Building on a strong base: Transport improvements will be key to the expansion of the local agro-industrial sector

 

Strategically central to the larger Kabylie region, the wilaya, or province, of Béjaïa has long benefitted from the area’s agricultural richesse – a fact that is perhaps surprising given the large swathes of dense forest and mountains that cover much of the region’s interior. As a result of the difficult geography, mechanised production of cereals is limited, as is irrigated land, and animal husbandry activity is modest. However, the wilaya has built up a strong base of production for arboreal crops that are well suited for small-hold farms and hilly terrain, including olives, figs, honey and tree fruit.

Together, these sorts of crops account for more than half of the total agricultural land in the region, spurring the creation of a sizable refined products segment for things like olive oil, bottled honey and dried fruits. As a result, in addition to employing a sizable part of the population, the refined products segment has also supported the development of several medium- and large-scale companies that now market their products both in Algeria and overseas. A combination of a strengthening domestic market and proximity to Arab and European countries gives the agro-industrial producers in Béjaïa in an enviable position from which to expand.

INDICATORS: According to figures from the National Agency for Investment Development (Agence National de Développement de l’Investissement, ANDI), the agricultural sector employed around 21.5% of the wilaya’s population in 2009. The province’s total usable agricultural area stands at 129,848 ha, of which 6500 ha are irrigated, according to ANDI figures. Due to the predominance of mountainous terrain, landowners have traditionally channelled a large portion of their efforts towards cultivating fruit and other trees: over 50,700 ha are planted with olive trees and 13,350 with fig trees, both staple products in the region. In terms of terrain, only a relatively small portion of the wilaya is home to plains; among these areas, the Soummam plain in particular is known for its intensive production of vegetables and citrus fruits, as well as cereals.

GOING ABROAD: The region’s established expertise in the production of products like olive oil, milk and fruit, as well as animal husbandry, has long helped to sustain the local population, and agriculture for personal consumption is an integral part of the social and economic fabric in Béjaïa.

Over the past two decades, however, key value chain linkages have allowed a number of Béjaï abased firms to expand significantly, and they now account for a large part of domestic food and beverage production. Still, some sectors still lack the needed capacity to agglomerate small local producers in a value chain where economies of scale and time to market remain key factors of success.

The ability of the region’s firms to expand, particularly in terms of exports, is largely contingent upon improvements to the transport infrastructure, which includes the port and rail system that are currently undergoing redevelopment (see analysis).

This dependency can be seen in the operations of Groupe Cevital, one of the wilaya’s largest homegrown firms and Algeria’s biggest food processor, which is based in Béjaïa. The firm has holdings across a variety of segments, although its single-largest revenue earner is sugar, which it imports from Brazil but processes locally. Its sugar refinery complex – part of a large food processing complex near the port of Béjaïa, including grain and sugar silos and a vegetable oil refinery – is one of the biggest of its kind in the world, and it plans to expand its refining capacity further over the coming months, from 2m tonnes to 2.7m tonnes per year. Given that local demand for sugar hovers around 1m tonnes per year, the excess production will be diverted towards exports (albeit not to the EU, where sugar exports from Algeria are not yet allowed under the terms of the existing association agreement). Cevital increased sugar exports in 2012 from 377,000 tonnes to 600,000 tonnes.

MORE CONSUMPTION: While exports are a major focus for many of the wilaya’s manufacturers, local consumption is also rising, helping to support growth in the fast-moving consumer goods and beverage segments. Increasing purchasing power has driven a steady double-digit growth in demand for consumer products. According to the Association of Algerian Drinks Producers, growth in the sector reached 14% in 2012. For local beverage firms, such as Ifri and Toujda, the nationwide trend reflects a dynamism that was already evident in the regional market. Ifri, which began by selling bottled water, has diversified into flavoured waters and juices. “The market has increased at a rapid pace over the past two decades. In the early 1990s there were three juice brands; now there must be over 25 companies operating in the region. This is a sign not only of the rise in purchasing power, but also of the greater demand from consumers for healthy options,” Gadouche Boubekeur, general manager of Toujda, told OBG. Local soft drink manufacturers now export their products to European consumers.

The rise in consumption is also having a knock-on effect in related areas, such as plastic and packaging. “The country’s macroeconomic performance in recent years – and consequent rise in household consumption – has significantly encouraged local plastics production,” Abdel-Hakim Meridji, the general manager of Meriplast, told OBG.

While consumption is likely to continue rising steadily over the medium term, the region’s manufacturers are also likely to receive something of a boost from the expansion of modern retail. The establishment of new dedicated retail space, including supermarkets and other wholesale networks, has allowed for a more cost-effective form of distribution and helped to expand the customer base.

BETTER CONNECTIONS: One of the major challenges facing producers in the region is the growing burden of logistics operations. Economic growth has impacted not only the region’s road network, which hosts some of the country’s busiest thoroughfares, but also Béjaïa Port, which is increasingly suffering the same fate as Algiers Port (see analysis).

Planned investments in infrastructure may soon begin to change this. The relocation and expansion of the oil terminal at the Béjaïa port will eventually boost handling capacity, while transport links connecting the wilaya with the rest of the country are also being strengthened. Work has begun on the 100-km Penetrante de Béjaïa auxiliary highway, which will connect the region, and more importantly, the port and the new East-West Highway. Train connections are also slated for upgrades. The doubling and modernisation of the 85-km line between Béjaïa and Beni Mansour, which will include connections to the Kseur and Taharakht d’Akbou industrial zones, is currently under way. Once completed, the extended line will support three freight trains per day.

However, agro-industrial producers aiming to expand business continue to point to the difficulties they face due to the lack of available space to set up operations. “It is a challenge to access industrial land because it is held mostly in private hands, and therefore available plots are few and go for high prices. In Béjaïa much land has been in the hands of families for decades, whereas in other parts of the country the government is in control. For investment purposes, it is often easier to deal with the government to secure land,” Boubekeur said.

INTEGRATION: Algeria’s decision makers are aiming to raise the level of foreign direct investment with the goal of opening up the economy and diversifying away from reliance on hydrocarbons exports, and agro-industry is increasingly seen as a way to achieve this. Béjaïa is well placed to attract such investment. According to ANDI, opportunities for investment include the development of fruit and vegetable conservation, milk processing, white meat production and olive processing.

Greater emphasis should also be put on branding regional products more efficiently. One example of how to go about this is BioTunisia, a labelling system for organic products. Indeed, some progress has already been made in this area: following the roll-out of standardisation and premium branding programmes, export prices for several local products, like honey and olive oil, are beginning to rise.

Béjaïa already has the basic fundamentals for strengthening its agro-industrial production in place. The success of beverage production and sugar refining shows that with careful branding and distribution, operators can transform local natural resources into marketable products for sale in domestic and foreign outlets. As transport and distribution channels improve, local manufacturers should find it easier to get their products to market. To create more local agro-industry champions, however, the region will have to expand the availability of land for processing units and make sure that traditional growers are increasingly bought into the supply chain.

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The Report: Algeria 2013

Béjaïa chapter from The Report: Algeria 2013

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