Younes Benjelloun, Partner and CEO, CFG Group: Viewpoint

Younes Benjelloun, Partner and CEO, CFG Group

 

The issue with savings in Morocco is not that they are weak but that they are not necessarily well oriented. Most savings go to traditional banking products, largely due to a lack of awareness. People are not familiar with saving products. Although we have seen a jump in undertakings for the collective investment of transferable securities (UCITS) in 2015, with more than Dh300bn (€32.64bn) invested, the largest clients are institutionals, such as pension funds.

When people have savings and aren’t aware of the available options, they opt for regular banking products, such as saving accounts or term deposits. This is in part caused by a lack of knowledge, but also because the majority of individual investors behave as purely short-term speculators.

Financial education is needed to understand that an investment in equities is a long-term investment, targeting retirement and children’s education. A part can be reserved for speculation, but these transactions must be seen as saving and not as commercial transactions with short-term impact. Even for Maroc Telecom’s initial public offering (IPO), which was the largest operation in the history of Casablanca Stock Exchange (CSE), we reached only about 120,000 small shareholders, which is a relatively low number.

Efforts have been made by the government to try and implement savings plans, but this was a complete failure. The main reason is that these equities saving plans were misconceived. If incentives are not attractive, people prefer to save normally, maintain their flexibility and invest directly on the stock market instead of doing so through a plan and being locked in for five years. In other places such as the US or Europe, incentives are strong, so people use them, and this is positive for the country’s economy. Morocco needs better financial education. Although the CSE has been making efforts in this area, it is imperative that the fundamental concepts related to financial markets, bonds and the stock exchange are taught during primary and high school. This education will change the current situation, where most of the public sees the stock exchange as something complicated and incomprehensible.

Today, demand exists, but the offers are limited. Saving are important for pension funds, insurance companies and UCITS, and through these there is constant demand for IPOs. The shortage of offers has different explanations. We cannot forget that the CSE had an extremely positive period, with 25 IPOs in less than three years, between 2006 and 2008; however, after these offerings, new issues haven’t been very successful. The last one lost 10-15% of its value in less than one month, even though the fundamentals of the company are very strong.

There is a timing problem; companies are too prudent, waiting for the perfect moment to go public. Unfortunately as the extremely favourable window of opportunity lasts only a year or two per cycle, most companies miss it as they are unable to go public in less than a year. Then when they are on the stock market, the positive wave passes and the investment climate is no longer as favourable. Although the way the delisting of Compagnie Général Immobilière was handled was not a good sign for investors, the reaction of the Financial Markets Authority showed there is a consistent authority acting on the CSE. Now, we are very confident; there are positive signs in the economy and a favourable economic situation gives us the feeling that companies are ready to list and are waiting for the right moment.

However, we need the conditions on the CSE to improve and we also need to push for a first African company to be listed on the CSE. When we have tangible signs, such as five or 10 African companies listed on the Casablanca bourse, we will then be able to affirm that Casablanca is indeed an African financial hub. This will not be easy, and we will have to attract these companies one by one, but this is absolutely necessary to be able to consider Casablanca Finance City as a successful regional hub.

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Younes Benjelloun

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The Report: Morocco 2015

Capital Markets chapter from The Report: Morocco 2015

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