The Report: Morocco 2015

Economy

With steady GDP growth and consistently low inflation, Morocco’s economic performance has both diversified and strengthened in recent years on the back of growth in the secondary and tertiary sectors, as the government has been channelling capital into productive industries such as manufacturing, finance and telecoms. As an energy importer, the kingdom is benefitting from lower international oil prices, which along with recent subsidy reforms have helped reduce the budget and current account deficits. Most indicators suggest strong economic growth is on the cards for 2015, though a number of challenges still need to be tackled, including less-competitive productivity levels and a stubborn unemployment rate.

This chapter contains interviews with Mohamed Boussaïd, Minister of Economy and Finance; and Tas Anvaripour, CEO, Africa 50 Fund.

Trade & Investment

Thanks to lower oil prices and improving conditions in its major export markets, Morocco’s trade deficit in 2014 shrank by 6.2% over the previous year and looks set to perform even better in 2015. Levels of foreign direct investment, especially from France, have grown substantially in recent years, boosted by investor incentives and good infrastructure, though they could be higher still if more progress were made on enhancing the ease of doing business and addressing challenges such as corruption. Outward investment has also been on the rise – the average in the 10 years to 2013 was up 12-fold on the previous decade – much of it moving south of the Sahara, where Morocco is emerging as a regional economic power.

This chapter contains interviews with Hamid Ben Elafdil, Director-General, Invest in Morocco; and Dominic Jermey, CEO, UK Trade & Investment.

Banking

One of the most-developed in Africa, Morocco’s banking sector is home to some of the continent’s largest banks, several of which have become major regional players and continue to expand their African footprint. Penetration is rising rapidly as product offerings continue to evolve, most notably through a banking law passed in early 2015 that has set the stage for fully sharia-compliant banks. As recent improvements in macroeconomic fundamentals have helped resolve liquidity shortages, lending has picked up, growing by about 4% in the year to end-2014 – though, as in many emerging markets, loan books tilt heavily towards the short term.

This chapter contains an interview with Abdellatif Jouahri, Governor, Bank Al Maghrib; and a dialogue with Othman Benjelloun, Chairman and CEO, BMCE Bank of Africa Group; and Mohamed Benchaâboun, CEO, Banque Centrale Populaire.

Insurance

The second-largest in Africa and 53rd-largest in the world by total premiums, Morocco’s insurance market is dominated by the non-life segment, and in particular by compulsory automobile insurance. Plans to make other forms of insurance mandatory are in the works but have yet to be implemented. Market share is concentrated in the hands of a small number of mostly local firms, although foreign insurance companies are also active in the market and several French firms have gained a substantial portion of local business. Since the insurance sector is one of the kingdom’s largest sectors of institutional investors and is heavily invested in local equities, new solvency rules are being explored to mitigate the risks this poses.

This chapter contains a roundtable with Zouheir Bensaid, CEO, RMA Watanya; Ali Harraj, CEO, Wafa Assurance; and Mehdi Tazi, CEO, Saham Assurance.

Industry & Mining

Signs of recovery have lately emerged in Morocco’s industrial sector, which has been affected by a slowdown in trade in recent years – growth in value-added processing (excluding oil and refining) rose from 0.8% in 2013 to 1.8% in 2014. While subsectors like aeronautics and automotive have made big strides over the past decade, others like textiles and pharmaceuticals have lagged behind, spurring the government to introduce its Industrial Acceleration Plan 2014-20, which aims to raise the sector’s contribution to GDP from its current 14% to 23% by 2020 and create half a million new jobs. Mining in Morocco has traditionally centred on phosphates – of which the country has around 77% of global known reserves – but a new mining code adopted in February 2015 should also help draw activity into less-developed segments such as barite, fluorspar, cobalt, antimony, lead, nickel and silver.

This chapter contains an interview with El Mostafa Sajid, President, Moroccan Association of Textile and Clothing Industries.

Construction & Real Estate

After a slowdown in recent years, Morocco’s construction industry saw a return to growth in 2014 and continues to be driven by strong demand for housing, public spending on infrastructure and investor incentives from the Ministry of Housing and Urban Policy – though constraints on credit access are restricting the volume of new developments. A unified construction code designed to raise standards, improve transparency, boost competition and reduce the incidence of informal building – which makes up 25% of sector activity, by some estimates – is expected to come into force in 2015. Real estate activity has closely followed that of construction, with transactions and foreign direct investment both increasing in 2014, though prices remained stable. Government incentives for development in the low-income and mid-range segments are designed to close the housing deficit, and a range of mixed-use projects are in the works.

This chapter contains interviews with Mohamed Nabil Benabdallah, Minister of Housing and Urban Policy; and Zhor Kabbaj, Director-General, Softgroup Immobilier.

Transport

An influx of capital and a number of major upgrades have improved Morocco’s transport sector significantly in recent years, with private investment initiatives working alongside the state-led development programme. Despite tight budgetary constraints, authorities allocated a large chunk of the 2015 budget towards transport projects, with the biggest slice going to the ports segment, followed by tranches for road, rail, airport and logistics upgrades. These projects should help push Morocco up the World Economic Forum’s rankings for global competitiveness, where it is currently ranked 55th out of 144 countries for overall infrastructure, well above many of its North African neighbours.

This chapter contains interviews with Driss Benhima, Chairman of the Board and CEO, Royal Air Maroc; and Nadia Laraki, General Manager, National Ports Agency.

Agriculture

The government’s Green Morocco Plan, launched in 2008 to run through 2020, aims to boost productivity through closer public-private collaboration, while at the same time improving smallholders’ earnings. While the country has in recent years made significant strides in boosting food output, several segments – including cereals, powdered milk and table oil – fall shy of their potential, and Morocco continues to rely heavily on food imports to meet demand. Even so, the value of food exports in Morocco grew 3.2% from 2013 to 2014, with the increase driven mainly by processed foods and seafood.

This chapter contains interviews with Mohamed El Guerrouj, Director, Agency for Agricultural Development; and Rita Maria Zniber, CEO and Chairman, Diana Holding.

Telecoms & IT

Estimated at around 5% of GDP, the telecommunications sector has greatly expanded over the last few years, even by emerging market standards. Mobile and internet penetration have increased on the back of reduced prices and a rise in foreign investment, with the mobile segment leading growth in usage volumes. Moreover, the government has led a push to encourage infrastructure sharing, on the back of a 2012 plan to cover 50% of the population with high-speed broadband by 2027. Indeed, the Digital Morocco 2013 plan aims to boost the use of technology by Moroccan businesses, although some constraints in implementation have caused delays.

This chapter contains an interview with Youssef Chraibi, President, Moroccan Association for Customer Relations.

Energy & Environment

As the only country in North Africa without commercially relevant oil or gas reserves, Morocco relies heavily on foreign energy imports to meet domestic demand. To counter this dependence, the government has embarked on a range of reforms to boost renewable energy sources. These efforts are concentrated around solar, wind and hydroelectricity, which together are expected to comprise 42% of the national energy mix by 2020. This new emphasis on renewables is also set to develop new industries and generate employment. At the same time, the government has sought to source hydrocarbons closer to home, attracting investment from small-scale oil and gas exploration companies. This chapter contains interviews with Stephen Jenkins, Chairman, Circle Oil; and Nasim Khan, Vice-President for Africa, First Solar.

The South

Although Morocco’s economy has traditionally seen the highest concentration of economic activity around the major cities of Casablanca, Rabat and Tangiers, several initiatives have sought to increase investment in the country’s southern region. The area benefits from a number of natural resources, including pelagic fish and mineral reserves. Wind and solar generation, as well as ecotourism, are other potential areas for growth. However, a lack of clarity over taxation procedures has reduced the amount of funding available for municipalities aiming to improve social services and infrastructure. Reducing unemployment – higher than elsewhere in the country – also remains a challenge.

This chapter contains interviews with Hassan Sentissi, President, National Federation of Seafood Processing and Development Industries; and Omar Belmamoun, CEO, Brookstone Africa.

Tourism

Despite grappling with the challenges of political instability in North Africa and the impact of the eurozone crisis in Europe, Morocco continues to pursue the objective identified in its national tourism development plan, Vision 2020, of becoming a top-20 tourism destination by 2020. The sector already contributes 12% of GDP, supports around 505,000 direct jobs and is an important foreign exchange earner, generating up to €6.2bn in 2014. Alongside efforts to expand Morocco’s air links and attract more visitors from abroad, however, the government has also targeted increases in the number of domestic tourists through marketing campaigns and building hospitality infrastructure that caters to the needs of local holidaymakers.

This chapter contains interviews with Imad Barrakad, President, Société Marocaine d’Ingénierie Touristique; and Abdelatif Kabbaj, President, National Confederation of Tourism.

Retail

The Rawaj Vision 2020 development plan devised by the Ministry of Trade, Industry and New Technologies aims to grow the retail sector’s contribution to GDP from 11% to 15% and generate 450,000 new jobs. As consumer confidence returns to the economy, new mall developments have sprung up, alongside an influx of foreign brands and franchises into the country. Although it continues to be dominated by informal trade and businesses, the advent of dedicated retail space is changing consumer habits in Morocco, and Rawaj Vision 2020 aims to restructure and gradually absorb informal activity into the formal economy.

This chapter contains an interview with Zouhair Bennani, CEO, Best Financière Group.

Capital Markets

After several years of decline due to liquidity shortages, a high current account deficit and reduced export demand from Europe, Morocco’s bourse is growing again, with its market capitalisation rising significantly in 2014 and early 2015. Trading is concentrated in a small number of companies and investors – the 10-most-traded shares made up three-quarters of transactions in 2014, carried out mostly by institutional investors. Faced with a slim listings pipeline and low levels of secondary trading in recent years, market authorities are working on the launch of a range of reforms and new products designed to reinvigorate capital markets activity at a time when liquidity is returning to the wider economy.

This chapter contains an interview with Karim Hajji, CEO, Casablanca Stock Exchange; and a viewpoint from Younes Benjelloun, Partner and CEO, CFG Group.

Education & Research

Considerable advances have been made in increasing enrolment levels, with net primary school enrolment reaching 98% in 2013, up from 85% in 2003, although challenges remain in ensuring adequate access to education in rural areas. The government has worked to improve infrastructure through the rehabilitation of schools and the involvement of the private sector. An emphasis on vocational training is expected to help match graduates’ skills with the demands of the labour market, reducing high rates of youth unemployment, while another major focus over the coming years will be to increase scientific research output at Moroccan universities.

This chapter contains interviews with Lahcen Daoudi, Minister of Higher Education and Scientific Research; and Tarafa Marouane, Chairman, Commission of Research and Development, General Confederation of Moroccan Companies.

Health

Although total expenditure on health per capita has stayed fairly constant in Morocco, advances have been made to improve the provision and delivery of health care. A 2011 constitutional amendment enshrined access to health care as a basic right, with increasing amounts of public financing going towards expanding health services, although work remains to extend coverage to uninsured segments of the population. The country has also made significant headway in reducing both maternal and child mortality rates. Alongside an epidemiological shift away from infectious diseases, increased longevity and changes in lifestyle mean that around 75% of deaths in Morocco today are related to chronic diseases, presenting both challenges and opportunities for the sector in the coming decades.

This chapter contains an interview with Hubert de Ruty, President, Maroc Innovation et Santé.

Tax

This chapter takes a closer look at the rules governing taxation in Morocco, examining in particular the changes made to pension insurance contracts and to the payment of value-added tax. It also contains a viewpoint by Kamal Mokdad, Managing Partner, Mazars Morocco.

Legal Framework

This chapter examines different aspects of the legal system in Morocco, in conjunction with Lefèvre Pelletier & associés, focusing on recent banking reforms and the impact of new rules relating to health care and the real estate sector. It also cointains a viewpoint by Romain Berthon and Lina Fassi-Fihri, Partners, Lefèvre Pelletier & associés.

The Guide

This chapter offers useful facts for visitors, including information about local customs and etiquette, access to health care, visas and local languages. Readers can also find a hotel listing and contact information for foreign missions, legal services, banks, airlines and other institutions.

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