Moroccan CEOs, Minister of Finance Underscore Policy Priorities

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Morocco is on track to record robust economic growth after last year’s drought, though some challenges remain. Recently, Mohamed Boussaïd – the minister of finance, whose exclusive interview with OBG will be unveiled in our forthcoming report on the country – mentioned five limitations that, in his words, “block the path to better performance”.

Boussaïd’s five limitations to growth were: employment not keeping pace with growth, gender inequalities in the job market, deficient trade agreements and uncompetitive exports, a lack of developed skills among workers, and poor economic and social governance.

It is unusual to see a minister of finance display this level of honesty with media about economic realities, and even less usual that the macroeconomic indicators are on Morocco’s side.

The last IMF mission, which ended in late October, stated that it expected the country to reach 4.4% growth in 2017, mostly thanks to a rebound in agricultural activity.

The simultaneous challenges and opportunities facing the country are, in fact, more suitable than they may appear. While it is on the right path, Morocco needs to undertake a series of reforms to boost its manufacturing industry, recover high levels of liquidity – and thus financial dynamism – and ensure long-term economic success through educational measures to improve its human capital.

Morocco’s economic “double reality” can be seen in the results of OBG’s latest CEO Survey. This survey is the second edition in Morocco, following the release of our inaugural survey in June 2017.

As our results show, the more than 100 CEOs in Morocco that participated in this edition are markedly optimistic when it comes to investing in the country and forecasting its short-term potential.

However, top executives know – and say – that much remains to be done with regards to access to finance, tax competitiveness and working with local suppliers. The focus should remain on surmounting these challenges; that is the way for Morocco to consolidate its regional leadership and achieve further
social development.

Takeaways from the CEO Survey

As underscored by the 80% of respondents who said it was likely (23.6%) or very likely (56.6%) that they would use their expertise in Morocco to expand into other regional markets, the development of the country into a regional centre looks like a possibility to some CEOs, and already a reality to others.

A fair number of local and international companies already use Morocco as a hub. Locally, this trend is strong in the finance segment: banks such as Attijariwafa, BMCE and CIH, and insurance companies like Wafa Assurance and SCR have all expanded regional operations from their Morocco bases. Multinationals, particularly industrial players such as BASF, Lear or General Electric, similarly use the country as a headquarters from which to manage operations in Mauritania, Tunisia and other neighbouring markets.

Local attitudes about suppliers and service providers were similarly positive, with 50% of executives expressing high or very high levels of satisfaction. Interestingly, however, of the 28% with low levels of satisfaction, more than half were international companies, suggesting more may need to be done to meet multinationals’ expectations.

Efficient supply chains are crucial to any hub, and in particular when it comes to industrial logistics such as Customs clearance and cross-docking storage, among others. The automotive industry is a success story in this regard, having built a complete ecosystem that the country plans to use to boost output from 650,000 to 1m units in just a few years. Other industries would do well to follow this example.

While many local conditions favour businesses, access to credit is still a major obstacle for some. Half those surveyed characterised access to credit in Morocco as difficult or very difficult. And although this was an improvement from 54% in our June survey, many companies are facing the realities of a liquidity drought – a fitting match to the very literal drought that took place in the agriculture sector last year.

As in many other emerging markets, funding is a particular challenge for SMEs. Many end up financing themselves via the black market, with all the financial consequences that entails. This is another field with room for improvement and, luckily enough, is in Boussaïd’s agenda.

While feedback from CEOs points to areas in need of either top-down or bottom-up fixes, broader sentiment surrounding local business conditions remains positive. In line with the June results, 86% of executives had positive (70%) or very positive (16%) expectations.

There is reason enough to be optimistic, particularly following the latest GDP growth figures; however, as the threat of insufficient rainfall raises doubts about consistent, agriculture-fuelled economic recovery, it is clear that structural fixes will be key to ensuring sustainable progress. Here, Boussaïd’s top five provides a useful map for policymakers.