Select a location

This selection will switch the site from presenting information primarily about Algeria to information primarily about . If you would like to switch back, you may use location selection options at the top of the page.


Algeria: Horizon Scanning 2022

Africa Connected: Issue 7

By Mohamed Lanouar

What is the most important legislative change expected in the next 18 months?

The main legislative change, although already introduced by the 2020 budget law, concerns the removal of the 49/51 rule for foreign investments (a 49% limitation on foreign ownership in Algerian companies) in “non-strategic” sectors.

This change will facilitate and streamline foreign direct investments which were previously put on hold by this obligation (namely for foreign investors to enter a joint venture with a local partner), regardless of the sector and the value of the planned investment.

In addition, it should be noted that the investment law that covers the entire legislative framework for investment in Algeria, whether local or foreign, will undergo a major revision. The date of promulgation of this amended text has not yet been specified, but everything suggests it will be published within the framework of the 2022 budget law.

Finally, to facilitate the financing of the economy, the Algerian government has put the privatisation of certain public banks on the agenda. This has been announced repeatedly by the authorities since 1997 but has never been implemented. Given the predominance of public banks in the Algerian banking sector and the lack of funding for private projects, whether local or international, this measure will likely revive and facilitate investment.

What impact, in terms of foreign investment or on the business climate, should this change have?

The repeal of the 49/51 rule will give foreign investors the option of investing alone or holding the majority of the capital of a company in Algeria, which was impossible until now.

There are many foreign direct investment projects through the creation of small and medium-sized enterprises and industries that do not necessarily require a joint venture with a local investor. If a local investor is required, its capital participation can be freely negotiated between the foreign investor and the local partner.

At the start of 2021, a stimulus and economic reform plan was mentioned by the government as a means to restore the country’s macroeconomic balance. This stimulus plan will focus on taxation, monetary policy, the foreign exchange market and the banking system.

In addition, and to consolidate and open the banking market to competition, further plans include:

  • authorising the opening of new banks with ratios in accordance with international standards (minimum capital of USD260 million);
  • making it easier for banks to open branches, the number of which is currently insufficient;
  • introducing new banking products; and
  • strengthening the central bank’s regulation and supervision of the banking system.

Where do you see the main areas of growth or opportunity for companies operating in your country?

Algeria, which has a significant deficit in its trade balance (15% of GDP on average over the past few years), imports most of its manufactured products, particularly food and agricultural products.

The Algerian authorities, aware of the need to reduce this deficit and to diversify sources of export income (which is almost exclusively covered by the export of hydrocarbons), have shown interest in promoting investment in the agri-food industry and processing in a broader sense.

This sector, considered today as almost untouched, is to receive several investments in different formats and sizes from both Algerian and foreign investors. Likewise, a facilitation strategy has been extended to the agriculture and tourism sectors, which already benefit from numerous support mechanisms.

What is the current investment appetite in the region? Do you see this changing in 2022?

Since its independence, Algeria has not been able to diversify its economy and remains largely dependent on its hydrocarbon exports subject to the vagaries of the international economy.

In this sense, most economic sectors in Algeria are potential sources of growth for local and foreign investors. The country has a considerably-sized market with a population of more than 45 million, whose needs are mostly met through imports. National production of goods remains very low compared to the country's needs.

In Algeria almost everything remains to be done in most sectors, which is why investor appetite remains very high. It is important to note that the foundations of Algerian legislation on investment and in particular the principles of freedom of investment, transfer of capital and fair treatment were imposed by the investment laws of 1993 and 2001.

Although these laws are applicable, they are still largely insufficient in giving confidence to investors, given the country’s cumbersome bureaucracy, poor governance and the weaknesses of the financial sector which altogether prevent Algeria from guaranteeing legal security to foreign investors.

Given the significant reforms needed to remove these obstacles and establish legal certainty, things are not expected to change significantly in 2022. The country is now at a crossroads and the authorities have realised the urgency of breaking out of the dependence on hydrocarbons and diversifying the economy.