Algeria is not among Africa’s “Big Four” when it comes to funds accruing to the continent’s startup ecosystem. In fact, in 2019, the last peak year of funding for the ecosystem — before the coronavirus enveloped the world — the country reportedly recorded just one round of funding, far behind its regional counterpart Egypt, which recorded 47 and ranked 3rd on the continent. But the story it is about to change. This is because of the recent launch of Algeria Startup Fund (ASF) by the country’s Minister Delegate to the Prime Minister in charge of the knowledge economy and startups, Oualid El-Mahdi Yacine.
The fund focuses on equity investments in startups instead of credit facilities.
According to Ahmed Haftari, Director General of this fund which began operations last January, the value of the funding granted by the Fund to companies bearing the label “Startup” and “innovative project” oscillates between 2 and 20 million DA ($15k-$150k).
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Already, sixty innovative projects are being examined for funding by the Fund.
In a statement on the sidelines of the closing of the first edition of the National Innovation Fair for Vocational Training and Education, Mr. Haftari called on labeled startups in the North African country to approach the Fund to obtain financing as well as the technical support that would allow them to materialize their projects in their respective areas.
Joining Other African Countries To Boost Local Startup Ecosystems
Algeria Startup Fund is one of the many incentives introduced by the country’s government to support local startups following the passage of Executive Decree 20–254 of September 15, 2020 for the labeling of “Startups”, “Incubators” and “Innovative projects”.
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Under the executive decree supported by the country’s 2021 Finance Act, companies in Algeria with a startup label will be exempt from several taxes, starting with the TAP (tax on professional activity) and the IBS (tax on corporate profits) for a period of 2 years from the date of obtaining the said label.
“Exempt from VAT and subject to 5% of customs duties are equipment acquired by companies with the label “startup”, ” says article 84 of the law.
“The purpose of this measure is to allow the Algerian startup to devote all of its financial resources, as well as all the attention of its management to activities related to its startup and rapid development,” the law further states.
For companies with the “incubator” label, they are also exempt from TAP, IBS in addition to Global Income Tax (IRG) for a period of 2 years.
“Exempt from VAT are equipment acquired by companies with the “incubator” label entering directly into the realization of their investment projects,” the law states.
With the tax incentives and a national fund for startups, Algeria joins other African countries which are vigorously championing local startup growth.
Notably, others are Tunisia, Egypt and Benin Republic which have recently implemented policies as well as instituted national funds to support startups. South Africa used to be among the list but has since scrapped Section 12J provisions which gave startups far-reaching tax incentives and funds accessibility.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer