Key takeaways:
A new agricultural agreement between Italy and Algeria demonstrates Italy’s continued commitment to its Mattei Plan, an initiative to invest in key African sectors focusing on mutually beneficial developmental projects.
KSG assesses that Italian state-led investment in Africa is highly likely to continue into the medium-term, especially in North Africa and in nations that generate high numbers of migrants, as a main priority of the Mattei Plan is to stabilise the partnering nation’s volatile political environments and curb irregular migration across the Mediterranean.
KSG assesses that continued Italian investment in Africa will highly likely create lucrative opportunities for European (primarily Italian) investors and developers in the energy, infrastructure, and agricultural sectors.
On Saturday, 6 July, Algeria and Italy signed a $455 million agricultural agreement outlining that 360 square kilometres of land be utilised to produce wheat and legumes by the Italian-based Bonifiche Ferraresi S.p.A. The deal is significant as it furthers Italian premier Giorgia Meloni’s Mattei Plan, an Italian development project focused on developing five key sectors in African countries: education and training, health, agriculture, water, energy, and infrastructure. Algeria’s new agriculture deal means it will join several of its North African neighbours, Egypt, Morocco, Tunisia, and other Sub-Saharan nations like the Democratic Republic of Congo, Ethiopia, Ivory Coast, Kenya and Mozambique in benefiting from Italian partnership.
Algerian-Italian cooperation has been crucial thus far in Italian efforts to de-risk from Russian energy with Algeria, with around a quarter of Italian gas imported from Algeria. Moreover, Algerian hydrocarbon exports to Italy increased by 156.7% from pre-Ukrainian invasion levels of $6.54 billion in 2021 to $16.4 billion in 2022. Italy now has the opportunity to repay Algeria by helping it de-risk from Russian and Ukrainian wheat producers by supporting the creation of a domestic wheat industry in Algeria.
The agreement also represents Italian efforts to promote climate-friendly practices as the cultivation of legumes can be quite water-conscientious, and legume plants are excellent carbon sinks. Italian investment in Algerian agriculture aims to support Algeria’s diversification of its oil-heavy export portfolio and increase the nation’s capacity to feed itself. As the sixth-largest global wheat importer, creating greater self-sufficiency in wheat production would insulate the country from potential shocks to the global wheat market (such as Russia’s 2022 invasion of Ukraine) while potentially freeing up capital to alleviate increasing Algerian public debt. As president of the G-7 in 2024, Italy has made cooperation with African nations and climate change solutions a central priority of the organisation’s agenda, aiming to lead its fellow G-7 members by example.
Looking forward:
KSG assesses that Italian investment projects through the Mattei Plan will continue to be well-received in the short-term due to its emphasis on non-predatory practices and developmental focus. As a result, there is a high likelihood that the Mattei Plan’s portfolio of projects will continue to grow in the short term. However, the number of African partner countries is unlikely to increase significantly due to historically soured relations between Italy and Africa.
KSG assesses that the Mattei Plan will likely create significant commercial opportunities in Africa, particularly for European companies. Italy seeks to coordinate its efforts with the EU and offer €200million of subsidised project financing through its state investment agencies. As Italy presides over the G-7 in 2024, short-term participation in the Mattei Plan provides firms with flagship investment opportunities to display their capabilities to a transnational audience.
Furthermore, KSG assesses that this agreement will likely help ease migration from Algeria to Europe, creating around 6700 jobs and stimulating the Algerian economy. The agreement also insulates the Algerian economy from the instability of the oil and wheat markets while providing the Algerian government with revenue that will help manage the public debt crisis.
Finally, KSG assesses that as long as Italy acts unilaterally, its progress towards achieving the Mattei Plan’s objectives, especially concerning migration, is highly likely to be stunted in the long run. Consequently, current (and future) Mattei Plan projects will have limited geopolitical impact across Africa without EU coordination. The projects ability to increase Italian, and European influence in the region will be heavily contested by Chinese efforts to expand economic operations on the continent. Italy and the EU will be able to increase potential impact by coordinating efforts with the US.
By Carter Morton, Africa Analyst