The Report: Morocco 2016

Economy

Although Morocco is set to see weaker GDP growth in 2016, due in large part to a poor agricultural harvest following low rainfall, a series of financial reforms and initiatives, and strong foreign investment, have positioned the country well for future gains. The kingdom has had success in its recent efforts to build up export-oriented manufacturing projects, which should take over from more traditional industries in driving growth as well as provide higher-quality employment over the longer term. If Morocco can continue to attract major investment in high-growth-potential industries such as automobiles, aeronautics, agri-business and offshoring while also developing well-integrated business ecosystems in these areas, it could achieve the sort of growth rates seen in other emerging markets, such those in South-east Asia.

This chapter contains interviews with Mohammed Boussaid, Minister of Economy and Finance; Tanja Gönner, Chair of the Management Board, GIZ; Hafez Ghanem, Vice-President for MENA, World Bank.

Banking

The banks of Morocco rank among the largest on the continent, with a regional footprint matched only by South Africa’s biggest lenders. Recent years have seen these institutions deepen programmes for small and medium-sized enterprises and expand cashless transactions. The industry is not without challenges, however: having dealt with the issue of depressed liquidity levels several years ago, the sector is now faced with low lending growth and rising levels of non-performing loans, and when faster growth will return is unclear. However, continuing regulatory reform will enhance the stability of the system, and banks’ continuing expansion abroad, as well as the launch of Islamic banking and new payment institutions, will help to maintain profits, bring major new players into the kingdom, diversify the product offering and help boost financial inclusion levels that are already high by regional standards.

This chapter contains interviews with Abdellatif Jouahri, Governor, Bank Al Maghrib; and Adnan Ahmed Yousif, President and Chief Executive, Al Baraka Banking Group.

Capital Markets

The Casablanca Stock Exchange (CSE) was off to a good start in 2016, and in June saw its largest initial public offering (IPO) in eight years. However, the bourse’s all-share index remains below the levels seen before the global financial crisis, as do IPO and trading activity more generally, and it seems likely to be some time before these return to pre-crisis levels. Nevertheless, the coming months and years will see a wide range of reforms applied across the kingdom’s capital markets, including the launch of new exchanges and a variety of products, all of which should help to boost the CSE’s substantial potential.

This chapter contains interviews with Nezha Hayat, Chairperson, Moroccan Capital Markets Authority; Nikhil Rathi, CEO, London Stock Exchange; and Younes Benjelloun, Partner and CEO, CFG Bank.

Insurance

Already the largest and most developed in North Africa, the Moroccan insurance market is currently undergoing a range of reforms aimed at cementing its stability and further boosting premiums growth. While the life segment appears to be growing faster than non-life given its lower penetration rate, auto insurance can expect to see significant expansion as car ownership levels continue to rise. Plans to launch takaful (Islamic insurance) products and relax restrictions on distribution should further support continued growth in the coming years. Moroccan firms’ expansion drive in Africa is also set to continue, cementing the kingdom’s status as one of the continent's major insurance players.

This chapter contains an interview with Hassan Boubrik, Chairman, Supervisory Authority of Insurance and Social Welfare.

Industry & Mining

With a vision to create jobs and spur growth across the economy, the Moroccan government has focused considerable attention on developing the industrial sector in recent years. Under the framework of several government strategies, key manufacturing segments – including automotive and aeronautic components and agro-industry – have seen injections of capital and the rollout of specialised infrastructure, training facilities and fiscal incentives, helping to transform Morocco’s industrial sector over the past decade. Investments continue in the relatively young aeronautics and automotive industries, and in the recently lagging textiles and pharmaceuticals segments. In the phosphates-dominated mining sector, authorities have sought to increase activity in underdeveloped segments, passing a new mining code after the commodity price drop with the aim of attracting foreign investment, boosting capacity and spurring a more diverse range of output. If local operators and foreign players are able to improve their cooperation, further development of the industrial sector is likely to follow.

This chapter contains interviews with Philippe Petitcolin, CEO and Director, Safran; and Ali Bennis, President, Laprophan.

Transport

Capitalising on its strategic location and promising economic environment, the Moroccan transport sector has made significant strides in recent years. A range of major upgrades and expansions to roads, ports, railways and airports have continued to press forward, despite challenges such as the eurozone debt crisis, regional political instability and a tightening of the state budget. Looking ahead, the private sector is set to play an increasing role in financing and managing transport infrastructure. Significant investment in road construction has improved connections between newly developed industrial areas and port infrastructure, and the benefits of lower distribution costs are beginning to appear. Improvements to urban transport, particularly in Casablanca, will help further improve connectivity and reduce congestion, while ambitious plans to expand aviation and maritime infrastructure will ensure a gradual rise in capacity.

This chapter contains interviews with Aziz Rabbah, Minister of Equipment, Transport and Logistics; and Mohamed Benouda, CEO, SNTL Group.

Energy

In recent years Morocco has been working to reduce its energy dependency through renewable energy projects and the rollout of an ambitious oil and gas exploration programme. Its energy consumption has increased by 5-6% a year for the past 25 years, and demand is expected to quintuple by 2050. Though it possesses few oil and gas reserves, Morocco boasts strong potential in renewable energies, and is expected to use the next climate change conference, which it will host in November 2016, as a springboard for its ambitious plan to source 42% of its energy needs from renewables by 2020. Having successfully introduced renewables into its energy mix by developing several wind farms and its first solar plant in Ouarzazate, the country is now looking to share expertise by offering to cooperate on renewable energy projects in neighbouring countries.

This chapter contains interviews with Mohamad Abunayyan, Chairman, ACWA Power; and Isabelle Kocher, CEO, Engie.

Environment

Morocco has established a solid legal framework in recent years to encourage the development of renewable energy and the implementation of energy efficiency strategies. With the impact of climate change becoming more apparent in the country, the government has developed several initiatives to lower greenhouse gas emissions and improve its management of water resources. In the context of urban sprawl and its impact on water supply and natural ecosystems, Morocco has put in motion a robust plan aimed at enabling the country to better adapt to climate variations.

This chapter contains an interview with Hakima El Haite, Minister of Environment.

Construction & Real Estate

Following a slowdown in 2013 caused by a range of factors, Morocco’s construction industry returned to growth in 2014 and 2015, driven by high demand for housing and investment in infrastructure projects. While the prices of building materials have fallen with global economic downturn – the steel segment in particular has felt the impact of slow growth in international markets – cement consumption saw a modest return to growth in 2015. In the real estate sector, after a drop in the market following a boom that peaked in 2007-08, recent years have shown signs of a modest recovery. While the luxury segment has remained depressed after the global downturn of 2008-09, state incentives aimed at attracting developers to the mid-range and affordable housing segments, which are marked by a persistent deficit, have helped offset this somewhat, and new legislation allowing for the creation of real estate investment trusts (REITs) is set to attract greater foreign investment in segments that have previously lagged. If such investment picks up in the coming years as predicted, the sector’s recovery will continue.

This chapter contains interviews with Abdelaziz El Mallah, General Manager, JACOBS Engineering S.A.; and Nawfal Bendefa, CEO, Vecteur LV.

Telecoms & IT

Since its liberalisation in 1997, Morocco’s telecoms sector has experienced substantial growth driven by the entry of new operators, a rapid increase in mobile subscribers and rising consumption of voice and data services. Despite the sector’s potential, user revenue growth has slowed in recent years due to fierce price competition among the main providers. Operators seeking new springboards for growth are therefore exploring a capital-intensive push towards data offerings. In the IT sector, having made an early drive for development in the mid-1990s, Morocco has managed to carve out a sizeable niche for itself in selected areas such as offshoring and electronic payments. The government is now working on a new strategy, Plan Maroc Numeric 2020 – a successor to the previous Plan Maroc Numeric 2013 – aimed at building on the country’s international position in cost-competitive IT services, while emphasising greater diversification and entrepreneurship.

This chapter contains an interview with Nadia Fassi-Fehri, CEO, Inwi.

Casablanca

Already by far Morocco’s largest city and its economic capital, Casablanca is currently going through a major period of redevelopment. Planned large-scale works include substantial improvements to infrastructure, construction and renovation of leisure and cultural facilities, and expansion of the public transport network to make the city a more attractive place for residents and tourists alike. Launched in late 2014, a major new growth strategy, the 2015-20 Casablanca Strategic Development Plan, outlines a vision for the city as a well-connected and inclusive financial centre that is also an appealing place to live and visit. New industries are also emerging in the city.

This chapter contains interviews with Abdelaaziz Omari, Mayor of Casablanca; and Mohamed Aouzai, Governor of Urban Agency of Casablanca.

Retail

While Morocco’s retail sector remains fairly limited, an expanding middle class, increasing urbanization and a more competitive formal sector are set to drive the industry in the coming years. Strong economic growth has seen malls and supermarkets proliferate, drawing an increasing number of foreign brands and franchises into the country. Although the traditional, informal sector continues to dominate – particularly in rural areas – changing consumer habits and a heightened awareness of quality bode well for the industry’s future.

Tourism

Welcoming more than 10m tourists annually since 2014, Morocco is Africa’s top tourism destination by foreign arrivals, the result of a decade of steady development under the framework of two successive sector development plans, Vision 2010 and Vision 2020. Despite an increasingly challenging regional environment, the sector has proved resilient thanks to the kingdom’s political stability, with only a minor drop in tourist arrivals in 2015. Authorities are expecting the sector to pick up in 2016, driven by increased air connectivity, further diversification of source markets and a more specialised tourism supply.

This chapter contains an interview with Omar Kabbaj, CEO, Interedec.

Agriculture & Fisheries

Agriculture accounts for around 14% of GDP and 35-40% of jobs in Morocco. Driven in large part by the national agricultural policy, the Green Morocco Plan (Plan Maroc Vert, PMV), the sector’s GDP contribution increased by 57% between 2008 and 2015 to reach Dh115bn (€10.5bn). Among the key changes in the sector since the launch of the PMV is a shift in structure: Moroccan agriculture today is less dependent on cereals output for growth. Results borne of this strategy became most evident when, at the start of the 2015/16 agricultural season, severe droughts hit the country, leaving little hope for prosperous cereal yields. The increased value addition, however, is expected to offset the decline in upstream cereals production. In addition, efforts to mitigate the effects of climate change are playing a significant role in improving the sector’s resilience.

This chapter contains an interview with Mohammed Fikrat, CEO, Cosumar.

Education & Research

Ensuring access to education has been a prime objective for Morocco over the past couple of decades, and recent indicators show significant progress. This comes on the back of major efforts to reform the education system through strategies such as the National Charter of Education 1999-2005 and the Emergency Plan 2009-12. The government has also maintained a high level of public spending on the sector. In the short to medium term, the public sector will remain the main provider in Morocco, while the private sector will continue to depend on political will to encourage its growth and attract more students. Collaboration between both sectors will be key to addressing capacity and quality shortfalls. Vocational training is also likely to continue playing a major role in providing an alternative to mainstream education, as well as in putting new graduates into a market where needs for qualified labour are constantly evolving.

This chapter contains an interview with Hervé Biausser, President, CentraleSupélec and Vice-President, Ecole Centrale Casablanca.

Health

Health care services in Morocco have evolved in line with the country’s epidemiological transition, facilitated by heightened surveillance of health-related conditions and the maturing role carried out by the private sector. Developments have tracked objectives outlined in the country’s long-term strategy, Vision 2020. In its 2012-16 phase, reforms have aimed primarily at consolidating past gains but also addressing new needs, with a particular focus on restructuring emergency services, promoting family medicine, developing rural health care, extending national coverage schemes and developing human resources. Broader health coverage and the gradual expansion of medical services bode well for the future of the sector. The challenge that lies ahead is to ensure even distribution of facilities and medical staff as demand for health services rises.

This chapter contains an interview with Ahmed El Bahri, Managing Director, Cheikh Khalifa Ibn Zaid Foundation.

Tax

This chapter provides an overview of Morocco’s taxation system and examines its investor-friendly business environment.

This chapter contains an interview with Kamal Mokdad, Managing Partner; and a viewpoint from Asma Charki, Partner, Mazars Morocco, on Casablanca Finance City.

Legal Framework

This chapter introduces potential foreign investors to the different aspects of the legal system in Morocco.

This chapter contains a viewpoint from Romain Berthon and Lina Fassi-Fihri, Partners, Lefèvre Pelletier & associés, on participatory democracy in action.

The Guide

This section includes information on hotels, government and other telephone listings, and useful tips for visitors on topics like currency, visas, language, communications, dress, business hours and electricity.

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