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Cevital, giant of the Algerian private sector, goes from strength to strength

February 2006
With a AD5 billion bond issue launched on the domestic market in January and having grown at an astonishing rate over the past five years as the sector has opened up in Algeria, the agrofoods giant led by Kabyle entrepreneur Issad Rebrab, Cevital , has unveiled an ambitious programme of investments and plans to expand into new sectors of the economy such as petrochemicals.

It seems there is no limit to the ambition of Rebrab, who this month gave a revealing and frank interview to the weekly economic review of El-Watan newspaper which is also part of the Rebrab empire.

Rebrab has overseen the company's astronomic growth, and can take credit for the fact that Cevital now enjoys a very healthy balance sheet the company is able to fund its activities from its capital base of about AD970 million, Rebrab said. "Our activities rapidly met with a great deal of success, and we have experienced an annual level of growth above 50%."

While he has raised funds on the Algiers bourse a grey market inhabited by a few local institutional investors Rebrab has bigger ambitions: he even hopes to list his firm on the London Stock Exchange, if he gets backing from the Algerian authorities. And why not? This strategy has been working recently for Russian companies and the junior Alternative Investment Market loves to hear a new story from an emerging frontier.

The company's investments have grown from just under AD4 billion in 1999 to over AD20 billion in 2004, and turnover has increased eleven-fold over that period to reach AD38.2 billion in 2004.

This grand success has attracted the attention of international financial institutions, reflected in its recent export guarantee loan backed by Fortis Bank. Foreign financing has also been provided by Arab Banking Corporation , with back-up from a number of Algerian banks, including BADR.

On 16 January, Cevital issued bond worth AD5 billion divided into a five-year tranche repayable at 3.75% and a six-year tranche which carries 4% interest. It thus became the first private sector company to enter the Algerian bond market, which is dominated by the big public sector players such as Sonatrach, Sonelgaz, Air Algerie and Algerie Telecom.

The group continues to expand its sphere of activities, with a total of 15 industrial projects entailing an investment of AD18 billion under way in sectors such as sugar refining, electricity co-generation plants, and the concrete, glass and mineral water sectors.

Rebrab now plans to expand into the petrochemicals sector, and among the "finalized and ready" projects he mentioned a 1.7 million t/yr methanol production factory, a gas-toliquids plant and a PET plastic manufacturing unit to produce packaging materials.

Tricky political context
Rebrab apparently enjoys political backing from the head of state, but no success on such a large scale comes without the need to overcome political obstacles, particularly in the Algerian context. Nonetheless, Cevital is an important symbol for the Algerian authorities, enabling them to demonstrate that the private sector has potential and warrants foreign investments.

When Brazilian President Luiz In?cio Lula da Silva visited Algeria this month, he cited Cevital 's partnership with two Brazilian companies, Randon and Neobus, as an excellent example of Brazilian-Algerian economic partnership, and said the initiative was "crowned by success".

Cevital also has political clout by virtue of the fact that it is a major employer, and has created up to 40,000 jobs in the country.

Hence Rebrab claims to enjoy President Abdelaziz Bouteflika's backing, a welcome change after the difficult 1990s when members of the political elite tried to block his group's expansion. "The president of the republic is not among those who block investors, as the development of the country is in the president's interest," Rebrab said, adding that " Cevital 's projects reflect the president's policy".

However, the liberalising reform drive is not yet fully accepted, even by decision makers in government.

"There are two mentalities in the heads of certain top officials in the administration: there a socialist economic mentality and there is a liberalising economic mentality," Rebrab observed.

Also in this issue of Algeria Focus

Policy focus
Bouteflika on top of the world
Courted by the Pentagon and the FBI
A significantly
A regional policy
Democracy initiative

Politics and security
Belkhadem’s retro pitch: FLN chief seeks to reassert the party’s primacy
Reconciliation laws ready soon
Sadi gears up his party FFS boycott, amidst senate election manoeuvres

Geopolitics
Straw plays it smoothly on first official visit to Algeria
MiG deal: Russia is back at a price
Lula expresses Brazilian interest

Energy industry
Sonatrach’s new-look organisation
Shell joins hands with Sonatrach in strategic partnership
PetroVietnam, PPT and Sonatrach plan ‘$3 billion’ investment
Sonatrach expands Niger exploration portfolio

Business environment
Cevital , giant of the Algerian private sector, goes from strength to strength
Electronic payments on trial in the banking sector
Tenders launched in privatization drive
Hotel projects under way

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© Menas Associates 2006