the country is targeting sector growth to average 8.3% a year between 2009 and 2014. Recent data shows production improving from 8.5% in 2010 to 10.6% in 2011. The value of agricultural production has risen from AD500bn (€7.05bn) in 2001 to AD1.3trn (€13bn) in 2010 and AD1.64trn (€16.07bn) in 2011. The sector now employs 2.4m people and contributes 10% to total GDP. Such growth is, in part, due to better management of the sector under the various instituted national programmes. Against this backdrop, Algeria aims to meet 70% of its food needs by 2014.

RISING IMPORTS: Data from the National Centre for Customs Information and Statistics (centre national de l'informatique et des statistiques des Douanes, CNIS), indicates that food imports in 2011 increased by more than 61% over 2010, from €4.57bn to more than €7.01bn. This is high relative to the country’s total import bill, which was just above €33.06bn. The sharp increase is mainly a result of the 102.6% year-on-year (y-o-y) rise in cereal imports, up from €1.49bn in 2010 to €2.9bn in 2011 (see analysis).

Imports of cereals were followed by increases in sugar and confectionary up 71.2% €833.8m, a 53.5% rise in milk and dairy products, a 35.3% elevation in coffee and tea reaching €238.1m, and lastly, a 30.6% jump in pulses amounting to €280.98m. In the first half of 2012, food imports declined by 11.91% over the same period in 2011, falling from €3.78bn to €3.32bn and reflecting the reduction in cereal, milk and sugar imports according to data from the CNIS.

MODEST EXPORTS: Exports of Algerian crops and food products have struggled over the past two decades.

Although once a large exporter of agricultural products, the political instability of the 1990s seriously hampered the movement of goods and people.

Government-instituted programmes of the 2000s are also taking time to bear fruit. Food exports in 2011 accounted for as little as 5% of non-hydrocarbons exports and amounted to just $300m (€215m) according to the National Agency for the Promotion of Exports (Agence nationale algérienne de promotion des exportations, Algex). Major exported products included pasta, sugar, olive oil and dates. The annual value of fresh agricultural products hovers between $35m (€25.16m) and $50m (€35.94m). Dates account for 50% of this.

Exports are expected to benefit from the PRAR thanks predominantly to a better supply of modern equipment and a significant increase in technical assistance.

INSTITUTIONAL CHANGES: To encourage more investment the authorities are strengthening public institutions, largely through greater cooperation with private operators in addition to the creation of trade organisations to boost local production in strategic segments such as cereals and dairy products. These changes have been ongoing since 2008 under the PRAR strategy and aim primarily at removing major obstacles to investment in agriculture, notably access to land and credit.

The National Office for Agricultural Land (Office National des Terres Agricoles, ONTA) was created in August 2010 to improve access to land, whereas the Banque de l’Agriculture et du Développement Rural (BADR), first established in 1982, was tasked with developing loans and easing access to credit.

Agricultural projects are also being encouraged at a local level through the establishment of executive committees in each of the country’s 48 wilayas(provinces).

Ongoing since 2012, this is aimed at overseeing the implementation of the PRAR strategy. Each committee serves as its own local administration and sector operators follow up the implementation of the PRAR objectives in their respective wilayas. Organisations to strengthen public-private cooperation are also being set up such as the Coordinating Committee for Rural Communities (Cellules d’animation rurale communale, CARC). CARC encourages sector operators in rural areas to exchange information, share experiences, identify challenges and suggest solutions to overcome them.

At present, Algeria is seeking to develop 17 major segments, up from 10 in 2009, including cereals, milk, potatoes, olives, dates and poultry, among others. Trade committees are the main bodies responsible for developing each segment, promoting private sector participation, and bringing together public authorities and private operators. So far, committees have been set up in seven segments, including a Cereals Trade Committee (Comité interprofessionnel des céréales, CIC), a Milk Trade Committee (Comité interprofessionnel du lait, CIL) and a committee for each of the tomato potato, olive, date, and poultry processing industries.

Farmers and industrialists operating predominantly in the private sector have been invited to renew their membership to the abovementioned trade organisations, in order to improve accessibility to information on potential incentives including loans being offered on agricultural projects by the BADR.

WORKING THE LAND: Following South Sudan’s separation from Sudan, Algeria has become the largest African country by area. Despite this, it has only 8.5m ha of arable land. In 2011, 44% of agricultural production was carried out in plains and coastal land, 23% in highlands, 18% in mountain areas, and 16% in the Sahara and oases. In 2011, 8.4m ha or 19.9% of total arable land (42m ha) was being used for production.

The government has increasingly sought to expand the surface available for agricultural exploitation by developing rural land. As a result, there was an 11% rise in usage of unexploited arable land suitable for agriculture between 2000 and 2010. This can partly be attributed to favourable legislation issued in the past four year to regulate and ease access to land. Indeed, a law passed in 2008 (Loi d’Orientation Agricole n° 08-16) made it possible to lease state-owned land for up to 40 years and a second law in 2010 set the terms and conditions for land exploitation.

This has helped to address landownership problems, notably with regards to the nationalisation of land previously under French control, which has hindered sector activity since independence in 1962. More land is expected to be made available under PRAR. The creation of ONTA in 2010 as the government institution regulating access to land should allow for more areas to be exploited. In just two years, ONTA received approximately 195,000 applications for agricultural projects. “With the landownership problem now solved, it is prime time for farmers to take advantage of available fiscal incentives to work the land and establish businesses,” Amine Bensemmane, the chairman of Filaha Foundation, an agricultural expo organiser, told OBG.

OTHER OBJECTIVES: The strategy of easing access to land is also designed to address unemployment by getting youth to engage in more agricultural projects. Youth unemployment for those aged 16 to 24 officially stands at 22.4%. However, data released by the Chamber of Agriculture paints an unequal picture by revealing that more than 50% of agricultural projects are carried out by people aged over the age of 50.

RURAL DEVELOPMENT: To boost local production and meet food targets, partnerships are being initiated at all levels. An important component of the PRAR strategy is being addressed through the Rural Development Project (Projet de Proximité de Développement Rural Intégré, PPDRI), which was launched in 2009 and has been one of the main public partnerships enabling investors to develop rural agricultural projects. Over 6000 PPDRI projects have so far been approved, with more than 4000 having already benefitted 650, 000-plus households. The government aims to bring the total number of projects to more than 12,000 by 2014.

In addition, access to financing has been eased by the BADR to support sector operators. Loans currently on offer, among others, include the two-year RFIG loan, which was brought into effect in 2008 and is to be reimbursed between six and 24 months, and the three-year ETTAHADI loan reimbursed over seven years. The government covers the interest rates for both loans provided investors meet deadlines for reimbursement.

CEREALS: The previous four years have seen an upturn in cereal production, especially wheat, thanks to favourable weather conditions, the changes brought by the PRAR, and progress by farmers in applying more modern production techniques (see analysis).

Local production of cereals rose from an annual average of 2.9m tonnes between 2000 and 2008 to 4.2m tonnes in 2011. The country does, however, still rely on imports to meet its annual consumption estimated at roughly 7m tonnes. In 2011, cereal imports were up by 102.6% over 2010, as the government sought to quell rising popular discontent over food prices at a time of political instability across the region.

The state is responsible for importing and distributing cereals through the Algerian Cereal Office (Office Algérien interprofessionnel des céréales, OAIC), the government agency responsible for overseeing grain trade. The OAIC supplies private operators largely active in milling and grain processing with up to 70% of their needs (increased from 50% to 60% in January 2011, and from 60% to 70% in August 2011).

The government has raised quotas as part of wider measures to control consumer level prices, address fluctuating annual demand (especially during the holy month of Ramadan), and to confront rising speculation since 2008 following the global food crisis.

September 2012 saw taxes on corn and soybean imports removed. Meanwhile, wheat, a leading local staple, remains heavily subsidised. The country is nevertheless shifting its focus to boosting domestic production and delivering better-quality cereals to satisfy consumers. In 2012 up to 3.3m ha of seeds were planted, with durum taking up the largest portion of land followed by barley and bread wheat.

Raising cereal production ultimately requires overcoming several challenges. Many cereal farmers face limitations to production, specifically small portions of land, following the dismantling and downsizing of state farms in 1987. Other issues include limited storage capacity, the need for an efficient irrigation system and the importance of diversifying cereal varieties.

DATES & OLIVES: Algeria is the second-largest producer of dates worldwide after Iraq, with more than 18m palm trees and dates cultivated in 16 wilayas. Annual output increased from 601,000 tonnes in 2009 to 645,000 in 2010 and 724,000 in 2011. Biskra is one of the main producing wilaya located in the south-east, with 4.1m palm trees and an expected output of some 300,000 tonnes in 2012, of which with the Deglet Nour variety accounts for around 60%.

Dates are a key agricultural export, with 12,803 tonnes exported in 2010 alone. Exports generated €16.72m in 2011, up by 2.69% from €17.46m in 2010. The country hopes to boost exports to around 50,000 tonnes by 2014. To enhance production, three research units have been set up in Biskra, Touggourt and Adrar. According to Foued Chehat, the director of the National Institute of Agronomic Research of Algeria, all date varieties have been identified across the country and researchers continue working on diseases affecting palm trees. An in-vitro experiment to produce dates is in fact being carried out in Touggourt, with the purpose and potential of meeting rising demand at a lower production cost. “The experiment is now in its sixth year and its first dates are expected to be delivered soon. If output proves successful, we will carry on with this method to boost date production,” Chehat told OBG.

Olive production is slowly moving from the hands of small operators, traditionally families, to big investors as global demand for olive oil increases. Production has risen from an annual average of 250,000 tonnes between 2000 and 2008 to 607,000 tonnes for the 2010/11 season. However, output dropped by 35% in the 2011/12 season to 392,000 tonnes, as a result of poor weather conditions. The surface area for olive trees is to be expanded from around 350,000 ha to 500,000 ha by 2014. With regards to olive oil, approximately 50% originates from olives cultivated in each of the wilaya of Tizi-Ouzou, Bejaia, Mascara and Relizane.

FRUITS & VEGETABLES: Although Algeria has long relied on imported fruit and vegetables to meet local demand, farmers are in fact now seeking to develop domestic production through partnerships with foreign investors. It is hoped that this will transfer modern farming techniques, especially for potatoes and citrus.

Improving potato cultivation has been one aim of the PRAR strategy. Solid results have been registered in recent years, from 2.6m tonnes in 2009, production jumped to 3.3m tonnes in 2010 and 3.8m tonnes in 2011. This is an improvement from the annual average of 1.7m tonnes produced between 2000 and 2008. “Algeria is capable of producing its own potatoes. We need to fight the habit of relying on imports and encourage farmers to produce locally and develop an export industry in this segment,” said Bensemmane. One encouraging sign has been the increase over the past three years of seeds used to plant potatoes, rising from 217,500 tonnes to 272,200 tonnes in 2011. The country is in fact targeting 5m tonnes by 2014.

Citrus is another major crop the country is looking to develop. Output for citrus has jumped from an annual average of 580,000 tonnes between 2000 and 2008 to 788,000 tonnes in 2010, and 1.1m tonnes in 2011. The largest producing wilaya for citrus is Blida, contributing one-third of the national total.

LIVESTOCK & POULTY: Algeria still relies on imported frozen red meat to satisfy its needs. However, plans are under way to develop the segment. The production of red meat rose from 382,000 tonnes in 2010 to 420,000 tonnes in 2011. Between 2000 and 2008, production averaged 260,000 tonnes. The country is looking to become self-sufficient in red meat production as domestic demand and prices rise. In line with this, a number of state-owned farms to breed sheep and protect certain endangered species with potential for red meat production have been set up across the country, and include one each in Relizane, Adrar and Bejaia.

Approximately 336,000 tonnes of white meat were produced in 2011, up from 282,000 tonnes in 2010.

Production averaged 195,000 tonnes a year between 2000 and 2008. Inefficient production and feeding techniques, however, continue to result in higher market prices. Chicken, for instance, costs double what it does in Tunisia and Morocco. In fact, Algeria currently uses 3.5 kilograms of feed per 1 kilogram of meat, whereas neighbouring and developed countries use 1.6 to 2 kilograms thanks to modern feeding techniques.

Another factor is the global rise in corn and soybean prices, two main ingredients in animal feed, following poor weather that affected the output of large producer countries. Even so, prices of white meat are predicted to fall in wake of the government’s decision in September 2012 to cut Customs duties and value added tax on imported corn and soybeans until August 2013.

MILK: Milk is a staple product for domestic consumers, with national consumption standing at 3.3bn litres.

Approximately 572m litres of raw milk was produced in 2011, up from 393m litres in 2010 and a major improvement from the 173.2m litres produced on average between 2003 and 2008. The country is nevertheless reliant on imported powdered milk to meet demand.

Algeria is ultimately seeking to be self-sufficient in raw milk production and replace powdered milk imports, which reached $800m (€616.74m) in 2010. “A plan to develop the dairy segment is in place and a milk policy, aimed at boosting local production of raw milk and reducing reliance on imported powdered milk, has been imposed, and production has at least tripled since 2008,” Bensemmane told OBG.

The sector is overseen by the National Dairy Office (Office National Interprofessionnel du Lait, ONIL), which, to this end, has made agreements with some 114 dairy operators. ONIL will subsidise the powdered milk that is supplied to these 114 producers provided they use raw milk to make pasteurised milk products.

Cattle and technical equipment are being imported more frequently into the country, and a number of state-owned pilot farms have been established where farmers are raising cattle and receiving training on modern farming and production methods. International firms present in Algeria, such as Danone and Lactalis have also established their own farms to produce milk locally. The segment is thus being promoted at national and international trade fairs such as the symposium on milk held in Algiers in May 2012 to showcase the sector’s potential for growth and investment.

SKILLS: The government’s programme to strengthen human resources and modernise administration ( Programme de renforcement des capacités humaines et de modernisation de l’adminstration, PRCHAT) was launched in 2008 by the Ministry of Agriculture. To date, it has facilitated training in business administration, management and modern production techniques through a series of courses, seminars and technical assistance programmes. The government spends an average of AD25bn (€250m) a year on the programme, and more than 43,000 managers and farmers were trained under PRCHAT in 2010 alone, up by 21% from 2009.

“Subsidised loans granted by the public authorities will allow firms to invest in upgrading the training of personnel,” Mohamed Kamel Ait Dahmane, president of the management board at SGP Etudes and Realisations des Grands Travaux Hydrauliques, told OBG.

Achievements under PRCHAT include the establishment of a national committee in 2010 to coordinate forestry, agricultural research, and technical assistance to follow, manage and assess the development of the sector’s human resources, as well as the creation of eight regional committees. The National Bureau for Rural Development has been revamped and will be aided by the creation of 250 private consulting firms for research and consultancy. Further, modernisation plans relating to strengthening human and technical capacities are being supported by the World Bank, which is assisting the mobilisation of public and private operators to boost production of key agricultural segments.

AGRIBUSINESS: More than 23,000 businesses are active in agro-industry, generating over 140,000 jobs and providing 33% of the industrial sector’s added value. As the second-largest industrial contributor to GDP after hydrocarbons, its contribution is expected to rise in line with the projected increase in agricultural production. However, very few processed products are for sale on the market. Limited production has essentially resulted in many firms being small in size and using outdated machinery and production techniques.

Turnover for production volumes only exceeds DA300bn (€3bn). To raise this figure existing firms will need to invest in up-to-date machinery and adopt modern techniques. Transportation and distribution channels also need to be more efficient given that inadequate distribution channels are currently driving up transportation costs and prices for consumers. This invariably hampers the development of the sector. New entrants to the market will need to consider rising purchasing power, demographic growth, changing consumer habits, in addition to greater competition from overseas products sold domestically.

Diversifying and modernising the processing industry will require the mobilisation of capital. Yet, trade organisations are also playing an important role in galvanising the sector. The trade association for tomato producers, for instance, which was set up in 2009, has been central to encouraging the mechanisation of the sector and replacing outdated facilities to boost local tomato processing and reduce the country’s reliance on imported tomato paste.

OUTLOOK: Investing in agriculture is vital for guaranteeing Algerian food security and reducing dependence on imports. With local crop production forecast to rise, greater investment and improved sector modernisation, backed by the development of legal and financial incentives, have supported partnerships that will allow for the transfer of technical know-how and management practices. That said, resources deployed since the implementation of PRAR in 2008 will take time to generate positive results, and Algeria is expected to continue to rely on food imports in the medium term.