DZG I TAL

TRA N SF OR M A T IO N
IN ALG E R I A
Assessing Digital Transformation in the country:
Overview, challenges and opportunities.

December 2020

In cooperation with DAAS e.V. A Digital Arabia Network Initiative

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Index

1. Executive Summary........................................................................................ 4

2. Background ..................................................................................................... 6

What is Digital Transformation.............................................................................7

Digital Transformation in the MENA region........................................................8

Digital Transformation in Algeria.........................................................................9

3. Assessing Digital Transformation in the country.................................... 10

A framework to asses Digital Transformation................................................. 11

Consumer .......................................................................................................................... 12

Producer............................................................................................................................. 13

Regulation........................................................................................................................... 14

Infrastructure..................................................................................................................... 15

What’s the state of digital in Algeria?............................................................... 16

4. Findings and conclusions............................................................................. 17

What’s blocking a thriving digital ecosystem?................................................. 18

What if Algeria misses the digital turn? ........................................................... 19

How to accelerate the ongoing Digital Transformation?............................... 20

Annex.............................................................................................................. 21

Methodology........................................................................................................ 22

Acknowledgment ................................................................................................ 23

About and authors.............................................................................................. 24

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1.

Executive
Summary

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Executive Summary

This report gives an overview of the ongoing digital transformation in Algeria. We’ve led over 20 interviews
with local digital champions and extensive desk research to develop it. We ground our review in four essential
dimensions governing digital services: infrastructure, regulation, producers and consumers of digital services.
The result is an analysis of the different digital initiatives and their impact on government institutions, busi-
nesses and individuals. We’ve also designed a Digital Transformation index that informs about the digital
maturity level of the country in an objective manner.

Algeria has an enormous potential in Digital (good coverage, young tech-savvy population, government good-
will). However, a lack of talents, funding, infrastructure and the right regulatory framework hampers its full
development. The next 3-5 years are key to demonstrate whether this potential could be fully realised or not.

KEY FINDINGS KEY RECOMMENDATIONS

Large tech savvy and Continue educating and accompanying
young connected popu- businesses and individuals adopting digital
lation, mistrusts digital services
CONSUMERS services. Low adoption
of advanced ICT by gov-
ernment institutions and
businesses

Start-up creation on Support ICT producers notably through

the rise but they lack better access to funding & talent
PRODUCERS access to talents and
funding

Government focus on Accelerate implementation of digital

digitalisation and start- ­agenda and review existing law and
up industry. However, ­regulation impeding its development
partial executions of
the new adopted regu-
REGULATION lations, legacy laws and
lack of accountability
and a clear vision ham-
pers the development of
the ecosystem

Large investments in the Continue investing in modernising the

technical infrastructure, technical and payment infrastructure of
good coverage, afford- the country
able access however
INFRASTRUCTURE access remains patchy
and restrictive. Very low
online payment pene-
tration

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2.

Background

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What is Digital Transformation

We consider Digital Transformation to be an ongoing process Social Impact

that leverages technologies, data and innovation and applies
it to all aspects of society in order to streamline businesses
and improve people lives.
Poverty
We look at digital transformation on both its economic & so-
cial impact through three lenses:
Experience in countries such as
Individuals: access public and private services in more af- Bolivia and India shows that digital
can be a tool for inclusion and in-
fordable and convenient ways. Take part in the digital econ-
creased income among the disad-
omy. vantaged

Businesses: fasten time to market, improve competitiveness

and improve services

Government: improve public services, help create new jobs Health-

and improve people’s lives. care

E-health enables new forms of

healthcare management and pro-
Economic Impact vision, increasing patient coverage
and improving quality

Economic
growth Education
Increased digital penetration has
a substantial impact on economic
growth DIGITAL Education can be provided to
the masses at low cost and good
­quality, using e-education tools

Job
Creation Environ-
IMPACT ment
Digital has a powerful multiplying
effect: international cases show
that each digital job creates 2-4 Digital can make an enormous
jobs elsewhere in the economy contribution to the environment: (it
might contribute with ~ 15% reduc-
Moreover, those are high-value tion in CO2 emissions, for example,
jobs (wages ~ 30% above average) by using smart grids)

Produc- Other
tivity

The industries that most harness

Moreover, there is evidence of the
digital experience the greatest pro-
impact of digital on reducing crime,
ductivity increases
increasing road safety, enhancing
SMEs that make better use of Source: World Bank; financial inclusion, and improving
­digital grow faster Nasscom;Van Reenenet al. farming
(2005), MGI; UNESCO

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Digital Transformation in the MENA region

• Citizens are ready for more - 50% of the population under the age of 25. +100% smartphone penetration
and +70% social media adoption in most countries.

• Businesses lag behind in ICT adoption, supply and innovation. Level of digitisation in the business sector
scores lower than benchmark. MENA countries has fewer patents compared with benchmark

• Governments can do more. Significant progress has been made in improving connectivity and the basic
infrastructure. However, a more structured use of new technologies could better meet citizens’ expecta-
tions according to the OECD. Only 6 percent of the population lives under a digitised smart government.

• The contribution of the Middle East’s digital economy is low (4.1%) compared with the EU (6.2.%). Large
room for Improvement

Ranked by overall digitisation

Source: Digital Middle East, transforming the region into a leading digital economy (2016). Benchmarking Digital Government Strategies in MENA countries (2017).

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Digital Transformation in Algeria

• Algeria is the largest country in Africa (by Area)

• Population: 44.2 million. 59.6% of the population connected to Internet (+16% yoy growth).

· Mostly young (median age 28.6).

· Concentrated in urban areas (74%).
· Mostly connecting through social media.

• New Government has put an emphasis on digitalisation and startups with the establishment of
deputy ministries and preparation of a host of related legislations

• State of digitalisation inline with the MENA region average

44.2 M 26.3 M 42.8 %

POPULATION INTERNET USERS HAS A BANK
ACCOUNT

74 % 25 M 105.8 %
POPULATION
LIVES IN SOCIAL MEDIA MOBILE
URBAN CENTERS USERS PENETRATION

Source: Digital 2021 Algeria, Hootsuite (2020)

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3.

Assessing
Digital
Transformation
in the country

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A framework to asses Digital Transformation

We‘ve designed a Digital Transformation Assessment framework and an index to gauge the degree of read-
iness of the Algerian society to Digitalization. We’ve identified and researched 17 KPIs across 4 key layers to
develop this framework. The data comes from desk research + multiple conversations with different actors
making the digital ecosystem in the country. The four key layers are:

• Consumer Layer: end-users of digitals services

• Producers Layer: providers of digital services

• Regulation Layer: Government interventions & laws governing digitalisation

• Infrastructure Layer: the physical networks enabling digitalisation

It is an effort to help articulate our findings, quantify the readiness of the country and capture what is blocking
the spread of digitalisation and what levers can be pulled in order to accelerate this process.

We conclude this report by offering 19 tangibles recommendations across the 4 layers.

First, let’s understand the situation at hand ….

Digital Transformation Assessment Framework

CONSUMERS

PRODUCERS

REGULATION

INFRASTRUCTURE

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Consumers CONSUMERS

PRODUCERS

Individuals REGULATION

INFRASTRUCTURE
• 59.6% of the population connected to Internet

• 76 web shops have included online payment

• Cash is King! Only 4.6% of the population makes online purchases or bill pay. Cash on Delivery pre-
ferred method for e-commerce

• Online payment usage ramping up quickly to over 638k transactions and 5.4 Billion DZD in volume in
2020 (224.81 % CAGR over 5 years)

Corporates & SMEs

• +1 Million incorporated SMEs in Algeria. 97.1% are micro-enterprises, with less than 10 employees.
Large informal sector (±50%)

• Good adoption of basic ICT by SMEs. Low adoption of more advanced ICT such as enterprise resource
management software

Government

• Low consumption of ICT despite new leadership plans

• Smart City Algiers project dropped in 2019

• Rank 120 /193 on UN‘s E-Gov Index. And 183/193 on E-Participation Index

Online payment activities

6000

5000

4000
Amount in Million DZD
3000

2000

1000

0
2016 2017 2018 2019 2020

Source: GIE Monetique.

“344“ SMEs Adoption of ICT: Evidence from Algeria, L. Atik 2018

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Producers CONSUMERS

PRODUCERS

Fragmented Local ICT Providers market REGULATION

with a host of SMEs and Freelancers offering their services INFRASTRUCTURE

BigTech & Foreign Providers capture Algerians’

attention online
14 of the 20 most visited sites in Algeria are foreign

Tech Start-ups are on the rise

+900 start-ups identified , 40+ have been granted the government‘s Startup Label

Funding Innovation is scarce

• Public funding not adapted so far (e.g. ANSEJ).

• Little VC activity - Between 2011 and 2020, only 3 start-ups raised over 100k USD vs 13 in
Tunisia & 92 in Egypt

Talent in the Rough

• Algeria records the highest rate of women engineers in the world according to UNESCO
• Not enough IT engineers graduates per year
• Brain drain is key issue
• Talents lacks in soft skills

SERVICE LEADERS IN DZ TRACTION

SEARCH GOOGLE 16:10 MIN / DAY / USER

SOCIAL MEDIA FACEBOOK 23 M USERS

COMMUNICATION FB MESSENGER 14 M USERS

ENTERTAINMENT YOUTUBE 18:03 MIN / DAY / USER

TRANSPORTATION YASSIR 3 M DOWNLOADS

E-COMMERCE OUED-KNISS 11:36 MIN / DAY / USER

JOBS EMPLOITIC 1.2 M CANDIDATES

NEWS ENNAHARONLINE 4:32 MIN / DAY / USER

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Regulation CONSUMERS

PRODUCERS

Ambitious e-Government Programme underway REGULATION

• Digitization and interconnection of the central administration INFRASTRUCTURE

• Online request of documents and administrative forms
(civil status, criminal record, cnas, casnos, etc)
• Establishment of a National Identification Number (NIN) and generalisation
of biometrics-based documents (passport, identity card).

Government’s bet on start-ups

• with a deputy minister attached to the Prime minister office,
• A “Start-up Label” granting tax benefits to eligible companies
• Online platform dedicated to startups (https://startup.dz/)
• A government fund ”Algeria Start-up Fund”

Centralisation and Legacy laws and regulations still impede the

development of the sector
• notably regarding company formation, foreign investment and foreign exchange

Financing ICT startups in Algeria

(18 - 40 year-olds; ANSEJ)

Projects in ICT Number of projects funded by ANSEJ

800 7%
Projects in IKH
700 6%

600
5%
500
4%
400
3%
300
2%
200

100 1%

0 0%
42832 65812 43039 40856 23636 11262
2011 2012 2013 2014 2015 2016

Source: ANSEJ

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Infrastructure CONSUMERS

PRODUCERS

REGULATION
Connectivity & Coverage
INFRASTRUCTURE
• Plans to extend further submarine cables (fiber optics) to Spain,
Niger and Nigeria.
• 4G network in place across three Telecom providers
• Low network quality despite constant progress and investment in infrastructure
• Government interventions limit connectivity (e.g. during exams)
• Government surveillance spreads mistrust

Huwaei Global
Affordability Connectivity Index
• Avg. Cost of 1GB of data =  $0.65 (lowest in the region)
• Expensive for businesses COUNTRY RANKS

Algeria Morocco
Hosting 2020 2020

• 3 colocation data centres 69/79 60/79

• low number of active website hosted locally (<1000)

COUNTRY SCORES
E-Payment
ALGERIA Morocco
• Nascent E-payment infrastructure managed by SATIM 2020 2020
• E-Payment remains restrictive and costly for services providers
• M-payment project in the pipe 32/120 38/120
• Low card penetration (3.2%)
Source: Huwaei Global Connectivity Index (2020)

Fiber optic expansion km National bandwidth Mbit/s

Number of municipalities International bandwidth Mbit/s
connected to fiber optics

1000000

800000

600000

400000

200000

0
2012 2013 2014 2015 2016 2017

Source: Ministry of Posts, Telecommunications and ICT, Algeria

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What’s the state of digital in Algeria?

Consumers
Large tech savvy and young connected population, mistrusts digital services.

Producers
Low lever of innovation, large share of women in ICT. Start-up creation on the rise but ICT providers lack
access to talents and funding

Regulation

Government focus on digitalisation and start-up industry. However, partial executions of the new adopt-
ed regulations, legacy laws and lack of accountability and a clear vision hampers the development of the
ecosystem

Infrastructure

Large investments in the technical infrastructure, good coverage and affordable access however access
remains patchy and restrictive

Low High

KPI NOTE
Internet usage
Mobile usage
CONSUMERS
Social media usage
Online purchase
Patent
Startup creation
PRODUCER Funding
Human capital
Women in tech
Vision
Provision of E-Services
REGULATION
Ease of doing business
Laws & regulation
Coverage
Connectivity
INFRASTRUCTURE
Affordability
Hosting infrastructure

This Digital Transformation Assessment Index evaluates a country’s level of digitalisation based on 17 KPIs
across four areas (Infrastructure, Regulation, Producers & Consumers). We’ve rated each KPI on a scale of 1
to 10. Results represented above in a colour coded manner.

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4.

Findings &
Conclusions

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What’s blocking a thriving digital ecosystem?

1. Expensive and unstable technical Infrastructure – the availability and affordability of the technical in-
frastructure (hosting, connectivity) makes it difficult for both consumers and producers of digital services

2. Limited payment infrastructure – the low penetration of online payments and credit card use makes
the commercialization of digital services most challenging

3. Absence of a political vision – a lack of clear vision and concrete roadmap aligned with stakeholders
needs confuses digital players and makes it difficult to count Algeria as country championing digital in the
region

4. Unsuited laws and regulations – antiquated laws and regulations prevents digital players from experi-
menting and scaling their initiatives.

5. “Raw” talents – ICT talents are scares (the university system doesn’t cover the needs of the market) and
lack soft skills.

6. Access to funding – a lack of funding for digital providers is a key challenge. In particular, a post-Series A
funding gap is noticeably. State support and bank loans are not suited for digital providers

7. Lack of leadership & capabilities – Corporate and SMEs show a disdain for digital and lack of know-how
when it comes to execution

8. Low trust – Algerians have yet to adapt and adopt digital services fully. Online purchases are low. Local
brands are perceived poorly

Digital Transformation Blockers in Algeria

LEADERSHIP &
TRUST
CAPABILITIES

RAW ACCESS TO
TALENTS FUNDING

LAW &
VISION
REGULATION

TECHNICAL PAYMENT
INFRASTRUCTURE INFRASTRUCTURE

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What if Algeria misses the digital turn?

Should Algeria fail to embrace digitalisation in the next 3-5 years, a host of risks can harm its development.
Below we’ve identified some of the most worrying risks. To mitigate, the country should seek to benefit from
digital and accelerate its transformation.

Loss of Privacy & Data Sovereignty Digital Darwinism

Data hosted on 3rd party platforms can end up If we fail to foster local champions, global players
misused, sold, or leaked with no recourse for the will take their place and most of Algerian digital lives
in­dividuals and business if the right policy is not will be served and monitored from offices in Silicon
in place. Algerians have experienced data privacy Valley, Europe or Dubai. This is detrimental to the
issues with digital platform and their views on the country competitiveness, tax revenue and to the en-
subject are changing. trepreneurship ecosystem.

Cybersecurity Catastrophes Job Destruction

Several cybersecurity issues such as data leaks or Many of today’s jobs are at risk. Algeria is particularly
power plant outage may arise, whether by accident vulnerable as most of the country’s productive jobs
or by criminals. This could prove disastrous to busi- are blue-collar jobs that can be automated, and the
nesses and individuals if they are not ready, and white-collar jobs might go abroad.
nothing is done to protect them.

Wider Digital Divide Political & Social Tensions

The lack of access to digital services disproportion- The combination of poor infrastructure, security
ately affects rural and less educated populations ­catastrophes, loss of jobs and loss of companies
who are already most vulnerable today. Poor in- driving job creation might lead to lower tax revenue,
frastructure, centralisation and automation of low- higher unemployment rates and amplify social un-
skilled jobs lead to an increase in inequality. rest, This might well exacerbate the current political
turmoil.

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How to accelerate the ongoing Digital Transformation?

Recommendation

Consumers
Regulation

1. Promote the benefits of digital for 10. Set a clear vision with a national digital
businesses and individuals particularly strategy, industry-specific roadmaps
in time of Covid co-created with the relevant stake-
holders.
2. Educate individuals and businesses
on the risks posed by Digital notably 11. Review and reform existing laws im-
in terms of, infowar, data privacy and peding digital entrepreneurship (copy-
cybersecurity right law, self-employed status, etc, .dz
website, investment, e-signature, digi-
3. Evaluate the digital maturity of SMEs tal identity) and enact new ones where
(see here for an example) and Cor- needed (e.g. Data Privacy)
porates and helping upskill those busi-
nesses 12. Review tax schemes to incentive SMEs
and individuals to adopt digital means
of payments

13. Mandate that social transfers and key

Producers Government services can be carried
online
4. Train for what’s next. Focus on prob-
lem-solving and soft skills in addition 14. Ensure the full executions of laws and
to hard skills learned at university. decrees and put in a place an account-
ability process
5. Leverage Diaspora for talents
15. Learn from other government initia-
6. Understand how digital can uniquely tives in the region
benefit your business. Not all ICT pro-
viders are meant to be start-ups.

7. Experiment with digital. Build the right
set of capabilities through open inno- Infrastructure
vation and experimentation.
16. Build a secure and trustworthy digital
8. Think global when raising funds and identity infrastructure for Algerians.
encourage venture capital and busi-
ness angels activities 17. Democratise access to online and mo-
bile payments by lowering barriers to
9. Foster local champions by allocating a entry through SATIM
share of public spending to local start-
ups and SMEs and lifting the ban on 18. Build an affordable, secure and acces-
investing internationally sible cloud infrastructure capable of
hosting local websites, sensitive data
and guaranteeing data sovereignty.

19. Continue to invest in internet infra-

structure and lower data access fees to
be on par with neighbouring countries

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Annex

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Methodology

To develop this report, we‘ve organised a field trip to Algeria to meet with the local players and experts. We
have organised 23 semi-structured interviews online and in-person between November and December 2020.
We’ve interviewed actors from four areas: Government bodie, Tech Startups, Local Media & ICT Providers and
NGOs & Think-thanks. The list of interviewees is provided in Annex.

In order to articulate our findings, we’ve designed a “Digital Transformation Assessment Framework” that
evaluates a country’s level of digitalisation based on 17 key performance indicators across four areas (Infra-
structure, Regulation, Producers & Consumers). The framework is inspired by similar assessment tools and
adapted to the region. We’ve rated each indicator on a scale of 1 to 10.

Furthermore, to complement the interviews and fill our Digital Transformation Assessment Framework, we
have carried out extensive data gathering and desk research, reviewing existing papers on the subject of
digitalisation in Algeria and in the MENA region. In particular, we’ve found the work of the Algerian industry
bodies “CARE” and ”GAAN” particularly insightful.

AREA KPI
Internet usage Internet penetration

Mobile usage Mobile penetration

CONSUMERS Social media usage Active accounts on social media

Share of online purchase & online bill

Online purchase
payment

Patent Total patents application per c­ apita

Startup creation Share of startups created per year

Funding VC funding as a share of GDP

PRODUCER
Total employment in the provision of IT
Human capital
services per capita

Number of femal engineers g

­ raduating
Women in tech
per year per capita

Availbility of a digital t­ ransformation

Vision
plan & roadmap

Provision of E-Services UN’s E-government INDEX

REGULATION
Ease of doing business World Bank’ Doing Business S
­ urvey

World Economic Forum survey on how

Laws & regulation
developed a nation’s ICT laws are

Coverage 4G network coverage

Connectivity International Internet bandwidth

INFRASTRUCTURE
Affordability Broadband tariffs

Hosting infrastructure Secure internet servers

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Acknowledgment

This reports draws from hours of interviews with some of the key digital champions in Algeria. We are very
grateful for their time and contributions. In particular, we would like to thank:

Abdellah Mallek Sylabs

Abdelmalek Chetta ITihad group
Abderrahime Abdellaoui Consultant
Ahmed Siouani Yucca Labs
Ali Kahlane Ministery of Transport
Amira Boutouchent Bridgr
Anis Mohammedi Khibra
Assam Bekhti Algerie Market
Djalel Harouni OpenDevices
Riad Hartani Independant
Fatma Meheni Zolizola
Hadj Khelil BigMama
Kamel Haddar TemTem
Karim Chaib FixIt
Karim Kiared ESAA
Abderafik Khenifssa IT Mag
Lakhdar Marhoun Rougab Allegorie
Leah Bitat World Learning
Louay Djaffer Emploitic
Nassim Lounes Sens Conseil
Noureddine Tayebi Yassir
Samia Khedim RdvToubib
Slim Othmani Care
Walid Ghanemi Legal Doctrine
Yacine Benmosbah GOUBBA
Zaki Mentouri Easy Relay

Many thanks also to Bassant Helmi and Global Project Partners who’s invaluable support made this work
possible, to the DAAS members who contributed their time and effort and to the large DAN community for
their feedback. The authors would also like to thank all the ride hailing app drivers that helped move us
around Algiers and who contributed much needed insights and a different perspective.

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About

About this report Credits

This report was authored by Ismail Chaib Lead authors: Ismail Chaib, Amine Lefkir
& Amine Lefkir for Digital Arabia Network
(DAN) & DAAS – Deutsch-Algerischer Akade- Interviews: Nadir Benkhelouf,
miker und Studierender Verein e.V., (DAAS). Fatima Giuliano-Arnaout,
It was funded by Global Project Partners e.V. Asma Khalifat
as part of a programme to strengthen and
interconnect the digital society in the MENA Review: Bassant Helmi
Region.
Design by: Hendrik Weber | WDA

This work is published under a Creative Commons Attribution-ShareAlike

Berlin / Algiers, December 2020 4.0 International (CC BY-SA 4.0). A copy of this license is available here:
https://creativecommons.org/licenses/by-sa/4.0/legalcode

About DAN About DAAS

“Digital Arabia Network” (DAN), is a lab for DAAS- Deutsch-Algerischer Akademiker und
the digital future of the Arab world, which Studierender Verein e.V., is a German asso-
extends from the MENA region to the Euro- ciation that supports students, young grad-
pean diaspora. Launched in 2017 as an on- uates, researchers and professionals from
line and offline platform, DAN connects all an Algerian background in making a dent in
the creative and digital innovators who con- Germany.
tribute to making our lives a little bit easier,
fairer and better.

More info: https://digitalarabia.network More info: http://daas-ev.org

[email protected]

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