Interview: Hassan Laaziri
How would you describe the current state of the private equity market in Morocco?
HASSAN LAAZIRI: In the early 1990s the European Investment Bank spearheaded the development of the private equity industry in Morocco through Moussahama. The other funds did not come into existence until 2000, when the Association of Moroccan Capital Investors was created, bringing together the majority of private equity players. Private equity then started to establish itself in Morocco. As was the case for the beginnings of the industry internationally, the first private equity funds were created with the backing of banks and other financial institutions such as CDG. According to the latest available figures, around Dh9bn (€833.4m) is managed through funds, and nearly 200 companies are financed by private equity. In addition, fund managers in Morocco have become more organised, professional and, most importantly, independent.
What we have noticed in the Moroccan market is that funds tend to invest more in growth capital than venture capital. However, the government has realised that venture capital fosters start-ups and an entrepreneurial mindset. Therefore, the public sector has taken the initiative to launch two venture capital funds of €20m. Those funds will be leveraged by private money to about €40m to help establish companies and set up this type of financing. Private equity funds have proven they can successfully exist in Morocco; of the more than 60 companies currently listed on the Casablanca Stock Exchange, around 16 of those, including HPS, Disway, S2M and CMCP, are financed by private equity.
How has the development of the industry reshaped the overall marketplace?
LAAZIRI: The government changed the private equity laws in 2015, and this has had a positive impact so far. However, group taxation for holding companies remains an issue. There is also the problem of value-added taxes containing management fees, as funds generate revenue in the long run, which can become costly for investors. At the same time, high taxes arise for transferring personal shares to a company. Looking at investors, the majority of funds are large scale and regional. We have also noticed that even if numerous funds are regional, the majority of their investments are done locally. This means that most of their assets are based in Morocco due to the political stability, economic growth and existing capital markets regulations.
For us to be a centre for private equity managers, we need to develop a strong framework of laws and non-taxation conventions with African countries that will help facilitate the location of funds operating in Africa in Casablanca, and thereby make Casablanca a financial hub for the industry.
To what extent have local enterprises benefitted from this type of investment?
LAAZIRI: We do not really invest in sectors, but rather in entrepreneurs who want to develop their companies and expand internationally. The people are the key: their willingness to develop their respective businesses, as well as their innovative potential. In general, private equity firms seek to invest in companies that challenge the market. By presenting innovative business restructuring plans, small and medium-sized enterprises across all sectors are able to raise capital, grow and eventually become market leaders. Increasing private equity-backed initial public offerings of small enterprises exemplifies this positive development.
Overall, private equity has had a remarkable impact on the progression of local companies. Between the time funds invest and divest, turnovers, margins and the number of people employed have grown. This financing involves operational and structural guidance, including the establishment of a board with an independent member, along with obtaining ISO certifications. But most importantly, we aim to depersonalise companies away from the “one-man shows” common in Morocco.
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