The development of the agricultural sector is an integral part of the Algerian government’s push for economic diversification. To that effect, the Public Investment Programme 2015-19, launched in 2014, aims to build on the existing Agricultural and Rural Renewal Policy (Politique de Renouveau Agricole et Rural, PRAR) by spending close to AD300bn (€2.5bn) per year on the sector. The Public Investment Programme 2015-19 targets include increasing the number of irrigated lands by 1m ha; reach 1m ha of olive trees planted; develop storage infrastructure, including silos and fridges; promote mechanisation; and support specific agricultural segments, namely cereals, milk and arboriculture.
Promoting private sector investment and bids for self-sufficiency in an attempt to lower the country’s import bill are some of the more prevalent issues concerning Algeria’s agricultural sector in 2016.
Economic Performance
According to the World Bank, the national economy grew by close to 3.9% in 2015, surpassing IMF forecasts and up 0.1 percentage points from 3.8% in 2014. This was primarily due to higher output in the agricultural sector, where production grew by 7.5% in 2015, a 5.1-percentage point increase compared to 2.4% growth in 2014, according to the Ministry of Agriculture, Rural Development and Fisheries (Ministère de l’Agriculture, du Développement Rural et de la Pêchem, MADRP). The country’s grain output is a significant contributing factor to this increase, yielding 4m tonnes in 2015, up 14.3% from grain output in 2014. According to Sid Ahmed Ferroukhi, the former minister of agriculture, rural development and fisheries, the agriculture sector’s 2015 production of non-aquatic goods was worth AD2.9trn (€24bn), while fisheries and aquaculture products totalled AD46bn (€380.5m).
Felaha 2019
Launched by the MADRP in June 2016, the Felaha 2019 initiative reinforces the ongoing Public Investment Programme 2015-19 and aims to achieve a reduction in the country’s agricultural import bill of $2bn by 2019. The plan intends to restructure the government’s agricultural and rural policy, and organise itself along three axes: agriculture and husbandry; forests and water basins; fisheries and aquaculture. To reduce the agricultural import bill, the Felaha 2019 plan aims to foster 5% average annual growth in the agricultural sector by 2019, irrigate up to 2m ha and reach a production value of AD4.3bn (€35.6m). As a result, the MADRP expects to export close to $1.1bn worth of domestic products by 2019 and create around 1.5m jobs – including 40,000 new jobs in the fishing industry – on top of safeguarding 80,000 existing positions.
Additionally, the MADRP is planning to step up its support for mechanisation processes, largely by increasing the number of tractors, planting and harvesting machines, and sprayers and combine harvesters. For instance, according to a January 2016 statement by Ferroukhi, the MADRP aims to increase mechanisation rates for combine harvesters to one for every 300 ha, up from the current one for every 400 ha, and the number of tractors to one for every 70 ha, up from the rate of one for every 100 ha today. New measures will supplement an existing subsidy that finances a tractor produced in Algeria for up to 30% of its price.
Land Appropriation
While Algerian agriculture boasts significant potential, it is also faces challenges due to land appropriation issues. “Between 25% and 30% of the land owned by the private sector is currently un-seeded and fallow,” Amine Bensemmane, president of GRFI Filaha Innove, told OBG. “There are also a succession of problems in some cases where the land cannot be divided due to confusion over ownership.”
According to Bensemmane, the private sector holds 70% of agrarian land in Algeria, representing about 12m ha. An amendment to Law No. 87/19 which regulates agricultural land appropriation was passed 2003 to upgrade the 1987 legislation. Since November 2015, owners of agricultural land have been awaiting the passage of an additional five bills that would augment the 2003 amendment. The first bill stipulates that a producer can go to a notary to sign partners on to his or her land to raise funds. The second piece of legislation will allow any producer to sign his or her land over to a third party, provided they are a citizen of Algeria. Another piece pertains to succession rights, which previously required inheritors to wait for the death of the landowner but can now be arranged at any time.
Land-sharing agreements currently exist, but can be ambiguous as contracts can exist for farmers on the same parcel. The fourth bill is expected to tackle this issue by making large tracts of land officially dividable. In regards to this amendment, the fifth and final piece of legislation would legalise the acquisition of multiple pieces of land by an Algerian landowner, provided the parcels are located next to each other. “We have been waiting since November 2015 for these five pieces to be voted on. We expect the vote to happen within the third or fourth quarter of 2016, which will enable us to clarify Algeria’s land appropriation rules,” Belkacem Ouali, president of the Chamber of Agriculture of the wilaya (province) of Algiers, told OBG in July 2016.
Accordingly, the MADRP’s Land and Patrimony Protection Office announced in February 2016 that private owners of collective and individual agricultural land that are not ensuring their cultivation and/or exploitation will have these lands expropriated. However, unlike expropriation for non-agricultural purposes in which the government indemnifies the farmer, non-cultivated expropriated land will continue to be used for agricultural purposes, meaning the government will not owe the previous owner any compensation for the land.
Cooperatives
Increased investment coupled with new agricultural policies on land appropriation and land division have encouraged the creation of clusters and cooperatives (see analysis). As clusters have enabled the development of highly technical and specialised pôles d’excellence (poles of excellence), cooperatives are facilitating the modernisation of Algeria’s 200,000 small farms, which are in the range of 4-5 ha.
Organising as cooperatives also enables small farms to take up mechanisation processes – something they cannot typically afford on their own. Additionally, the MADRP has highlighted the role played by cooperatives in furthering the government’s irrigation programme, as well as enhancing the quality of crops and yields given that under a cooperative farmers will have increased collective financial capacity to hire engineers and technicians to advise them. Cooperatives will also play a role in the sales of agricultural products on the market.
“By organising themselves in cooperatives, farmers can more easily and strongly defend their products and protect local production against unfair market practices and the informal economy,” Ouali told OBG. “The only issue with expanding cooperatives is that, traditionally, farmers do not like to gather under associations.”
Imports
As the country is increasingly able to satisfy its domestic market demands in staples such as tomatoes and potatoes, Algeria is looking to further boost local production of other crops. Nevertheless, the agricultural sector continued to represent about 20% of an estimated $60bn total annual import bill, according a mid-2015 Reuters report. For instance, over the past five years, Algeria imported an estimated 6bn-7bn tonnes of wheat, primarily from France, the US Department of Agriculture (USDA) reported in March 2016. The Algerian government has increasingly imposed import restrictions and quotas on many products, particularly those from the EU, given that of the estimated $1bn worth of total annual imports from the EU 92% is agricultural products, according to figures from the Ministry of Trade. While Custom duties for products imported from the EU do not currently exist, as of January 2016 the Algerian government has started to set quotas on 63 agricultural products, including milk powder, which is now capped at 70,000 tonnes.
Exports
As part of the Felaha 2019 programme, Algeria is also expected to export $1.1bn worth of agricultural products by 2019. Currently, the sector’s exports fall short of supply, causing some surplus production to go to waste, and those products that are exported, such as potatoes, are often shipped in difficult conditions, sometimes leading to spoilage. “There must be a good export policy,” Ouali told OBG. “Exporters must be brought together with producers to enter into a dialogue on the sale price, the cost of goods sold and the quantities.”
Agricultural experts are also calling for the implementation of an export policy that is based on the sector’s comparative advantage and not just on excess production. At a special forum at the April 2016 agro-industry conference Djazagro in Algiers, Ali Bey Nasri, president of the National Association of Algerian Exporters, said, “Algeria needs to put in place an export vision by using assets such as the production of products in off-season. We must prepare an export act, that is, export for market and not just surplus.” Additionally, Nasri suggested a relaxed Customs process for exports and the implementation of tracking systems to monitor the origin and quality of the exported products, particularly produce exported by European countries that are not subject to Customs duties and are sold for higher prices.
Irrigation
Increasing the area of irrigated land is a major component of both the PRAR and the Public Investment Programme 2015-19. Indeed, in June 2016 the MADRP announced that it expected a slight decline in 2016/17 grain production due to persistent low rainfall. Low rainfall and drought plagued production in 2014 as well, with the grain harvest falling to 3.4m tonnes, down from 4.9m tonnes in 2013, according to a June 2015 Reuters report. To counter the effects of an arid climate, the Public Investment Programme 2015-19 aims to increase Algeria’s total irrigated land to 2m ha by 2019, up from 1.2m ha currently. Of those 2m ha of irrigated land, 600,000 ha will be devoted to cereal plantations, up from the current 60,000 ha.
According to figures from GRFI Filaha Innove, as of the third quarter of 2016, 280,000 ha of additional land had been irrigated. The Ministry of Water Resources plans to construct 30 new dams by 2019, with a total capacity of 1.5bn cu metres, which will complement the country’s existing 68 dams, with a combined capacity of 7bn cu metres. The impact of these large irrigation projects is already beginning to show, Ouali told OBG. “Thanks to the irrigation programmes, the wilaya of El Oued can now satisfy close to 33% of national demand for potatoes, for instance,” he said.
Funding
Farmers and producers have access to short- and long-term bank loans, as well as specific state subsidies for heavy material and seeds. The state-owned Banque de l’Agriculture et du Développement Rural (BADR) offers different types of credit: a short-term instrument known as a RFIG loan and longer-term loans for heavier investments. The RFIG loan is open to individuals or a group of producers to finance mainly smaller investments, such as fertiliser, seeds, and food or medication for livestock. The bank also offers financing for heavier investments, such as the ETTAHADI loan and the crédit fédératif (federative loan). Both are longer-term loans dedicated to farmers and producers wishing to purchase more land and new equipment.
While these loans are available, obtaining them can be challenging for producers and farmers, particularly if they are organised into a collective. “The documents requested by the BADR are quite complicated, particularly for farmers that are part of a collective, as they need to provide paperwork for each member of the collective and one cannot guarantee the other one’s loan,” Ouali told OBG. “These loans are basically mostly available to individuals, though still with some difficulty.”
Financial support also exists in the form of subsidies for basic products such as seeds and larger equipment – provided the latter is produced in Algeria.
Cereals
According to the USDA’s report, Algeria is a major consumer of cereals, with wheat accounting for close to 75% of calories consumed by individuals and annual wheat demand totalling roughly 8bn tonnes. The country has about 430 wheat mills in operation and some 3.3bn ha is used for cereals cultivation. According to the USDA, out of the 3.3m ha planted at the time, about 1.5m ha were planted with durum wheat, 1m ha with barley, about 600,000 ha with bread wheat and 100,000 ha for oat. As the sector expands and develops, the consumption of barley for feed is expected to rise alongside the increase of livestock, namely sheep.
The 2015/16 harvest season yielded around 4m tonnes of grain, up 14.3% compared to the 3.5m tonnes harvested the year before, per USDA figures. In 2015 the weather remained largely dry until the end of the year, except for rainfall in September. Thus, the land cultivated for the 2016 harvest season was affected by the dry weather in the first half of the year, particularly in the west of Algeria. The conditions seen in the west of the country during the first half of the 2016 harvest season may only slightly affect annual output, given that the majority of wheat is produced and harvested in the east where weather conditions are much better.
As the Algerian government continues to try to maintain low imports, the country will be looking to increase its cereal production to meet domestic demand. Durum wheat is of particular interest to the government, and it is seeking to make the country self-sufficient in this respect by 2019. Under the 2013-16 Country Programming Framework, the UN Food and Agriculture Organisation (FAO) is working with Algeria on introducing quinoa to producers and consumers.
Indeed, quinoa has a natural resistance to arid soils, and is thus seen as having the potential to contribute to the country’s fight against hunger and malnutrition. The FAO provided seeds to farmers across the country and is responsible for organising training courses, mostly in farm management techniques for quinoa and traditional cropping.
Potatoes
Expansion of irrigation projects has enabled Algeria to develop potato production to the point where it has begun exporting to other countries. “Algeria produced close to 400,000 tonnes of potatoes in 2015,” Bensemmane told OBG. “Of this, about 10% goes for export, mainly to Russia.”
The north-eastern wilaya of El Oued is home to about 40% of national potato production and will benefit from a series of investments as part of the MADRP’s ambition to restructure potato exports. In April 2016 Ferroukhi announced that while foreign demand for Algerian potatoes totalled around 25,000 tonnes, exports had only reached 2000 tonnes by that month. The MADRP, therefore, has expressed the goal of developing and consolidating Algerian potato exports in order to reach exports of 70,000 tonnes per year by 2019.
Dairy
According to figures from the Inter-Professional Milk Committee, demand for dairy, which averages around 137 litres per capita for an annual total of 5bn litres, is largely met through imports of powdered milk from five exporters: New Zealand, which accounts for 26.3% of powdered milk imports; Argentina, which contributes 23.8%; France with 19.4%; Poland, which makes up 9.6%; and Uruguay, accounting for 9.5%. Despite an increase in the value of powdered milk imports between 2013 and 2014, according to the USDA, Algeria’s milk import bill – which includes milk powder, milk cream and milk fat – dropped 23% over the first five months of 2016 to $399.1m, compared to $519.04m during the same period in 2015, according to Algeria’s Customs Centre of Data Processing and Statistics. The lower bill was attributed both to a 6.77% drop in imported quantities from 172,930 tonnes to 161,225 tonnes over that period and a 20% decline in milk powder import prices in the first quarter of 2016 to $2469, down from $3040 during the same period in 2015.
Attempts at reducing the import bill by developing local milk production have been made over the past few years, though there remain several obstacles preventing further development. According to Lode Vandermissen, innovation manager of local milk products manufacturer Promasidor Djazair, “there is little local capacity as the climate makes it hard for milk cows to pump more than 18-20 litres per day per head of cattle.” That said, according to a statement made by Ferroukhi during a press forum in January 2016, the MADRP is looking to support planting and growing feed plants for cattle, so as to boost milk cattle breeding and local milk production in order to reach “zero imports” of powdered milk by 2019. Vandermissen told OBG that increased support for dairy farms, coupled with improvements to collection systems to limit waste, would be a good step forward for the dairy industry.
Furthermore, an Algerian-US joint venture signed a memorandum of understanding on the creation of a new agricultural complex in November 2015. The Lacheb Group and the American International Agriculture Group agreed to set up a 6000-ha integrated plant between the western cities of Mascara and Mostaganem. The joint venture is expected to focus on irrigation, seed importation, cattle ranching and dairy farming, as well as offering technology transfer.
Outlook
Algeria has been taking active steps to lower its food import bill and improve local agriculture production, and the Felaha 2019 programme is on track to create over a million new jobs in the sector to support its growth. That being said, the government continues to face challenges in areas such as of land appropriation and financing. Regulations surrounding land appropriation has already been relaxed over the past couple of years, but fundamental pieces of legislation have yet to be passed to improve land division, ownership and inheritance rules.
Given its sizeable agricultural land potential and current development programmes, Algeria is ideally poised to be an exporting country for agricultural produce. Developing a smart export policy and system based on intensive agriculture will be crucial going forward.
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