SONATRACH’s energy deals shrink—but Gulf investors bet on smaller projects
Algeria’s foreign direct investment (FDI) inflows have fallen sharply this year, mirroring a broader African trend. While total FDI across the continent dropped 26% to $70 billion in 2025, Algeria’s decline is particularly stark for local entrepreneurs. The government’s push to diversify beyond hydrocarbons—long dominated by SONATRACH—has stalled as global investors pivot toward smaller, high-margin projects in energy transition and critical minerals.
Recent data reveals a paradox: the number of new investment projects in Algeria rose by nearly a third, but their average value plummeted. This shift reflects a global trend where investors prefer agile, niche ventures over megadeals. For Algerian startups, the message is clear—opportunity lies in filling gaps left by retreating multinationals. Take renewable energy: while SONATRACH secures liquefied natural gas (LNG) contracts with European firms, local solar and wind firms struggle to access financing. The National Agency for the Development of Renewable Energy (ANDER) reports that only 3% of approved projects are led by Algerian entrepreneurs, despite the sector’s $10 billion potential by 2030.
The diaspora is already testing this gap. In Paris, Algerian-French entrepreneur Karim Benaissa launched Algeria Green Tech, a modular solar panel assembly plant near Oran, after failing to secure bank loans in Algeria. “Banks here see renewables as high-risk,” he told Jeune Afrique. “In France, we got a €5 million grant from Bpifrance within six months.” His company now employs 45 locals, exporting panels to Morocco and Tunisia—a model Algeria’s Ministry of Industry could replicate with targeted tax breaks.
Gulf money flows in—but Algerian SMEs get squeezed out
Asia and the Gulf are filling the investment void, but Algerian small and medium enterprises (SMEs) are losing ground. According to a recent report by the African Development Bank (AfDB), 68% of new FDI in Algeria this year came from Saudi Arabia and the UAE, primarily in LNG infrastructure and phosphate mining. These deals rarely include local partners beyond subcontracting.
The problem? Algerian SMEs lack the capital to compete. Take Phosboucraa, the state-owned phosphate giant: its $2.1 billion expansion in Ghardaïa was funded entirely by Chinese loans, with no Algerian private-sector involvement. Meanwhile, a 2025 study by the Algerian Federation of Entrepreneurs (FPA) found that 72% of SMEs in the phosphates sector cite “lack of access to credit” as their top barrier. The central bank’s Algerian Fund for Investment and Development (FDI) has allocated just $80 million for SMEs this year—peanuts compared to the $3.5 billion in Gulf-backed projects.
The diaspora is exploiting this divide. Djamel Eddine Kherfi, a London-based Algerian investor, recently backed Algeria AgriTech, a precision farming startup supplying drought-resistant seeds to Saharan cooperatives. His pitch to Gulf investors? “We’re not competing with SONATRACH—we’re solving a problem they ignore.” His company secured $1.2 million from a Dubai-based agri-fund, a fraction of the $100 million+ deals SONATRACH lands. The catch: Kherfi had to register his startup in the UAE to access funding.
How Algerian founders can turn the tide
The good news? Algeria’s FDI slump creates space for entrepreneurs who play by different rules. Three strategies stand out:
1. Target Gulf investors’ blind spots
Saudi and Emirati firms are pouring money into Algeria’s energy and mining sectors—but they overlook logistics and services. Algeria Logistics Group, a diaspora-backed firm, recently won a $500,000 contract to manage phosphate exports from Béchar to Djibouti ports. “We’re not building pipelines,” CEO Souad Benali says. “We’re the invisible layer that makes their supply chains work.”
2. Leverage diaspora networks
Algerian expats in France, Canada, and the UAE control an estimated $20 billion in remittances and business capital. Platforms like Algeria Invest (a diaspora-focused accelerator) report a 40% rise in startup applications this year. The catch? Many founders return to Algeria only to hit bureaucratic walls. President Abdelmadjid Tebboune’s recent decree to fast-track visas for investors is a step forward—but entrepreneurs say corruption at the National Investment Agency (ANI) remains rampant.
3. Bet on “critical minerals” before the rush
Algeria sits on $2.5 trillion in untapped mineral wealth, from lithium in Tindouf to rare earths in Béchar. Yet no Algerian firm has secured a single major mining concession. Noureddine Aït Hamouda, a geologist turned entrepreneur, warns: “China and Turkey are already negotiating directly with tribes in the Hoggar Mountains. If we don’t move now, we’ll be left with crumbs.” His startup, Algerian Critical Minerals, is mapping deposits—but without state backing, he’s struggling to attract foreign partners.
Sources
💡 Starting a business in Algeria? GlobalStart guides you step by step: procedures, real costs, company forms (SARL, EURL, SPA) and CNRC registration.