The Algerian Market
Impact Europe is assisting in building a market for social entrepreneurs in Algeria. But what does that market look like today, and what does it need to move forward? In this piece, we take a look at the social economy in Algeria, in order to better understand the local situation.
First, some context. At Impact Europe, we have a few central missions. Making more capital impact capital, for instance, and connected to that, making more people impact people. Getting them to take collective action. And in doing so, taking impact wider and higher.
This last part of our mission statement can sometimes take us to unexpected places. It has nudged us to establish new partnerships over the course of Collaborate For Impact. As you may know, that is the name of our EU-funded market building programme geared towards impact communities, incubators, and social entrepreneurs in Eastern Europe. And just last year, during our flagship event Impact Week in Torino, we formally launched Impact Together!, our most recent market building project in the MENA-region. More specifically, we have spread our wings to cover nascent partnerships in Morocco, Tunisia, Algeria, Egypt, Palestine, Lebanon and Jordan.
These forays outside of our familiar European borders are learning experiences, both for the local partners we selected and for us as an organization. While we call these projects ‘market building projects’, the truth is that we are greeted by different existing economies with their own sets of policies, incentives, and characteristics when it comes to impact investing and social entrepreneurship.
It is no different in Algeria, a country with many ambitious young start-ups and great forward potential. In what follows, we zoom in on the state of their national market, trying to paint a picture of the social economy there, today.
A bird's eye view
Let’s set the scene first. Algeria is a very large country. In fact, at some 2.3 million square kilometers in surface area, it is effectively the largest country of Africa. It counts about 43 million inhabitants that are spread quite unevenly. The cities house the large majority, with an estimated 90 percent of the population living in about 12 percent of available territory. Traditionally, the country’s economy has been largely reliant on hydrocarbons, being the sixth-largest gas exporter in the world.
When it comes to the social economy in the country, data is fairly limited. In terms of numbers, an estimate made in 2016 during the Euromed Summit, the Euro-Mediterranean Network of Social Economy, put the number of social entrepreneurs at around 7.700, employing an estimated 168.000 people. These numbers include farming cooperatives, mutual associations and various other organisations. While indicative of scale, these numbers don't tell the whole story about social entrepreneurship in Algeria. A pioneering study commissioned by the British Council and conducted by the Algerian consultancy firm BH Advisory and Social Enterprise UK in 2021 can serve as a baseline in this respect. Some key findings from this report are …
... that most social enterprises have emerged recently (66% in the last three years)
... social enterprises are mostly in their start-up or growth stages (76%)
... they mostly use personal financing to launch their enterprises
... they often have a regional reach and serve sectors like arts and crafts, culture and leisure and environment
... they have a better track record at creating jobs for women than other businesses, with 64% having at least gender parity in their workforces
These numbers are indicative of a growing interest in social entrepreneurship, and point towards possible advantages of this approach to generate social and environmental impact.
It is worth noting the initial challenge of this study, when considering this data. While principles of solidarity and mutuality have their place in Algerian culture, there is no actual consensus on what constitutes a social enterprise. The study by the British Council offers a few selection criteria: the enterprise should put impact first, it should generate an income, and this income should not be used to increase shareholders’ wealth.
The truth is, though, that the exercise in defining the essential characteristics of a social enterprise is a crucial next step in advancing their potential. Some enterprises might qualify as a social enterprise unknowingly – in fact, this was the case for over one third of respondents in the British Council study. Others may in fact be less of a social enterprise and more a traditional business with some degree of corporate social responsibility (CSR).
In absence of a legal framework, there is no great impetus for enterprises to insist on either qualification. Social enterprises are largely bound to the same obligations and tax demands as traditional for-profit enterprises, while often struggling to access conventional finance. Unsurprisingly, a majority of respondents in the British Council study indicate that regulations and administrative burdens are “significant barriers” to their activities, while over one quarter testifies to a lack of access to finance. For lack of a better legal form, they tend to register as sole traders (individual business owners) or limited liability companies (LLC). Unregistered businesses, too, are a significant part of the Algerian economy. The World Bank estimated them to account for about 29% of Algerian GDP between 2010 and 2018.
Start-ups on the rise
While there is no specific support for social enterprises, there have been several programmes in recent history that have benefited small-to-medium sized enterprises (SMEs) and start-ups as a whole. Ever since the nineties, the Algerian government has been supporting SMEs through three different agencies that target different demographics. A specific focus of these agencies is to reduce unemployment through the creation of new enterprises. The incentives offered by these agencies are largely financial in nature: non-interest bearing loans, facilitation of obtaining bank loans, tax benefits and interest rate subsidies.
The ANGEM, or National Agency for Management of Microcredits, can serve as an example here. Established in 1999, it has since supported a tremendous amount of entrepreneurs through micro-credits and loans. According to their official numbers, they have extended around 915.000 loans over a period of 24 years, creating an estimated 1.420.000 jobs in the process. With the inclusion of craftsmen, home-based women entrepreneurs and agricultural enterprises, it is fair to say that these measures have benefited social entrepreneurs, even if they were not specifically targeted.
The European Union, too, has been implementing programmes in Algeria that have helped support local development in various ways. Some examples include the PAP ENPARD Programme in 2014, aimed at improving life in rural areas of Algeria, or a more recent UNDP Programme focused around economic inclusion.
Some of the greatest advancements, though, have come even more recently. Under impulse of the Ministry for Start-ups and Knowledge Economy, led by minister Yacine Oualid, Algeria has been increasingly profiling itself as a hub for innovation and technological ambition. A first relevant measure came in the form of a certification label for start-ups, incubators and other innovative projects, created in September 2020. Labelled start-ups benefit from tax exemptions during their first five years, while also potentially benefiting from financing through the Algerian Startup Fund. In a recent interview at the African Startup Conference in Algeria, Oualid stated that around 560 million euros have been invested by the fund since its inception.
Tunisian Minister Yacine Oualid in interview with TechCabal at the end of 2023.
From start-up to impact
While this is great for start-ups in the broad sense, it does not resolve some of the specific vulnerabilities of social enterprises and start-ups. As quoted in the Pioneer’s Post, Oualid admits that “in a free-market economy, being a social entrepreneur is like being in the middle of a jungle.”
To bridge this gap and to clear the jungle branches, private support in the form of incubation, mentorship and networking are essential. Impact Europe has been collaborating on this front with Sylabs, one of the first private Algerian startup accelerators in the country. Abdellah Malek founded Sylabs in December 2015 to help unlock the full potential of Algerian youth and to help promote entrepreneurship.
“Today, we are running a range of different programmes," says Malek, "including an ideation bootcamp, that helps social entrepreneurs develop impactful ideas, as well as more specialized guidance in developing a business plan and measuring their impact”. These types of learning opportunities are essential in making sure social enterprises go beyond the start-up stage and become sustainable businesses. Sylabs pays attention to involving Algerians in more rural regions, too, as they are often the most in need of such training and guidance. Most existing opportunities are focused Algiers and a few other big cities, creating an imbalance in knowledge and participation.
The work of Sylabs, and other, similar incubators and accelerators like Leancubator and WomWork, aims to not only support social enterprises, but also to instill an impact mindset in more traditional start-ups. “To do this, we are also working on creating an impact guide, that can serve as a reference to talk about what impact is in Algeria”, says Malek.
While the idea of a social economy may still be nascent in Algeria, and the legal framework for it absent, there is reason for optimism. Students polled within the framework of the British Council study indicated interest in knowing more about the concept, while 66 percent of polled social entrepreneurs were optimistic about their future prospects.
One additional element that may aid in establishing a foothold for true social enterprises, is the cultural history of Algeria. Academic research by Karima Benamara and Malika Ahmed Zaid has detailed different forms of solidarity that are engrained in Algerian culture. Village solidarity, for instance, which comprises the contributions to the local community. The idea of touiza, for example, a system of mutual aid that benefits those in need, persists across the country to this day. Religious tradition, too, insists on solidarity through the tradition of the wakh or charitable endowment and the zakat, the offering of money to the poor and needy.
The presences of these traditions should make for a fertile feeding ground for social enterprises. That is, if and when that term truly takes off in the country.
This article is a part of an on-going series where we provide some insights into the context of some of our market building work. Algeria is one of the countries where we have active projects, within the framework of our Impact Together! project, funded by the European Union.