A helping hand: Several programmes aim to strengthen regional SMEs

The rising tide of government investment in the last decade has resulted in a marked improvement in the Oriental region’s business infrastructure, increased activity, the creation of an efficient transport network and improved linkages with other economic centres. The establishment of modern industrial platforms has also expanded opportunities for capital.

Oujda’s Regional Investment Council (Conseil Ré gional d’Investissement, CRI) is charged with aiding both domestic and foreign investors in the region. The CRI approved 250 requests for assistance for new investment projects in 2013, on par with the number of new projects launched in 2012. In terms of new business creation, the CRI estimates that it assisted in the creation of 500 new businesses in 2013, thanks in part to a support programme for very small enterprises, led in collaboration with the German Society for International Cooperation. According to the Oujda Chamber of Commerce and Industry, over 90% of local businesses are small and medium-sized enterprises (SMEs), with the exception of a handful of large players in the construction materials and distribution sectors.

INDUSTRIAL ZONES: The fact that the region’s three new industrial zones are all geared toward local SMEs will also support the expansion of firms liquid enough to move into the zones. The Oujda Technopole, Selouane Industrial Park and the Berkane Agropole would offer SMEs more visibility on domestic and international markets, ensure a reliable power supply and offer proximity to transport infrastructure. In addition, the concentration of logistics, support services and material suppliers that are planned for each zone should reduce operating expenses. Yet installation costs and land prices remain out of reach for many regional SMEs at present, particularly considering the strain placed on banks by the domestic liquidity shortage.

FINANCING TOOLS: In the past, the financing available to local SMEs and family-owned companies was limited. One of the first measures adopted was a royal initiative for the creation of a fund dedicated to developing and investing in the local private sector: the Investment Fund for the Eastern Region (Fonds d’ Investissement de la Région de l’Oriental, FIRO). The fund was established with an initial capital of Dh300m (€26.6m), made up of public and private financing. FIRO supports regional SMEs that have potential for growth, but limited financial means, through equity investment, which is a first for the region.

As with many emerging markets, equity investment poses a challenge in a region dominated by small firms, many of which do not have regular reporting standards in place. Yet between 2008 and 2013 FIRO took a stake in three businesses: Microwarehouse, an e-commerce firm focused on IT sales; Monlait, an agro-industrial firm specialising in dairy products; and Midi Peintures, a paint manufacturer. FIRO is reportedly considering acquiring stakes in another four companies.

CHALLENGES: SMEs in the Oriental region must work to overcome a unique set of challenges. Boubkeur Amar, manager of family-owned flour mill Minoteries Achark, told OBG, “Small businesses in the east have difficulty competing elsewhere in Morocco, given the high cost of transport and existing competition in other regions. In addition, the regional market is flooded with low-cost, contraband goods that cross over the Algerian border, making it difficult for local businesses to offer competitive prices.” Many goods, ranging from flour and biscuits to textiles and petrol, continue to arrive illegally from Algeria, where heavy state subsidies allow for much lower sales prices.

The state has taken extra measures since 2013, including reinforcing border controls, to disrupt the flow of contraband goods. However, this will continue be an issue, as it is for any such border area worldwide. “More organised representation for small and family-owned businesses, either at the national or local level, could increase their visibility and encourage the creation of market protections,” Amar said. However, in the short term, businesses in the Oriental region must find new ways to remain competitive.

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The Report: Morocco 2014

Oriental chapter from The Report: Morocco 2014

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