Our Algeria Politics & Secuirty publication guides you through this enigmatic state, interpreting developments there with the benefit of over 40 years’ experience. The paper focuses on the social and political challenges of the country, as well as the opportunities that could arise as the country seeks greater levels of foreign investment and undertakes sensitive internal reforms. By covering examples of public unrest, and the evolution of the militancy threat, the publication also explains the relevant risks. To get your free copy, click the button below:
There are significant investment opportunities in Algeria. But in order to benefit from them, Algeria will need to remain stable while redressing the factors that have heightened the risk of instability. We would argue that Algeria faces an elevated level of political risk whilst solutions to the country’s economic problems are implemented.
A strengthening presidency; a weakening president
In 1999, when he was installed in the role by the army, President Abdelaziz Bouteflika (b.1937) was a compromise candidate. He was awarded power as a civilian figurehead for the military regime that was responsible for the country’s civil war from 1991-2002.
His appointment was important in bringing about an end to that conflict and Bouteflika’s power has grown, even as his personal health declined with a mini-stroke in 2013, heart disease, and rumours about declining mental faculties.
Given his ill-health, it is highly unlikely that he would stand for a fifth term in 2019. The Bouteflika clan is therefore attempting to manage the presidential succession to ensure that — even if he is not succeeded by his powerful brother Saïd Bouteflika (b.1958) — the next president will not prosecute the clan for its wholesale corruption.
Elections in Algeria have always been controlled rather than democratic, but we are concerned by the rising political alienation among ordinary Algerians, which is underlined by the population being predominantly youthful but its leaders are ageing and, increasingly, ill.
Disillusionment with the political classes — and particularly the pro-government parties — extends to the opposition that is permitted in Algeria, as well as to the regime.
Who will succeed Bouteflika?
The Bouteflika clan — and the corrupt business oligarchs who financed its last election campaign — are the most powerful force in the country. Despite a short-lived campaign in summer 2017 to ‘separate power and money’ they are as inextricably entwined and powerful as ever.
Ultimately, Bouteflika’s successor will be chosen not by the Algerian people but by a small group of men representing the country’s most powerful interests: the military and the business elite.
The next president will most likely have close links to the business community so could yet hold a positive outcome for investors.
Business strengths despite economic weaknesses
The country has very low foreign debt levels — since it repaid its past foreign debts and has very healthy but shrinking foreign currency reserves — and could secure lending with relative ease but is so far determined to avoid this approach.
The main reason is that IMF or other Western loans would require Algeria to open up its financial books. Given that an estimated US$300 billion in hydrocarbon revenues have been stolen by the regime in the past ten years, this is something that it is determined to avoid.
Algeria’s hydrocarbons sector
The hydrocarbons sector is Algeria’s greatest asset. The current emphasis, which is to be expected in a low-price environment, is an effective programme of enhancing production from the countries existing wells.
Research into the possible extraction of shale gas has been suspended because it was too expensive in the current economic climate. The prospect of another licensing round has therefore been postponed until oil prices begin to rise.
Algeria has close relationships with its existing IOC investors, and the appointment of the business friendly Abdelmoumen Ould Kadour as Sonatrach’s new CEO will continue to accelerate the reform process.
Renewable energy, although considered, continues to be dwarfed by the gas sector.
Concerns about corruption, the opacity of policy formation, the manipulation of the judiciary, and the arbitrary nature of decision-making are all interrelated examples of political issues that negatively impact the economy.
Although the economy has proved responsive to many of the reforms, the significant test will now be whether more reforms can follow. Further reforms are certainly needed, both to attract the investment that Algeria requires and to rein in the state spending.
Companies able to manage the risks in Algeria can win significant rewards.
There is a fear that any changes during the forthcoming austerity campaign will hurt the poorest Algerians and that this could provoke street protests.
Capable security forces could face an irrepressible threat
Algeria’s military has maintained its high levels of funding and the country’s leaders remain adamant that it will not be deployed abroad. Therefore the focus will remain within Algeria’s borders in countering the threat from Islamist militancy. We expect this to continue, and Algeria is well placed to confront a deteriorating security landscape characterised by threats from neighbouring Libya and the Islamic State group (IS).
The military and intelligence apparatus have been effective in countering internal terrorist threats, and although the leadership of these security forces is a bone of political contention, their capabilities on the ground do not seem to have been disrupted.
Given the imbalances in Algeria’s economy and failure to meet the needs of the growing population, the probability of popular protests is elevated in Algeria for both the short and long term.
Memories of Algeria’s civil war, and the disastrous impacts of conflicts that started as popular revolutions in countries like Libya and Syria, will make many Algerians reluctant to push dissent too far.
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