In the wood-paneled boardrooms of Algiers’ largest state-owned and private firms, a collective “aha” moment — or perhaps a collective groan — is echoing.
As of January 2026, Algeria has officially decided that if big business won’t innovate voluntarily, it will do so by decree. According to the Official Gazette №88[pdf], published in the final hours of 2025, any establishment governed by Algerian law with an annual turnover of 2 billion dinars ($14.8m) or more is now legally required to spend at least 1% of its taxable profit on research, development, or “open innovation” with startups and incubators.
Fail to spend it? The taxman takes it anyway. It is the corporate equivalent of “use it or lose it,” and it’s about to turn the Algerian ecosystem into a very busy, very wealthy beehive.
The Stick: Mandatory Enthusiasm
For years, the relationship between Algeria’s “dinosaurs” — the massive public-sector banks and industrial giants — and its “gazelles” — the nimble tech startups — was one of mutual suspicion. The corporates found startups “unreliable”; the startups found the corporates “unreachable.”
Article 119 of the new law effectively hands out the wedding invitations. By mandating that 1% of profit must go toward R&D or accredited startups, the government is forcing a level of corporate venture activity that most global markets only achieve through decades of tax incentives and FOMO (fear of missing out).
“It’s a masterstroke of bureaucratic nudge theory,” an Algiers-based founder confided in Launch Base Africa. “You can either give your money to a 24-year-old in a hoodie to build a fintech app, or you can give it to the Treasury. Suddenly, the 24-year-old looks like a very attractive investment.’
The Carrot: The 12J Playbook?
This maneuver bears a striking resemblance to South Africa’s now-defunct Section 12J. Launched in 2009, 12J allowed investors to deduct 100% of their investment in “Venture Capital Companies” from their taxable income. It was a wild success — until it wasn’t — funneling over $750m into the ecosystem and turning South Africa into a VC heavyweight.
Algeria is taking a slightly different path. Along with the corporate mandate, startups themselves get a five-year exemption from Corporate Income Tax (CIT), renewable once. While South Africa’s 12J eventually shuttered due to concerns about “low-productivity” investments (think: hospitality and student housing disguised as tech), Algeria is tightening the screws by specifying that the 1% must go toward accredited startups and open innovation.
Algeria’s institutional backing goes beyond this new law. The Algeria Startup Fund, launched in 2020 with an initial capitalisation of 1.2bn dinars (around $8.9m), has been repositioned as a venture-style investment vehicle rather than a policy lending tool.
Its recent appointment of Anys Rahabi — formerly of HSBC and Citibank — as director is a signal of intent. The fund is jointly owned by the Ministry of Knowledge Economy and six public banks, and focuses on equity investments and structured partnerships, rather than soft loans.
The Bottom Line
Algeria is betting that by forcing local investment in innovation it can bypass the slow evolution of a private VC market.
Is it risky? Absolutely. Forcing corporates to invest in startups can lead to “check-the-box” innovation where money is wasted on vanity projects just to satisfy the 1% rule. However, by making the cost of not innovating equal to the cost of innovating, Algeria has ensured that for the first time, the country’s biggest companies have a vested interest in the success of its smallest.
The beehive is officially open. Whether it produces honey or just a lot of stinging remains to be seen.