Investment remains strong in Morocco's transport sector

Capitalising on its strategic geographic position 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, including the eurozone debt crisis, regional political instability and a tightening of the government budget.

Key Indicators 

The transport sector’s contribution to GDP has remained steady in the past few years. It accounted for 3.68% of GDP in 2015, compared to 3.75% in 2014 and 3.71% in 2013, according to provisional data by the High Planning Commission (Haut Commissariat au Plan, HCP). In 2015 the sector grew by 2.4%, compared to 3.7% in 2014 and 1% in 2013.

As of the third quarter of 2015, the latest period for which data is available, transport, storage and communications comprised 4.6% of total employment, up from 4.4% a year earlier.

According to the Ministry of Equipment, Transport and Logistics (Ministère de l’Equipement, du Transport et de la Logistique, METL), the government will allocate Dh31.6bn (€2.9bn) for public works in 2016, slightly less than the Dh36bn (€3.2bn) allocated in the previous year. Roads and highways will receive a Dh11.1bn (€1bn) share, while Dh7.5bn (€687.7m) will go to the ports sector. Railways will be allocated Dh4.3bn (€394.3m), the aviation sector Dh1bn (€91.7m), and the transportation and logistics sector will receive Dh514m (€47.1m).

Morocco was ranked 47th in the World Economic Forum’s 2015-16 global competitiveness index for transport infrastructure, far ahead of Egypt (74th), Tunisia (88th) and Algeria (109th). While the country’s transport infrastructure is far more advanced than its North African neighbours, there is still room for development. As the government increasingly turns to public-private partnerships (PPPs) for financing, new works look set to continue in the years to come.

Logistics

Improving distribution and logistics has been a priority for the government, and the authorities allocated Dh514m (€47.1m) for the sector in 2016. Cutting costs has been key to enhancing the competitiveness of the industry.

Under the national strategy to boost the competitiveness of the logistics sector, the METL announced in 2014 that the country would invest $25bn to improve logistics infrastructure over the course of the next decade and a half. By 2030, 3300 ha of new designated zones will be established (see analysis).

According to the World Bank’s “Doing Business 2016” report, it took 152 hours for border compliance to import goods into Morocco in 2015 and 74 hours for documentary compliance, for a combined total of 226 hours to perform an import. The time to import falls close to the average for MENA, where imports require on average 120 hours for border compliance and 105 hours for documentary compliance, for a combined total of 225 hours. However, the time is significantly longer than that of OECD countries, where imports take an average of nine hours. According to the report, Morocco ranks at 102nd out of 189 economies on the ease of trading across borders, behind Tunisia, but ahead of Algeria and Egypt.

Structure

The public sector has traditionally been the dominant player in Morocco’s transport industry. Rail transport is run by the public National Railways Agency (Office National des Chemins de Fer, ONCF), while the state agency in charge of Morocco’s airports is the National Airport Agency (Office National des Aéroports, ONDA). The country’s system of highways is overseen by Autoroutes du Maroc (ADM), a public limited company. The private sector plays a prominent role in maritime transport, where many private shipping and logistics companies operate the nation’s ports. The National Ports Agency (Agence Nationale des Ports, ANP) is the public entity in charge of overseeing Morocco’s ports, except Tanger-Med, which is administered by the Tanger-Med Port Authority (TMPA). Local port operator Marsa Maroc manages and provides logistic services for terminals at nine ports in the across the country.

Helping to accelerate the development of transport infrastructure by increasing the role of the private sector, the Moroccan parliament approved a PPP law in December 2014. Under the new law, private finance initiative-style deals are allowed by permitting a private partner to lead planning, financing, construction, maintenance and the operation of projects needed for public service.

Since the law’s passage, parts of the transport industry, including the publicly managed rail and airport segments, have turned to PPPs as a source of financial and technical support. “PPPs have been successful throughout the world, allowing the separation of infrastructure from operations,” Aziz Rabbah, the minister of equipment, transport and logistics, told OBG. “Private partners develop the infrastructure – and their investments are not included in external debt – and this frees national companies from infrastructure work so that they can focus on operations.”

The government is currently exploring PPPs to finance a range of projects in the road, motorway, rail, port and logistics segments across the country, according to the METL. Possible projects include the Rabat-Casablanca motorway, Mohammadia port extension, regional transport development projects in Casablanca, the new Khouribga-Beni Mellal railway, and Oulad Saleh, Deroua, Nouaceur and Lakhyayta logistics zones in Casablanca.

Currently, the largest PPP transport project is Tanger-Med, Morocco’s largest port. The port is administered by the TMPA, which is itself overseen by the Tanger-Med Special Agency, set up as a PPP. Tanger-Med 1 is operated by Netherlands-based APM Terminals, a subsidiary of Danish energy and shipping company Maersk Group, under a 30-year concession with Akwa Group, while the second terminal is managed by a consortium of companies consisting of EUROGATE, Contship Italia, and shipping lines MSC, CMA-CGM and Comanav. Tanger-Med 2, the second phase of the Dh35bn ($3.2bn) port development, is scheduled for completion by the end of 2018.

On The Road

As with most emerging markets, roads are Morocco’s primary means of transportation, but a population reaching towards 35m and a growing number of private vehicles has increased the pressure on road infrastructure. As a result, Dh11.1bn (€1bn) – just over a third of the country’s Dh31.6n (€2.9bn) budget for public works in 2016 – was allocated for the roads and highways segment.

The kingdom’s highways have traditionally been financed through loans and toll fees. As of 2014, the latest year for which data is available, Morocco had 11,324 km of highways and national roads, as well as 9221 km and 22,068 km of regional roads and provincial roads, respectively, according to the METL and ADM, totalling 42,613 km. This was up from 41,437 km a year earlier. The total network length is around 60,000 km. The road segment employs 80% of the workforce in Morocco’s transport sector, according to the National Road Transport Federation.

Expansion

Since the turn of the decade, there has been a push to connect more isolated areas of the country by investing in rural road transportation, though local municipalities have faced challenges providing good roads and managing public transport.

The first two phases of the government’s national rural roads programme, which began in 1997 and ended in 2015, saw the construction of over 25,000 km of roads. In February 2016 the METL announced that Dh36bn (€3.3bn) is set to be invested in a new rural roads programme, Dh28bn (€2.6bn) of which will be used to build new roads to open up rural areas covering 23,600 km. The remaining Dh8bn (€733.5m) will be used to rehabilitate 9000 km of local roads.

Other major road projects currently under way include Rabat’s Dh2.8bn (€256.7m) ring road (autoroute de contournement de Rabat), which adds 41 km to the route and aims to reduce congestion on some of the kingdom’s busiest roads by bypassing Temara, Rabat and Salé. Completion of the project is expected by late 2016 or 2017.

A 143-km highway linking El Jadida to Safi, south along Morocco’s western coast, is also under construction, and is expected to be completed by December 2016 at a cost of around Dh500m (€45.8m). The road will help to link Tangiers, Rabat and Casablanca, Morocco’s biggest urban centres, to a new port currently under construction in Safi. Following the expansion of the Rabat-Casablanca highway, a new upgrade is set for the Casablanca-Berrechid section. Around 40,000 vehicles travel the Casablanca-Berrechid highway every day, according to the ADM, and a bulk of its budget will be allocated to addressing this.

Toll Roads

The ADM manages more than 1600 km of toll roads in Morocco. In 2015 total tolls collected by the ADM reached Dh2.4bn (€220.1m), an increase of 9% year-on-year (y-o-y). Growth was attributed to a significant increase in traffic on the Tétouan-Fnideq, Kénitra-Tangiers, Rabat-Kénitra and Berrechid-Marrakech roads. Highway toll fees were increased in the beginning of 2015 by 9% due to a value-added tax hike from 10% to 20%, according to the ADM. In August 2016 toll fees for ring roads around Casablanca and Rabat were also raised.

Ports

Port traffic has grown significantly during the last 10 years, with an average growth rate of 8%, according to the METL. As around 95% of Morocco’s external trade takes place via the country’s ports, structural developments have been undertaken by the government in an attempt to capitalise on the country’s location on several major shipping routes.

In 2015 some 110.2m tonnes of cargo were handled by the country’s ports, down 4.3% from 2014, according to recent figures by the ANP. The Port of Casablanca, the country’s largest port, handled 25.3m tonnes of cargo, or 31.1% of all traffic, excluding trans-shipments. It was followed by Jorf Lasfar with 22.7m tonnes, or 27.9%, and Tanger-Med with 9.8m tonnes, or 12.1%. “Casablanca’s port will play a greater role in terms of trade in the coming years. For domestic containers, Casablanca will confirm its leading position with an expected target of 1.6m containers per year by 2030,” Nadia Laraki, general manager of the ANP, told OBG.

National traffic accounted for 74% of total cargo handled, or 81.3m tonnes, down 3.4% from 2014. Trans-shipment accounted for 26% of total cargo handled, or 28.9m tonnes, down 6.7% from 2014. The first quarter of 2016 saw a rebound, with overall traffic reaching 27.8m tonnes, up 3.4% on the same period of 2015. The increase is attributed to the 10.9% jump in domestic (import-export) traffic. In 2015 the kingdom’s largest trans-shipment facility, Tanger-Med, handled some 3m twenty-foot equivalent units (TEUs) of cargo, around the same amount as the previous year, ADP data shows. Of the total in 2015, 2.8m TEUs were trans-shipped. Geared towards the handling of domestic containerised cargo, Casablanca Port handled 853,008 TEUs in 2015, an increase of 0.7% from 2014.

Development Plan 

The METL has made lofty predictions for the sector, estimating that total cargo passing through the kingdom’s ports will rise between 280m and 370m tonnes a year by 2030. In anticipation, the government has adopted an ambitious port development plan, known as the Port Strategy 2030. As part of this the government is set to invest around Dh6bn (€550.1m) in ports between 2014 and 2016.

The Port Strategy 2030 seeks to increase port capacity by building new ports and expanding existing ones, and building maritime clusters to drive regional economic development. Additionally, the strategy includes upgrades of associated logistics and industrial hubs. Among the projects included in the strategy are new ports at Nador on the Mediterranean coast, and Safi in the central Marrakech-Safi Region, both of which will cater to local industries. The port of Safi, which is estimated to cost around Dh4bn (€366.8m), is located near some of the kingdom’s main phosphate operations, and the government plans to develop a nearby integrated industrial centre. Initial operations will focus on phosphate exports, while the port will offer facilities for a variety of cargo such as agricultural and industrial products, and bulk and container shipments.

Nador West Med, the new Dh10bn (€916.9m) port complex close to Nador, will ease coal imports. The complex, which should be operational in 2021, will have commercial, industrial, logistic and tertiary areas covering a free trade zone of around 1500 ha and a 2500-ha harbour area. Another new port facility is planned for Kénitra Atlantique with an investment of Dh8bn (€733.5m). It is expected to open in 2019, prior to the scheduled opening of the Peugeot-Citroën factory in 2020. Expansion work is also under way in Casablanca, which handles the bulk of the country’s trade and the port authority has set a target of 1.6m containers per year by 2030.

An expansion of Morocco’s biggest and newest deepwater port, the Tanger-Med complex, will also boost capacity. With its strategic location on the Strait of Gibraltar, the port acts as a trans-shipment hub and is part of the Tanger-Med complex that includes export-oriented free-trade zones targeting manufacturing, automobile and aeronautic activity. Cargo handled is set to rise to 8.2m TEUs in 2018, according to the TMPA, following the completion of Tanger-Med 2, the second phase of the project, which is being overseen by a consortium including France’s Bouygues Travaux Publics, Italy’s Saipem, Belgium’s Besix and Morocco’s Somagec.

Shipping

Morocco ranked 16th on the “2014 Liner Shipping Connectivity Index” conducted by the UN Conference on Trade and Development, following the UAE at 15th place, Italy (14th), Spain (13th) and France (12th). Although the expansion of port infrastructure has pressed ahead, the Moroccan maritime industry has not been immune to the global slowdown that has seen growth flatten/ leading to overcapacity. Large international players have dominated the industry. Danish-owned Maersk Line is the largest player among shipping firms operating in the kingdom, occupying a 30% market share, according to the company, followed by Switzerland-based Mediterranean Shipping Company, France’s CMA CGM, and a range of small and niche companies. Container traffic in 2015 did show some measure of growth partly thanks to a higher container utilisation rate, driven by operators throughout the sector seeking to develop further efficiencies.

Railways

Ensuring efficient internal distribution networks is crucial to the growing economy. As a result, to avoid contributing to further road congestion, the country has sought to significantly expand and upgrade its rail links. In addition to freight traffic, the rail network also carries 40m passengers per year, according to ONCF, and the firm predicts passenger numbers to reach 133m by 2030. To keep pace with demand, the rail sector has also witnessed considerable investments since the early 2000s (see analysis). In 2016 ONCF plans to invest €710m in the country’s rail sector. Some 55% of the funds will go towards modernising existing infrastructure or the acquisition of rolling stock. A loan of $112.3m from the African Development Bank (AfDB) was secured in 2016 for a series of infrastructure improvements.

ONCF will double a 142-km section of the Tangiers-Casablanca-Marrakech railway, building a second track between the Settat and Marrakech stretch of the route. According to the AfDB, passenger volumes between Casablanca and Marrakech increased by 20% between 2010 and 2014. The works, which are scheduled to be completed by 2020, will make way for increased passenger and freight traffic between the two cities. More importantly, and underscoring the ambitiousness of the government to boost the rail sector, 45% of ONCF’s €710m budget will go towards setting up the new high-speed railway. In June 2015 ONCF began testing the first high-speed train on the route between Casablanca and Tangiers. The 200-km long connection is set to become Africa’s fastest rail link. Travel between the two cities will be reduced from around four hours and 45 minutes today to two hours and 10 minutes, with an average speed of 320 km per hour. Meanwhile, travel between Tangiers and Rabat will be reduced to one hour and 30 minutes.

Airports

Traffic through Morocco’s airports reached a record 17.6m passengers in 2015, according to figures from ONDA. The number represented a 1.8% increase y-o-y compared to 2014 when traffic was up 4.8% after surging 9.2% in 2013. The subdued growth in 2015 was attributed to a drop in demand from key European and Maghreb markets. German, British and Dutch passengers are driving up the European market, the geographical zone that continues to make up the largest percentage of air traffic according to ONDA, amid the decline in French passengers.

Nonetheless, in the first three months of 2016 Moroccan airports saw continued growth, with 3.87m passengers travelling through the kingdom’s airports, an increase of 4% from the same period in 2015. The growth is slowing, however: in the first five months of 2016 passenger traffic at airports grew by 2.7% While traffic from Europe and the Maghreb countries declined slightly in May 2016, the latest month for which data is available, international traffic between South America, the Middle and Far East, and African countries saw significant increases of 48%, 21% and 9%, respectively.

The rise in transiting passengers from further afield is in part a result of higher flight frequencies by national carrier Royal Air Maroc to other destinations in Africa, as well as an increase in connections from other major carriers, such as Qatar Airways, which in October 2015 began flying daily to Marrakech. The number of flights per week between the two countries thus rose to 10, with Qatar Airways flying seven times a week and Royal Air Maroc three. While road and rail networks handle the majority of local passenger travel, the domestic aviation sector has also seen a y-o-y increase, rising 2.85% in 2015. Air freight expanded in 2015, up 18.67% compared to 2014.

Casablanca’s Mohammed V Airport is the largest and busiest of the country’s 26 airports. A total of 8.2m passengers were recorded at the airport in 2015, an increase of 2.6%. With tourism figures in the country stagnating in recent years, Marrakech’s Menara airport, the kingdom’s second busiest, recorded slightly less than 4m arrivals in 2015, down 1.4% from 2014. The trend continued into 2016 with a 4.87% drop in traffic in the first three months of the year. Agadir was Morocco’s third-busiest airport with 1.4m passengers in 2015, down 4% y-o-y.

Capital Upgrades

A range of investment projects to expand capacity and develop the nation’s air transport are under way. According to local media, in 2015 ONDA was allocated Dh3.9bn (€357.6m) for capacity upgrades as well as safety and security improvements. One of the largest projects is the expansion of terminal 1 of Casablanca’s Mohammed V Airport. After initial plans were finalised in 2009, then put on hold, work restarted in November 2014 and completion is expected in 2016. After the project is finished, capacity will double to 14m.

An expansion project at Marrakech airport will add a new 67,000-sq-foot terminal to the airport worth Dh1.2bn (€110m). The new terminal is scheduled to be completed by the end of 2016, according to ONDA, and its capacity will increase from 3m to 9m passengers per year. A project to expand the Fez Saïss Airport was finalised in mid-2016 at a cost of Dh479m (€43.9m). The project increased capacity by 2m to 2.5m passengers a year.

Future projects in the works include an airport specialising in business aviation in Tit Mellil, 30 km from Casablanca. The project is estimated to be launched in the second half of 2017 and will need an estimated investment of Dh490m (€44.9m). Preliminary studies are under way to set up a PPP arrangement for the project. With the completion of all the projects currently under way, total annual airport capacity in Morocco will increase from 24m passengers to 50m passengers, according to ONDA.

Urban Transport

Responding to the kingdom’s growing urbanisation – Morocco’s urban population more than doubled between 1960 and 2015 from 29% to 60%, World Bank data shows – authorities have stepped up efforts to improve urban transport with a series of projects aimed at enhancing connectivity and reducing congestion in cities. Over the next 10 years, the authorities say the urban transport sector will need around $3bn in financing.

Casablanca, Morocco’s largest city and its commercial capital, has been the main beneficiary of this push. With a total budget of around Dh8.5bn (€779.3m) for transport infrastructure projects in the country’s economic centre, the 2015-20 Casablanca Strategic Development Plan aims at modernising the city’s transport systems with projects that include a new tramline, road upgrades, bypasses and a tunnel (see Casablanca chapter).

Casablanca’s first tramline, which was inaugurated in December 2012, extends across 31 km and includes 48 stations. It has helped improve access to lower-income and marginalised areas such as Sidi Moumen in the east. A second 17-km tramline project for the city is now on the cards, according to Casa Transport, the public transport operator responsible for the service. The project, also part of the new programme, is scheduled to be completed by the end of 2018. The total cost of construction for the tramline project is estimated at Dh4.3bn (€394.3m) and will be funded mainly by state-guaranteed loans totalling Dh1.7bn (€155.9m), with the municipal and the regional governments providing the rest.

Recording a structural operating deficit of Dh80m (€7.3m) in 2015, Casa Transport has been hard pressed to maintain affordable passenger fares. The Support Fund for Transport reform will offer Dh1.7bn (€155.9m) to subsidise the deficit. Casa Transport will also seek further revenues by initiating a tender for an advertising agency to work on the line.

While the urban transport offer has increased in recent years, demand still outpaces supply. Traditionally taxis have filled only part of the gap: there are 15,000 taxis in Casablanca, including 8000 “petit taxis”, which are only able to carry fares within the city, and 7000 “grand taxis”, which provide service between cities. As a result, the city has seen the entrance of mobile app car booking and rideshare services including Dubai-based Careem, Polish company iTaxi and most recently US firm Uber, which in the 12 months since its arrival in July 2015, has roughly 3000 regular customers, according to Meryem Belqziz, general manager of Uber Morocco. The company has plans to expand to Marrakech and Rabat.

Individual transport by personal cars, however, continues to account for the bulk of traffic in Casablanca, with around 25% of households in the Casablanca-Settat region now owning a car.

Outlook

The government has been pressing ahead with its efforts to overhaul and expand the kingdom’s transportation network, with major road, airport, railway and port projects set to improve the country’s global competitiveness and strengthen its bid to serve as a gateway to western Africa. 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 transportation, particularly in Casablanca, will help further improve connectivity and reduce congestion, while ambitious capital plans to expand aviation and maritime infrastructure will ensure a sustainable rise in capacity.