A drive to improve food security, coupled with weakened oil prices worldwide, have prompted Algeria to accelerate its planned agricultural reforms over the next five years. To that end, in 2014 the government announced plans to spend AD300bn (€2.8bn) each year on agriculture as part of the Public Investment Programme 2015-19 in order for the country to build on its ongoing Agricultural and Rural Renewal Policy (Politique de Renouveau Agricole et Rural, PRAR).
Sector Policy
Launched in 2008, PRAR aims to enhance Algeria’s output of key crops, stimulate rural development, attract higher levels of private and foreign direct investment, and improve market structure. The policy has acted as a significant driver of industry development in recent years, leading to an annual growth rate in agricultural production of 8.3% in the period between 2010 and 2014. This a marked improvement on the average of 6% between 2000 and 2008.
Measures introduced under the scheme have included facilitating farmers’ access to land and introducing preferential lending rates for producers, along with efforts to encourage farming in underserved areas such as the Hauts-Plateaux. More recently, during the 2014/15 agricultural season, the government took steps to improve irrigation and increase fertiliser usage. It also targeted generating higher domestic production of staples, from potatoes to milk.
One of the most important steps was the introduction of a 2008 law permitting the lease of state-owned land for up to 40 years. Prior to the introduction of this law, strict lease conditions and opaque land ownership documentation made the buying and selling of land somewhat difficult for producers. Furthermore, in 2010 the National Office for Agricultural Land was established in order to regulate access to state-owned agricultural land, which is estimated at 2.5m ha. All told, Algeria has 42.9m ha of agricultural land. This includes forested areas, meadows and pasture. Of this total, the country has 8.4m ha of arable land, with only 919,000 ha permanently cultivated.
Access to finance has also been eased thanks to two agricultural loans in 2008. The two-year RFIG loan and the three-year ETTAHADI loan offer government-subsidised interest rates. Furthermore, the creation of dedicated trade committees, such as the Inter-professional Cereals Committee, has helped structure the various segments of the sector and spread the use of best practices, promoting private sector participation and enhancing collaboration and communication with the authorities.
Economic Performance
Currently, agriculture is a major part of the country’s non-hydrocarbons economy. In 2014 farming and agro-industrial activity contributed 10% of Algeria’s GDP and, as of 2013, employed more than 2.4m people – roughly equal to one-fifth of the entire labour force. This is significant when compared to the hydrocarbons sector, which contributes about one-third of GDP but accounts for just 2% of total employment.
Despite a brief dip in GDP contribution to 9% in 2012, and another drop from 10.5% in 2013 to 10% in 2014, caused by external pressures, agriculture’s domestic output is on the rise. The Ministry of Agriculture, Rural Development and Fisheries estimates that the value of agricultural production increased five-fold between 2001 and 2013, from AD500bn (€4.6bn) to AD2.56trn (€23.6bn) in 2013. Under its new five-year plan, the country aims to bolster agricultural output, with plans to bring garden produce, for instance, from its current 12.9m tonnes to 16.1m tonnes by 2019.
Sector authorities stated that domestic production in 2013 represented 72% of the country’s annual food supply, exceeding its target of supplying 70% of Algeria’s food needs locally by 2014. Algeria is largely self-sufficient for durum wheat production, and is also approaching self-sufficiency with regard to cash crops, including fruit, citrus and garden vegetables, such as tomatoes, peppers, onions and garlic.
External Headwinds
Despite these positive indicators, in 2014 outside pressures exerted their influence on Algeria’s agricultural industry, leaving it a lot more exposed than usual. In July 2014 the cattle industry was confronted with an outbreak of foot-and-mouth disease that began in Sétif and quickly spread to 19 other provinces. The number of animals affected was successfully contained to a small number, thanks in part to a stepped-up vaccination campaign following an outbreak of the disease in neighbouring Tunisia in May of that year.
A greater cause for concern was 2014’s relatively poor cereal harvest. Production for the harvest in fiscal year 2013/14 fell by more than a third to 3.4m tonnes, a five-year low. The early onset of hot, dry conditions in April 2014 had a particularly dramatic impact on the eastern provinces, which represent a large portion of national production, with 12 ha of cereal acreage destroyed by more than 20 crop fires in the Sétif region alone. The decline in output highlighted the variability of Algerian cereal production, given the sector’s heavy reliance on rainfall. Only 3% of local production is based on irrigation. Into 2015, a brief released by the Global Information and Early Warning System on Food and Agriculture reported a recovery in cereal production, estimating yield to be around the 4m tonne mark, a figure 18% above 2014 levels, but still 12% below the annual average. This has been attributed to dry weather in May 2015.
Imports
Algeria remains reliant on food imports in several key areas. According to the press, food imports increased by nearly 65% between 2009 and 2013, from €4.3bn to €7bn. Food represented 17.5% of total imports in 2013, and its value continued to rise in 2014, hitting a record €9.8bn. Milk imports rose by 62.47% year-on-year, reaching €1.8bn in 2014. Wheat and durum imports also rose 11.1% to €3.3bn. With local consumption hovering around 8m tonnes of cereals per annum, Algeria is one of the largest wheat importers – and the biggest on a per capita basis – worldwide. According to the US Department of Agriculture, cereal consumption in Algeria has doubled in the past 50 years to 285 kg per capita.
“With the pace of population growth, food needs are increasingly important. To ensure better coverage of demand, it is imperative to act on improving yields of agricultural production,” Fouad Chehat, the director of the Algerian National Institute of Agronomic Research, told the local media.
Cereals
Boosting domestic production is a top priority for government officials, given the significant variation in global prices and domestic output from one year to the next. The cultivated surface area devoted to cereals has remained steady at 3.4m ha in recent years, equivalent to nearly half of the country’s arable land. The dry climate limits cereal cultivation to the north; therefore, with little room to expand, Algeria will need to focus on increasing productivity going forward, from an average of 1.8 tonnes per ha to 3 tonnes per ha, according to Algerian Cereals Office targets.
Productivity
Measures to strengthen long-term performance, such as the ongoing effort to expand the use of irrigation, are beginning to yield benefits. Productivity is on the rise – the number of farmers achieving cereal output of more than five tonnes per ha increased from 16 in 2010 to 279 in 2013. Despite the recent production downturn in 2014, cereal output has steadily increased over the past two decades, rising in the five years leading up to 2012/13 from an annual average of around 2.7m tonnes to around 5m tonnes.
The government targets doubling cereal output by 2019, bringing yields up to the 7m-tonne mark, according to the press. To achieve this goal, the sector is undergoing a process of modernisation, which includes expanding and improving irrigation coverage, using certified seeds and fertilisers, and offering training to workers within the sector.
Irrigation
At the top of the state’s agenda is irrigation. With an arid climate, increasing access to water is essential to improve agricultural productivity and stabilise output. Algeria has 1.2m ha of irrigated land, and the government hopes to increase that area to 2m, with over a quarter earmarked for the production of cereals. The Algerian Cereals Office announced that it had distributed some 900 irrigation systems to local farmers in 2014, increasing the irrigated surface area of cereal plantations to 600,000 ha by April 2014.
In order to achieve its goal, the government has undertaken a major dam construction programme, increasing the number of dams from 44 in 1999, with a combined storage capacity of 3.7bn cu metres, to 68 in 2010, with a capacity of 7bn cu metres. The authorities targeted the construction of a further 18 barrages between 2010 and 2014, followed by another 30, with a combined capacity of 1.5bn cu metres, between 2015 and 2019. According to local press, in July 2014 the government decided to end electricity production at two major hydroelectric dams and use them to provide water for agriculture and households instead.
Fertilisers
Increasing the use of fertilisers in Algeria is a key objective under the government’s five-year plan. At present, the Ministry of Agriculture, Rural Development and Fisheries subsidises 20% of the cost of fertilisers. World Bank statistics show that, overall, Algeria used an average of 12.7 kg of fertiliser per ha of arable land between 2009 and 2013. While this is an increase from the five kg per ha used in 2003, it remains well below the average of neighbouring countries. Morocco and Tunisia used 39.1 kg and 40.4 kg of fertiliser per ha, respectively, in the same period.
Several companies produce fertilisers on the local market, which helps to keep costs down. Furthermore, in 2012 the government announced plans to invest €103bn in the construction of three additional production units in Arzew, a gas processing and export terminal on the coast (see analysis). Construction is to be completed by 2020.
Other measures, such as reducing the fragmentation of the sector by combining smallholdings into larger farms, may also help to improve yields. In addition, authorities are developing a 22-km system of canals and pumps that will help to support cereal production through delivering water in the north-east of the country.
Dairy
Algeria is one of the world’s largest milk consumers, averaging 137 litres per capita and a total of 5bn litres nationwide each year. Demand is mostly met through imports of powdered milk, which have risen substantially in value in the space of a year, from €786.6m in 2013 to €1.3bn in 2014 according to the US Department of Agriculture. Officials are working to replace imports with locally produced fresh milk, partly to protect against future price volatility, which weighed heavily on Algeria’s import bill in 2014. Domestic production of fresh cow milk rose over 50% from 1.57m tonnes in 2007 to 2.39m tonnes in 2011, and capacity is estimated at 3.3m tonnes. However, overall productivity is still low, averaging 12 litres per head of cattle, and some production is wasted through inefficient collection and processing methods.
Jean-Yves Broussy, former general manager of Danone Algeria, told OBG, “On the production side, efforts to encourage aggregation and increase the number of dairy farms will help to boost national output, but more critically, on the distribution side, improvements are needed to Algeria’s collection system in order to maximise the amount of fresh milk that enters the formal value chain.”
Meanwhile, encouraged by a continuing strong demand for powdered milk, Polish firm Kaskat Dairy is currently looking to partner with an Algerian company to establish a factory on Algerian soil, according to the local press. Currently a significant provider of milk powder to Algeria, the company exports over 1000 tonnes to the country each year and speculates that shifting production in-country could increase this to over 100,000 tonnes per year. “Algerians will not substitute powdered milk for fresh milk anytime soon,” Bart Willems, general manager at milk powder producer Promasidor Djazair, told OBG. “There is a concern about the quality of fresh milk, while the high price is also an impediment for consumers.”
Agri-Business
The agro-industry represents one-third of the industrial sector’s value added, making it the second-largest industrial contributor to GDP after hydrocarbons. PRAR has helped to stimulate investment in food processing, particularly in vegetable oils, milling and dairy farms. However, a substantial portion of Algerian agro-industry still relies on imported inputs, due to a lack of local supply. The scope for development in the sector is wide, especially in cereals and milk, which make up the bulk of food imports, with Algeria still importing 28% of its food needs annually.
To that end, some industrial groups are boosting local supplies by launching their own production. Groupe Cevital, for instance, is developing a sunflower project to produce oil and animal feed, while Groupe Benamor grows produce such as tomatoes and garlic. Groupe SIM is growing wheat, olives, fruits and vegetables to supply its production units. Agri-businesses are also looking to boost ties and knowledge-sharing with other industry players by participating in organised events. “There is a need to improve partnerships and collaboration in the agricultural sector to maximise productivity and bolster growth. We are seeing this to some extent as small agribusinesses start to increase their promotional and development activity via forums such as the SIMA-SIPSA [livestock and agribusiness] exhibition in October 2015 in Algiers,” Amine Bensemmane, chairman of the Filaha Foundation and an agricultural expo organiser, told OBG.
In addition to serving the domestic market, agro-industrial production contributed an estimated 18.3% to non-hydrocarbons exports in 2013, creating total revenue of €270.5m.
Wine
Given the mild Mediterranean climate in the coastal zones, wine production in Algeria also represents significant potential for future growth. Like its neighbours Morocco and Tunisia, the country has a long history of wine-making, dating back to antiquity, although production and consumption has tailed off in recent decades. Just over 50 years ago it was the largest exporter by volume of wine in the world and the fourth-largest producer.
At that time, Algeria’s vineyards were churning 12m-13m hectolitres of wine annually. That figure has fallen noticeably since, with the country averaging around 650,000 hectolitres. While it remains the second-largest producer on the continent after South Africa, which produces 9m hectolitres per year, the scope to spark a recovery to the production levels of the 1960s is sizeable.
“The policy of introducing new varieties – such as Merlot, Syrah, Pinot and Cabernet grapes – and the significant improvement in product quality, combined with the major advantages of the Algerian market – such as the lengthy viticultural tradition, favourable climate, internationally recognised appellations (vin d’appellation d’origine garantie, VAOG) and competitive prices – means Algeria can occupy a more prominent position on the international stage”, Omar Fodil, CEO of the National Office of the Commercialisation of Wine and Vineyards Products (l’Office National de Commercialisation des Produits Viti-Vinicoles, ONCV), told OBG.
To encourage this, the government is looking to rehabilitate and redevelop sub-sectors across the value chain, such as boosting production of grape juice and raisins, and improving quality for export-oriented products. As a result, recent ONCV efforts have sought to ensure that wine caves and cellars meet international standards, ensure more regular enforcement of quality standards at vineyards, and help growers maintain a more steady supply of grapes through improved cultivation techniques. The government has also unveiled a quality assurance and control laboratory, with help from the EU, to provide ancillary support to winemakers. Should the initiatives have their intended impact, Fodil expects growth for the wine sector in the coming years to reach 10-15% annually, with major export growth in new consumer markets, including Russia, China, Singapore and Turkey.
Bilateral Ties
A number of cross-border initiatives with European government bodies are also expected to improve Algeria’s agricultural productivity. In July 2014 the Austrian ambassador to Algeria, Aloisia Wörgetter, said that the two countries were holding talks on a joint agricultural investment project in the Khenchela province, related to livestock, thus building on several pre-existing agricultural cooperation agreements. In recent years, several bilateral projects have been established between France and the Algerian agriculture sector that allow the latter to benefit from modernisation techniques established in France. A pilot project was launched in early 2013 between Algeria and the French region of Normandy to improve techniques for rearing dairy cattle.
Meanwhile, Italy and Algeria have forged three memoranda of understanding (MoUs) on agriculture, plant protection, animal health, food safety and plant quarantine, allying the two countries’ food industries through three projects that cover integrated management of rural information and agriculture, and plant certification to improve fruit crops. Poland and Algeria have also agreed on an MoU concerning plant quarantine and protection, with a view to promoting partnership between the two countries and sharing best practices.
Outlook
Some key challenges must be addressed over the next five years if Algeria is to achieve its goals of improving food security in line with state policy. In this respect, government-led efforts to increase the area of irrigated land, encourage the use of fertiliser and promote uptake of new farming techniques constitute a big step forward.
In terms of training, Algeria is taking steps to improve the technical capacity of its farmers through the creation of the School of Agricultural, Forestry and Agribusiness Professions in January 2015. Although still in its early stages, the school is expected to play a major role in improving vocational skills and providing training in agriculture-related occupations, forestry and agro-industry.
In the coming years, water usage is expected to play a central role in sector development plans, given the challenges posed by Algeria’s hot, dry climate and the government’s declared intention to intensify local production levels as a means to reduce the country’s reliance on food imports.
Read More from OBG
