Upgrades to irrigation and machinery to ensure growth in Morocco's agriculture sector

The agriculture sector remains the main driver of growth for Morocco’s economy, contributing 19% to GDP – divided between agriculture and agro-industry, which hold a 15% and 4% share, respectively. The sector is one of the country’s main employers with a workforce of over 4m people, including over 100,000 working in agro-industry. The Green Morocco Plan (Plan Maroc Vert, PMV), which was launched in 2008 and runs until 2020, is the national agricultural policy. The plan is responsible for generating growth in the sector as well as preparing for future challenges, such as food security, climate change and an increasingly competitive global market.

Harvest Results

In the 2017/18 season the sector experienced overall growth, despite late rainfall. The harvest averaged 2.3 tonnes per ha, representing an increase of 27% compared to the previous season and 7% compared to the 2014/15 season, when a record production of 115m tonnes was recorded. Cereal production reached 10.3m tonnes, up 7.3% from the last crop year, while a record 2m tonnes of olives were produced, up 22.3% from the previous season. Sugar crops increased by 3.6% to meet 46% of the country’s demand, while legumes increased by 3.4%.

Agricultural exports increased by 4% in 2017/18 compared to the previous season. As a result of this successful harvest, the government has high expectations for 2018/19. There have already been promising results in some areas such as citrus production, which is expected to reach a record 2.6m tonnes, an increase of 18% from the previous harvest. In 2019, 220,000 tonnes of certified seed and 680,000 tonnes of fertiliser will be available to farmers, in addition to a 610,000-ha extension of areas equipped for agricultural irrigation, 1m ha of land for growing cereals and 500,000 ha for fruit trees.

Green Morocco Plan

In 2018 the PMV marked the completion of its first phase. The majority of its objectives were achieved, thanks to the restructure and modernisation of the sector carried out in recent years. At end-2018 the sector was worth Dh125bn (€11.2bn), a 60% increase from 2008.

Upon its completion the PMV is hoped to contribute Dh174bn (€15.6bn) to GDP, create 1.2m jobs and triple the income of nearly 3m people in rural areas.

In 2017/18 the harvest averaged 2.3 tonnes per ha, representing an increase of 27% on the previous season, and 7% on the 2014/15 season, when a record production of 115m tonnes was recorded The PMV is focused on two main pillars: developing a modern and competitive agricultural sector; and promoting productivity and higher value-added components for smallholder farms in rural areas. The development of agricultural segments is supported by contract programmes, which bring together public and private stakeholders. The first pillar is primarily focused on the private sector, while public sector organisations play a central role in the second. Specifically, the government is responsible for developing initiatives to diversify and develop niche segments to increase productivity and agricultural revenue, financed through partnerships with banks and microcredit institutions, and supported by cooperatives, associations and NGOs.

The PMV has encouraged a sector-wide restructure of government organisations and policy instruments. A number of new state agencies have been created, including the National Office for Food Safety, created in 2009, and the Agricultural Development Agency (Agence pour le Développement Agricole, ADA), and National Office of Agricultural Council (Office Nationale du Conseil Agricole, ONCA), both created in 2013. ADA initiated the first project under the PMV. This was a public-private partnership to manage land owned by Société de Développement Agricole and Société de Gestion des Terres Agricoles. Although the state only invested a small amount, the private sector input ensured that the target was met, and the land is now more efficiently managed. ONCA is responsible for conducting research into agricultural development in partnership with various universities and research institutions.

Investment

The PMV has harnessed Dh104bn (€9.4bn) worth of investment as of December 2018, 60% of which originated from the private sector. International donors and partnerships contributed Dh34bn (€3.1bn), with 37% in the form of grants. The Ministry of Agriculture, Fisheries, Rural Development, Water and Forests (Ministère de l’Agriculture, de la Pêche Maritime, du Développement Rural et des Eaux et Forêts, MAPMDREF) predicted that investments will reach Dh115bn (€10.3bn) by 2019.

The state plays an active role in incentivising investments, particularly by offering subsidies.

The Agricultural Development Fund (Fonds de Développement Agricole, FDA) is responsible for promoting and directing investment through targeted subsidies and grants. As of 2018, the government had invested Dh15bn (€1.3bn) in sustainable agriculture, while Dh30bn (€2.7bn) had been allocated to other agricultural programmes.

To secure investment for future projects, in October 2018 Morocco hosted the Global Forum on Investments in Food and Agriculture in Marrakech, organised by the European Bank for Reconstruction and Development, the UN Food and Agriculture Organisation and the EU. The forum brought together over 200 investors, business leaders, policymakers, government officials and representatives from multilateral development institutions across the world. Discussions focused on the private sector’s perspectives on investing in emerging markets and managing risks in value chains, the importance of investing in new technologies to modernise and transform the sector, and lowering carbon emissions and environmental impacts.

Mechanisation

Agricultural mechanisation is an important aspect of the PMV, as improvements in technology are a central part of raising productivity and making rural employment more attractive, thereby ensuring future growth and the alleviation of poverty. Mechanisation has seen progress in recent times thanks to the PMV and the acquisition of subsidised machinery through the FDA.

Financial incentives have made it possible to go from an average of 4.9 tractors per 1000 ha in 2008 to 9 in 2018. However, financing is still the biggest challenge to successful mechanisation, as the cost of agricultural machinery and new technologies is far beyond the reach of most small farmers, who often lack collateral bank loans.

Increased investment is also crucial to improving training on how to use new agricultural technologies. To this end, there are 52 agricultural vocational training centres for developing technical skills. As a result of these efforts, the production of agricultural processing units has increased by 44%. Some 241 new units were built and another 327 were equipped for the benefit of small farmers.

Morocco needs to continue this positive mechanisation trend, as increasing finance for agricultural technology will continue to improve the sector’s overall contribution to the economy as well as enlarge the number of opportunities to develop smallholder farms across the country.

Irrigation

Utilised in half of the country’s agricultural GDP and 75% of agricultural exports, irrigation plays a key role in the sector. Within the parameters of the PMV, the MAPMDREF developed a strategy to optimise water usage and increase productivity in irrigated agriculture. The Directorate of Irrigation and Rural Infrastructure is also responsible for managing water resources for agricultural use and deploying new farming technologies.

The 10-year National Irrigation Water Saving Programme (Programme National d’Economie d’Eau en Irrigation, PNEEI) aims to improve the irrigation water service; strengthen the financing and incentive system for water saving; improve the agricultural downstream water industry; and develop a local council to design water-saving irrigation systems.

Water Resources

New private sector firms have also arisen in the water sector. According to Simohamed Azzouz, director-general of Magriser, an irrigation systems producer, in 2016 there were 700 private companies operating in the sector, whereas in 2019 this had increased to 1700.

Beyond irrigation systems producers, small farmers are also offered incentives to take up irrigation equipment and implement water conservation techniques in the form of tax exemptions and subsidies. The ultimate goal is to more efficiently manage the limited water resources, improve the sustainability of irrigated agriculture and strengthen the role of irrigation in maintaining food security.

The irrigated agriculture sector depends largely on government subsidies. According to Azzouz, the market is worth Dh2.5bn (€225bn), of which Dh1.6bn (€144bn) is subsidised. However, in recent times the Treasury has experienced payment delays. In some cases, it can take up to a year to unblock payments. Therefore, the government has turned to the financial sector to assist with some of the funding.

“Drip-fed irrigation systems have become popular across the country, encouraged by the subsidies given by the PMV. Since the agriculture sector still represents 60% of fresh water use, the generalisation of drip-fed is likely to reduce the water-stress risk of the kingdom. In the medium term, it should even completely replace spring and spill irrigation systems,” Yassine Mellouk, general manager of KSB, a water management company, told OBG.

As of December 2018, 560,000 ha of the agricultural land in Morocco was irrigated, representing 18% of arable land and 21% of cultivated land in the kingdom. The original goal for 2020 was for drip irrigation technology to reach 550,000 ha, but as this has already been surpassed, the MAPMDREF expects 610,000 ha of land to use irrigation by 2019. Additionally, the country mobilises an estimated 22bn cu metres of water, of which around half comes from the Oum Er-Rbia, the country’s second largest river originating from the Atlas Mountains. According to Azzouz, the areas where irrigation systems are most effective are in the south, such as Agadir, the region of Meknes for large-scale agriculture and Marrakech for smaller-scale agriculture.

Agricultural output was historically reliant on the volatile rainy seasons and irrigation has helped to mitigate the risk of water scarcity. However, it is still an issue, particularly due to the effects of climate change. Therefore, continued improvement to irrigation systems is vital in order to ensure its resilience against adverse weather conditions.

In the years ahead, many of the existing irrigation systems put in place towards the beginning of the PNEEI will need to be upgraded or replaced. An irrigation system generally lasts between eight and 10 years. Therefore, during the 2020-22 period some facilities are likely to become obsolete. The government also announced that 1m ha of land will become available for agricultural use in the next 10 years, which will further increase the demand for new irrigation infrastructure.

Solar Project

At the end of 2017 the government implemented a €200m programme to invest in solar power, in order to boost agricultural growth by utilising the annual 3000 hours of sunshine. Under the leadership of the Ministry of Energy, Mines and Sustainable Development as well as the MAPMDREF, the government will subsidise solar energy solutions to ensure that farmers can become increasingly self-sufficient. For example, solar energy will be used to power water pumps for irrigation purposes. This will both reduce energy costs for farmers and enable them to reduce their butane gas usage. As energy is one of the highest expenses for farmers, increased use of renewable energy such as solar power will significantly reduce operational costs.

Additionally, solar panels are highly mobile, providing farmers with the flexibility of moving solar power stations to maximise production. The plan intends to increase agricultural water access to upwards of 100,000 ha of new land in order to significantly improve productivity and profits. This measure will contribute to the country’s overall efforts to increase the use of renewable energy.

Top Crops

Cereals continue to lead agricultural production, taking up around 75% of arable land. Despite the late rainfall in 2018 compared to the previous year, the cereal harvest matched that of 2016/17 with 9.8m tonnes of the crop produced. This includes 4.8m tonnes of soft wheat, 2.3m tonnes of hard wheat and 2.7m tonnes of barley.

Citrus fruits also remain important crops. In the 2018/19 harvest tangerine and mandarin production is predicted to increase by 14% to produce 1m tonnes of fruit, orange production is set to grow by 18% to 1.2m tonnes and lemon and lime production by 47% to reach 45,000 tonnes. The success of this season is primarily due to more favourable weather conditions with good levels of rainfall, as well as younger citrus trees starting to bear fruits.

Furthermore, as of 2017/18, Morocco was the world’s fourth-largest producer of olive oil, tomatoes and saffron, producing 2m tonnes, 527m kg and 6.8 tonnes, respectively. These crops benefit from the Terroir du Maroc or “Local Morocco” initiative launched in 2015 as part of the PMV. The scheme aims to regulate usage of the local label in order to raise the visibility and reputation of domestic goods among both Moroccan and foreign customers.

The country has also been integrating new crops into its agricultural production. For example, goji berries began being produced in July 2018. Furthermore, with more agricultural land to be put to use in the coming years, there will be more opportunities to incorporate new crops into the local sector.

Sweet Land

The sugar industry is led by one of Morocco’s largest agro-industrial companies and its sole producer of sugar, COSUMAR. In 2017 the company refined 1.1m tonnes of sugar and made investment worth a total of Dh791.8m (€71.2m). The sugar industry is also one of the leading industries in terms of pushing for aggregation.

The sugar industry is an important part of the PMV as well as the country’s economy as a whole, generating around 1700 direct and 3000 indirect jobs. Sugar is extremely popular in Morocco, particularly in tea and local sweet delicacies. The country’s sugar consumption per capita, at 35 kg, is considerably higher than the world average of 23 kg.

Industry Growth

Sugar production in the country has expanded significantly in recent years, aided by the company’s efforts to develop processing technology, and reduce its water and energy consumption. Additionally, in 2014 Morocco began re-exporting refined sugar to approximately 40 countries, which accounted for a total of 420,000 tonnes in 2017. As a result of this, COSUMAR’s consolidated turnover increased by 5.9% from 2016 to 2017, reaching Dh8.33bn (€749.2m). The company has benefitted from significant investment, which has helped increase production capacity to 1.7m tonnes in 2016. As the domestic market requires around 1.2m tonnes of sugar, this provides significant potential to serve the international market. Morocco currently exports sugar to 40 countries, and there is room to expand further.

COSUMAR operates seven sugar factories, five of which process around 60,000 ha of sugar beets and two processing nearly 20,000 ha of sugar cane. The company’s Casablanca refinery has the capacity to process around 1.1m tonnes of imported raw sugar per year. COSUMAR also assists farmers producing both sugar cane and sugar beet by providing technical, financial, logistical and social support.

Production Clusters

Agriculture clusters, in which farmers share resources for production and marketing, are being promoted as a method of increasing competitiveness in the sector, as well as offsetting the effects of market pressures, particularly for smallholder farmers.

The fragmentation of farmland has historically been an obstacle to maximising crop yields. Smallscale farmers usually have access to around 1-5 ha of land, and may still use outdated production methods, which can result in low yields and a modest income.

Clusters are a way of organising smallholders together around private operators with collective facilities, which benefits farmers by improving yields and offering them better access to financing. A cluster is also able to access both national and international markets more easily.

“Clusters are one way to overcome land fragmentation. It allows very small landowners to gather together, which also offsets financing challenges. Around 60 projects have been formalised since 2008, but we have not yet met the full potential,” El Mahdi Arrifi, general manager of the ADA, told OBG.

Overall, Dh13.6bn (€1.2bn) has been invested in cluster projects. The FDA has also provided Dh1.2bn (€108m) worth of subsidies. This funding has enabled 52,000 smallholder farmers to operate in clusters, covering 155,000 ha worth of land. This has mainly benefitted the production of sugar crops, citrus fruit and dairy, which account for 45% of projects and 91% of the total number of smallholders operating in clusters. The PMV aims to have a total of 200,000 farmers operating in clusters by 2020.

Agro-Industry

The agro-industrial subsector is an important source of foreign currency, generating Dh52.2bn (€4.7bn) in exports in 2017. Agro-industry accounts for nearly one-third of the country’s industrial capacity, with Dh116bn (€10.4bn) of yearly turnover and a workforce of 143,000 employees.

There are over 2000 agro-industrial companies, which are responsible for the production of a range of goods, such as vegetable oils, aromatic and medicinal plants, and canned olives. Despite this, the subsector only receives around 19% of total industrial investment. Consequently, the government has shifted its focus towards generating investment in agro-industry.

To this end, a contract programme was signed in December 2017, which aims to boost the sector’s growth by harnessing Dh12bn (€1.1bn) worth of investment before 2021. As of 2018 Dh2bn (€180m) had been invested towards 90 different agro-industrial projects, so there is still progress to be made.

The programme aims to further incentivise investment in such projects, including the development of conditioning, transformation and cold storage facilities. Additionally, the strategy seeks to increase agro-industrial exports, as well as having wider goals of modernising and professionalising the subsector.

Some of the investment in agro-industry stems from the World Bank, which launched the Strengthening Agri-Food Value Chains Programme to improve sector growth and market efficiency by promoting agri-business. The project directly addresses small and medium-sized agri-food producers and enterprises to improve their integration in agrifood chains. The programme aims to connect small producers with larger buyers.

Additionally, enhancing the efficiency of the agrifood market will help to modernise management for wholesale markets, by improving their access to competitive market prices. By promoting sustainable agriculture, and improving efficiency and productivity, the programme also hopes to alleviate poverty as it increases food security and creates new employment opportunities.

Outlook

Although the sector has seen positive performances in the 2018/19 season, there is still room for growth. There are two years left to complete the objectives of the PMV, and further financing will be required to achieve these. In May 2018 King Mohammed VI announced that an additional 1m ha of land would be distributed for agricultural use, meaning more land will need to be developed. This measure is meant to promote agricultural activity while consolidating growth for the rural middle class and the younger population. For this to happen, more land needs to be accessible for investment. Indeed, one of the ongoing challenges is reducing poverty and expanding the country’s middle class. More can still be done to enable agriculture to drive broader economic growth and develop Morocco’s economic opportunities.

Another key challenge for the sector will be adapting to the effects of climate change, which is causing unpredictability in weather and rain patterns. It is estimated that in the period between 2040 and 2069, Morocco may experience a decrease in rainfall ranging between 17% and 20%. Although better irrigation infrastructure does protect the country to a certain extent from rainfall variations, climate change is likely to increase the number of natural disasters as well as cause temperatures to rise. Maximum temperatures are predicted to increase by 1.9% by 2040 and 3-4% by 2069.

Therefore, beyond the management of water resources, Morocco will need to position itself strategically to be able to endure the impact of climate change and unpredictable weather conditions, and ensure the agriculture sector’s resilience and continued growth, as well as the country’s food security.