The business environment in Morocco is one of the most attractive in North Africa and it continues to improve in international rankings. While a number of challenges such as payment delays and access to finance affect companies operating in the kingdom, the government is working on a range of initiatives to address these and other problems, though observers say progress remains slow in several key areas.
Morocco was 75th of 189 countries in the World Bank’s 2016 “Doing Business” report, up five places from its position in 2015. This put it second in the North Africa region, one rung behind Tunisia, but well ahead of Libya (188th), Mauritania (168th), Algeria (163rd) and Egypt (131st). The kingdom’s performance was boosted by improvements in the categories of registering property (up 27 places) and starting a business (up nine places).
Overall, the country performed particularly well in the categories of dealing with construction permits (29th), starting a business (43rd) and getting electricity (55th), but was weighed down by weaker scores in areas such as resolving insolvency (130th) and getting credit (109th).
One notable business environment challenge not captured by the rankings is the issue of delayed payments. “Payment delays by both the government and private firms have become a big problem for small and medium-sized enterprises (SMEs) and micro-enterprises in particular,” Mohamed Tahri, deputy director-general at Société Générale Maroc, a local subsidiary of the French bank, told OBG.
A draft law is being created to address the issue, and Faical Mekouar, vice-general president of the SME Committee at the General Confederation of Moroccan Companies (Confédération Générale des Entreprises du Maroc, CGEM), which has been providing input on the new law, said the body was broadly happy with the legislation. “We are optimistic that the law will help clear up the problem, though much will depend on its implementation,” he told OBG. Among other changes, the legislation specifies that existing regulations on payment delays apply to publicly owned industrial and commercial institutions, which was previously unclear.
“It is an important change, as such institutions are major purchasers,” Mekouar told OBG. The government has also drawn up a decree to shorten the timeframe for payments by government institutions from 75 to 60 days, though this has yet to be implemented. In addition, the CGEM has put in place an initiative of its own on the matter, namely a “good payers charter”, which Mekouar said had been signed by several major local businesses.
Obtaining credit is another challenge for some firms. The World Economic Forum ranked access to finance as the most problematic factor for doing business in the country in its 2015-16 “Global Competitiveness Report”, as it has done for several years, while the 2013 World Bank Enterprise Survey for Morocco ranked the issue as the fourth-most-important business environment obstacle to firms in the kingdom, with 9.8% of respondents citing it as a problem.
As in many countries, this difficulty is particularly acute for SMEs, though by regional standards the situation is relatively good. SMEs accounted for around 38% of lending to companies, and only 27.7% of respondents to the enterprise survey categorised access to finance as a major constraint, compared to a regional average of 35.7%.
The state has taken a number of initiatives to further improve the situation, including a move in 2013 by Bank Al Maghrib (BAM), the central bank, to allow banks to use loans to SMEs as collateral for liquidity, and various initiatives by the Central Guarantee Fund to boost SME lending rates (see Banking chapter). In April 2016 BAM also stepped up its coordination with the CGEM and the Moroccan Banking Association – the banking industry representative body – to increase lending.
Another significant challenge Moroccan businesses are faced with is corruption. Morocco ranked 88th out of 168 countries in Transparency International’s 2015 corruption perceptions index with a score of 36 out of 100 (100 indicating no corruption). Within the Nort Africa region, Algeria and Egypt were also placed 88th, while Tunisia ranked 76th with a score of 40. The kingdom’s score has improved somewhat over the course of the last decade, having stood at 32 out of 100 in 2005, though its 2015 score was down from 39 in 2014.
The 2015-16 “Global Competitiveness Report” ranked corruption as the third-most-problematic factor for doing business in the country, while the 2013 enterprise survey for the kingdom ranked it first, with 20.6% of respondents identifying it as the biggest obstacle, 53.1% of firms identifying corruption as a major constraint and 37.2% of firms having experienced at least one bribery request, compared to 24% regionally.
The constitution of 2011 aims to improve transparency through various measures, which have been gradually implemented since their conception. As part of this process, in 2015, the National Authority for Integrity and the Prevention and Combatting of Corruption, which replaced a previous anti-graft body, the Central Authority for the Prevention of Corruption. Unlike its predecessor, the new body is independent of the government.
Speaking to OBG, Abdessamad Saddouq, former secretary-general of local anti-corruption NGO Transparency Maroc, told OBG that the government anti-corruption strategy, which lays down medium- and long-term anti-corruption action plans adopted in December 2015, represents a bright spot in the kingdom’s efforts to tackle graft. However, he did highlight potential weaknesses in the legislation, noting that its independence from the authorities is reduced by the degree that power is concentrated in the hands of its president, who is appointed by (and subject to reappointment by) the king.
The authorities are also working on a range of other initiatives to improve the general business environment, including the creation of a new National Business Environment Council, presided over by the prime minister, underscoring the government’s commitment to dealing with the issue at a high level. Various initiatives are also under way aimed at improving the kind of interactions companies have with public entities and the government in particular. These include the creation of a new website by the government in conjunction with the CGEM that publishes the details of various governmental procedures pertinent to businesses.
Under the initiative, government entities will only be permitted to request documents from businesses that are specified on the website as being required for any given procedure. “The implementation of the change would have a big impact, as at the moment procedures are highly variable from one region to another,” El Khatib told OBG. The government has also created a new system that assigns businesses an identification number, which companies have been obliged to sign up for since July 2016.
To ease the process of obtaining construction permits, in 2014 the government also set up a one-stop shop for such permits. However, Mohamed El Khatib, head of projects at the Business Environment, Public-Private Partnership and Public Procurement Commission of the CGEM, said the system was not working particularly well thus far. “The system’s staff are not always well trained, and there has been some resistance from civil servants towards its implementation, as well as a lack of sufficient funding for it,” he told OBG.
A number of regional authorities have also been making efforts to improve the general business environment. For example, in April 2016 the Casablanca Regional Centre of Investment signed an agreement with several local partners, including the city’s municipality, to strengthen the investment climate by reducing the amount of time required to establish a new company from 11.5 days – as was the case in the first half of 2015 – to less than one.
Despite all these efforts, El Khatib said that the state’s enthusiasm has not always begotten success. “The current government has shown a lot of interest in reforming the business environment, but progress has been slow, and many projects have faced repeated delays,” he told OBG.