• Home
• News Article

Algeria: Major privatisations expected this year

January 2006

A number of high-profile privatisations are on the cards for 2006, notably in the banking, telecommunication and transport sectors. Many of these are not full privatisations, but rather a partial opening up to foreign capital, retaining a share for state interests. However, the spin from Algiers is that this represents a major opening up to foreign investment and is a full-hearted embrace of free market reforms. Privatisation in the banking sector emerged as one of the core strategies of the new finance team appointed in last year's cabinet reshuffle, led by finance minister Mourad Medelci and privatisation minister Hamid Temmar, who has just published a new book entitled "The fundamental theories of liberalism".

They began by laying the groundwork for opening up Algeria's state banks to private capital began,appointing France's Rothschild to advise on the sale of a stake in Crédit Populaire d'Algérie ( CPA ).

The proposed sale has reportedly attracted in the region of 25 local and international banking groups. French banks such as CIC and savings group Ecureuil have been among those to announce their interest in establishing more of a presence in Algeria, and there has also been interest from Tunisia and

Morocco, with Casablanca-based Attijariwafa Bank indicating its intention to bid for CPA last November.

There have been varying reports on the size of the stake that the Algerian authorities are prepared to offer a foreign partner. Medelci has said that a 51% share is up for grabs, but local bankers are calling for a larger share that will be more attractive to investors. The sale is expected to go through between July and September this year.

Also on the horizon is the sale of a share in Banque de Dévelopment Locale (BDL), which is due to be launched - again -- within the next six months, according to the finance minister. The bank has a capital of $190 million, compared to the CPA 's $334 million, and its smaller size may mean a simpler privatisation than that being envisaged for the larger bank.

Unfortunately a number of Algeria's other state banks have been tarnished by recent fraud andcorruption scandals, representing a set-back for plans to open up the sector further (see Algeria Focus, December 2005, page 10). The passing of the corruption law may give some hope that efforts to improve accountability and transparency will take root, but as Algeria Focus has consistently argued, disassociating the banks from Algeria's wider culture of clientelism and favours for the well-connected will be a mammoth task requiring immense political will.

Promising sectors
Apart from banking and aviation, a number of other sectors are increasingly opening up to foreign partnerships. This process has been >>> ongoing in the power, water and desalination sectors during 2005, and this year a number of major projects are up for tender and attracting foreign investors.

The telecommunications sector is also generating some excitement. It is already one of Algeria's more vibrant economic sectors, representing a number of foreign operators including Kuwait's Watanya and Egypt's Orascom. The state operator Algérie Telecom is due to offer a stake to private investors in February, and as many as 50 companies have already expressed an interest, according to the group's CEO Brahim Ouarets.

While the state is likely to retain a majority share in the group, which had revenues of $2.2 billion-2.5 billion in 2005, this is still a very attractive proposition.

Progress so far
According to figures released by Temmar this month, 102 public enterprises were sold in 2005. This does not mark a major improvement from 2004, when also roughly 100 SOEs were sold.

The figures presented by Temmar can be somewhat confusing and misleading, mainly because partial and total privatisations are lumped with transfers of capital to other public institutions, divestment of shares to company employees and public-private partnerships.

Speaking of the period from 2001 to 2005, Temmar announced that there had been 270 "privatisation operations". This figure includes 58 transfers to other public institutions (especially to the local governorates or walayat), 45 divestments of isolated assets belonging to public companies, 60 divestments to company employees, 18 partnership accords and 22 partial privatisations. Of the 270 privatisation operations mentioned, only 67 were totally privatised.

Most of the privatisations and other forms of divestment involved Algerian investors, whilst foreign partners represented 30% of the total, according to Temmar. The minister was once again keen to emphasise the positive benefits of the programme, both in terms of capital raised and employment opportunities granted.

The latter is still as sensitive topic in Algeria, and the minister went out of his way to offer reassurances: "With these privatisation actions, we have not lost jobs, but to the contrary we have gained employment opportunities", adding that 7,000 new positions had been created as a result of the process.

Also in this month's Algeria Focus

Policy focus
> Bouteflika's return home reassures, but leaves many questions unanswered
> Five strange weeks
> Return of the old guards
> A political opportunity
> Post-operation politics

Politics and security
> Riots in Béchar and Constantine: social tensions will not go away
> Wanted: more dynamic opposition

Geopolitics
> Rewriting history again, Chirac puts friendship treaty plan back on track
> Government denies reports of illegal migrant abuse

Energy industry
> Year ahead full of promise as hydrocarbons industry embarks on major expansion
> Iberdrola clinches $12 billion supply deal...
> ... ahead of Spanish rivals
> Award of Medgas onshore sections imminent
> FCP granted another life-line

Business environment
> Major privatisations expected this year
> Algeria's risk rating upgraded by Coface
> Tunisian-backed company offers funding for SMEs

Contact info@menas.co.uk for further details

© Menas Associates 2006