The opportunities of investment and partnership in the sector of Agriculture and Rural Development

Introduction :

  1. Agricultural and rural renewal: A triple purpose and three main pillars.

The Algerian Ministry of Agriculture and Rural Development has implemented since 2009 a policy of « Agricultural and Rural Renewal » which has a triple purpose: contribute to the food security of the country and household (i), promote the harmonious development, balance the rural areas and improve the incomes and the living conditions of rural populations (ii), contribute to the economic growth and to the promotion of our exports’ diversification (iii).

Agricultural and Rural Renewal policy is based on three main pillars, which are declined into programs and projects and imply the management of three dimensions of human activity: economic and social dimension, territorial and community dimension and cognitive dimension.

– The first pillar, or Agricultural Renewal, is part of a the new methodological approach that emphasizes the chain approach and identifies priority agricultural segments that are the subject of the intensification programs: cereals and pulses, raw milk, potato, olive growing, industrial tomato, fruit, date palm, red and white meats.

Operationally, the Agricultural Renewal sets priority objectives of agricultural production, by sector and by prefecture and establishes a scale of priorities that guides actions towards a sustained development of the productive potential: mechanization, fertilization, economy of water, seeds, seedlings, etc.

Another part of this pillar is the establishment of a regulation system for the general consumer goods (SYRPALAC) and the mobilization of several intervention tools :

  • The public companies operating in the sector and being part of the portfolios of the three Management Companies of the State Participation (SGP-PRODA for animal production; SGP-SGDA for agricultural development; SGP-CEGRO for cereals) and of GIPLAIT for milk and dairy products ;
  • The storage capacity of reinforced cereals, through the rehabilitation and the construction of new silos (OAIC) ;
  • The storage company under positive and negative cold conditions (FRIGOMEDIT) ;
  • The company for management and operation of three complexes of slaughtering and processing of the red meat (ALVIAR) ;
  • The Office National Interprofessionnal for Vegetables, Fruit and Meat (ONILEV) expected to become a space for dialogue for professionals from the concerned sectors ;
  • The cooperatives of cereals and pulses (CCLS) rehabilitated ;
  • The spaces for dialogue and animation rehabilitated and defined through the consolidation of the role of chambers of agriculture and the agricultural mutual insurance and the establishment of interprofessional councils by sector.

The third part of the Agricultural Renewal is the creation of a conducive and safe environment, which is the only way to enable the achievement of the objectives.

– The second pillar, or Rural Renewal, is based on four priority themes: the modernization of villages and Ksours, the diversification of economic activities in rural areas, the protection and the preservation of natural resources, the protection and the enhancement of the rural tangible and intangible heritage.

Implemented through local projects for integrated rural development (PPDRI), the Rural Renewal relies on a participatory and bottom-up approach that promotes an integrated and intersectoral action at the bottom and ensures synergies between programs and available financial resources.

It also relies on four programs: i- the protection of watersheds, ii- the management and the expansion of the forest resources, iii- the fight against desertification and iv- the conservation of natural ecosystems.

It should be noted finally that the operational mechanism set up under the Rural Renewal has allowed to identify and to evaluate natural and economic potential of each territory, to reconcile and to ensure synergies between the different actors involved – people, businesses, professionals and interprofessional, agricultural administration, local authorities and civil society -, to take into account all economic activities, crafts and rural services and to build innovative tools for monitoring and evaluation.

The third pillar or, Program human capacity building and technical assistance, commits the agriculture and rural development in the way of :

  • A modernization of the agricultural administration methods ;
  • A more important investment in research, training and agriculture extension in order to facilitate the development of new technologies and their rapid transfer to farms ;
  • A strengthening of the material and human resources of all institutions and agencies in charge of the support to farmers and business operators ;
  • a strengthening of the animal and plant health control and protection services, the certification of seeds and seedlings services, and the technical control and fight against forest fires services.

 

  1. Public / private partnership, national and foreign: an asset to serve our agriculture and food security

The implementation of the Agriculture and Rural Renewal policy enabled us to consolidate the results of the National Plan for Agricultural and Rural Development (NPARD), launched from 2000, and to strengthen the national agricultural production system. Convincing results have been so registered since 2009, which have resulted in the rehabilitation of the agricultural activity, the significant recovery of the national agricultural production, the greater availability of agricultural products widely consumed in our markets and the better regulation thereof.

The dynamics created has also highlighted the technical and technological weakness of our national agricultural production system and the constraints that continue to affect our agriculture.

Also, it has became necessary to pursue a sustained modernization and development of the latter, through, in particular a structuring and development of the agricultural sector, a greater involvement of the profession and the interprofession and a strengthening of human capacities and a technical support to all stakeholders.

Recognizing the importance of the contribution of the national foreign private sector, and the dynamics of development and modernization that his involvement can generate, the Algerian Government has decided to encourage the latter to invest in agriculture and that, as part of a (national and foreign) public / private partnership that is mutually beneficial and fruitful.

  1. OBJECTIVES RESEARCHED and AREAS OPENED for INVESTMENT AND PUBLIC / PRIVATE PARTNERSHIP :
  2. OBJECTIVE OF THE PARTNERSHIP :

The partnership policy aims to achieve the following objectives:

  • The development and modernization of corporate activities in the public sector ;
  • The transfer of technology ;
  • The transfer of know-how in management ;
  • The training of personnel ;
  • The employment creation.

 

  1. ACTIVITY AREAS OPEN TO PARTNERSHIP :

The investment and partnership in the sector of agriculture and rural development is done through two Management Companies of State Participation (SGP): the SGP- PRODA « Animal Production » and the SGP-SGDA « agricultural Development », whose missions are :

  • The strategic management and surveillance and the valorisation of shares held by the state in public enterprises;
  • The enhancement of the existing productive potential through the operation of partnership / privatization.
  1. Partnership under the SGP-PRODA :
  2. The portfolio of the SGP-PRODA :

This company has a significant portfolio consisting of 08 subsidiaries (seven groups and research firm). These groups have 44 subsidiaries.

The portfolio employs 9,746 agents and recorded a turnover of 53 billion dinars.

  1. The SGP-PRODA activities :

The activities of this company are:

  1. Manufacture and sale of cattle feed ;
  2. Production, slaughtering and processing of white meat ;
  3. Production and sale of several ranges of CMV ;
  4. Breeding and fattening sheep, cattle and goats ;
  5. Processing, packaging and marketing of red meats ;
  6. Compliance checking and technical expertise ;
  7. Trading / resales in the state of imported raw materials (corn and soybean) ;
  8. Distribution and food packaging ;
  9. Regulation of agricultural products.
  10. Partnership opportunities provided by the GSP-PRODA :

The partnership opportunities mainly concern:

  • cold storage through the construction and the exploitation of refrigerated warehouses for a volume of 1 million m3;
  • slaughter and processing of red meat.

In terms of poultry production, the SGP-PRODA is receptive to any proposals from potential partners.

  1. Partnership under the SGP-SGDA :
  2. The portfolio of the SGP-SGDA :

This company has a cohesive portfolio formed by:

  • four (04) farm corporations and nurseries ;
  • four (04) agrifood businesses of processing, packaging and marketing operations ;
  • one (01) enterprise of fishing and aquaculture;
  • one (01) group company of investment development and forest management;
  • one (01) group for the production of seed of tree seedlings;
  • one (01) enterprise for managing the state funds for the development of land;
  • one (01) National Office of studies for the Rural Development.

The portfolio employs 24,931 agents and recorded a turnover of 8,739 million dinars.

  1. The SGP-SGDA activities :

The activities of the SGP-SGDA revolve around three areas:

  • Agriculture: viticulture, the production of seeds and seedlings and production agricultural consumer goods.
  • Agrofood industry : processing and packaging of agricultural and forestry products, processing and packaging of wine products and olive products; packaging dates, cork processing and aquaculture products.
  • Services: studies, forest management, marketing of agricultural inputs and management of funds for the highlighting by the concession.

 

  1. Partnership opportunities provided by the SGP-SGDA: the case of pilot farms

The SGP-SGDA provides different areas of partnership within its activities, particularly in the framework provided by the pilot farms.

The pilot farms are enrolled in the process of public / private partnership in order to enhance and to develop their agricultural vocation. These pilot farms are located in agro-soil areas in favor of the establishment of model and reference farms for farmers and ranchers activating in their environment.

The partnership in the context of these entities aims to:

  • Optimal use of farmlands contained in it;
  • Create reference farms, for the agricultural sector in general, which are likely to create a dynamic incentive;
  • Develop the seed and planting production of high-quality and the inputs production needed for support the government program of agricultural development;
  • Contribute to the preservation of the national genetic heritage;
  • Participate as a priority to cover the national agricultural market.

The selected partner in this framework must commit to and develop the existing heritage, to modernize and upgrade the existing infrastructure to make it a center of excellence and performance in terms of the latest techniques and technologies.

The proposed partnership in the framework of pilot farms will result in:

  • the creation of a new company to operate the pilot farm as an association between national private and / or foreign partner and the pilot farm EPE / SPA;
  • the granting to the new company a right of land use and production buildings attached to the farm, which are and will remain the property of the state as a concession for 40-year renewable;
  • the involvement of national and / or foreigners professional investors in the capital of the new company to be created will be open, in accordance with laws and regulations, in particular Articles 58 and 62 of Ordinance No. 09-01 of 22 July 2009 concerning the complementary Finance Law for 2009.

 

  1. THE LEGAL FRAMEWORK AND FORMS OF PARTNERSHIP
  2. THE LEGISLATIVE AND REGULATORY FRAMEWORK

The main legislation governing current investment and public / private partnership, national and foreign, as well as the modalities of implementing the partnership are:

  1. Ordinance No. 01-03 of 20 August 2001 on the development of investment, supplemented by Ordinance No. 09-01 of 22 July 2009 on the Complementary Budget Law for the year 2009;
  2. Instruction No. 2019 of 14 March 2011 laying down the conditions and modalities of implementation of partnerships for the management and operation of pilot farms erected in public economic enterprises (SPA);
  3. Resolution No. 11/134 of 03.14.2013 of the Council of State Holdings (CPE).
  1. PARTNERSHIP’S FORMS SCHEDULED :
  • One or more partners :

The national or foreign ownership may be constituted by one or more partners added.

  • Two forms of partnership :

Two forms of partnership are planned:

  • the opening of the capital;
  • the creation from scratch of a company whose business plan defines the capital and the contributions of partners, which may be in kind or in cash.

In both cases, the share of foreign equity partner of the firm will be paid in foreign currency. The foreign investors – that investments are direct or in partnership – have to present a balance in foreign currency in surplus in favor of Algeria during the entire lifetime of project.

  • The capital structure

The structure of the retained capital is as follows:

  • 51% stake back to the Algerian side;
  • 49% stake back to the foreign partner which will be entrusted with the management of the project;
  • The foreign trade activities may be performed by physical and legal foreign entities, as part of the partnership, the national resident shareholder must own at least 30% of the share capital;
  • Investments made by national residents in partnership with public economic enterprises can only be achieved through a minimum participation of these companies, equal to or less than 34% of the share capital; these provisions are applicable also in the case of the opening of the capital of these companies to the national resident shareholding;
  • National ownership can raise, with the Council of State Holdings, an option to purchase the shares held by the economic public company to the expiration of a period of 5 years.

In the case of pilot farms, the capital of the new company will be distributed as follows:

  • 66% stake back to the national private partner and 34% to the pilot farm EPE / SPA in question;
  • 51% stake back to the pilot farm EPE / SPA concerned and 49% to the foreign partner.

 

  • The issue of the existing companies before the 2009 CBL

The Complementary Budget Law (CBL) for 2009 contains no provision on compliance of existing companies.

  • IMPLEMENTATION OF PARTNERSHIP: TERMS AND CONDITIONS

The modalities of implementation of the partnership and the conditions that it must comply are specified in the resolution of CPE No.11/134 dated on the 14 March 2013.

  1. ELIGIBILITY CONDITIONS :

These are:

  • build a partnership over a period compatible with the type of project and the industrial sector concerned;
  • set the period of inalienability of shares held by each party over a period compatible with the type of project and the industrial sector concerned;
  • ensure the right of preemption by the State in accordance with the legislation (section 46 of the Complementary Budget Law 2010);
  • determine the level and distribution of the share capital of the mixed company for an amount consistent with the project;
  • establish a structure for research and development;
  • ensure the transfer of technology and know-how that are related to the business of the company;
  • ensure the management of the company in partnership;
  • include in the framework of the project a range of recent products;
  • carry out the manufacturing of products and equipment with the label of the technology partner;
  • achieve an optimal and evaluative integration for the product envisaged by the partnership;
  • provide the option of exporting after the gradually satisfaction of domestic needs;
  • Participate in staff training on the industrial project site as well as on the technology partner sites;
  • Use the production and the Algerian national capacities.

 

  1. THE RULES FOR IMPLEMENTATION:
  • The partnership under the SGP-PRODA :

The implementation of the partnership will be based on the following steps:

  • the elaboration of a Memorandum of Understanding
  • the approval of Memorandum of Understanding by the CPE,
  • the elaboration of a business plan,
  • the preparation and signing of the shareholders’ agreement and the partnership contract,
  • the formalization of the partnership,
  • the creation of the joint enterprise,
  • the presentation of the benefits file to the National Agency of Investment Development (NAID)
  • the negotiation of the terms of the Investment Agreement,
  • the examination by the National Council for Investment (NCI)
  • the signature of the Investment Agreement,
  • the publication of the Investment Agreement in the Official Journal of the Algerian Republic,
  • the preparation of decisions to grant benefits by NAID,
  • the support and monitoring of the project.
  • The partnership within the scope of the pilot farms :

The EPE / SPA pilot farms can forge a partnership with individuals or legal entities, following a call for expressions of interest or without any formal call for competition at the initiative of the Minister of Agriculture and Rural Development.

The terms of partner selection are then as follows:

  1. The call for expressions of interest

The call for expressions of interest is in two phases:

  • A call for expressions of interest published in national newspapers and on the websites of the Ministry of Agriculture and Rural Development and the SGP / SGDA. It leads to the establishment of a shortlist of protesters of interest (short list).

The expression of interest should be addressed to the SGP / SGDA and contain:

  • A document certifying technical and professional references of the candidates;
  • A certificate of financial capacity established by the bank of the candidate.

The examination of expression of interest is made by an ad hoc committee.

  • The invitation to withdraw the specification and to perform the « due diligence » addressed to the protesters of interest pre-qualified (short list).

The specification is intended to establish the general framework of the partnership process and in particular:

  • The conditions under which the interested individuals or legal entities in the partnership may provide their submissions;
  • The arrangements for tenderers’ access to information and documents relating to the pilot farm;
  • The procedure for selection of tenderers who will be allowed to compete for the implementation of the partnership.

 

  1. The evaluation of submissions :

The procedure is as follows:

  • Submissions must contain the following:
  • An administrative file ;
  • A technical offer ;
  • A financial offer.
  • The evaluation of submissions will be made by the the tender evaluation Committee. The selection of candidates is made by the commission on the basis of the rating criteria contained in the specification

 

  1. c) The « simple mutual agreement » :

The partnership project can be initiated at the request of the Minister of Agriculture and Rural Development, in the case of the priority projects of national significance.

 

  1. SUPPORT FOR INVESTMENT :

Investors are eligible to mobilize funds from local banks.

Mixed agricultural investment projects can, if they would provide a benefit to the country, have access to leasing credit for the purchase of equipment from local suppliers and take advantage of the incentive program of investment provided by the legislation.

Laws in force provide the eligibility requirements, institutional support network for investors and partners as well as tax exemptions and additional benefits.

  1. ELIGIBILITY EXTENDED WITH SUITABLE BENEFIT PROGRAMS
  • Eligibility for benefits :

The offered eligibility for benefits concerns the new creation, the industrial restructuring, the facilities rehabilitation, the expansion of production capacity and the total or partial privatization of public enterprises.

  • Two suitable benefit programs

They are:

  • the general scheme: for current investments producing goods and services, not excluded;

 

  • the special arrangements for investment in the areas to develop and / or investment for national interest (the Investment Agreement).

 

  1. INSTITUTIONAL NETWORK SUPPORT FULL

This network is deployed on two levels:

  • At the strategic and policy level
  • National Investment Council (NIC) ;
  • Ministry of Industry ;
  • Sectoral ministries.
  • At the operational level :
  • National Agency for Investment Development (NAID) ;
  • National Agency for Intermediation and Property Regulation ;
  • National Agency for Tourism Development
  • Assistance Committee for the Location and Investment Promotion and Regulation of the Land at the prefecture.

 

  1. TAX EXEMPTIONS INTERESTING

They go through two phases:

  • The implementation phase of the project :

The exemption is granted for a three or five-year period, according to the table below:

VAT 7% 17% // 0%
DD 5% 15% 30% 0%
DM 5% 8% // 0%
  • The operational phase of the project :

The exemption is granted for a period of up to 10 years according to the following table:

IBS 25% 19% 0%
TAP 2% // 0%
  1. ADDITIONAL BENEFITS :

There are four types of benefits:

  • Access to Concession of lands

It is possible according to two formulas:

  • the mutual agreement for projects of national interest;
  • the selection for regular projects.

 

  • Support for infrastructure work
  • Opportunities of local funding

The ability to use local funding through:

  • National Investment Fund for some partnership projects.
  • Domestic or foreign, private or public banks.

 

  • Incentives for export

These incentives are made through two forms:

  • Exemption from VAT and customs duties.
  • Exemption from IBS and TAP.