Algeria - A two-part deep dive into a potential startup giant (Part 1)
The history of North Africa and its constituent states goes back millennia. Its geographical location has made the region a centre of culture, trade, conflict, colonisation, nationalism, and innovation at different points in time.
Fast forward to 2022. North Africa is attracting the interest of global and African VCs and ecosystem players. Egypt is widely seen as having the most mature startup ecosystem in the region and is vying for the title of Africa’s preeminent startup ecosystem.
Yet, to Egypt’s west lies Algeria, a country that has the ingredients to become a giant in its own right in the North Africa startup ecosystem, if it can be unleashed. Historically and culturally, while Algeria shares some of the characteristics that define its North African neighbours, it stands as an exception in many ways, given its political and economic past.
This past impacts the shape and animation of its startup ecosystem, and its future evolution. In this two-part series, we will be diving into the Algerian startup ecosystem, with Part 1 focusing on Algeria’s political and economic history, its influence upon the country’s startup ecosystem, and what its startup ecosystem looks like on the ground.
Part 2 will discuss the different incubators and accelerators operating in Algeria, the two categories that broadly define the country’s founder class, and why Algeria remains a land of untapped innovation potential that is waiting to be unleashed.
The influence of Algeria’s politics and economy on its startup ecosystem
Politics in Algeria is probably more important than anywhere else in the continent as the government has roots in every human activity in the country. It literally punctuates people’s lives and is a daily topic as important as football.
Algeria declared its independence in July 1962, marking the end of a bloody 8-year war and 130 years of settler colonisation. At that time, invigorated by their victory against imperialism and leading the first Algerian government in history, the military took control of institutions that were emptied of their civil servants, including schools, universities, hospitals, and clinics. The whole country was to be built and the workforce retrained in ways that placed the state as the centre of social, political, and economic life. To enact this vision, Algeria naturally turned towards the USSR and adopted its means and philosophy. It also erected itself as a leader of the fight against imperialism, with Algiers called “the mecca of revolutionaries” and Algeria exerting a certain pan-African influence through this prism.
During the 1970s, Algeria went through the so-called “Agrarian Revolution”, during which the country’s most powerful families found themselves deprived of their wealth through the nationalisation of agricultural land, industries, and private companies. Simultaneously, it became apparent to the Algerian government during the 1973 and 1979 oil shocks how impactful oil and gas would be on the country’s development plans.
The 1970s would leave a lasting legacy on Algeria’s economy. Firstly, the Agrarian Revolution sparked a flight of skills and capital from the country, leading to a reordering of the country’s social structure. It also left the government as the most powerful economic body in Algeria, leading to a surge in infrastructure spending. By the end of the 1970s, Algeria’s 2.38 million square kilometres were 100% electrified, with bridges, roads, railways, hospitals, and schools built everywhere and a clean water system put in place by the state.
This is how the first building blocks of Algeria’s rentier economy came into being, with it highly dependent on fossil fuels and public investment. The military always exerted its control and led political strategy through a complex bureaucratic system, while also keeping its hands on the country’s primary economic industries through a handful of anointed oligarchs in industries ranging from food and transportation to construction. Since this period, Algeria’s economic and social health has been measured through the price of the oil barrel, purchasing social peace in exchange for generous local subsidies and programs. These programs include the granting of free apartments or the outright donation of cash through disguised micro-enterprise aid mechanisms (such as ANSEJ).
However, the 2000s in Algeria have been defined by reports of corruption within the highest levels of the state, with unfair business successes, failures, and prosecutions that severely undermined Algeria’s entrepreneurial culture.
More recently, the country has experienced a deep and peaceful protest movement, the Hirak. The almost-revolution lost vital momentum due to the COVID-19 pandemic, and by 2022, had gained limited concessions for the country’s youth with the military still holding primacy in Algerian political life.
In an ecosystem context, the Hirak has had a lasting effect on the government, which arguably realised that maintaining social stability meant keeping the country’s youth population vested, with 70% of its 45 million citizens under the age of 30. In 2020, the government that replaced the Bouteflika administration officially created the role of Minister Delegate for Startups, which has since become the Minister of Startups and Microenterprises.
Within this context, and as part of the government’s broader efforts to support the startup ecosystem, the Algerian Startup Act was passed in 2020, leading to the founding of the state-backed VC vehicle, the Algeria Startup Up Fund. In theory, the Fund is meant to support promising startups within the Algerian venture ecosystem and to provide a base to make the startup ecosystem more sustainable.
Startup DZ, a national platform that connects labelled startups in Algeria with a broader ecosystem of partners, and the Algeria Venture accelerator, were also established to round out Algeria’s government-backed startup ecosystem. However, with the fund restrictive in terms of who is granted funding — they must meet the government’s definition of a startup (hence “labelled”) — and there being a lack of private funding within the Algerian ecosystem, the ability of the fund to create real impact is questionable.
This lack of agility, and its resemblance to ANSEJ, has led to suggestions that the fund serves to buy social peace through targeting a segment of the population where the most discourse exists regarding the government’s role in society. Furthermore, the process of applying for capital from the fund is reportedly administratively opaque, with government influence significant at every step of the process.
The ecosystem is underground
Below the surface of Algeria’s public-facing ecosystem, underground, Algeria is a nation of hackers.
In a country where all official media and communication are state-controlled, that had closed borders during the 1990s, and with few commercial and cultural exchanges with external parties, Algeria has a deep well of skills in engineering, mathematics, physics, and computer science. The arrival of computers and the Internet in the early 2000s provided an outlet for the country’s population, with the smartphone becoming socially and entrepreneurially transformative. The 2000s have seen a generation of hackers emerge who understand technology’s potential to hack their way out of the system.
The story of Ouedkniss, the Algerian Craig’s List, exemplifies this period of time. Ouedkniss was founded in 2006 by 5 friends in high school after a popular but informal pop-up market was shut down that year by the police in Ouedkniss street in Algiers. This market meant a lot to its users, especially the unemployed who navigate their way by acquiring and selling various items from carpets to radios or televisions. Angered by the market’s closure, the 5 young founders gathered in one of the numerous “cyber-cafés” downtown and created what was first a blog with no more than 20 visitors a day. Today, Oued Kniss is the only marketplace for used cars in Algeria, outpacing in volume the traditional brick-and-mortar market, and is the largest e-commerce website for many product categories, ranging from home decoration to electronics.
Apart from being a nice story to tell, Oued Kniss is characteristic of the startup journey and ambitious venture pool in Algeria. This character is seen in its roots and foundation, in the way it navigates around obstacles in a hostile business and tech environment, how it remains authentic to its original vision, and how ventures are regularly bootstrapped and developed with intuitive design talent. The country’s access to skills and talent means that numerous projects have come to fruition, but have not gone beyond survival mode or moved past the “startup underground” because their success is staked on that underground anonymity.
With that, we conclude Part 1 of our deep dive into the Algerian startup ecosystem. In Part 2, we will go into detail about the incubators and accelerators within Algeria’s startup ecosystem, the entrepreneurs driving its startup ecosystem, and what can make Algeria a significant player within the African tech ecosystem.
Abderrahmane Chaoui is an African ecosystem researcher, consultant, and writer. He was born a few blocks away from Ouedkniss Street in Algiers.
