A measure of Algeria’s economic crisis is that Chinese investors are looking elsewhere in Africa to develop projects under less arduous business conditions.
In 2020 there were around 1,100 Belt and Road Initiative (BRI) cooperation projects in Africa but Algeria has benefited from very few. It is fast losing its place as China’s privileged interlocutor and South Africa, Nigeria, Angola, Egypt and Congo (DRC) were its main partners in 2020. This is very worrying because China had major economic ambitions for Algeria which stood to gain from its position on the BRI’s maritime axis concluding in southern Europe. Back in 2018 ministers were still talking about lots of new Chinese-financed projects, so what has gone wrong?
Most of the most ambitious economic projects have subsequently been frozen, and Algeria has plunged into an unprecedented paralysis. This has forced Chinese investors to move elsewhere, but the bottom line is that they feel betrayed. Algeria has proved to be an untrustworthy and unreliable partner in two potential mega-projects in which China was keen to invest: the US$4.5-US$4.8 billion El Hamdania port near Cherchell, and the US$6 billion Tébessa phosphate development.
The El Hamdania port dates back to 2010. Financed by an Export-Import Bank of China loan it never got off the ground for multiple and complex reasons. They include: the government’s lack of project management skills; squabbling and infighting between vested clan and other such interests; corruption and the muscling in of many Abdelaziz Bouteflika-era oligarchs and especially in the construction sector. It was impossible to do business with the Algerian authorities and the political situation effectively placed the project in indefinite suspension in 2019.
The Tebessa phosphate mega-project is one of the more bitter pills for the Chinese because it centres around Algeria’s deception and endemic corruption. The project dates back to November 2018 when CITIC Construction’s chairman Chen Xiaojia, and Sonatrach’s then CEO, Abdelmoumen Ould Kaddour, signed cooperation documents for mega-project to expand phosphate production in the eastern Tebessa region. The joint venture — composed of CITIC Construction, which was committed to 80% of the investment, Sonatrach, Asmidal and Manal — planned to begin production in 2022. Prime Minister Ahmed Ouyahia hailed the project as ‘the largest industry project in the last decade in Algeria, and marking the beginning of a real partnership between Algeria and China.’
It was supposed to create 3,000 direct jobs, with 14,000 indirect jobs in construction sites across the four wilayas. This was expected to rise significantly as related industries were established in the Tebessa region.
Around March-April 2021, however, Mohamed Arkab’s Energy Ministry decided to oust CITIC from the project in order to try and sign contracts with others from whom the regime hoped to obtain more lucrative commissions. With little understanding of global business and markets, and little or no concern for anything more than the personal gain, two major engineering companies were invited to make offers for the project. The two — the US’ Bechtel and Belgium‘s De Smet Engineers & Contractors — have long experience of working for two of Algeria’s rival phosphate exporting countries
Bechtel is working for Saudi Arabian Mining Company (Ma’aden), which has been developing the Waad Al Shamaal City Development since 2012. Ma’aden finalised an investment in 2016 of more than US$6 billion to double its phosphate capacity. By building a third domestic complex the group has embarked on a frantic race to position itself as the world’s third largest producer and is therefore a direct competitor of Algeria’s Tébessa project. By inviting Bechtel, which has been operating in Saudi Arabia for 70 years, to participate in discussions Arkab is providing it, and potentially its Saudi clients, with access to confidential details of the Tebessa project. Theoretically this could enable the Saudis to torpedo the expansion of Algeria’s currently small role in the global phosphate market.
Arkab has made the same mistake by potentially granting the world’s largest phosphate producer, Morocco, access to Tebessa’s commercial secrets. He invited De Smet Engineers & Contractors — which has been collaborating in several industrial projects with the Morocco’s state-owned OCP since 2007 — to consider the project. This will enable them to identify Tebessa’s strengths and weaknesses.
CITIC Construction has at least two official agreements with the government which means that it will be able to go to arbitration. None of these groups may now want to work with the regime which could find that its actions have sabotaged the whole Tebessa project. As for Chinese investors, it is unlikely that they will rush back to Algeria after this sort of treachery.