Algeria is preparing to allow foreign investors to buy shares on its stock exchange, where authorities hope the number of listed companies will rise from four to 50 in the next five years, the head of the bourse told Reuters. The expansion plan is part of wider reforms aimed at opening up Algeria's largely state-controlled economy, diversifying its sources of income and complying with international standards, Yazid Benmouhoub said in an interview.
Algeria has had limited foreign participation in its economy for years, a legacy of the socialist ideology adopted after its independence from France in 1962. Its companies rely heavily on state finances which in turn depend on its energy sector. But official figures show the country's trade surplus fell 48.8 percent to $9.14 billion in the first ten months of 2013 from a year earlier, due mainly to a drop in oil and gas sales. They accounted for 96.6 percent of total exports, highlighting the need for alternative business interests.
Over the past year, Algeria has signalled it will open up its economy, including allowing foreign firms to invest in the housing sector. The Opec country's stock market, which is smaller than those in neighbouring Morocco and Tunisia, has very low levels of liquidity and a large state sector, deterring foreign investors despite the country's oil wealth.
Algerian authorities signed a preliminary agreement last week with financial advisers from Paris Europlace to help the Algiers bourse with a modernisation plan and provide advice for companies wishing to list, Benmouhoub said. "We are planning more agreements with foreign bourses. The goal is to get expertise and speed up the implementation of our strategy," he said. "This is just a step to prepare the ground for foreign investors to enter our bourse."
The Algiers exchange will not be accessible to foreigners immediately, but they should be able to get involved soon. "This is not authorised for the time being, but the preparation is underway," Benmouhoub said, without specifying how and when a final decision will be made. Algeria's investment law currently limits to 49 percent the stake held by foreigners in any enterprise, with Algerian partners holding the rest. The government set up a team of Algerian and foreign experts to draft recommendations on mechanisms to improve the investment climate, though details of how are still under discussion.
"We have already started implementing recommendations. The government is determined to go on with its ambitious plan to inject dynamism into the economy," said Benmouhoub, a financial expert appointed to the post in June this year. In an apparent attempt to show more willingness to diversify its economy, Algeria last week said it was authorising eight state firms to list on the Algiers stock exchange. The firms include state bank Credit Poulaire d'Algerie (CPA) and mobile telephone operator Mobilis, which is competing to win one of three licences to set up and operate Algeria's first third-generation (3G) mobile phone networks.
The bourse chief said those companies were expected to join the stock market in 2014. "The goal is to get 7 to 8 new listed companies per year. We aim for between 40 to 50 firms in the next five years," he said. The government is aiming for a bourse capitalisation of $48 billion by then, up from around $190 million now. "The current capitalisation does not reflect the reality of the Algerian economy," Benmouhoub added.
New amendments to legislation have eased listing procedures for small and large-sized firms, including tax incentives. "These changes are very important. They will also encourage private firms to list on our bourse," said Benmouhoub. Two companies from the private sector are currently listed on the Algiers bourse. Boosting the bourse will strengthen domestic investment opportunities and allow listed companies new financial resources, but changes in management policies are needed, Benmouhoub said. "The government is determined to open up the economy in line with universal standards, but firms should in return respect transparency requirements," he said.