Upgrades to Morocco's transport and logistics infrastructure set to drive economic growth

Upgrades in transport and logistics infrastructure have been key to driving economic growth in Morocco in recent years. As the country develops and urban areas expand, the interconnectivity of economic centres and efficient connections to the rest of the world will be paramount to supporting the growth of other sectors, such as agriculture, manufacturing and tourism. Over the last two decades the kingdom has spent an average of about Dh40bn ($4.2bn) on transport and logistics, representing 10% of total investment in the country and 20-25% of the state’s investment’s budget. As of January 2020 the sector accounted for around 6% of GDP.

Public-Private Partneships

As a relatively cost-intensive sector, an increasing number of projects are being funded and executed through public-private partnership (PPP) models, following the passage of a 2014 law outlining their framework. Amendments to the law in 2019 enlarged the application of PPPs beyond government ministries to the level of local administrations and public entities. The 2019 amendments also created a commission under the auspices of the prime minister to help fast-track and supervise PPP contracts and provide technical support to administrations at the local level in writing contracts.

Building on the success of Casablanca Technopark, established under a PPP model, tenders for the development of three new industrial parks in the Casablanca area under PPP schemes are planned for early 2020. Other regions are also seeing benefits from this new model of financing. In December 2019 Dakhla received Dh2bn ($208.4m) for the development of what will become the largest water desalination plant in the kingdom, which will support local agriculture.

According to the Islamic Development Bank (IDB), the kingdom received about $7bn in funding from the bank as of April 2019, 27% of which has been earmarked for transport infrastructure projects, with PPPs accounting for an increasing amount. PPPs have seen the highest success rate among funding models: 89% of PPPs have come to fruition, compared to 86.5% of private projects and 72.5% of public ones, according to the IDB.

Road Network

With 90% of people and 85% of goods – excluding phosphates – transported via the kingdom’s roadways, economic development on both national and local levels goes in hand in hand with road development. Over the past 20 years the government has built approximately 1800 km of roads, connecting most major cities via toll expressways. The Ministry of Equipment, Transport and Logistics (Ministère de l’Equipement, du Transport et de la Logistique, METL) is in charge of road development and aims to build an additional 3400 km of expressways and 2000 km of highways by 2030, at an estimated cost of $9.6bn. Part of this work will include the Dh1.7bn ($177.1m), 30-km Tit Mellil-to-Berrechid highway, the construction of which should start in 2020; and the Dh5bn ($520.9m), 60-km Rabat-to-Tit Mellil highway, which will alleviate traffic between the economic and political capitals.

These investments are aiming to address the growing number of vehicles in circulation. According to a 2017 METL census, there were over 4m vehicles in the kingdom, an 18% increase from the previous 2014 census. This included 2.8m personal cars, or 70% of the total, and 1.1m professional vehicles. The distribution of vehicles across the kingdom was uneven, with 50% of vehicles registered in the Casablanca-Settat or the Rabat-Kénitra regions. The market, however, is expected to grow; currently, 38% of Morocco’s 7m households own a vehicle, and prices for cars are declining.

As of January 2020 Morocco’s road network consists of more than 57,330 km of road, of which 76% is paved. National roads account for 41% of the country’s network while regional and provincial roads make up 21% and 18%, respectively. The remaining 20% consists of highways and expressways managed by the Moroccan Highway Administration (Autoroutes du Maroc, ADM).

In early 2020 the METL announced a change regarding the concessions of national highways controlled by the ADM. While each concession was previously subject to different conditions, the new policy will group all of them under one contract as a means of increasing profitability and streamlining management.

Transport of Goods

The transport market is largely characterised by singular private operators and an ageing fleet. The largest actor, the state-owned National Transport and Logistics Company, owns over 130,000 vehicles, has over 210,000 sq metres in storage capacity and transports about 20,000 tonnes of goods annually. However, excluding informal actors, approximately 80% of the 84,300 companies operating in the transport sector own less than two vehicles, with one-third of these vehicles over 15 years old.

Some 75% of the value of all transported goods is moved via the country’s road network, so improvements in road quality and fleet efficiency translate to immediate benefits for the entire sector and wider economy. To this end, the METL implemented new measures in March 2019 aimed at increasing freight capacity by at least 30% for vehicles transporting three to 19 tonnes. It also introduced subsidies aimed at encouraging operators to replace vehicles weighing 14 to 19 tonnes with ones over 19 tonnes. Other METL-funded measures include training programmes aimed at upskilling the workforce and increasing competition within Morocco.

The ministry is also making efforts to increase the digitisation of trade processes, remove entry barriers, integrate informal actors, institute sector-specific payment delay fines, and make overall policy changes that will align the sector with European standards in terms of training and environmental considerations.

Transport companies are hoping for better government assistance in accessing foreign markets through revised trade agreements, as well as better overall management of domestic trade, which will boost efficiency and output of local producers and transport services companies. Transport companies have also voiced a desire for greater access to logistics zones and easier regulations regarding renewing or upgrading permits.

Rail

Aside from roads, rail accounts for a significant share of the transport of people and goods across the kingdom. Morocco’s railway network includes 1300 km of track, with 120 stations serving passengers as well as freight. The network is exclusively managed by the publicly owned Moroccan National Railways Office (Office National des Chemins de Fer, ONCF), and carries around 70% of goods to and from the kingdom’s ports. The ONCF possesses 19,000 containers for a total freight capacity of 80,000 tonnes per day. Additionally, it operates 106 ha of logistics zones, including 19 ha of dry ports in Marrakech-Sidi Ghanem, Casa-Mita and Fes-Bensouda. Four new logistics zones are in the pipeline at Mohammadia-Zenata, Tangier-Dalia, Nador-Sefouna and Oujda-Beni Oukil, which, when completed, will increase the total area of logistics zones to 212 ha.

In an effort to aid the automotive industry, the ONCF dedicates six trains per day between Casablanca and Tangier in each direction, with a capacity of 1500 vehicles daily. The transport services come in addition to the agency’s vehicle storage services in Casablanca-Mita.

The ONCF in late 2019 received the last of its 47 new vehicle carrying wagons from manufacturer Gefco. The agency currently carries around 20,000 Renault vehicles from an assembly plant in Kéntira. Following a contract signed in 2019 between ONCF and the vehicle’s producer, Groupe PSA, the agency will transport between 100,000 and 200,000 vehicles annually between Kénitra and the Tanger-Med port.

High-Speed Rail

Representing an important leg of the national infrastructure modernisation strategy, Morocco’s 2040 Rail Strategy is the kingdom’s longterm overall development plan for the national rail network and its various components. The plan has an allocated budget of Dh20bn ($2.1bn) that will fund a variety of projects and updates, such as improvements and general maintenance to reinforce the existing network, new rail connections to existing and future ports, an extension of conventional rail lines to cities not currently served by the network and the establishment of high-speed rail links between major cities. By 2040 the rail plan seeks to nearly double the number of cities served from 23 to 43.

Part of the kingdom’s rail strategy saw the 2019 opening of the Dh3bn ($312.5m) Tangier-Casablanca high-speed rail line. The 323-km bullet train is the first of its kind on the continent, and has reduced travel time between the two cities from 5 hours and 45 minutes to 2 hours and 10 minutes. In the pipeline is an extension of the high-speed network from Casablanca to Marrakech and then on to Agadir, with the ultimate goal of creating a 1500-km high-speed rail network alongside a standard network of 2700 km by 2030.

In December 2019 the METL announced it would invest in a Dh3.8bn ($395.9m) project that would connect Casablanca’s Mohammed V International Airport with the high speed-rail network, increasing the connectivity of the country’s largest airport to other cities.

Air

Air traffic to and within the country continues to expand, with 2018 seeing a record number of 22.5m passengers passing through the country, representing an annual growth of 10.4%. While national traffic experienced more steady and sustained growth, international traffic – representing more than nine in 10 passengers – surpassed the 20m threshold for the first time in 2018, according to the Moroccan Airports Authority (Office National des Aéroports, ONDA). In late December 2019 the country’s air transport segment saw another landmark moment, with Mohammed V International Airport recording over 10m passengers that year, a 5% compound annual growth rate over five years. The national carrier, Royal Air Maroc (RAM), represented 65% of seats arriving at and departing from the airport. The completion of upgrades at Terminal 1 in January 2019 saw the area of the airport increase to 76,000 sq metres and its annual capacity to 14m passengers. The capacity increase came with material upgrades as well, with travellers set to benefit from more efficient immigration and Customs procedures.

“Airports are increasingly becoming living areas similar to shopping malls rather than just transportation zones. The Casablanca airport is capitalising on this trend and still has many opportunities to increase its revenue,” Christophe de Figueiredo, CEO of Swissport Maroc, told OBG. In 2019 the Swiss aviation services company renewed its licence with the ONDA for seven years to continue providing ground-handling services to 22 airlines in 15 airports throughout the country. Swissport Maroc will invest over Dh200m ($20.8m) in new equipment and staff training.

International Expansion

In addition to its shorthaul flights within the country, RAM operates medium-haul flights to Europe and Africa, and transatlantic long-haul flights to the US, Canada and Brazil. The airline currently has a fleet size of 61, consisting mostly of Boeing aircraft. It is expected to join the Oneworld Alliance on March 31, 2020, offering the third-largest global airline alliance by number of passengers a foothold into the growing African market, adding 34 new destinations and 24 countries to the group’s portfolio. The news comes in addition to RAM’s inauguration of a new route between Philadelphia in the US and Casablanca, following the opening of direct routes from Boston and Miami in 2019, significantly reducing travel time between the two continents.

In terms of passenger traffic, Europe is by far the largest destination market for Moroccan aircraft, representing more than three in four passengers. Consistent with historical links and cultural proximity, France is the leading market, with Paris airports Orly and Charles de Gaulle receiving about 10% of all national flights, followed by Spain and Belgium. Beyond Europe, the Middle and Far East region comes second in terms of passenger traffic. Since the relaxation of tourist visa requirements for Chinese nationals in 2016, arrivals of Chinese citizens to Morocco increased sharply, raising by 550% from 2018 to reach 350,000 in 2019. Also in 2019 RAM announced it would initiate the first direct air link between Morocco and China, and in mid-January 2020 the first of three weekly flights left Casablanca for Beijing, with a flight time of just under 13 hours.

Airport upgrades have been initiated at facilities in Guelmim, at a cost of Dh273.5m ($28.5m); in Zagora, for Dh106m ($11m); and in Errachidia Moulay Ali Cherif, at a cost of Dh82.1m ($8.5m). Other major airport extensions include a new terminal at Rabat-Salé, which is to be co-financed by the ONDA, the African Development Bank and the French Development Agency for Dh1.6bn ($166.7m). Once complete, it is expected to nearly triple the airport’s current annual capacity to 4m passengers. Nador International Airport has also started a $31m expansion project, and in Marrakech there are plans to develop a second airport, which is estimated to cost $520m and hopes to absorb the projected influx of more than 14m passengers annually by 2020.

Over the longer term, airport extensions throughout the kingdom are projected to increase capacity to accommodate a total of 50m passengers by 2030, and are going to require a combined investment of some $1.7bn between 2018 and 2030.

Aeronautics

The growing Moroccan aerospace sector has seen increasing support and development in recent years, and shows much potential in manufacturing parts and finished aircraft, as well as providing maintenance and airport services. The growth of the local aeronautics parts industry has relied on the participation of major international companies like Boeing, Safran Aerosystems and Spirit AeroSystems, as well as a supply chain of internationally certified local subcontractors, who have supplied over one-third of parts used in national production.

Over the last 20 years the subsector has grown from just a handful of companies to nearly 140 different actors, employing over 16,000 people. It generates Dh17bn ($1.8bn) in revenue and Dh14bn ($1.5bn) in exports, or just under 6% of GDP.

Air Freight

Despite a relatively low volume, the amount of goods transported by air within the kingdom and abroad increased by 7.47% to 80,000 tonnes in 2018. The World Bank recently ranked Morocco sixth in Africa in terms of the volume of air freight. “Considering its proximity to export markets, Moroccan air freight is fairly limited. Development of the cold chain and perishable products can open new opportunities for the segment,” de Figueiredo told OBG.

Logistics

Comprehensive improvements to transportation and trade infrastructure are expected to enhance the logistics sector’s overall performance countrywide. According to the World Bank’s Logistics Performance Index, Morocco’s ranking dropped by 23 spots between 2016 and 2018 to 109th out of 160 countries. The World Bank cited poor international price competitiveness and shipments frequently missing their scheduled delivery dates as reasons for the considerable decline in ranking. The logistics sector employed about 500,000 people and generated some Dh50bn ($5.2bn) in revenue, or 5% of GDP, in 2017, up from Dh34bn ($3.5bn) in 2010.

Oversight of the sector is managed by the Moroccan Agency for Logistics Development (Agence Marocaine de Développement Logistique, AMDL) and the Moroccan Observatory for Logistics Competitiveness ( Observatoire Marocain de la Compétitivité Logistique, OMCL). According to the AMDL, logistics costs equal 19.6% of GDP, exceeding the 15% goal set by the agency in 2015. By comparison, logistics costs represent 10-16% of GDP in Europe and 15-17% in emerging markets. With 60% of costs of road transportation related to trans-shipment, the AMDL is building an interconnected grid aimed at increasing efficiency. Despite slow progress towards the agency’s goals, storage costs dropped by 35% between 2010 and 2019 to reach Dh35 ($3.65) per month for rent and Dh1.90 ($0.20) per day per pallet, according to the OMCL. In 2016 the transport and logistics sector received about Dh32.3bn ($3.4bn) in investment, or 10% of total investment, and generated 24,000 jobs.

The availability of land and its affordability in and around the kingdom’s economic centres continue to pose challenges for logistics businesses. By 2030, however, the AMDL plans to develop 3300 ha of multi-flow logistics parks, 1100 ha of which are planned for the greater Casablanca area. These parks will offer end-to-end services, including transportation, storage, and clearance in ports and dry ports, optimising time management and costs across the value chain.

Public Transportation

The rapid growth of urban centres has made the decongestion of the country’s roads a top priority (see analysis). Approximately 80% of people on the move use public transportation, according to a study by Casa Transports, the authority tasked with carrying out Casablanca’s transportation development plan for 2015-20. The plan includes the Dh25bn ($2.6bn) construction of four new tramway lines with a combined total of 76 km of track, as well as two bus rapid transit (BRT) lines totalling 24 km.

Another BRT line will be implemented in Agadir in 2022, for an estimated Dh900m ($93.8m). Rabat is investing $560m in a 20-km extension of its tramway network by 2022. Tramway projects are also in the pipeline for Agadir, Fez, Marrakech and Tangier.

Outlook

While the transportation and logistics sector continues to grow in value and volume, efficiency remains an issue, and local players continue to face relatively high operational costs. Nevertheless, the modernisation of equipment and better integration of transportation modes, coupled with an increased digitisation of processes, are supporting the sector’s development. However, a more appropriate legal framework and increased focus on training will prove crucial to integrating informal actors for more inclusive growth.