Algeria considers massive layoffs to modernize its industry

Algeria's President, Abdelmadjid Tebboune, faces a thorny problem that could break social peace in the short term: in order to reorganise the productive apparatus inherited from an economy with parasitic income and oil prices above 80 dollars a barrel, he must accept the dismissal of tens of thousands of employees in a full administration and in two of the country's main state companies: Sonatrach and Sonelgaz.

The new energy minister, Abdelmadjid Attar, told the Algerian media of the deplorable situation in the sector. Sonelgaz, which employs 91,000 workers, is in financial ruin. It is only surviving thanks to direct aid from the state. The bankruptcy of the gas and electricity giant has been dragging on for decades. 

The Spanish electricity company ENDESA, now a majority shareholder in the Italian company ENEL, employs only 10,000 workers and has business in Portugal, other European countries and a large number of Latin American countries. The French group EDF, a producer and distributor of energy, and the second largest in the world after China Energy Investment, maintains high profitability with 70,000 employees. 

The head of Energy in Algeria has let it be understood that only a drastic cut in the number of workers and modernisation of the company will allow it to be in the market, both national, regional and African, on which Sonelgaz hopes to expand. 

As for the Sonatrach group, although it is not financially bankrupt like Sonelgaz, it is far from competing in an increasingly open world oil market. Minister Attar is counting on the hydrocarbon giant, thanks to its monopoly in the sector, to remain the lung and engine of the country's economy, although reforms will be necessary to achieve this. The company "will have to reduce operating and running costs", well above the world average, to be profitable and competitive. 

The Algerian monopoly company has 180,000 employees, a large part of them in administrative positions. Compared with other oil giants, such as Halliburton, Algerian society is far from internationally profitable. The American company employs 55,000 people and has a turnover of 240 billion dollars; the Algerian company has six times less business (40 billion dollars) and employs 3.5 times more workers. The other oil cartels show similar but smaller proportions to Halliburton. British Petroleum had a turnover of 128 billion dollars in 2019 with its 77,000 employees. France's TOTAL employed 104,000 people in 2018, with a turnover of $209 billion. 

"To transform these companies and bring them up to international standards, it will be necessary to do away with a large number of their staff, who from a technical and economic point of view are absolutely useless," writes the widely read digital daily Algérie Patriotique this week. 

Judging by the existing obstacles, including strong union resistance to the dismissal of thousands of workers in a country where job offers are scarce, it seems an impossible mission. However, the new Algerian leadership will have no choice but to tackle the problem in order to provide the country with a healthy and profitable economy. However, in the current conditions, such a social divide presages deep political-institutional instability.