Holder

Algerian agriculture Analyst Mohamed Naïli speaks about the price of potatoes in Algeria reaching the unprecedented level of DZD 100 per kilo [read here in French]. But potatoes are not alone in becoming out of reach for millions of Algerian households. Their grocery bills are increasing with the sudden spike in prices for such basic commodities as tomatoes, dry legumes, chickpeas, and virtually everything else in the list. The nation’s food and agriculture policy is out of touch as we discussed in detail in our latest issue.

Since February 2012, Algerian consumers noticed unusual rises in food prices, in a trend that according to Naïli contradicts the political discourse heard from government officials and politicians. These politicians’ assurances to the contrary are happening while the country is preparing its legislative elections. With a government contradicting itself, the likelihood of an Islamist victory based on yet another populist discourse is as strong as ever.

Government ministers in charge of the food sector, from agriculture to trade keep promising price readjustments in the coming days and the news of potato prices dropping slightly in towns like Mostaghanem adds to the idea that they are in control. But the Algerian consumer does not buy the politicians views. There is a widespread belief that the food sector in Algeria is dominated by speculators that are simply untouchable and above the law. If they are not engaged in the import sector, which affects all products, perhaps with the exception of potatoes, they control the supply chains, logistics and distribution that influence availability and pricing.

According to Naili, these speculators are also involved in politics to a certain extent. He quoted the head of the Algerian consumer protection association as saying that those price hikes are the result of a conspiracy to sabotage or influence the May 10 parliamentary elections. He pointed the figure to those who control the distribution sector, in particular, as being behind it. For what reasons and purposes, it is unclear, but there are plenty of reasons to believe that lobby groups are there to influence politics to gain economic favors. If lobbying happens everywhere else in the world, why not in Algeria too?

For observers within Algeria the question is increasingly about whether the various regulatory bodies, watchdogs and law enforcers are too weak and vulnerable to face these highly influential speculators. Their conclusion is that such institutions are worthless and without any power to apply the law and bring to justice wrongdoers. While no single institution has managed to prevent the current price crisis, politicians currently running for Parliament seats keep pledging to the masses that they would do the right things if they were to be elected.

Although a great deal of Algeria’s problems can be blamed on powerful speculators and a leadership crisis in governance, the concept of the curse of oil is real in the case of that particular country. While other nations with similar oil wealth managed to diversify their economies as they learned a lesson from the 1980s oil crises, Algeria’s financial well-being remains deeply rooted in the oil and gas sector. Virtually all of its foreign currency income comes from petroleum-related exports.

Despite efforts to diversify exports, at least in speeches, the country’s policy makers and government leaders are unable to create the proper environment to open trade, while lobby groups continue to pressure in favor of more import so they continue to expand their control of domestic markets. Consider that for a country that has Africa’s largest territory and enormous farming potential, the agricultural sector exported only $30 million worth of food in the entire 2011. Morocco typically exports at least 33 times that value, in fact exceeding the $1 billion mark.

The agricultural sector accounts to a meager 5% of non-petroleum exports, which by themselves account for a low single-digit share of all export value. Most of what Algeria exports in terms of food do not include what it really can potentially export like vegetable, fruits or grains, but mostly pastas, sugar, cooking oil and dates.  In fact, date exports accounted for half of the $30 million earned in 2011.

While agricultural experts are quick to blame the nation’s bad policies such as the unavailability of such products as fertilizers, machinery, bad financing offerings, etc, they tend to avoid discussing the thorny issue of speculators, many of whom are major influencers of politics.  Additionally, in the agro-industry sector, problems abound in the way businesses are managed. Most of the 22,000 firms involved in food processing, for instance are small businesses with no management skills and resources to improve their productivity and up their profitability, let alone crack foreign markets. Yet, some 150,000 people work in the food processing sector.

As Algeria faces a new parliament, most likely dominated by Islamists, it may be time for its new legisltive leaders to revisit the nation’s food policy. It is unsustainable that Algeria continues to rely on imports to feed itself when it has good arable land, an abundance of labor, and a very good domestic market. Unless the new leaders are in cahoots with speculators!