In this second part of the investigation on the dual partnership of the American AIAG and the Algerian groups Lacheb and Tifra Lait, the financial expert Ferhat Ait Ali decorates the business plan of this investment to demonstrate its “dummy” side. He also talks about how the American could benefit from it.
The American developers, Ted Ayash and Dale Didion, who own AIAG, an LLC born in 2015 without any commercial activity, have little suspicion of being able to develop a far-reaching agricultural project. This is what the first part of this inquiry has shown with great detail. They also do not have the financial means to deploy international investments.
It is therefore not surprising that the analysis of the production projections of their last contract in Algeria, which constitutes the second part of this survey, shows how weak and artificial is the business plan of this investment.
In order to stay on the most recent contract, the two partners, AIAG and Tifra-Lait, plan to produce 22,000 tons of cereals, 105,000 tons of livestock feed at Adrar without specifying which, together with 20,000 tons Meat, and 190 million liters of milk, covering a total area of 25,000 hectares. When analyzing these data, it is easy to conclude that these predictions are not rational.
A project that swallows its funding in the equivalent of 3 dams of Keddara
In order to produce on-site, as much milk and meat as possible, on the basis of the best world production ratios in wetlands and with proven qualifications, 15 tonnes of dry matter per hectare and 8 500 liters of Milk per cow, as well as 400 kg of meat per cattle of 22 months of age, to have an irrigated area south of the order of: 58,000 hectares (see calculation below), needing 580 boreholes of 10 inches.
It will be necessary to find something like 300 million m3 of water, to aspirate from the aquifer at the same place, in one year, the equivalent of 3 dams of Keddara. When it is known that a 300-meter drilling in 10 inches is currently $ 300,000, and the 50-hectare pivot is $ 80,000, it is easy to calculate the fund requirements to arrive at these results.
We have to mobilize $ 180 million, just for drilling, and $ 92 million for pivots. Of the $ 250 million to $ 300 million planned for the development of the project we have already swallowed 270 million without any cow on the horizon. The analysis of the project could stop there, as it shows how far-fetched it is. Details show other things.
Cereals and livestock feed cannot co-exist for the intended purposes
About the cereals, in view of the maximum production of cereals on equivalent farms in the south, which is of the order of 80 quintals of wheat, it can be concluded that the 22 000 tones thus projected require a surface of the order of 2750 hectares, which represents something like 11% of the total area.
Implementation of the entire area will give a maximum of 220,000 tons of cereals for an annual turnover of about $ 44 million, to be supported in the domestic market by a subsidy of 4.4 billion dinars Support for production by the public treasury. But the inconsistencies in the business plan show that it will be necessary to abandon this production as well as potatoes’ one because by mobilizing the 25 000 hectares to produce only the feed of cattle. Clearly they aren’t not doing such a bad job. .
For livestock feed, whatever the nature of this feed, the maximum dry matter to be extracted from these lands is the world’s maximum of 15 tons per hectare and the production of 105 000 projected tons requires an irrigated surface Of 7000 hectares.
The total area of the project, if dedicated to this production, would give a maximum of about 375 000 tons of dry matter. As we will see immediately this quantity is very insufficient to combine meat production (cattle) and milk production (dairy cows) as presented in the projections of AIAG-Tifralait.
Projection of meat and milk that does not stick
The quantity of meat to be produced locally presents a serious problem, since the expected 20,000 tons of red meat represents, on average, the product of the slaughter of 50,000 adult cattle weighing 700 kg In addition to cows that must produce 190 million liters of milk per year.
But when we know that a farmed cattle still consumes an average of 40 kg of dry matter per day, as well as 90 liters of water in temperate zones, this brings us back to a total consumption of 1.2 million tons of livestock feed, and 3 million m3 of water. Keep in mind that cattle do not reach the 400 kg of clean meat in the best cases until they have been taken care of for over 22 months.
In order to produce 190 million liters of milk a year, on the basis of the American average, which is far from ours, that is to say 8,500 liters year, instead of 4,000 liters in Algeria, we must milk at least 22,500 cows and not 15,000 as presented in the project that obviously puts on a production of 12,600 liters per cow year, which has never been seen anywhere in the world to date.
However, 22,500 cows consume something like 12 tons of feed per cow per year and 44 m3 of water per cow per year, not counting the cleaning and general hygiene of cows and premises. This gives us annual quantities of: 270,000 tons of food and 985,000 M3 of water for the milk component.
A complement of imports between $ 100 million and $ 150 million per year
In the projections of the AIAG and Tifra Lait partners, 105,000 tons of food are being produced, and in a projection dedicated to the entire cultivated area for this exclusive crop. Forgetting the other cereal crops and potatoes included in the project, the maximum expected is 375 000 tons of dry matter, retaining optimistic yields valid in temperate zones.
The analysis of inputs previously identified the need for food to feed 50,000 cattle (meat) and 22,500 cows (milk) in order to meet the announced meat and milk production targets. They are 1.2 million tons per year for the 50 000 cattle and 270 000 tons per year for dairy cows, i.e. 1.47 million tons. It will therefore remain to seek elsewhere something like 1.36 million tons in the projection of these investors or 1.1 million tons in the case of a projection of total exploitation of fodder.
This will mean importing between $ 100 million and $ 150 million annually, depending on the variant chosen. In order to save on the import of 19,000 tons of milk powder and 20,000 tons of meat, for values of about $ 60 million for milk and $ 100 million for meat.
Once the non-feasibility of the projections of these investments has been verified, it becomes clear that the work was not the work of agricultural professionals on both the Algerian and the American side. And what is not at all conceivable is that this last entity, named American International Agricultural Group, (AIAG) created by Ted Ayash, sign agreements within the framework of 51/49, with existing Algerian entities, having Assets, funds and entry into the sector’s decision-making spheres. This poses a major legal problem.
The BADR predicted to finance 80% of the projects if they materialize
The agreements signed in Algeria by Dale Didion and under the supervision of Ted Ayash, the company’s first initiator, make it a 49% partner in a new entity will be created if these agreements were about to see the light.
We will therefore have a new company under the Algerian law, named as you wish, but who will have to call for 49% financing of its share capital by the American side. For the rest of the financing, it will be another story.
Article 58 of the famous LFC 2009, prohibiting any financing (indebtedness) coming from abroad, and a surplus foreign exchange balance for any contribution in kind, the American part will in fact have to finance only 49% of the new entity. Who, if we estimate the two projects at $ 800 million, will be $ 80 million, considering that the BADR will have to finance 80% or 640 million on the two projects while the local and foreign partners will put 160 million of their own funds.
The first part of this investigation showed that the two American founders of AIAG do not have funds nor the associates or partners in the United States that would allow them to bring the $ 80 million that falls to them in both partnerships With the Lacheb group and with Tifra Lait. They have, however, taken rights in a 25,000 hectare concession in Algeria. How will they then proceed to take advantage of this asset?
Overbilling to finance intake and siphoning currencies?
There are several possibilities for AIAG to stay in the project and take advantage of it. They all involve a serious risk for the Algerian side, partners and bank. The AIAG part finds the suppliers of project equipment and know-how, which finance their contributions, and advance the 80 million supposed to be used to aspire the 800 million acquisitions. Which, by a small increase of the materials and services of 20%, will have the effect of filling the holes of the American part digging the same hole in Algeria. Something that does not seem to be very difficult, given the turn of the story in Algeria.
Another way is that the two Americans find third-party financing from banks convinced by the financial part of the project. Getting the funds for their initial contribution, through a promise of recession of shares of the project once it is put in place and productive. This variant is somewhat less certain, because banks in the United States, do not trust this type of investment in a country that is not well rated, and located in a turbulent zone at the moment.
Third and final possibility is for them to find a private funds to invest for themselves, with a right of scrutiny over the whole of the case, and a possible eviction of the Algerian side later and once the law is changed and the bases of 50,000 hectares legally occupied by this entity; And there we are in a different vision. The scenario of fraudulent bankruptcy is also not to be dismissed.
US investors are planning major projects, and are limited to one or two acquisition operations that are fairly limited in time and amounts, reselling locally materials that have been acquired in the United States or elsewhere, at a price that will leave them some profit. They will end the project at the first local incident, which seems to be in their ropes and fairly easy to achieve with a split and convoluted enough not to let the unfortunate end of the project.
US parties well aware of investment gaps in Algeria
In all cases, the most obvious conclusions in this case are alarming. The AIAG, is not a group of American companies, but just a small LLC without equity. The protagonists of this company and of the whole affair, on the American side, have no expertise in the field of agriculture. On the other hand, they are linked to Mason University, which has a proven proximity with American intelligence agencies.
Projects ratified with Algerian operators are not feasible on these surfaces, with these amounts and especially with the projections of production presented by these people. The US parties seem to be familiar with national investment laws, and the benefits that can be derived from anybody else than investing seriously.
The flaws in our control system, inherent in its nature or desired somewhere, have been such that a whole state finds itself involved in an enterprise that has no chance of materializing in the way it was presented.
Better to do with such amounts
With the amount projected at El Bayadh and Adrar, one can already save what remains of affected farms, and finance as many cows as in these projects, but divided into 50 farms of 1000, for 50 integral Algerian operators.
Algerians wanting to invest in this niche are numerous. They should be obliged to recruit local agricultural and livestock management specialists as project managers, and to seek out foreign know-how only as rewarded technical cooperation, to be sought in all possible countries.
Article wrote originally in French by Mr Ferhat Aït Ali, translated by our team.
This Article should not be published without Mr Ferhat Aït Ali or our previous consent.
Part one of the investigation:https://themaghrebtimes.com/02/14/algeria-american-aiag-saharan-agriculture-looks-like-clandestine-passenger-partnership/