Morocco adding value to sea resources

With vast quantities of maritime resources in the waters along its coast, Morocco’s southern provinces have transformed the fisheries sector into one of the region’s most important sources of income. Continued growth, however, will depend on the local industry’s capacity to raise the number of value-added activities carried out locally on its annual catch.

The southern provinces’ resources have given them a pivotal role in the development of Morocco’s fisheries industry. According to the National Federation of Seafood Processing and Development Industries (Federation des Industries de Transformation et de Valorisation des Produits de la Peche, FENIP), fishing and fish processing account for 3% of the country’s GDP. The sector is export-oriented, processing 70% of its catch and selling 80% of its production to 126 countries, with the EU the largest destination market. In 2014, total exports surpassed 411,000 tonnes, at a total value of Dh15.8bn (€1.7bn).

Southern Stronghold

Fishing and related processing activities are central to the regional economy and, given the high quality and availability of seafood resources compared to the rest of Morocco’s coast, an essential avenue to promote further development of the southern provinces. According to 2012 figures from Morocco’s Economic, Social and Environmental Council (Conseil Economique, Social et Environnemental, CESE), the southern provinces accounted for almost 80% of the national catch, at a total volume of around 930,000 tonnes.

Development of fishing resources has represented an important revenue stream for the region. The annual GDP attributed to fisheries and seafood processing activities in the southern provinces reached between Dh6.6bn (€718m) and Dh6.8bn (€740m) in 2013. However, the sector remains excessively dependent on upstream activities.

Added-Value Opportunity

Up to 64% of total seafood added-value activities carried out on the region’s annual catch takes place in Morocco’s northern provinces. This represents a missed opportunity for the region’s economy. As an example, the southern region’s annual volume of landed fish is seven times higher than that of Agadir, another national centre for the fishing industry, but its earnings from seafood processing are three times lower, according to the report by CESE. In addition, the report shows that of the 74,000 people that were employed by the sector in 2013, only about 5% worked in the seafood processing side of the industry.

Dakhla remains a regional centre for the southern provinces’ fishing industry, with industrial activities focusing on the freezing and processing of fish and seafood. A total of 85 permanent and seasonal units operate in the area, with a strong focus on the freezing of sardines and octopus, according to the National Institute of Fisheries Research. To help ensure the regional fisheries sector achieves its full potential, the government is encouraging investment in value-added activities, including packaging and processing, as well as looking to strengthen infrastructure and human resources availability.

Long-Term Planning

A number of national programmes are aimed at strengthening output in the fisheries sector, including the Halieutis Plan, which was launched in September 2009 and piloted by the Ministry of Agriculture and Maritime Fishing. The strategy aims to establish fishing as a major economic driver by 2020. The key objectives of the plan were to have the kingdom’s fishing sector contribute an annual amount of Dh21.9bn (€2.38bn) to national GDP, employ 115,000 people in the sector and produce Dh3.1bn (€337m) in exports. The strategy also looks at addressing food security concerns, with an eye to boosting annual per capita consumption of fish and sea products to 16 kg.

Given that many of Morocco’s major fishing areas are also trafficked by European-flagged boats, sustainability of stock is a concern, and the strategy also set long-term sustainability goals, by establishing that reserves of 95% of fish and seafood species must be managed to last over the long term.

To help facilitate the move of local business up the value chain, the government has also sought to improve infrastructure and establish requirements for the local landing and processing of fish caught in the region’s waters. For example, volume quotas are now in place for the processing of fish unloaded in Dakhla. The Boujdour and Dakhla areas have also seen the expansion and renovation of port areas, as well as the creation of dedicated fish markets.

In its quest to protect resources, the Halieutis Plan has also helped change the focus of the industry. Instead of fishing large quantities of low-quality fish mainly oriented for fishmeal, firms are increasingly focusing on bringing in smaller quantities of better-quality fish, which can then be used for higher value-added activities, such as canning or freezing, increasing the value of the industry.

Exports

Exports of the country’s fish and seafood products have already established continuous market demand in a number of high-income markets, such as the US and the EU, both of which have free trade agreements in place with Morocco. At the same time, however, the southern provinces’ fishing and processing industry is also focusing on developing new markets such as Africa, Asia and Middle Eastern countries. “We want to focus on the most difficult markets, because our region’s fishing resources are of very high quality,” said Reda Chami, general manager at King Pelagique, which is based in Dakhla, and is one the biggest sector operators. For the region’s fishing industry, the national strategy has brought some visible results.

Artisanal Fishing

The sector is heavily fragmented, which means that expanding the industry relies not just on attracting large capital investments but also on improving smaller operators’ income and revenues, and encouraging greater cooperative action. As with small and medium-sized enterprises in the industrial sector, or with smallholder farmers, ensuring smaller fishing operators are able to access support facilities and infrastructure is crucial to maintaining growth and job creation.

The southern provinces are home to 46% of Morocco’s artisanal fishing fleet, which numbered 6532 boats in 2013, according to CESE. To promote the unification of fishermen, and the organisation of the region’s artisanal fishing fleet along unified clusters, authorities established fishing villages in N’Tireft, Lassargua, Labouirda, Lamhiriz and Ain Baida.

Village Mentallity

The initial objective was to establish adequate living conditions to allow fishermen to settle down in the villages and have access to basic services. Most of these villages currently serve as seasonal fishing areas, but have had trouble gaining sufficient critical mass to act as de facto settling areas for the fishermen.

A report by CESE states that areas such as these sometimes lack adequate access to health services. Others lack sufficient infrastructure for the long-term establishment of populations, namely a sufficient number of quality housing units and docking infrastructure to sustain fishing operations.

Insufficiently planned management of the fishing villages represents a lost opportunity, as the efficient clustering of fishing communities could provide for better pooling of resources and ease government efforts to increase access to public services. Revamped fishing villages could establish more viable employment options, especially in the regions that are farther away from urban centres.

Fishing Agreements

The EU has played a significant role for the Moroccan fishing sector, not only in terms of export markets but also in terms of purchased rights. The first fisheries deal between the two countries was signed in 1988, and fishing cooperation has typically included access by EU ships to some of the country’s fishing areas along the Atlantic coast, in exchange for fees as well as financial incentives to modernise Morocco’s own fishing industry.

In 2014, after lengthy negotiations, a new deal was established giving access to certain fishing areas across Morocco’s Atlantic Ocean coast in exchange for an annual payment of €30m for fishing rights, and an additional €10m to be paid specifically by private European – predominantly Spanish – fishing companies wishing to obtain licences.

Cooperation agreements with the EU are a sensitive topic in Morocco’s fishing industry, given the impact larger European ships can have on the local catch. According to Hassan Sentissi, president of FENIP, fishing cooperation agreements with the EU could have established better concessions for local fishing and processing operators. “Priority over the processing of our rich sea resources should be first given to the local industry,” Sentissi told OBG.

To address this, authorities have also aimed to establish stricter rules against illegal fishing. In 2013 Parliament passed a bill to increase the penalties for this. Fines ranging between Dh2000 (€218) and Dh100,000 (€10,900) were established. The legal package also aligned sector law to international practice by establishing mechanisms to block the access of illegal catches to the market.

Infrastructure

Given the limited transport links connecting both the processing facilities in Morocco and the country’s export markets abroad, the fisheries sector in the south has had to grapple with increased costs of doing business, even though the fishing companies based in the region remain very close to the most productive maritime resources in the country. “Being very close to the base resource allows us to compensate for higher logistics and energy costs,” Chami told OBG.

The result is that supply chain management is essential. Since the ports in the three southern provinces are relatively small and do not receive regular commercial lines, operators have to transport the area’s catch and processed products northward in order to access exporting routes. Laâyoune, for example, is heavily reliant on the port in Agadir, meaning that containers need to be carried 700 km by road, thereby raising risk levels for the product. If there is a delay and the goods are not shipped, companies generally need to stock the products for week – a situation that requires a lot of extra planning.

As a result, many of the port facilities in the southern provinces are upgrading. A Dh355m (€39m) extension of Dakhla Port started in 2010 and was completed in 2013, providing added capacity. “The expansion of the port has allowed the number of boats that can simultaneously discharge to rise to 24, as opposed to six boats before the project. This has improved the port’s services,” said Chami.

Similarly, a long-discussed project to establish a new dedicated fishing port facility in the Dakhla region has been gaining support, and in 2014 the Ministry of Agriculture and Fisheries launched initial studies for the facility. A new port would certainly help develop the fishing industry, not only in terms of its ability to reach export markets faster, but also as a means to capture more valued sea resources. “EU fishing agreements are not beneficial for Morocco,” Said Derhem, general manager of Derhem Seafood, told OBG. “European boats fish in Moroccan waters but the product does not transit through the kingdom’s ports. Moroccan processors should at least have the option of buying the product.”

Industrial Infrastructure

Regional and national authorities have been trying to attract investment into the downstream sector. As the CESE report mentions, in 2013 there were only five cannery units in the southern provinces, accounting for 9% of national canned seafood output, but there is plenty of room to increase this.

In July 2014 the Ministry of Agriculture and Fisheries launched a tender for the setting up of seven processing units in the Dakhla region, six of which are targeted at small seafood resources and the other at sub-product valorisation. The tender rules include a 25,000-tonne annual quota for small seafood development projects, 20,000 of which need to be fished by the investing firm, with a further 5000 that can be acquired from other regional fishing companies. Authorities have also set aside 95,000 sq metres of land in Dakhla Port’s industrial area for the establishment of the processing units.

On top of these, a host of investment commitments from private operators are expected to add processing capacity in the short term. Unimer has announced the opening of a Dh120m (€13m) integrated processing unit in Dakhla, which will focus on export markets. Also geared towards exports is a project to set up a Dh70m (€7.6m) aquaculture unit focusing on molluscs, such as oysters, in Dakhla, being established by the Moroccan-Catalan Aquaculture Society. Another Dh40m (€4.4m) fish sorting and freezing unit is being set up in Dakhla by Sanam Holding. “The development of aquaculture offers a lot in Morocco, although in some segments – like oysters – production is already above what is needed for the local market. National consumption has increased in the last 10 years but demand for Moroccan oysters is very limited,” Derhem told OBG.

These projects will all help to raise the industry’s value, but with such a competitive international market, innovation will also be key to maintaining export levels. “In order to add value in the fishing sector, Morocco needs to think out of the box, and go beyond just canning to considering other products, such as exportable ready meals and frozen goods,” Kamal Yahyaoui, manager at Gelfish, told OBG.

Challenges

As has been the case elsewhere in the kingdom, weaknesses in utility and industrial infrastructure have limited development in the downstream segment. For operations that consume a lot of energy, such as large-scale freezing, the local electricity grid is sometimes insufficient. “The electricity link is still weak. Because we have substantial requirements for refrigeration purposes, larger than the city of Dakhla’s reserves, we need to work with our own capacity sometimes, resorting to generators to make up the difference,” Chami told OBG.

Lack of sufficient processing capacity is especially problematic for the region of Dakhla. “The role of the industrial zones in the Oued Eddahab Lagouira region is limited. Only a very small proportion of the fish that originates here is transformed through value-added activities. Most of the catch only transits through Dakhla and goes by road to the processing facilities and markets in the north, which means that added value for the region remains weak,” Mustafa Ait Chattou, director for the Dakhla office of the National Institute for Maritime Research, told OBG.

A further challenge stems from the lack of support industries producing the necessary additional inputs for the processing of seafood resources. The canned seafood industry, for example, is heavily dependent on the transport of elements such as olive oil and packing cans from northern Morocco. “Overall, our production costs here are around 25% more expensive in comparison with the same type of production unit in Agadir,” Chami told OBG.

Financing

Securing adequate funding can also be an issue for local companies. “One of the main burdens for industrial firms in the fishing sector – and especially in the southern provinces – is access to financing. It is easier for them to partner with foreign companies for capital than to solicit support from Moroccan banks, even for strong actors with solid balance sheets,” Yahyaoui told OBG.

Human Resources

Similarly to other relevant sectors in the south’s economy, the fisheries industry lacks a sufficient number of local workers to support its expansion potential. This is particularly true for labour-intensive processing, and can mean difficult hiring processes and added costs. “A quality control manager in Agadir might be paid Dh10,000 (€1090) per month, and here he will likely earn Dh18,000 (€1960) per month, as well as demanding other perks,” Chami told OBG.

Most businesses OBG spoke to, however, expressed a preference for employing local workers. “People from here are inserted into their social environment, but if you bring someone from the north they are out of their comfort zone, so it is harder,” Chami told OBG. “As a business decision we aim to employ people from the region.” However, the lack of trained human resources sometimes leads local fishing firms to employ workers from other parts of the kingdom.

The fishing sector remains important for Morocco, due to its significant weight in terms of the national economy. As a result, development efforts taking place in the southern provinces and with an impact on the fisheries sector will resonate across the kingdom over decades to come.

In the short-term, infrastructure development should help the sector progress more rapidly, especially in terms of port capacity. However, improving the quality and quantity of value-added activities will determine the industry’s ability to remain competitive in international markets over the long term.

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The Report: Morocco 2015

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