Algeria-Morocco Business Dialogue: The Startup Industry

News | December 18, 2020

On November 30, the EastWest Institute (EWI), together with its partners at the German Chambers of Commerce in Algiers and Casablanca (AHKs), held a webinar entitled “The Startup Industry: Challenges and Opportunities for Cooperation”—the fifth in a series of virtual meetings as part of EWI’s ongoing Algeria-Morocco Business Dialogue. The webinar brought together six entrepreneurs, three Algerian and three Moroccan, to take part in a cross-border business dialogue aiming to promote greater economic connectivity between the two countries in the startup sector.

The Startup Industry

Startup initiatives are a relatively new phenomenon within the Maghreb, with regional countries varying their measures to cultivate a thriving ecosystem for young businesses. Numerous startups have sprung up throughout the region recently, especially the three main countries of Algeria, Morocco and Tunisia, as innovative leaders pursue sustainable and inclusive approaches to their respective country’s development. As a new generation of workers begin to graduate from university, the region is experiencing a growing trend of fresh graduates increasingly seeking opportunities in the private sector instead of applying to safer governmental jobs in the public sector—a characteristic of previous generations. This growing entrepreneurial spirit not only needs to be harnessed, but must be actively encouraged so regional states can diversify their markets and explore new streams of revenue.  

The respective startup ecosystems in Algeria and Morocco are experiencing disparate levels of success. In Algeria, there remains plenty of room for government intervention in terms of promoting innovation and seeking means to attract investments. Local investors are familiar with bureaucratic hurdles to conducting business in the country, resulting in the negative conviction that the local startup ecosystem lacks the capacity to scale up. Morocco, on the other hand, boasts a more vibrant startup ecosystem with the country increasing its Global Entrepreneurship Index (GEM) from 5.6 to 8.8 percent between 2017 and 2018. Nevertheless, this is offset by the fact the country failed to continue this trajectory into 2019 as a lack of promotion and a culture of risk-aversion hindered the country’s burgeoning startup industry. 

Local Experience

The webinar assembled startup entrepreneurs from across a wide spectrum of business interests, including renewable energies, logistics management, communications and IT and digital solutions. Each of the startups represented differed in their business life span, ranging from eight years to only one month. This enabled EWI and its partners at the AHKs to ask a range of questions pertaining to the different stages of development required for founding a new business in the region, as well as the trials and tribulations which inevitably accompany such an endeavor in the world’s least economically integrated region. 

Consistent with previous webinars under the framework of  the Algeria-Morocco Business Dialogue, participant testimonies affirm that opportunities for business collaboration across the border are rare. All the entrepreneurs present discussed their various projects in Europe, sub-Saharan Africa and North America, yet not one participant had any current avenues of business in the respective neighboring country. From an economic perspective, the current state of affairs is immensely counterproductive given the proximity, similarities in culture, shared desire of young graduates to develop startups, and market complementarity between the two countries. 

It must be noted however, that this dearth of bilateral trade is not a result of lack of trying from the perspective of business leaders on the ground. During the webinar and in previous project meetings, participants attested to a distinct lack of knowledge and trust in the respective markets on each side of the border. With this in mind, EWI, the AHKs and the participants of the webinar composed the following policy recommendations to help identify means to kickstart better commercial relations. 

Recommendations

Pool resources: A major concern for one of the participants who worked in digital solutions for the transport sector was the incurred cost due to a lack of synchronization between companies in the same industry. Companies on either side of the border possess the capacities to make operations more cost-efficient and environmental. However, to move beyond this current state of affairs, Algerian and Moroccan organizations need to pool resources to overcome this fragmentation.

Foster a more cooperative culture: In order to pool resources and develop more efficient and environmentally friendly operational practices, local companies must address the lack of trust, which currently hinders the region unlocking its economic potential. Fostering a culture of cooperation requires the sharing of information so organizations on either side of the border understand each other’s markets and learn how to navigate administrative bottlenecks and bureaucratic hurdles. 

Build on current successes: Despite the dire analyses of multiple international institutions regarding regional integration, there are some cooperation success stories in the Maghreb. The energy sector presents one of the flagship cooperation sectors in the region. This should act as a launching pad to explore new avenues of cooperation, such as joint regulation or an interconnected network of production lines. Startups could offer local assistance in developing these initiatives. 

Learn from the Tunisian model: Both Algerian and Moroccan participants praised Tunisian initiatives in the startup industry, which could act as a successful regional model in their respective countries to develop a healthier ecosystem for upcoming enterprises. Tunisian startups formed an association to harness their collective bargaining power to lobby the government in granting them economic subsidies and advantages. To date, there is no such Moroccan or Algerian union for startups to lobby for their collective needs. 

Encourage market access: The inability of both Algerian and Moroccan startups to found their own collective associations means young organizations often have to navigate their respective markets without any discernible structure or local administration. Private and governmental mistrust towards startups is a consequence of the lack of understanding in how startups operate. Market access can be encouraged by providing startups with financing and regulations tailored towards their particular needs. 

About the Algeria-Morocco Business Dialogue

Despite its vast potential, the Maghreb region is often cited as being one of the least economically integrated regions in the world. The Algeria-Morocco Business Dialogue project seeks to bring together Algerian and Moroccan business leaders from multiple business sectors with the aim of overcoming obstacles to bilateral trade between the two neighbors.

The dialogues center on topics vital to successful entrepreneurship in Algeria and Morocco such as food security, agriculture, healthcare, the impact of digitalization and new technologies and energy—with a particular focus on how to attract quality investment, ensure environmental protection and empower businesswomen.

COVID-19 has unfortunately had a detrimental effect on the overall operation and schedule of the project. Each meeting was envisioned as an in-person conference such as the first event on the agricultural industry, which took place as a two-day delegation to Berlin to attend the city’s Green Week—one of the world’s largest international agriculture trade affairs. Nevertheless, EWI has moved the project online in order to maintain the good momentum of the project generated in Berlin. Although this means the discussions between participants are less interactive, they proved no less intensive nor productive as the following policy recommendations attest.

Links to Reports of Previous Briefings:

Cooperation in the Automobile Industry

Women’s Empowerment and Entrepreneurship: Challenges and Opportunities

The Agricultural and Food Manufacturing Sector