A ribbon of countries along Africa’s northern expanse have begun to make their mark on the world’s manufacturing landscape. It is a development occurring at the same time that the export value of the region’s hydrocarbon exports has taken a dip.

Algeria, Morocco and Tunisia – often collectively referred to as the Maghreb (meaning ‘place of sunset’) – along with Libya have a combined population of 84 million people. They have all proved adept at attracting a combination of transportation and electronics manufacturers, a development that could significantly diversify the region’s economy and opportunities for foreign investment.


Opening trade barriers

With their easy access to the Mediterranean Sea and its trade routes to Europe, the Maghreb countries made natural signatories to the Euro-Mediterranean Association Agreements with the EU. Comprised of a series of measures designed to guarantee free access to European markets and exemption from customs duties, the agreements have deepened the region’s trade links with Europe. Libya, however, declined to sign.

Since 2006, Tunisian printed circuits company Fuba Tunisia, which specialises in electronics and telecommunications, has emerged in the country’s capital, Tunis, as a spin-off of the German digital firm Fuba Printed Circuits GMBH. Over the past two years, Fuba Tunisia has completed a modernisation worth nearly $10m and expanded its plant in Bizerta for an operation with export revenues of about $40m. It supplies companies such as Alcatel, Bosch, Delphi, Siemens and Schneider.

Tunisia’s manufacturing expansion is not limited to electronics. In 2010, Airbus is slated to open a Tunisian factory that will employ 1500 workers at a cost of $76m.

Despite president Zine El Abidine Ben Ali having ruled the country as a virtually unchallenged authoritarian since 1987, Tunisia boasts a burgeoning middle class and has experienced an annual average economic growth rate of 5% over the past decade.

“Tunisia has a fairly diversified economy and manufacturing base,” says Andrew Atkinson, an analyst with Paris-based Euler Hermes, a credit insurance provider that devises country risk assessments. “There’s a clear pecking order in the risk appetite for dealing with these countries.”

Out of a possible rating of AA, Tunisia scores a BB on the Euler Hermes scale, Morocco ranks as a solid B, and Algeria and Libya are Cs.


Next on the risk scale of foreign investment in the region is Morocco. The country’s King Mohammed, who took over in 1999 after his father, King Hassan II, has presided over deals with France for civilian and military contracts totalling more than €2bn. These deals include the construction of a high-speed train between the coastal cities of Tangiers and Casablanca, and the construction of a power plant outside the north-eastern city of Oujda.

Morocco is also enjoying playing host to Geneva-based semiconductor company ST Microelectronics, which has expanded its integrated circuit design and development centre in Morocco’s capital city of Rabat.

Algeria and Libya lag behind


Awash with oil and natural gas reserves, Algeria and Libya have been slower to industrialise their economies, but the worldwide economic turmoil may accelerate that process.

“If you look at Algeria and Libya, both economies are absolutely dependent on hydrocarbon exports for revenues,” says Craig McMahon, North Africa analyst at Wood Mackenzie, a UK-based consulting firm that closely follows the energy market. “The biggest issue [for them] has been the drop-off in oil and gas prices. They are still in a positive cash flow position but I think it’s fair to say that the scale and magnitude of drop-off has taken them by surprise.”

Algeria and Libya – both members of the Organization of the Petroleum Exporting Countries (OPEC) – may find the precipitous drop in oil prices over the past year a driving force in the diversification of the region’s economy. Amid the global economic downturn, demand for oil has remained weak, with prices hovering near $50 a barrel for months. OPEC expects the decline in demand to continue.

Having struggled with the scourge of Islamic militancy for years, Algeria appears to have successfully extricated itself from an agonising decade-long civil war that pitted Islamic militants against the Algerian government following disputed 1991 legislative elections. Against a backdrop of quelling the activities of Al Qaeda in the Islamic Maghreb, Algerian president Abdelaziz Bouteflika, supported strongly by the military, won 90% of the vote in Algeria’s April presidential elections. This secured him another five-year mandate in an election boycotted by one of the main opposition groups.

Notable business activity in the country includes Algerian electronic manufacturer ENIE collaborating with the Spanish renewable energies companies Isofoton and Alsolar to construct a $50m thermal energy plant, which will be the nation’s first.

Libya’s new direction

Farthest east, Libya’s president, Muammar Gaddafi, has succeeded to a degree in ingratiating himself with Europe and the US following Libya’s 2003 announcement that it was abandoning its nuclear weapons programme.

The country’s capital, Tripoli, has hosted visits by Benita Ferrero-Waldner, the EU’s commissioner for external relations, for discussions on how to increase energy and trade relations between the two zones. Libya’s recent acceptance to the World Trade Organization will likely make such steps all the easier.

The important thing for investors to remember, observers say, is that, as can be discerned from their level of involvement with foreign investment, all the countries of North Africa maintain distinct personalities, despite their cultural links.

“You’ve got significant differences in terms of size of the economy, population, exchange rates and political systems,” says Euler Hermes’ Mr Atkinson. “These countries tend to act independently, and any sort of dealings are probably best done on a country-by-country basis.”