Doing Business in Algeria?

Once a closed-off nation, Algeria is now opening its doors to the world, presenting a wealth of untapped potential.

As a regional powerhouse and a global energy giant boasting the 17th largest oil reserves, 11th largest gas reserves, and third largest untapped shale gas reserves, Algeria is strategically positioned as a gateway to both Saharan and sub-Saharan Africa, as well as a critical connector to Europe. The turbulent ‚dark period‘ of the 1990s has long passed, and Africa’s largest country is now open for business, offering a promising landscape for growth and development.

Despite its vast size, Algeria is sparsely populated, with the majority of its 45 million inhabitants residing in the Mediterranean north, while the southern Saharan regions remain largely uninhabited. The populace is comprised predominantly of Arab and Berber tribes, with approximately one million still leading nomadic lifestyles. Additionally, 170,000 refugees from Western Sahara reside in camps along the Moroccan-Mauritanian border. While Muslims constitute the overwhelming majority, ethnic diversity adds complexity, with many identifying proudly as Berbers, emphasizing various subgroups such as Tuaregs, Mozabites, and Kabyles. The country also hosts migrants from both Saharan and sub-Saharan Africa, along with descendants of Turks. Unemployment hovers around 14%.

The Algerian Democratic People’s Republic (ADPR) operates as a semi-presidential constitutional republic, with the president concurrently serving as the Minister of Defense. Given its geostrategic significance, defense remains a pivotal sector, consuming a substantial portion—up to 25%—of the national budget, sustaining Africa’s second-largest military. Despite its republican structure, Algeria’s democracy ranks relatively low on a global scale (EIU, 2023: 110/167), characterized by institutional weaknesses, including fiscal overruns dating back to the 1990s. Dissatisfaction with the regime/government culminated in the 2019 Hirak movement, prompting long-standing President Bouteflika to forgo his fifth presidential bid. The election of President Tebboune offered hope for curbing presidential authoritarianism and transitioning towards a parliamentary republic.

Defense remains paramount for Algeria due to regional crises (Libya, Mali, Western Sahara) and complex relations with Morocco, a longstanding rival. France, Algeria’s significant European partner, maintains intricate ties shaped by a bloody struggle for independence that still evokes resentment toward France. However, millions of Algerians reside in France, highlighting a brain drain from Algeria. Recent years, particularly under President E. Macron, witnessed improved relations between the two countries. Other key partners include Italy and Germany, with around 50% of Algeria’s exports, predominantly oil and gas, flowing to the EU. China and Russia also emerge as significant partners, with Russia positioning itself as an alternative to the EU (especially France). For the US, Algeria serves as an ally in counterterrorism efforts.

Algeria’s economy relies on imports, despite stringent restrictions, and revenues from oil and gas sales. Major imports include industrial goods, semi-finished products for local assembly (electronics, household appliances), food, and consumer goods. Potential sectors of interest for foreign investors include defense and security, as the country seeks to diversify suppliers; mining and oil technologies, with a newfound focus on mineral extraction; energy, aiming to reduce reliance on fossil fuels and invest in renewables; water management, challenged by climate change and population growth; and agriculture and food processing.

Business negotiations in Algeria can prove challenging for Europeans, necessitating collaboration with diplomatic missions. Discussions are often protracted, emphasizing relationship-building alongside frequent pauses. It’s crucial to recognize that Algeria’s private sector is still nascent, influencing communication styles and expectations. Punctuality may be lax, requiring flexibility on both sides. Choosing meeting venues like prominent hotels or private office spaces is advisable. Emphasizing the partner’s origin is key, given Algeria’s ethnic diversity, where different ethnicities prioritize their heritage over national identity. Most Algerians are proficient in Arabic, French, or English, and many representatives of the older generation are also fluent in Russian. Nonetheless, incorporating cultural consultants into the team can be a crucial asset in navigating Algerian intricacies. Face-to-face meetings are imperative, with repeated visits often necessary.

Avoiding risky situations, especially nighttime excursions in urban areas, is prudent when traveling within the country. Consultation with local security forces is advisable in southern regions. Algeria offers a plethora of hotels providing safe and tranquil accommodations, both in enchanting historic districts and beyond, easily accessible through booking websites.

Major trade fairs include POLLUTEC, focusing on water management and purification technologies; BATIMATEC, showcasing engineering; FPA for military equipment; and SECURA for security solutions.