A regional role: Flagship project aims to attract a growing share of investment in Africa

Working to position its commercial capital, Casablanca, as financial centre for investors eyeing the African continent, Morocco has been drawing support from the City in London, Singapore and Luxembourg. Casablanca is now using its strategic location, near Europe and at the tip of Africa, to try to become a regional financial centre at a time when investors are looking to Africa for new opportunities.

As Morocco’s ambition continues to take shape, 11 multinationals had secured Casablanca Finance City (CFC) status as of end-2012, granting them special privileges, such as exemption from corporate taxes for five years and a reduced rate thereafter.

According to professional services firm Ernst & Young, foreign direct investment projects in Africa grew from 339 in 2003 to 857 in 2011. This growth shows that foreign investors are getting more confident about putting their money into Africa. Johannesburg at present serves as the main conduit for inflows, making it the kingdom’s key competition for investment.

BEGINNINGS: The Moroccan Financial Board (MFB) was created in 2010 to build the CFC. The seed capital was brought equally by six institutions: Bank Al Maghrib, Caisse de Dépôt et de Gestion and the Casablanca Stock Exchange (CSE), as well as three banks, Attijariwafa Bank, Banque Centrale Populaire and BMCE Bank.

Besides its location, Morocco is depending on its sophisticated banking sector to carry the project along. Moroccan banks, many of which are partly European-owned, have operations in more than two dozen African countries, as well as a handful of European states, where they specialise in services to the large Moroccan diaspora. Those bridges and proven cross-cultural expertise are strong selling points for the CFC, which promotes trade with Africa as well as within it. Naturally, the larger body of the MFB also offers a platform for foreign investors wishing to start or grow their operations in Africa.

SUPPORT: The project enjoys strong backing from the Moroccan government, which has offered a range of support, including providing the mandate for the project under Law 44-10 in 2010, building infrastructure for the CFC, developing services such as a planned court of arbitration, and awarding tax breaks to attract investors. It has also fast-tracked immigration processes for companies obtaining CFC status.

The financial sector has also rallied behind CFC, even though at the moment its ambitions may seem somewhat out of reach given the low volume and rate of activity on the CSE over the last two years. “It is urgent for us to reform our capital markets and more specifically for the CSE to be able to live up to the expectations of CFC,” said Youssef Benkirane, president of the Professional Association of Stockbroking Firms.

A deal signed in early October 2012 between CFC and the TheCityUK, which promotes UK financial and professional services abroad, to increase cooperation between the two bodies should help. The objectives of this partnership include facilitating the roll-out of a derivatives market in Morocco, improving the competitiveness of domestic insurers, and expanding training and educational programmes. “CFC seeks to position Casablanca as a financial hub at the forefront of business in the region and facilitate deal-flow into Africa,” Said Ibrahimi, the chief executive of MFB, told OBG.

NEXT STEPS: Drawing regional capital would help the stock exchange to further diversify, hedging its position vis-à-vis local macroeconomic downturns and reducing its exposure to the troubled economies of the eurozone. Morocco’s market regulator has been meeting with its counterparts in other African countries to lure companies from within the region to list on its exchange. One obstacle to that, however, is the kingdom’s stringent exchange controls.

Meanwhile, although the physical site of the CFC is still under construction, marketing efforts are already well under way. “Connectivity and the movement of people and of capital are among the things we are looking into,” said Hicham Zegrary, the acting director of operations and institutional affairs of the MFB.