Algeria: Formalising the retailing sector in Algeria

The government in Algeria is stepping up its efforts to boost commercial activity and bring unlicensed traders into the mainstream economy through a combination of legislative changes and investment in retail infrastructure.

The move forms part of a national drive to reduce the informal retail sector and capture a larger slice of consumption, which is growing on the back of easing inflation and the opening of new outlets.

A draft revision of the 2004 law regulating retail activity, known as Law No. 04-08, was submitted for parliamentary review in late June and proposes amendments aimed at facilitating the process for obtaining a commercial licence.

Under the proposals, new companies would be exempt from having to submit annual corporate accounts to the National Centre for the Commerce Register (Centre National du Registre Commercial) in their initial year. In addition, they would have annual fees tied to the corporate account submission waived for the initial two years of operations.

The changes would as well relieve the restrictions for prospective entrepreneurs with a criminal record looking to obtain a retail licence.

Officials believe young entrepreneurs, in particular, may be opting to set up in business informally, knowing their application would be turned down under the current law on the basis of completed infractions on their civil record. The expectation is the proposed amendments will generate additional jobs, particularly part Algeria’s youth, by bringing additional operators into the formal economy. Bans on licences will remain, however, for violations related to copyright infringement, counterfeiting and illegal international capital transfers.

The encouragement of entrepreneurship and small and medium-sized enterprises (SMEs) is part of the national’s larger efforts to reduce the unemployment rate, which stood at 9.7% as of the end of 2012. The government has as well established business counselling centres, strengthened credit guarantees and introduced additional financing mechanisms for smaller businesses.

SMEs have room for expansion in services industries and particularly in the retail sector, where non-licensed establishments are prevalent. While official data is limited, an estimated 40% of the people relies on informal shops, particularly outside urban areas.

According to local media reports, the Ministry of Commerce aims to cut informal retailing by 80% in 2013. Its clampdown has by presently led to a reported 300,000 licensing inspections in the initial half of 2013, with the seizure of merchandise valued at AD3bn (€29m).

At the same time, the national is working to attract operators into the formal economy by constructing 800 new retail facilities across the country. The majority are slated to be neighbourhood shops, or “marchés de proximité”, offering groceries and general consumer goods.

Reducing the volume of unlicensed commercial activity could help attract additional foreign investment into the sector. In 2009, French retailer Carrefour withdrew from a project to build a 140,000-sq-metre shopping centre in Algiers, citing widespread informal retailing and high import duties as reasons. Despite this setback, the local partner, Arcofina Holdings, went on to build the facility, Ardis Commercial Centre, which opened in July 2012.

While mall developers face diverse challenges, such as the availability of land in urban areas, other projects are under way, inclunding the construction of a €440m shopping centre in Oran, headed up by Société de Centres Commerciaux d’Algérie. The real estate company, which is 46% held by the Swiss investment management firm Valartis Group, as well led the recent development of the Bab Ezzouar in Algiers, the second-major mall in the Maghreb next the Morocco Mall in Casablanca.

Efforts to rein in the informal retail segment will sit well with industry players, although unlicensed vendors are likely to maintain a strong hold at the local level. Moreover, the government will as well be keenly aware of the fall-out it could face from removing the gain of self-employed vendors, operating in the informal economy with limited means. By offering opportunities for them to enter the formal sector, it will be hoping to achieve a balancing act that pays off in the longer term.