Jul 19, 2018
The release of July 2018 report of the International Monetary Fund calls on the highest authorities to analyse the prospects of the Algerian economy with lucidity according to internal and external constraints and no longer to sail on sight. In July 2018, the IMF’s alarming report on Algeria’s economy outlook, contrary to the views of gloom must be realistic. The country is in a situation that could take on another dimension and possibly worsen without any deep change in the system of governance, adapting it to new internal and global changes.
There is a unanimity of national and international experts on the Government that clearly shows lack of strategic vision, as if suffering from lack of foresight. We always said:
“The greatest ignorant is the one who does not listen; instead of beliefs everything to deepen the culture of tolerance and favour the interests of Algeria and not his interests.“
The IMF report of July 2018
For the IMF in its last report, the country remains faced with significant challenges, posed by the decline in oil prices four years ago. Economic choices are also likely to “complicate macroeconomic management”, undermining growth “and” aggravating risks to financial stability in the medium term. Despite a critical budget adjustment in 2017, budget deficits and the external current account remain high. Overall economic activity has slowed down, although growth outside the oil sector has remained stable. The current policies of the Government according to the IMF weaken the resilience of the economy rather than strengthen it. Therefore, without profound reforms, these measures may lead the country into a deadlock at horizon 2020/2022. In any case and despite these measures to pay off some of the liquidity injected through monetary financing, the Bank of Algeria which raised the minimum reserve rate from 4% to 8% in January whilst resuming its absorption operations by taking bank deposits at seven days and also envisaging a moderate increase in the price of management, the use of printing money to finance the budget deficit risks aggravating imbalances, increasing inflationary pressures and accelerating the loss of foreign exchange reserves, notably through the use of banknotes to finance the budget deficit which according to the Bank of Algeria, the amounts loaned to the Treasury was in the order of 5,723 Dinars (DZD) as at the end of March 2018.
The inflationary thrust has undoubtedly not (yet) taken place, and even growth is expected to have a net rebound this year to 3%, compared to 1.6% in 2017, but for the IMF, unconventional financing representing 23% of GDP which will have enabled the funding in the first quarter 2018, for nearly 50% of the credits to the public sector, the economy will also have reached its limits from 2020 with rates of inflation and unemployment record likely to exceed in 2020/2022, 15%.
Quoting the IMF report, the increase in liquidity will stimulate demand, which will result in short-term price increases due to insufficient domestic supply and savings opportunities. At the same time, the hardening of import barriers is likely to fuel inflationary pressures by reducing supply – even by leading to shortages for specific products. Wage and price expectations could quickly adjust and strengthen each other. The authorities could then be forced to resort to monetary financing in subsequent years, which could lead to an inflationary spiral in the economy.
The International Monetary Fund advises to “use a wide range of financing instruments, including the issuance of public debt securities at the market rate, public-private partnerships, asset sales and, ideally, borrowing to finance well-chosen investment projects. “No progressive depreciation of the Dinar combined with efforts to eliminate the parallel market in foreign exchange would also promote adjustment”.
Two factors: demographic pressure and changes in foreign reserves
The Algerian population evolution looks thus:
For that, 350.000/400,000 productive jobs per year will have to be created with a real growth rate of 9/10% over several years to avoid sharp social tensions. However, the blocking of investment in Algeria does not lie in changes in laws or the elaboration of utopian strategies, bureaucratic vision, as one does not fight the informal sphere by strict administrative measures, but by improving on the functioning of the society, with a focus on participatory and civil society.
Hence the urgency of a speech of truth for the foreign exchange reserves have evolved as follows:
According to the IMF, foreign exchange reserves will, in 2022, allow less than five months of estimated import and in 2023 assessed at $12 billion less than three months of import.
Growth is expected to slow very strongly as early as 2020, causing an increase in the unemployment rate. It will also result in a particular persistence of budgetary deficits and, above all, external deficits which will gradually eliminate all the leeway available to Algeria.
As per the IMF, Algeria needs a barrel at $87.6 to achieve a balanced budget by 2016 compared to $60 in 2007, $80 in 2009, $125 in 2010, $140 in 2012, $110 in 2015. As for 2017, under the year’s Finance Act, the level is close to $75.
As far as 2018 is concerned, the supplementary finance law of 2018, as approved on 5 June 2018, for an additional envelope of DZD500 billion (approximately $4.4 billion) to cover all current public and unproductive expenditure, generalized subsidies, other costs and mismanagement not to say bribery, will require a barrel exceeding $100, for not to draw off the foreign reserves that could then increase.
Conclusion: The return to confidence and growth within the framework of universal values as a condition of political, social and economic stability.
To meet future challenges, to project on the future, far from any devastating populism, new governance, a language of truth and morality of the leaders are necessary.
A certain budgetary rigour, better governance, a change of course in the current economic policy, with a barrel between $60/70, Algeria can sense out, possessing assets. Debt is low, 20% of GDP, external debt 2.5% of GDP. However, above all, Algeria needs a return to trust to secure its future, to move away from the vagaries of the rentier mentality, to rehabilitate work and intelligence, to bring together all its political, economic and social parties, avoiding division on secondary subjects, to learn to respect our different sensibilities. This is how eternal Algeria can realise as bound by its oath of November 1st, 1954, a sustainable development accommodating economic efficiency and profound social justice to which we are deeply attached.
admmebtoul@gmail.com
Jun 19, 2018
What prospects for OPEC’s June 22nd, 2018 meeting would be expected when Saudi and Russian oil ministers multiply statements since their meeting at the inaugural opening of the World Cup games. The Russian minister finding that the increase in OPEC and non-OPEC production, to 1.5 million barrels would be ” Inevitable “; the balance price not to exceed 70 Dollars. In addition to the meeting of OPEC countries, another meeting will be held in conjunction with non-OPEC member countries. It will be the 9th meeting of the Joint OPEC/Non-OPEC Ministerial Monitoring Committee (JMMC). This is made up of four-member countries of OPEC (Algeria, Saudi Arabia, Kuwait and Venezuela) and two non-member countries OPEC (Russia and Oman).
Meanwhile, we are seeing a particular situation that is in addition to the decline of exports from Venezuela, Libya and the US sanctions against Iran; the US have actually exported record quantities of oil to China in the last six months of 2018 (at 363,000 barrels per day). But the closing of the Chinese borders to American oil, and a possible slowdown of the global economy in this incessant trade war could have a negative impact on the price of oil.
Reminder of the Vienna agreement of 30 November 2016
Following the work of the high-level committee, which has made it possible to resolve tensions between Saudi Arabia and Iran, the last meeting in Vienna in December 2016, allowed all member countries of OPEC and certain non-member countries to reach a reduction agreement and this for the first time since 2008 of oil supply up to 1.8 million barrels/day (Mb/d).
According to the Vienna agreement of December 2016, this agreement having been extended to end 2018, at the meeting of 30 November 2017, the production limits provided for in the agreement affected 11 of the 14 OPEC member countries. The bulk of the agreement of November 30th, 2016 is carried by the largest producers of the cartel: Saudi Arabia, Iraq, United Arab Emirates, Kuwait, while Iran, Nigeria and Libya were exempted. Only Iran has benefited from the most favorable reference with a volume of 3.97 Mb/d withheld (against a level of 3.69 Mb/d, although Iran has wished this period that Its production dates to 4.2 Mb/d. Saudi Arabia’s first world oil exporter, agreed to bring back its production to 10.06Mb/d) and thus reduce its production by 500,000 barrels. The non-OPEC countries present at the meeting agreed to a reduction of 558,000 b/d which is in addition to the 1.2Mb/d reduction of OPEC countries. For non-OPEC, Russia will be the most important of these contributors with a reduction of 300,000 bpd.
In fact, the bulk of this decline is ensured by the two largest producers in this heterogeneous group: Russia (-0.3 mb/d) and Mexico (-0.1 mb/d).
The 9 (nine) price of oil determining factors
Brent’s despite the threat of American president was quoted on June 18, 2018 at $75.47 and the WTI at $65.63. What are the reasons?
I identify nine interdependent determinants of the price of oil for the period between 2018,2020 and 2030, that are essentially exogenous factors.
- The First reason, is the persistent geostrategic tensions in the Middle East the position of the USA vis a vis the agreement with Iran, that upset the whole OPEC strategy, albeit timidly attenuated by the European position. These tensions with Iran and the security situation In Iraq, Syria and Yemen have increased the price by at least 7 to $8 b/d. The world had an unparalleled cold winter that also increased demand.
- The Second, as just highlighted by the IMF and the World Bank in this month of June 2018 is the growth that is likely to fall with both American – European and Chinese – American rivalries on US protectionist measures having a negative impact on international trade, but we must also pay attention to changes in the way of growth as a result of the Fourth World Economic Revolution involving a new model of energy consumption with particular regard to efficiency and mix.
- The Third, is the overall respect for the quota of members of the OPEC as per agreement of December 2016 in Vienna,
- The Fourth, is the introduction of the American Shale oil and gas that has upset all the global energy establishment. According to international observers, the desirable price should not be more than 70 Dollars in order not to penalise global growth and avoid the massive entry of US Shale oil and gas from all those numerous marginal deposits that become profitable, thus flooding the market. The Institute of Energy Agency has just indicated in January 2018, that for 2018, US production if the price remains higher than 60 Dollars would exceed for the first time the production of Saudi Arabia.
- The Fifth, is the agreement out OPEC between Saudi Arabia and Russia; these two countries producing more than 10 MB/d each.
- The Sixth, is the domestic political situation in Saudi Arabia, the scholarships not yet seeing clear of the action of the Crown prince in the fight against corruption, with the fear of internal political tensions, but above all the sale of 5% shares of a part of ARAMCO, to maintain shares at a high level; sale that has been postponed for 2019.
- The Seventh, is the tension in Kurdistan, this area producing about 500,000 barrels/day, the decline in Venezuelan production, tensions in Libya and Nigeria
- The Eighth, is the weakness of the Dollar in relation to the Euro.
- The Ninth is the decline or rise of US stocks while not forgetting the Chinese stocks.
What prospects then ?
At its next regular meeting to be held on 22 June 2018 in Vienna, OPEC will decide to suspend existing restrictions on the oil production of its member countries, as of 2019?
According to OPEC data, the difference between $102 and $45 a barrel since June 2014 up to before the straightening of the price resulted in a loss of $1 trillion in terms of revenues and $1 trillion in terms of investment.
The price of $55 reduction has caused a loss of 3.78 billion barrels/year and about $219 billion for OPEC countries.
An OPEC study shows on average that profitability for many OPEC countries and for balancing their budget, the price must be between $60 and $80 depending on the life of the deposits and the costs per country. But many experts wonder on the temptation for producers to ‘make up’ natural declines, linked to the depletion of certain deposits and already integrated into the forecasts, to pass them off as voluntary reductions. OPEC although representing the world’s largest reserves, has no longer the same impact on the market as in the 70s. Before deciding on a reduction in production of 1.2 million barrels/day, it had only 33% of the world traded production, with the remaining 67% being non-OPEC.
What lessons can we learn from this?
The problem will be to review all fossil energy subsidies policies that penalize the energy transition. Every year in the world, $5.30 billion ($10 million per minute) are spent by States to support fossil fuels, according to estimates by the International Monetary Fund (IMF) report for the COP21. However, it seems that the majority of the world’s leaders have become aware of the urgency of moving towards an energy transition. Because if the Chinese, the Indians, the continent of Africa, had the same model of energy consumption as the USA, it would take five times the planet Earth. In the event of a change in the energy consumption model at the global level, the future on the horizon 2030 being Hydrogen, this could influence the level of fossil energy prices down, at horizon between 2025 and 2030.
Dr Abderrahmane Mebtoul, Professor of universities, PhD 1974 – International expert Former Director of studies at Energy Department – SONATRACH 1974/1979-1990/1995-2000/2007 ademmebtoul@gmail.com
NB – This contribution is a synthesis on this subject – from various interviews to Radio Algeria International Debate – Algerian public Radio Channel 3 – interview with various international television
Contribution to MENA-Forum – London – by Dr. A. Mebtoul “Urgency of a Strategic Vision Articulating the Functions Of the State, Local Authorities and the Market”
Jun 11, 2018
Algeria has the institutions that it needs to energize if it wants a State with the rule of Law; a sine qua non condition for a sustainable development and above all for its credibility at both national and international levels. Could Re-activating Algeria’s National Energy Council for a robust energy strategy be an absolute necessity and at the earliest of times?
For starters, the National Energy Council (CNE) alone could set Algeria’s energy strategy but it is itself in great need to be, as it were, re-energized.
This contribution looks in depth at the National Energy Council and the management of SONATRACH (SH).
Legal texts are a necessity but an insufficient condition: the important thing is to act on the functioning of Algerian society, as a function of the power relations of the various political, economic and social components, themselves as linked to the world economy so that these laws are applicable.
The National Energy Council
The National Energy Council, as a supreme organization for the country’s energy strategy, set up by Presidential Decree on April 8th, 1995, in its Article 6, stipulates
· “The Council shall meet periodically on the convening of its president”, the President of the Republic whose secretariat (article 5) is provided by the Minister of Energy and composed of the so-called sovereignty ministers (National Defence, Foreign Affairs, Energy and Finance), the Governor of the Bank of Algeria and the planning delegate. This Article 6 states also that:
- · The National Energy Council is responsible for monitoring and evaluating the long-term national energy policy, including the implementation of a long-term plan to ensure the energy future of the country.
- · An energy consumption model to be based on all national energy resources, external commitments and the country’s long-term strategic objectives;
- · The preservation of the country’s strategic reserves in the field of energy; Long-term strategies for the renewal and development of national oil reserves and their recovery;
- · The introduction and development of renewable energies; strategic alliances with overseas partners involved in the energy sector and long-term trade commitments.
As far as prerogatives are concerned, it is no longer SH to grant the operating perimeters under the new Oil Act of April 28th, 2005 as amended on July 29th, 2006 together with January 2013 Law extending the rule of 49/51% ownership and Introducing the exploitation of Shale Gas and reconducting the same procedures but onto ALNAFT, a Ministry of Energy dependent agency, thus maintaining functional relations with this structure as well as with another agency, the Authority of Regulation to monitor prices mechanisms.
The new law established at least 51% of SONATRACH’s shares of the perimeters granted by ALNAFT and less than 49% to the various other oil companies.
Other SONATRACH’s organizations
The General Assembly Is composed of the Minister of Energy and Mines, the Minister of Finance, the Bank of Algeria’s Governor, the delegate from the Planning Department, a representative of the Presidency of the Republic.
Article 9.3 specifies that the General Assembly shall meet “at least twice a year in ordinary session” and in “special session on the initiative of its Chairman or at the request of at least three of its members, of the auditors or of the President and CEO of SH”. At the end of each session, the General Assembly is required to send its report to the President of the National Energy Council, who is the President of the Republic.
The Board of Directors is composed of the President and chief executive officer of SH, the CEO of SONELGAZ, the utility provider the vice-president of pipeline Transport, vice-president of marketing, the department’s director general of hydrocarbons, another departmental representative and of two representatives of the SH Union.
The Executive Committee is the real working ankle of SH and comprises the CEO of SH, the secretary general of SH, the Vice-Presidents of upstream, downstream, pipeline and marketing-of the executive director of Finances, the director Executive of Human Resources and of the executive director of all central activities (DAG), the Director of strategy, Planning and Economics-of the Executive Director Health, safety and environment. And not to mention the holdings that are annexed to the Vice-Presidents. Thus, upstream is attached to the holding oil and paratanker services; For downstream, holding refining, chemical hydrocarbons (example Naftec) ; For the commercialization of the holding Sonatrach, it is attached to it the holding Sonatrach/valuation of hydrocarbons (example Naftal). At the international level, the Sonatrach group has set up a system of reorganization of its activities through the grouping of subsidiaries abroad around an international holding company (S.I.H. C) created in July 1999 which operates in different countries.
For a new strategic management of SH
Transparency in the management of SH should be based on a scientific and operational approach, from the general to the particular, to seize the interactions and be able to carry out actions through successive steps.
Making SH more efficient would imply several strategic actions: starting with repositioning it in the international and national context immediately followed by a system of real-time organization based on networks and no longer on the current hierarchical vision type of organization. Transparent cost centers including the management of any partnership; rational management of human resources, an essential element of strategic management, involving executives listening to the collective of workers through a permanent and constructive dialogue.
All these actions refer in fact to the establishment of the rule of law and the urgency of renewed governance. If we want to fight against overbilling, illegal transfers of capital, make more efficient control of SH (this concerns all sectors), there is an urgent need to revive the now completely collapsed information system, posing the problem of transparency of accounts and accounts. Having had in the past, lead a financial audit on SH with an important team of executives of SH and experts, it was impossible for us to accurately identify the structure of the costs of Hassi R’mel and Hassi Messaoud whether for the barrel of oil and the MBTU of gas as delivered to ports, because of all those consolidation and transfer accounts of SH distorting any visibility.
In any case, the business management is inseparable from global internal and global governance. The growth or not of the world economy in the field of hydrocarbons, the geostrategic factors and the new model of global energy consumption play as an essential vector in the increase or decrease in revenue from SH, to avoid isolating the micro-governance of the national and global macro-governance that are inextricably linked. That is why it is necessary to revise the current ‘oil law’ which has not attracted potential foreign investment, for it is unsuitable for the new economic and to rethink the strategic management of SH in order to reduce costs by better management and hopefully position amongst the TOP global companies. ademmebtoul@gmail.com
May 31, 2018
The Algiers Bourse or stock exchange, an administrative creation in 1996 seems to be in utter lethargy; the largest Algerian companies such as SONATRACH, state oil company and SONELGAZ, power utility company with several other large public as well as private groups are not listed on it. Knowing that the dynamism of a financial market spearheaded by an active stock exchange would have prevented the current unconventional financing. So, how to energize the Algiers Bourse ?
The important thing for a reliable stock exchange is the number of reliable players in this market that is for the time being VERY limited. It is little bit like, let us imagine a very nice football stadium that can accommodate more than 50,000/100,000 spectators without a team to play the game. The Algerian authorities have and are therefore content with building the stadium but without players.
The lethargy of the Algiers Exchange refers mainly to a binding business environment itself linked to the mode of governance. The main obstacle therefore is a bureaucratized business environment as explained by the few productive companies. Referring to all those international reports, the mixed results, on the performance and / or the prevalent business climate in Algeria, it is those bureaucratic mechanisms that discourage real investors. Algeria has a macro-economic framework artificially stabilized by the oil exports revenues ‘rente’; this does not energize the real sphere of the economy and doing so might eventually run into risks such as emptying the county of its best brains, the essential substance of the development of the 21st century.
As shown some investigations of the ONS (Office National of Statistics), the Algerian economy being a rentier economy with about 83% of its fabric represented by trade and services of very small dimensions, the official growth rate excluding hydrocarbons being artificially sustained at 80% of GDP via public expenditure.
It is to be noted that, according to official data, more than 90% of Algerian private enterprises are of family type without any strategic management, and that 85% of public and private enterprises do not master the new information technologies. Most of the private and public sectors live through government contracts granted by the state and the economy is dominated by the informal sphere particularly of the merchant type that is itself linked to the rentier logic. The Bourse to have a significant role, all the capital shares of the Algiers Stock Exchange must represent a significant share of the gross domestic product, the volumes of transactions observed being currently insufficient. Private operators likely to engage in this activity will only be able to do so when the number of companies and the volume processed will be sufficient to cover their costs. This activity is in deficit in the services of public banks where it is exercised. On the technical level, in the current state of their accounts, very few companies know exactly the evaluation of their assets according to market standards. It turns out that the accounts of Algerian public companies from the most important to the smallest are in a state that would not pass the diligence of the most basic audits. SONATRACH needs a new strategic management like most of Algerian companies, with clear accounts to determine the cost per division and / or section. The opacity of the management of the majority of companies that are limited to delivering consolidated global accounts veil the essential. For example, for SONATRACH, it is a matter of distinguishing whether it has to mainly do with exogenous factors, thus to be dependent on the evolution of the price at the international level or to rely on good internal management. This failure should not be sought in the technical and regulatory apparatus (Cosob SGVB Algeria Clearing) but rather within the macroeconomic and macrosocial frameworks in the extent to which its effectiveness must be enrolled in a clear strategic vision of development of the new global mutations.
Therefore, how to energize the stock market from Algiers ?
I can see five axes.
First, it would be the lifting of all environmental constraints of which bureaucratic obstacles would mean the redesign of the new missions of the State as a matter of urgency. There can be no Bourse without competition and the Rule of Law..
Secondly, a Bourse must be based on a renovated banking system and I will insist on this fundamental factor because the Algerian financial system for decades is the place par excellence for the distribution of the oil ‘rente’ annuity and turning therefore into a huge power struggle.
Thirdly, there can be no stock exchange without the resolution of deeds that must circulate freely as segmented into shares or bonds referring to the urgency of integrating the informal sphere by the issue of title deeds.
Fourth, there can be no Bourse without clear and transparent accounts modelled on international standards sustained by the generalization of audits and analytical accounting in order to clearly determine the cost centers for stakeholders. This raises the problem of adapting the socio-educational system; for there is no such thing as financial engineering.
Fifth, transiently as primer, we propose a partial privatization of some national champions to start the movement and the creation of funds of Private / Public set ups to select a few private companies for their future Initial public offering (IPO). We could also introduce: 10% of SONATRACH, 10 to 15% of the BEA (Banque Exterieure d’Algerie), 15% of COSIDER and 15% of the CPA bank. This would create a stock index consisting of volume and quality starting the virtuous circle and attracting private operators. These funds would act as incubators of companies eligible for the stock exchange. In this context, aid for the development of private actors in the investment sector (IOB advisors, asset managers) would be needed.
In summary, if these conditions are fulfilled, accompanied by adaptation to new global mutations, good governance, valorisation of knowledge, Algeria, strong by its important potentials for a diversified economy, can become a pivotal and stability factor of the Mediterranean and African region.
Any destabilization of Algeria, as I pointed out on several occasions, would have geostrategic implications throughout the region. But it is to be recognised that in this month of May 2018, Algeria has still a predominantly public economy with a centralized managed system because structural reforms are slow to materialize on the ground. And yet, it is necessary to avoid living forever on the illusion of the permanent ‘rente’ for no country through history has developed solely through raw materials.
Major geostrategic mutations are expected to be inevitable in the future, making the 21st century to be dominated by the emergence of decentralized networks, replacing the state-to-state customary relations in above all the economic relations that together with the advent of artificial intelligence will revolutionize the entire global economic system.
ademmebtoul@gmail
May 28, 2018
Algeria’s gold reserves virtually unchanged since 2008, according to the World Gold Council report 2017 where it is shown that the gold reserves held by Algeria are 174 tonnes the World Gold Council, a very slight increase compared to the period 2008/2017.
In several contributions on this subject between 2009 and 2017, I had estimated it to be $9 billion in late 2008 and between six and seven billion Dollars between 2015 and 2017.
According to the report of the World Gold Council (WGC) in 2016, the total reserves of the top 100 countries were estimated to 32,813 tons, almost equivalent data (32,702 tonnes) by the WGC in its report of 2017 which lists the gold reserves held by central banks.
According to a study (2017) by Geological Survey, there would still be about 50,000 tons left to extract. For 2017, according to the WGC, world demand for gold declined by 7% to reach 4,071.7 tons. The annual influx of gold-backed stock exchange funds added 202.8 tonnes to world demand in 2017, but this accounted for only about one third of the influx of 2016. The global demand for ingots and gold coins has also fallen from 2% to 1,029 tonnes while U.S. retail investment has reached their lowest level in the last ten years, according to the report. On the other hand, the year 2017 has experienced the first annual growth in the demand for jewellery since 2013 thanks to the stable prices of gold and the improvement of economic conditions. The demand for gold in the technology sector increased by 3% to reach 333 tonnes, ending a decline for six consecutive years.
According to the WGC report for 2017, the first 10 (ten) countries are as per the chart below:
However, in several contributions back in 2009 and 2017 following the various reports of the WGC, I noted that Algeria in 2009, was ranked between 25th and 22th, with 173.6 tons of gold.
Within the Arab world, in 2017, it was second in gold reserves, see the chart below.
Per the 2016 report, referring to the African area, Algeria being 25th at world level is top, first rank on the African continent, as shown below.
To determine the intrinsic value of the 1 gold ingot kilogram, multiply the price of the gold ounce by 32.15, then apply the Euro/Dollar exchange rate. Depreciation of the monetary value converted into gold Dollars between 2009/2017 contributed to a loss of more than $2.5 billion to its monetary value of the Algerian gold stock, which I had estimated, in 2009, at $9.75 billion. On May 28th, 2018, an ounce of gold is $1304.84. This gives an average for the gold stock of Algeria, not including in the foreign reserves, about $7 billion representing 7.21% of foreign exchange reserves that were closed at $97 billion as at end of 2017.
Where is the additional production of gold mined at Amesmessa in the province of Tamanrasset, this having been active for years with significant investments?
The gold-producing company is a company that can either sell to the Bank of Algeria to increase its stock of gold or export it or sell it directly to jewellers.
The first option seems to have been discarded since the gold stock has virtually remained unchanged since 2009. Recall that on January 30, 2010 in a statement to the Algerian Press Service the Director general of ENOR, the gold mining company had officially declared: “The deposit of Amesmessa, located 460 km west of Tamanrasset, will benefit from a development plan with the objective of gradually increasing its gold production to three tons of gold annually.”
And for this period, as regards the company’s exports between 2009/2010, they were in the order of 848.49 kg of gold, while the local market consumed only 208.78 kg of gold. In February 2018 according to the Minister of Industry and Mines, the mining company, that is a subsidiary of SONATRACH Group should have in 2018, a gold production that should reach 286 kg, against 286 kg in 2016, or a significant regression of more than 560 kg compared to 2009/2010, which explains the structural deficit of this company which according to the Minister of Industry would have been 1.4 billion of Dinars (DZD) in 2016, DZD600 million in 2017 with a forecast of DZD400 million by end of 2018.
However, avoiding misinterpretation and to specify that the stock of gold or currencies in general do not create wealth, these are merely a means of exchange. In the past, tribes of Australia used salt bars because of their scarcity as a means of exchange. On the contrary, hoarding and speculation in refuge values such as gold, certain currencies or raw materials is harmful to any economy. Having foreign exchange reserves or gold is not necessarily the wealth of a Nation. There are countries with little or no foreign exchange reserves held by central banks but with significant development, with capital being transformed into productive capital. This is a necessary condition but not sufficient to secure the investment and especially for the rentier economies countries to avoid a greater slippage of the value of the Dinar compared to the currencies where there is a correlation of approximately 70% between the present value of the Dinar, and this stock of currencies via the oil revenues annuity. With exchange reserves of $20 billion, the official Algerian Dinar would float to more than 200 Dinars a Euro and 250/300 Dinars a Euro in the informal market. It is thus far from being a sufficient condition for sustainable development and above all from an ephemeral annuity based on hydrocarbons. The central problem for Algeria is to transform this virtual wealth into real wealth through a non-hydrocarbon development based on enterprise and knowledge, all conditioned by a new governance both central and local that adapts to the new global geo-strategic mutations.
ademmebtoul@gmail.com
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