Algeria Morocco Tensions Reshape North Africa Trade

In late November 2024, the International Crisis Group released a report detailing how the long-standing tensions between Algeria and Morocco have begun to reshape regional trade flows, with direct consequences for entrepreneurs and investors. According to the report, the closure of the land border between the two countries since 1994 and the severing of diplomatic ties in 2021 have forced businesses to reroute goods through third countries, increasing costs and delays. The report highlights that trade between Algeria and Morocco, which once reached $1.2 billion annually in the early 2000s, has now dwindled to less than $200 million, with most transactions channeled through Spain, Tunisia, or Mauritania.

For Algerian entrepreneurs, this geopolitical standoff has created both obstacles and opportunities. The energy sector, a cornerstone of Algeria’s economy, remains largely insulated due to long-term contracts with European buyers, but other industries are feeling the strain. The automotive sector, for example, has seen supply chain disruptions as Algerian manufacturers rely on Moroccan components for assembly plants. According to the Algerian Ministry of Industry, delays in receiving parts have increased production costs by 12-15% for some local firms. Meanwhile, the pharmaceutical industry, which once imported 30% of its raw materials from Morocco, has had to diversify suppliers, turning to India and China at higher shipping costs.

The agricultural sector has also been affected. Algeria, a net importer of food, traditionally sourced citrus fruits, vegetables, and dairy products from Morocco. With direct trade halted, prices for these goods have risen by 8-10% in Algerian markets, according to data from the National Office of Statistics (ONS). Entrepreneurs in the food processing industry, such as those running small and medium-sized enterprises (SMEs) in Algiers and Oran, report that the price volatility has squeezed profit margins. Some have turned to local producers, but domestic supply remains insufficient to meet demand, particularly for high-quality produce.

The diaspora has not been spared. Algerian expatriates in Europe, particularly in France and Spain, have historically relied on cross-border trade networks to send goods back home. With the Algeria-Morocco border closed, these networks have been disrupted, forcing diaspora entrepreneurs to find alternative routes. A recent survey by the Algerian Business Council in France found that 40% of Algerian-owned import-export businesses in Marseille and Paris have shifted their focus to other North African markets, such as Tunisia and Libya, to bypass the blockade. This has led to a surge in demand for logistics services, with startups in Algiers and Tunis offering new solutions for cross-Mediterranean shipping.

The financial sector is also adapting. Algerian banks, which once facilitated trade with Morocco through correspondent banking relationships, have had to restructure their operations. The Bank of Algeria recently announced a new partnership with Tunisian financial institutions to ease transactions for businesses trading with Europe. However, entrepreneurs report that cross-border payments now take 3-5 days longer, adding to operational costs. Fintech startups in Algiers, such as Temtem One and Yassir, are stepping in to offer digital payment solutions, but regulatory hurdles remain.

Despite these challenges, some sectors are thriving. The renewable energy industry, for instance, has seen a boost as Algeria seeks to reduce its dependence on fossil fuels. With Morocco’s advanced solar and wind energy sector off-limits, Algerian firms like Sonelgaz and private players such as Condor Electronics are investing heavily in local production. The government’s recent announcement of a $5 billion plan to expand solar energy capacity by 2030 has attracted interest from international investors, including those from the Gulf and Europe. Entrepreneurs in the clean energy space report that the geopolitical tensions have inadvertently accelerated Algeria’s push for energy independence, creating new opportunities for innovation.

The tech sector is another bright spot. Algerian startups, particularly those in e-commerce and digital services, are capitalizing on the lack of direct competition from Moroccan firms. Platforms like Jumia Algeria and local players such as Prometeo have seen a 20% increase in users as consumers turn to online shopping to avoid supply chain disruptions. The Algerian government’s recent decision to lift restrictions on foreign investment in the tech sector has further fueled growth, with venture capital firms like AfriCap and Partech Africa increasing their presence in Algiers.

For the Algerian diaspora, the tensions have also created new avenues for investment. With Morocco no longer a viable market for cross-border ventures, Algerian expatriates are redirecting their capital toward local startups and real estate. According to the Algerian Agency for Investment Development (AAID), remittances from the diaspora reached $2.1 billion in 2024, a 15% increase from the previous year. Much of this capital is flowing into sectors like renewable energy, agribusiness, and fintech, where government incentives and tax breaks are making investment more attractive.

The International Crisis Group report warns that the status quo is unsustainable in the long term. While Algeria and Morocco have managed to avoid direct conflict, the economic costs of their rivalry are mounting. For entrepreneurs, the key will be adaptability. Those who can navigate the new trade routes, leverage digital solutions, and tap into emerging sectors like renewables and tech will be best positioned to thrive. The report also suggests that a potential thaw in relations—however unlikely in the near term—could unlock billions in trade and investment, particularly in industries like automotive, agriculture, and logistics.

Key takeaway for entrepreneurs
The Algeria-Morocco standoff has increased trade costs and disrupted supply chains, but it has also accelerated local production and digital innovation. Entrepreneurs should focus on sectors like renewable energy, fintech, and agribusiness, where government incentives and diaspora investment are creating new opportunities. Diversifying suppliers and leveraging digital platforms can help mitigate risks while waiting for potential regional normalization.