New technologies strengthen Morocco's ICT sector

 

The ICT sector generates between 5% and 6% of GDP, of which telecommunications companies represent about half. However, technological developments coupled with strong political will and economic imperatives are pushing Morocco’s ICT sector growth beyond the telecommunications subsector. “Incorporating digital solutions in business operations is not an option – it is a must to keep Moroccan companies at the forefront of regional and international standards,” Lamiae Benmakhlouf, the managing director of Moroccan Information TechnoPark Company (MITC), told OBG.

Following broader international trends, the expansion of digital solutions has received support from the authorities at various levels. While improvements in infrastructure have been led by updated laws, uptake has been largely supported by Digital Morocco 2020 (Maroc Digital 2020), a national development blueprint adopted in 2016 to supplement the achievements of Numeric Morocco 2013 (Maroc Numéric 2013), adopted in 2008. In 2017 the blueprint established the Digital Development Agency (Agence du Développement du Digital, ADD) to oversee progress and regulate ICT-related projects and reforms. The agency’s missions include reducing the urban-rural digital divide, achieving a shift from e-government to digital government, and promoting the digitisation of business processes.

Oversight

The ICT sector is regulated by the Ministry of Industry, Trade, Investment and the Digital Economy (Ministère de l’Industrie, du Commerce, et de l’Economie Verte et Numérique, MCINET), which is responsible for promoting a dynamic ICT-driven economy. The National Telecommunications Regulatory Agency (Agence Nationale de Régulation des Télécommunications, ANRT), the subsector watchdog, has been key to liberalising telecoms and enabling technological development throughout the kingdom, as established by the 1997 Law No. 24-96 and its subsequent amendments. Other major actors in the sector include the newly instituted ADD and the Federation of Information Technologies, Telecommunications and Offshoring (Fédération des Technologies de l’Information des Télécommunications et de l’Offshoring, APEBI), a private sector-focused organisation that works to promote technological advancement and supports local IT companies’ global growth.

Performance

The liberalisation of the telecoms industry began in 1998 with the dismantling of the Post and Telecommunications Office and the creation of the national Maroc Telecom, which subsequently underwent privatisation. After three successive share acquisitions in 2001-07, Paris-based Vivendi acquired 53% of Maroc Telecom for a total of Dh45.4bn ($4.7bn) and 0.2% of Vivendi shares. The government then listed 14.5% of shares on both the Paris and Casablanca stock exchanges in 2014.

During the same year, UAE-based telecoms operator Etisalat became the majority shareholder following its acquisition of all of Vivendi’s shares for $5.7bn. In 2019 the Moroccan government sold an additional 6% of shares to local institutional actors for Dh125 ($13.02) per share and then listed another 2% of shares on the Casablanca Stock Exchange as a public offering, leaving the government of Morocco with the remaining 22% stake. This change in shareholder structure took place during the same year Maroc Telecom increased its international presence to include 10 African countries, following its acquisition of Tigo Chad from Group Milinet. Maroc Telecom remains the country’s largest telecoms provider as of 2019, with 19.3m users.

The second-largest market player is Orange Maroc, with 16.5m users. It was the first private actor to enter the market, in 2000, under the brand name Medi Telecom (MediTel). With ownership initially shared between Altice Portugal (32.18%), Spain’s Telefónica (32.18%), Moroccan investment fund FinanceCom (18.06%), and the state-owned Caisse de Dépôt et de Gestion (CDG) (17.59%), MediTel became fully Moroccan in 2009, with FinanceCom and CDG each controlling half. The French telecoms operator Orange took a 40% stake in the company a year later, paying €640m, followed by a second share acquisition in 2015, making it the majority shareholder with a 49% stake in the company, and leaving FinanceCom and CDG with a 25.5% share, each. In 2019 Orange Morocco accounted for 10% of the group’s MENA revenue.

The third-largest operator, Inwi, entered the market in 2009. Royal holding company Société Nationale d’Investissement owns 69%, with the remaining 31% split between Kuwaiti telecoms operator Zain and Al Ajial Investments, also of Kuwait. As of the third quarter of 2019 Inwi counted 11.7m users.

Mobile

In the first quarter of 2019 the Moroccan mobile market reached 44.73m users, representing a penetration rate of 127%. While more than nine out of 10 subscriptions were pre-paid, post-paid plans saw a 20% year-on-year (y-o-y) increase in the first quarter of 2019, according to the ANRT. Through the same period, Maroc Telecom held 43% of the mobile market, while Orange and Inwi claimed 35% and 22%, respectively. As a comparison, the three operators held 47%, 30% and 23%, respectively, in 2012.

Data

Despite the apparent market saturation, telecoms operators have been able to increase their revenue through the expansion of consumer data use. In the first quarter of 2019, two out of three Moroccans had access to the internet, representing a y-o-y increase of 9.32% to 23.1m users. This rise is mainly due to an increased use of mobile internet, which represented a staggering 93% of internet connections for the same period. Following the launch of 4G in 2014, LTE is now available in 60% of the country, according to Huawei’s 2019 Global Connectivity Index. In the mobile internet segment, Maroc Telecom held half of the market, while Wana Corporate and MediTel claimed just over a quarter and a fifth, respectively, as of 2019. In 2019 Orange Maroc announced a Dh1.2bn per annum plan to upgrade 4G and optical fibre infrastructure. Meanwhile, Maroc Telecom plans to invest Dh10bn in infrastructure in 2019-21, reaching Dh68bn in total investments and Inwi is seeking to develop 5G.

With online content diversifying and prices decreasing, the percentage of Moroccans who own a smartphone rose to 80% in 2019. Three-quarters of internet users are online on a daily basis, with their primarily use being social media. The increase in data consumption has offset the decrease in revenue from voice over internet protocol, with the average revenue per user (ARPU) from data consumption rising from Dh24 ($2.50) per month in the first quarter of 2016 to Dh31 ($3.23) per month three years later, despite a decline in market prices throughout the same period.

Home Internet

These market changes have been supported by infrastructure upgrades and better preparedness among stakeholders to provide new digital services. The World Economic Forum’s network readiness index, part of its “Global Internet Technology” report, measures the ability of a country to exploit ICT opportunities and ranked the kingdom 78th out of 139 countries in 2016, up from the 88th in 2010. The ranking underlines the need for Morocco to direct efforts towards the development of more robust infrastructure, the provision of more systemic training and the promotion of digitisation in the private sector. Nevertheless, it also recognises the fruitful efforts made in reducing costs and greater ICT use in the government. The World Economic Forum’s report is not the only index where Morocco is looking to improve its standing. Both the public and private sectors recognise the significance that a developed ICT sector has for the economy. “In order to reach its objective of ranking among the top 50 in the World Bank’s “Doing Business” report, Morocco must reduce its digital gap through a clear regionalisation plan,” Salah Ouardi, the managing director of HP Morocco, told OBG.

In terms of infrastructure, the country’s fibre-optic network is largely dominated by Maroc Telecom (25,000 km), followed by Wana Corporation (6000 km) and MediTel (5000 km). The country’s 10-year broadband strategy, implemented in 2012, aims to get the entire population connected to the internet by 2022. Part of the plan obliges telecoms operators to use 2% of their revenue to develop the network in commercially non-viable zones. Although 60% of households possess a computer or tablet, there is a significant technological rural-urban divide, with ownership rates at only 36% in rural areas, compared to that of 72% in urban areas.

Fibre-to-the-home connections reached 107,000 in the third quarter of 2019, according to ANRT, a 65% increase from 2018. Market actors recognise the benefit of sharing telecoms infrastructure in the development of high-speed internet across the country. With civil works accounting for 50-70% of deployment expenses, sharing infrastructure would dramatically reduce investments costs for service providers. Law No. 121-12, adopted in February 2019, considers fibre internet to be a universal service and reiterates an earlier obligation for operators to publish a technical offer for infrastructure sharing. The new law also allows operators to install fibre networks in public spaces, and requires all new buildings to be connected to the high-speed network.

To this end, Orange adopted a plan in 2019 to connect 1m households to the network over a period of four years. It also signed an agreement with the Office of Vocational Training and Work Promotion (Office de la Formation Professionnelle et de la Promotion du Travail, OFPPT) in April 2019 to develop curriculum for jobs training programmes on fibre network instillation and maintenance.

As of January 2020 about 180,000 households could access the programme. There is strong agreement in the private sector on the importance of creating a skilled workforce in tandem with adopting new technologies. “As Morocco continues its digital transformation, what remains the most important resource is grey matter,” Mountasser Fassi Fihri, the CEO of Involys, a Moroccan software solutions provider, told OBG. “The country needs to invest significantly in human resources in order to remain competitive.” Indeed, increased investment is needed throughout the sector, not just in infrastructure and training alone. Plans for 5G are currently under way, and more focus will need to be placed on security moving forward. “With the arrival of 5G, cyberthreats are likely to increase in Morocco,” Driss Benomar, the CEO of Alomra Group, a Casablanca-based security solutions firm, told OBG. “Further infrastructure investment will be needed to protect the local environment.”

Add

Under the auspices of the Ministry of National Education, Vocational Training, Higher Education and Scientific Research (Ministère de l’Education Nationale, de la Formation Professionnelle, de l’ Enseignement Supérieur et de la Recherche Scientifique, MENFPESRS), the ADD was created by decree in December 2017 and became fully operational following the appointment of its CEO, Mohammed Drissi Melyani, in February 2019. The agency’s task is to enhance the country’s innovation ecosystem through increased digitalisation in the public and private sectors, training public defenders to use digital solutions, developing and proposing legislation, and managing the overall evolution of the sector.

In its first operational year, the agency created the online platform startuphub.ma as part of its mission to boost access to digital tools and help start-ups scale up. The platform aims to facilitate access to financial services and ease dealings with the government by digitising the way young businesses can be categorised as a “young innovative start-up”, a classification which provides access to credit cards with an annual cap of Dh500,000 ($52,000) to be used for online purchases of foreign technology services. By the end of the first half of 2020 the agency plans to have established a digital lab for public administrations that will allow for the easier development and testing of new digital solutions, and will also provide training curricula and programmes to improve human resources.

The government’s efforts to embrace and facilitate digitalisation are already paying dividends, as seen by the kingdom’s rise to 53rd out of 190 countries in the World Bank’s “Doing Business 2020” report, up seven places from 2019. The increase is mostly attributed to wider adoption of digital solutions in the country’s public sector. The report, however, underlines the need for greater education and training in order for the country to reach the full potential of the new technology in place. In nine years Morocco saw a remarkable 101-place increase in the paying taxes indicator, following the digitisation of revenue collection and alignment of local tax rates to international standards.

E-Gov

Pioneering the use of ICT in daily operations, the government has been ramping up efforts to implement digital solutions. By 2020 over 80% of operations at the Ministry of Interior and all PortNet services were digitised, with nearly all Morocco’s port operations for international trade being electronic since 2019. “While developing and installing digital solutions is an important first step, we need to put more emphasis on upskilling the human capital that will deliver these services, and better educate the population for maximum effectiveness,” Mohamed Nebri, the chief of strategy and communications at ADD, told OBG. The country’s judicial system also saw improvements in the “Doing Business” report, implementing new legislation and procedures promoting transparency.

The ADD is similarly working to improve the interoperability of platforms across government organisations, which will enhance cooperation between institutions. The agency proposed legislation in 2019 that would unify digital administration among different public sector institutions, aiming to more efficiently deliver government services to the end user.

E-Commerce & Online Payments

Online merchants, too, are benefitting from recent developments in ICT. Active e-commerce outlets numbered around 1000 in 2019, according to the Monetic Interbank Centre (Centre Monétique Interbancaire, CMI), including 500 that started operations in 2019 alone. While online shopping is slowly gaining popularity in the kingdom, the sector needs to overcome cultural challenges for more sustained growth, as Moroccans predominantly prefer cash; some 90% of online purchases were paid with cash on arrival in 2019. An expansion of electronic payments would surely boost economic activity, and to this end ANRT, in partnership with Bank Al Maghrib, the country’s central bank, issued 11 electronic payment licences to financial institutions in November 2018.

The adoption of mobile wallets has also yet to gain momentum. According to the central bank, only about 360,000 e-wallets have been created since their legalisation in 2015. While this may fall short of the private sector’s expectations, some 1.5bn transactions from over 6m users are expected by 2024. Delays in greater adoption of mobile payments have been attributed to a lack of interoperability among operators and mismatched value proposals to unbanked populations, notably merchants who consider mobile payments a traceability tool rather than a beneficial financial product. Inwi is the first telecoms operator in the kingdom to invest in the segment, launching Inwi Money in the second half of 2019. During its first quarter Inwi Money registered Dh7m ($730,000) in transactions from over 140,000 clients. It also inked a deal with Marjane, the kingdom’s largest retail store network, to offer a mobile money payment option in all Marjane’s locations starting in January 2020. Nevertheless, in 2018, 14.2% of Moroccans made at least one purchase online – equal to more than one in five internet users. This represented a 6.2% increase since 2015. E-commerce experienced sustained growth in 2019, with a 13% full-year increase in volume, and seeing a 42.8% increase in value, for a total of Dh2.3bn ($240m), during the first half of the year, according to the CMI. However, the 2019 UN B2C E-Commerce Development index ranks Morocco 95th out of 152 countries as the share of the financially included population remains low, at 29%, below the world average (40%) and the continent average (60%).

Artificial Intelligence

With disruptive technologies becoming a cornerstone to economic development and business efficiency, the kingdom is ramping up efforts to change the mindset of local actors on artificial intelligence (AI). A recent study conducted by Microsoft and EY on the perspectives for AI development in the Middle East and Africa shows the kingdom made seven AI-related investments totalling about $7m in 2008-18.

By way of comparison, the leading AI countries in the region, Turkey and the UAE, made $3.46bn and $2.15bn in investments through 252 and 160 transactions, respectively. To increase kingdom-wide AI investment and projects, MENFPESRS, in partnership with the ADD, launched a programme called Al Kharizmi, the Arabic root for algorithm. The Dh50m ($5.2m) project aims to source and develop AI-based solutions for 11 specific sectors of the economy, including agriculture, tourism and health.

Education & Training

While effort has been directed at upskilling the workforce and better educating and preparing young people for the evolving labour market, a more proactive stance from the government, in partnership with the private sector, is needed to supply the job market with a relevantly skilled workforce, notably in terms of coding and soft management skills. “Before thinking about future trends like smart cities and AI, it is paramount that we fill the country’s skilled workforce gap,” Abdellah Idrissi, CEO of Sicotel, a telecoms engineering company, told OBG.

Following the king’s throne speech in August 2018, the private sector has been eagerly waiting to see the results of the OFPPT’s nationwide training schemes. The organisation is currently working to implement its Cities of Professions and Skills programme (Cités des Métiers et des Compétences), which will see education centres devoted to a range of relevant subjects opened throughout the country.

Technoparks

Within the sector, growth at the entrepreneurial level has been largely supported by the MITC. “Technoparks can be considered a kind of ecosystem, working to bridge the gap between innovative Moroccan tech start-ups and the business community at large,” Benmakhlouf told OBG. As of January 2020 the MITC has hosted about 1200 start-ups, with 300 working from one of its three facilities in Casablanca, Rabat and Tangier. A fourth facility is expected to open in Agadir in June 2020.

In addition to standard incubation services, the MITC aims to foster open innovation and create a suitable start-up environment. The MITC recently partnered with IBM and Happy Ventures, the latter of which specialises in consulting and strategy, to create Tech-Innov, a platform that enables public-private partnerships on an open-source model to help innovative start-ups tackle public challenges. Furthermore, in early 2020 Tech-Innov partnered with eco-city Zenata on a programme called Smart Z to help local start-ups develop and implement tech-enabled, eco-responsible projects in the city. Other examples of MITC collaboration include a three-year partnership with Réseau Entreprendre Maroc, which financed development programmes for start-ups, and a partnership with Microsoft, related to virtual reality, the internet of things and AI, which concluded in 2018.

Development Financing

A major hurdle for tech start-ups is financing. “Traditional banks do not want to engage in seed investing, as the risks are perceived as too high. We need to create alternative solutions for our innovative start-ups to thrive,” Benmakhlouf said. To this end, the MITC, through its subsidiary MITC Capital, established the Morocco Numeric Fund in 2010, a Dh100m ($10.4m) seed investment fund. The fund – co-owned by the Moroccan state and private actors including BMCE Bank, CDG, Attijariwafa Bank and Banque Populaire du Maroc – entered its second phase in 2018 with an additional Dh200m ($20.8m). In early 2019 CDG launched 212 Founders, another development fund, with Dh700m ($72.9m) in capital covering seed investments up to Dh1m ($104,000) and growth investments up to Dh3m ($312,000).

Outlook

Greater promotion and adoption of digital solutions has the potential to shift the backbone of the kingdom’s ICT sector beyond just telecommunications. While international rankings place the kingdom among some of the best performing countries in both the North African region and the continent of Africa in ICT-related indices, infrastructure development and upgrades must be strengthened in order to create more inclusive and productive development. Enhanced and updated training programmes will be crucial to changing mindsets on the benefits of technology, as well as preparing the current and future workforce to overcome modern challenges. With the kingdom’s regulatory framework moving in the right direction, ICT developments will continue to bridge national divides and cement Morocco’s position as one of the most important players on the African continent.

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The Report: Morocco 2020

ICT chapter from The Report: Morocco 2020

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