Posted by: OXFORD BUSINESS GROUP
Faced with a slowing economy, Algeria has launched a drive to revitalise its industrial sector and boost agricultural productivity by upping the focus on locally made products.
Food imports have weighed heavily on public expenditure in recent years, with the import bill largely supported by a strong performance from the country’s oil sector. However, with lower global oil prices of late, the government is moving to boost consumer interest in locally produced foodstuffs and Algerian-made goods through a range of initiatives and reforms, which include awareness campaigns and easier access to credit for consumers when buying non-imported products.
This effort, largely driven by various public bodies including the Ministry of Commerce, Ministry of Industry and Ministry of Agriculture and Rural Development, will also be achieved by focusing on improving consumer confidence and the assurance of the quality and availability of locally produced goods.
To that end, Minister of Commerce Amara Benyounes told local media, “Strong and sustainable economic growth can be achieved only by relying on the domestic market and working to improve locally produced goods, streamline production costs and develop supply logistics chains.”
However, while its efforts are being backed by the private sector, low levels of productivity and value-added remain key challenges to developing the Made in Algeria brand.
Keeping things local
Algeria recorded a trade deficit of $1.73bn in the first quarter of 2015, according to figures from the Algerian Customs’ National Centre for Data Processing and Statistics, against a surplus of $1.83bn for the same period last year. Imports edged downwards in the first quarter of 2015, slipping from $14.3bn to $13.0bn year-on-year (y-o-y), while exports fell by 30.1%, driven by a 32% contraction in the value of hydrocarbons exports.
Legal reforms will support the government’s efforts to generate a higher take-up of locally made products, led by the reintroduction of the consumer credit programme, which will make loans available for the purchase of locally produced goods.
The Algerian newspaper Liberté described the decision to bring back the programme as both welcome and timely. “The consumer credit comes at an important time, when inflation is eating away at purchasing power. The consumer credit will allow consumers to breathe and will also help stimulate local companies that drive Algeria’s development,” the report said. The programme issued loans to households totalling almost AD100bn (€912.5m) in 2008, the year before it was withdrawn, while four-fifths of the total was extended as car credit.
The private sector is also expected to play a part in boosting local production. In a key move, the Business Leaders’ Forum (le Forum des Chefs d’Entreprises, FCE) announced in May that it hoped to establish a “Guaranteed Algerian Production” (Origine Algérie Garantie) label. Studies are currently being carried out to clarify the criteria that need to be met before the label can be placed on Algerian products. Local telecoms operator Mobilis has offered financial support for the initiative, and the studies are scheduled to be completed by the end of June, according to the FCE.
The venture will be supported by a general push to promote Algerian products in the domestic market. While much of Algeria’s food produce and its locally built household appliances are already popular with locals, some products struggle to compete with international brands. Sales of cosmetics and textiles, in particular, remain low, with Algerian consumers overlooking local versions in favour of imported alternatives.
Aside from the challenges of winning over customers, domestic producers face other hurdles, including limits to the existing distribution system, according to media reports. Weak value-added is another sticking point that needs to be addressed if Algeria’s industrial sector is to thrive, particularly in sectors such as the automotive industry. The low level of value-added in locally made products came under scrutiny when the legislation governing Algeria’s consumer credit programme was drafted.
In addition, the African Development Bank (AfDB) highlighted the low levels of value-added processing in a study published last year on the integration of several African economies into the global value chain. The AfDB reported that of all imports to Algeria, just 28.8% undergo value-added processing for re-export, with the remaining 71.2% consisting of food or durable goods for consumption.
( OBG )