Algeria’s economic shifts and sectoral openings

Algeria’s economic activity this week centered on three axes: resource diplomacy, agricultural and water stress, and hydrocarbon expansion. Private firms registered new trade missions to Tanzania. The government signed a $455 million Italian farming project and a $1 billion oil deal. Cereal output forecasts fell. Water shortages triggered public protests. The African Development Bank pledged support for Algerian development initiatives. Visa waivers for Uzbek diplomats and a French energy firm’s gas supply talks signaled diplomatic and commercial realignments.

Trade and investment: new partners, old skepticism

Algerian firms listed on the national business registry are seeking partners in Tanzania for trade and investment. No sector breakdown or company names were disclosed. The registry, managed by the Centre National du Registre du Commerce, recorded 1,247 new enterprises in Q2 2024, a 3% increase year-on-year. Of these, 62% were service providers, 28% trade, 10% industry.

Investor skepticism persists despite government targets. The 2024 investment law guarantees tax exemptions for five years in priority sectors: renewable energy, agribusiness, pharmaceuticals, and digital services. The law also allows 100% foreign ownership in non-strategic sectors. Yet, foreign direct investment inflows reached $1.2 billion in 2023, down from $1.8 billion in 2019. The government attributes the decline to global uncertainty; analysts cite bureaucratic delays and capital controls.

Agriculture: cereal shortfalls, livestock imports, and Italian investment

Algeria’s wheat and barley crop outlook for 2024-25 was revised downward by the Ministry of Agriculture. Initial projections of 3.2 million tons of wheat were cut to 2.8 million tons. Barley output fell from 1.1 million tons to 900,000 tons. The revision follows below-average rainfall in March and April. Algeria imports 70% of its cereal needs, spending $3.5 billion in 2023.

Kenya will export 300,000 sheep to Algeria ahead of Eid al-Adha, up from 200,000 in 2023. The deal, brokered by the Algerian Ministry of Trade, includes veterinary certification and air transport. Local livestock farmers protested, citing unfair competition. The government responded by suspending new import licenses until September.

An Italian firm, Bonifiche Ferraresi, signed a $455 million contract with the Algerian state to develop 15,000 hectares of farmland in the Hodna region. The project includes irrigation infrastructure, grain storage, and processing units. Completion is scheduled for 2027. The firm will retain 49% equity; the Algerian state holds 51%.

Water and irrigation: shortages, cross-border deals, and AfDB support

Algeria’s water reserves fell to 45% of capacity in June 2024, down from 62% in June 2023. The Ministry of Water Resources reported 5.2 billion cubic meters in dams, against an annual demand of 12 billion. Rationing was extended to 18 wilayas, including Algiers, Oran, and Constantine. Protests erupted in Tlemcen and Sidi Bel Abbès over water cuts lasting 12-18 hours daily.

Libya and Algeria agreed on a water cooperation roadmap. The plan includes joint desalination projects, groundwater monitoring, and data sharing. No financial commitments were announced. Algeria’s desalination capacity stands at 2.1 million cubic meters per day; the government plans to add 1.5 million by 2027.

The African Development Bank approved a $300 million loan for Algeria’s water sector. The funds will finance three desalination plants in El Tarf, Skikda, and Mostaganem, with a combined capacity of 450,000 cubic meters per day. The AfDB also pledged technical support for irrigation efficiency programs.

Hydrocarbons: bid rounds, shale gas, and European demand

Algeria will offer 24 oil and gas blocks in the Sahara in its 2026 bid round. The blocks cover 120,000 square kilometers in the Illizi, Berkine, and Ahnet basins. Sonatrach, the state energy company, estimates recoverable reserves at 2.3 billion barrels of oil and 15 trillion cubic feet of gas. The 2023 round attracted bids from ExxonMobil, Eni, and TotalEnergies.

Sonatrach signed a $1 billion deal with an unnamed international partner to develop the Rhourde Nouss gas field. Production is expected to reach 10 million cubic meters per day by 2026. Algeria’s total gas output was 102 billion cubic meters in 2023, of which 54 billion were exported.

Europe is negotiating shale gas imports from Algeria. The European Commission sent a delegation to Algiers in June to discuss long-term supply contracts. Algeria holds the third-largest shale gas reserves in the world, estimated at 707 trillion cubic feet. No commercial production has started; Sonatrach plans a pilot project in 2025.

Algeria will increase oil production to 1.05 million barrels per day from September 2024, up from 950,000 in June. The increase follows OPEC+ quota adjustments. Sonatrach aims to reach 1.2 million barrels by 2026, requiring $40 billion in investment.

Health and food security: WHO cooperation, Chinese engagement, and rural reforms

Algeria and the World Health Organization signed a 2026-2027 cooperation program worth $18 million. The funds will support primary healthcare, vaccine procurement, and non-communicable disease control. Algeria’s health expenditure was 6.2% of GDP in 2023, up from 5.8% in 2020.

The Chinese ambassador to Algeria met with the Minister of Health to discuss pharmaceutical manufacturing. China is Algeria’s second-largest supplier of medicines, after France. Local production covers 30% of demand; the government targets 60% by 2028.

A manifesto titled “Rethinking Rural Living in the Sahara” was published by a group of Algerian agronomists and economists. It calls for decentralized water management, solar-powered irrigation, and land tenure reforms. The document cites Israel’s Negev desert and Morocco’s Ouarzazate solar plant as models. No government response was recorded.

Diplomacy and governance: visa waivers, French energy talks, and regional tensions

Algeria and Uzbekistan removed visa requirements for diplomatic passport holders. The agreement, effective July 1, 2024, follows a similar deal with Turkey in May. Algeria has visa-free or visa-on-arrival agreements with 45 countries, including China, Russia, and South Africa.

A French energy firm, Engie, is negotiating to increase Algerian natural gas supplies. The talks include a potential long-term contract for 5 billion cubic meters per year, up from 3 billion in 2023. France imported 12% of its gas from Algeria in 2023, down from 25% in 2010.

Algeria and Morocco’s rivalry remains centered on Western Sahara. Algeria supports the Polisario Front’s independence claim; Morocco advocates autonomy under its sovereignty. No direct talks have occurred since 2021. Trade between the two countries was $120 million in 2023, down from $250 million in 2018.

Balance of the week

– Trade and investment: 1,247 new firms registered in Q2; Tanzania partnership initiative launched; $455 million Italian farming project signed.
– Agriculture: Wheat output revised downward to 2.8 million tons; 300,000 sheep imported from Kenya; $1 billion oil deal finalized.
– Water: Reserves at 45% capacity; rationing extended to 18 wilayas; $300 million AfDB loan approved.
– Hydrocarbons: 24 blocks offered in 2026 bid round; shale gas talks with Europe; oil output to reach 1.05 million barrels per day in September.
– Health: $18 million WHO cooperation program; Chinese pharmaceutical talks; rural reform manifesto published.
– Diplomacy: Visa waivers for Uzbek diplomats; Engie gas supply negotiations; Western Sahara tensions unchanged.

Key takeaway for entrepreneurs
Algeria’s agricultural and water sectors offer immediate opportunities for firms with irrigation, desalination, and storage technologies. The 2026 hydrocarbon bid round will require local partnerships; Sonatrach’s $40 billion investment plan signals demand for drilling and refining equipment. The $455 million Italian farming project and $300 million AfDB water loan indicate state-backed contracts in agribusiness and infrastructure.