Morocco continues its transformation into a regional and international transport hub

Improved connectivity is a key pillar of Morocco’s economic development strategy. Internally, better road and rail links can improve the business environment by reducing transport costs and spreading economic development nationwide. Upgrades will prove particularly effective in bringing investment to more isolated regions. Externally, the marked increase in air and maritime connectivity since the turn of the century has helped Morocco integrate itself in regional and global supply chains, with ongoing investment in its ports and airports set to further advance industrialisation over the medium to long term. The strategic decision to locate special economic zones close to the main intercontinental ports has boosted activity, and there are calls to develop additional zones beside the country’s airports. With the kingdom’s beneficial location on the crossroads between Africa and Europe, Morocco is emerging as a continental transport and logistics hub.

TACKLING CLIMATE CHANGE: Given Morocco’s exposure to climate change and the kingdom’s hosting of the COP22 UN Conference on Climate Change in November 2016, there has been a growing realisation in recent years that transport investment can also help achieve environmental goals by reducing carbon emissions. To that end, a number of measures have been introduced specifically to support these efforts. Some initiatives that coincided with COP22 included the launch of a national green logistics charter, the introduction of the Medina Bike programme in Marrakech (see analysis), and the Airport Carbon Accreditation at the mapping level for Marrakech Menara Airport and Mohammed V International Airport in Casablanca.

ROAD TO SUCCESS: The road network is the backbone of the country’s transport system, and has been experiencing significant traffic growth over the past two decades. When measuring the millions of vehicle kilometres travelled per year, there was a 74% increase – from 52.7m to 91.6m – in the 10 years to 2013. According to the National Highway Office (Autoroutes du Maroc, ADM), that number had increased to 1.6bn as of the end of 2017. Sustained investment in Morocco’s highway system is proving to be a boon to the economy. In the near term, construction works are supporting domestic demand and creating jobs, while in the longer term, increased connectivity should reduce shipping costs for businesses, helping to attract inward investment, improve regional connections and reduce carbon emissions by promoting fuel efficiency. These benefits could eventually extend throughout broader West Africa, with both Morocco and Nigeria signalling in late 2016 their intent to pursue a continental-scale highway that would link Tangiers and Lagos.

“The only challenge that remains is security,” Anouar Benazzouz, CEO of the ADM, told OBG. “We have seen an increase in traffic: 560,000 vehicles now use Morocco’s motorways every day, which has led to an increase in delinquency with cars. Also, a campaign needs to be run to prevent pedestrians from crossing motorways, which results in 160 deaths per year.”

The 142-km El Jadida-Safi motorway segment opened in August 2016, with toll operations beginning the following month. Originally slated to open in March 2015, the project experienced multiple delays – one resulting from the appearance of holes in the surface of the motorway in the months leading up to the opening. Construction work had been under way since 2012 and cost at least Dh4.8bn (€444.5m). With the motorway now open, travel times between El Jadida and Safi, Casablanca and Essaouira have been significantly reduced.

The government’s priority road projects for 2017 involved reducing congestion around the Greater Casablanca metropolitan area, notably with construction of the Tit Mellil-Berrechid motorway and the widening of the Casablanca-Berrechid highway from one to three lanes. With 10 companies preselected for work on the expansion, construction is expected to take two to three years once a final offer has been selected. The ADM is also continuing with the digitalisation of motorway tolling, a task that has been under way since 2014 in collaboration with Vinci, a French civil engineering and construction company. ”The ADM introduced Jawaz, an electronic toll,” Benazzouz told OBG. “This came in line with its transformation from a construction company into a customer service company in terms of operations”.

Looking to the future, plans are being prepared for the development of up to seven new motorway projects, which would extend the country’s network by some 1500 km. Among the routes under consideration are Fez-Oujda, Tangiers-Tétouan, Fez/Meknès-Tangiers/Tétouan, Rabat-Casablanca, Marrakech-Kelaât Sraghna, Fez-Taounat and a ring road around Agadir. It is envisaged that these projects, if given the green light, would be delivered through public-private partnerships (PPPs) and aim for a 2030 completion date.

HIGH-SPEED RAIL: Early 2017 saw testing begin on Morocco’s long awaited high-speed intercity rail network (train à grande vitesse, TGV). Section one of the TGV is due to open in June 2018, and will link the cities of Tangiers and Kenitra in one and a half hours along a 183-km route. By end-2016 construction works were reportedly 85% complete. The TGV mega-project will ultimately extend from Tangiers to the commercial capital of Casablanca along a 350-km route, passing through the capital Rabat along the way.

The double-decker trains will reach speeds of up to 320 km per hour, reducing travel time between Tangiers and Casablanca from the current five hours by train or three and a half hours by car to two hours and 10 minutes. The journey from Rabat to Tangiers, meanwhile, is only expected to take one hour and 20 minutes. Speaking to local media in late 2016, Mohamed Rabie Khlie, director-general of the National Railways Office (Office National des Chemins de Fer, ONCF), said, “To achieve the target of 6m passengers a year, there will be a departure every hour from Casablanca and Tangiers, with the aim to achieve an average occupancy rate of 70%.” He citied the need to set ticket prices at an appropriate level to reach those targets, adding, “We will run trains intended for Moroccans and thus adapted to their purchasing power.” A one-way ticket on the Tangiers-Kenitra route is likely to cost about $20.

In total, the TGV project is expected to cost some $1.9bn, funded by the governments of Morocco, France, Saudi Arabia, Kuwait and the UAE. The Islamic Development Bank also granted a Dh1.23bn (€113.9m) loan for the project in March 2017. The second phase of the TGV, extending the route to Casablanca, should also involve an upgrade to the Casablanca-Marrakech line, which would ultimately see a reduction in the journey time along the length of the line from Tangiers to Marrakech from its current 10 hours to about three.

URBAN TRANSPORT: Amid increased urbanisation and economic development, traffic congestion has become an unfortunate fact of life in Morocco’s main cities. Efforts are being made to build additional roads and realign pivotal junctions in and around Casablanca and Rabat, with investment being ramped up in traffic management technology. Municipal authorities in large cities have also promoted the introduction and extension of modern tramway systems and bus networks (see analysis). Sustained investment in such infrastructure will be needed to stay ahead of the curve, as car traffic grew 3.5% in 2016 in Casablanca alone.

TAKING TO THE AIR: Perhaps the biggest game-changer in Moroccan air travel since the turn of the century was the signing of the Open Skies Agreement with the EU in 2006, which liberalised the rules and regulations governing international aviation between the kingdom and the bloc. A surge of new and low-cost operators in the market followed, first among them being Jet4U (now trading as TUI fly), and others such as Ryanair and EasyJet. This set the scene for a decade of double-digit growth in passenger traffic, which reached a new record of 20.4m in 2017.

Not only did this agreement facilitate increased tourist traffic to Morocco, but it reduced prices and allowed Moroccans living abroad to return to the country more regularly. Indeed, passenger numbers at the kingdom’s airports grew by 11.63% in 2017.

“The Open Skies Agreement, signed in 2006, allows any European low-cost airline to fly to and from Morocco, which has led to fierce competition,” Abdelhamid Addou, CEO of national carrier Royal Air Maroc (RAM), told OBG. “With 40 low-cost carriers bringing more competition for the aviation segment, our airline had to transform itself into a much more efficient operator. Thus, we had to protect our market share, which led to huge investments and promotions.”

Revenues have also continued to increase as sector players bring new income streams on-line and work to maximising profits from existing passenger throughput – one example being the introduction of paid parking at Marrakech Menara Airport.

Underpinning this growth, and laying the foundations for increased air traffic in the future, has been a national push to develop the aviation sector and ensure that related infrastructure in the country matches the strong demand. Notable recent improvements in aviation infrastructure – through a €400m investment programme over the 2014-16 period – include a new Dh1.22bn (€113m) terminal at Marrakech Menara Airport, which saw passenger capacity triple to 9m in 2016, and the inauguration in May 2017 of a new terminal at Fez’s airport, which raised the facility’s annual capacity from 500,000 to 2.5m. Furthermore, a new terminal is under construction at Mohammed V International Airport in Casablanca, which will see annual passenger capacity nearly double from 7.5m to 14m. It is set to open in the first half of 2018. Over the long term, a new $520m airport is envisaged for Marrakech with an annual capacity of 10m passengers to meet projected air traffic to the city of 14.37m by 2030.

RECOGNITION: Another significant recent development was a comprehensive agreement between Morocco and Eurocontrol that came into force in May 2016, fully integrating the kingdom into the organisation’s working structures. Eurocontrol, with its 41 member countries and two comprehensive agreement signatories, aims to deliver a “single European sky” that will provide air traffic management.

Also in 2016, Morocco received Airport Carbon Accreditation at the mapping level for Marrakech Menara Airport and Mohammed V International Airport. This certification, which signifies the kingdom’s efforts to reduce its carbon footprint in air travel, is expected to be granted to other airports in 2018.

BLUE SKIES AHEAD: The medium- to long-term outlook for the aviation sector is bright. Passenger traffic is picking up after a slowdown in 2016; a 3.6% growth in traveller numbers was recorded that year, which was roughly half the average of the 2004-15 period. Meanwhile, income from associated commercial operations should continue to improve the bottom line by boosting profit per passenger and generating new avenues for growth. Connections to other African countries are likely to drive growth in the future, but continued infrastructure investment will be needed to keep pace with the increasing number of passengers, particularly in airports like Casablanca and Rabat, where landing slot allocations come at a premium.

According to market regulators, other areas of focus include further improvements to service quality, integration of new smart technologies, and boosting operational and financial performance. “Major challenges for carriers still include the hub experience, the softening of connection times and delays caused by cabin luggage,” added Addou. “However, overall punctuality has improved from 71% to 86% over the past 18 months.”

Jawad Ouaziz, country manager for Morocco, Tunisia and Mauritania at DHL, told OBG there is also scope to increase air freight connectivity to match that seen for passengers. Addou went on to say that RAM already accounts revenues of $100m from air freight, adding that capacities are expected to increase more than 10-fold. A new Boeing 767, for instance, is set to begin operations in February 2018, further boosting capacity.

HIGH SEAS: In the maritime sector, more remains to be done to increase linkages between facilities in Casablanca and Tangiers, and other leading ports around the world. According to the National Ports Agency (Agence Nationale des Ports, ANP), commercial maritime traffic continues to record solid growth, increasing by 8.6% to reach 121.1m tonnes in 2016. At the Tanger-Med port alone, commercial volumes rose 8.7% to hit 44.6m tonnes. Vehicle traffic also surged by 24.7% in 2016, with 508,815 units passing through the country’s ports, of which three-fourths went to Tanger-Med. This increase is being driven by particularly dynamic international shipping volumes.

Despite accounting for 73% of total commercial traffic, domestic shipping has stayed relatively flat of late – registering a 0.9% year-on-year (y-o-y) rise in January 2017. Some 34% of commercial maritime traffic – excluding trans-shipment – goes through the Port of Casablanca, followed by the Port of Jorf Lasfar with 27% and Tanger-Med accounting for 16%.

The surge in international commercial shipping traffic is unsurprising given the extent of investment in Moroccan ports in recent years, which has greatly increased capacity and, in many cases, significantly improved efficiency. In operation since mid-2007, Tanger-Med port has been a game-changer in Moroccan maritime activity. Located 4 km east of Tangiers, it is one of the biggest and most modern ports in the Mediterranean and on the African continent.

According to the Tanger-Med Port Authority, the complex consists of Tanger-Med 1, with two container terminals, a railway terminal, a hydrocarbons terminal, a goods terminal and a vehicle terminal; Tanger-Med 2, with two container terminals; Tanger-Med Passengers Port; the Tanger-Med Port Centre; and MEDHUB, a 50-ha logistics free trade zone.

The Moroccan authorities are planning additional significant investments in port infrastructure. In late 2016 the ANP published its Dh6bn (€555.6m) development programme covering the 2017-21 period. More than half of this sum, Dh3.2bn (€296.3m), was frontloaded for investment in 2017. The programme includes projects at Wessal-Casa Port, where a naval construction yard is being built, and the Port of Mohammedia, where a liquefied petroleum gas plant is under construction.

“We have seen big investments in Morocco’s ports in recent years, and the ANP has signalled that more is on the way. One of the most significant is the construction of the Dh480m (€44m) polyvalent terminal in the port of Agadir,” Antoine De Mirbeck, associate general manager at Ipsen Logistics, told OBG. He added, however, that much more needed to be done, and some key projects face significant delays. “There is a strategic development project under way to make the Fez-Meknès region a national model for inward investment by 2022, but one of its flagship components – the relaunched dry port – has been put on hold.”

PASSENGER SEA TRAVEL: Improvements have extended to maritime passenger services. In December 2016 Italian firm Grandi Navi Veloci reopened its passenger line between Nador in Morocco and Sète in France. The company had upgraded its ships to meet the needs of passengers, including prayer rooms and common areas dedicated to children and families. The company serviced Nador to Sète, Tangiers to Sète and Tangiers to Genoa, Italy during the summer of 2017.

While traffic fell by 1.1% y-o-y to 284,173 passengers across all Moroccan ports in January 2017, initiatives such as those by Grandi Navi Veloci are looking to maintain or increase already strong maritime passenger figures. In the same month, for example, Nador Port bucked the trend by recording a 4.5% increase in passenger traffic to reach 19,959 travellers. Growth of 7.7% was recorded in maritime passenger travel for the whole of 2016 – totalling 4.9m passengers – including 337,971 cruise passengers. The vast majority travelled through the two ports in Tangiers: Tanger-Med (2.72m) and Port of Tanger Ville (1.46m).

MULTI-MODAL: Work connecting the transport modes needed to move goods across the country is making progress, with multi-modal facilities transferring rail freight to port freight most developed at Tanger-Med. While such facilities are not yet equally developed at the Port of Casablanca, efforts are under way to improve capacity there, as well as access to the port itself.

“The missing link in Morocco’s infrastructure is in rail freight. When it comes on-line, the new TGV will be a boon for passengers travelling between the big cities, but development of rail freight infrastructure lags behind,” Ouaziz told OBG. “Linking the country’s ports to big cities and industrial zones could reduce both logistics costs and carbon emissions arising from the trade of manufactured goods.”

LOGISTICS: Concerted government action in implementing the National Strategy for the Development of Logistics Competitiveness, launched in 2010, has seen significant improvements in the logistics segment. This strategy is centred around five pillars: namely competitiveness; laws, policies and regulations; training and development; special economic zones; and optimising supply chains. The strategy was supported by the 2011 creation of the Moroccan Agency for Logistics Development (Agence Marocaine de Développement Logistique, AMDL). Nonetheless, progress seems to have slowed in recent years. The World Bank’s logistics performance index recorded a significant improvement in Morocco’s overall score from 2.38 out of 5 in 2007 to 3.03 in 2012, but it dropped back to 2.67 in 2016.

Officials have set their sights on turning the segment into a global player. “If improvements continue to be made, the kingdom could become the next Dubai – a logistics hub for an entire continent.” Omar El Kadiri, CEO at FedEx Express, told OBG. “The proposed Mohamed VI Tangiers Tech City, being developed with Chinese investors, could be a game-changer. With the right logistics in place, it could become a high-tech manufacturing hub for the entire continent,” he added.

Active global firms the international logistics segment include DHL, FedEx and UPS. The domestic logistics segment is mainly composed of local players competing with Poste Maroc. This fierce landscape means margins are narrower in the domestic segment than in international logistics. ”The Moroccan logistics sector is still dominated by Spanish and, on a larger scale, European companies,” Mohamed Didouch, CEO of logistics company SJL Maghreb, told OBG. “At the moment, 20,000 transport and logistics companies exist in Morocco – 95% of which are small and medium-sized enterprises or smaller.”

Important advances have been evidenced fairly recently with respect to Customs procedures. Years of effort and investment led to the 2015 launch of PortNet, Morocco’s national single window for foreign trade, which allows for the dematerialisation of all Customs clearance procedures for trade through the country’s ports. According to commentary at the Fifth International Single Window Conference held in Marrakech in September 2016, PortNet will be extended to include air and road trade as well. “The right steps are being taken to help establish Morocco as a logistics platform for the whole of Africa,” Ouaziz told OBG.

The sector is not without its challenges, however. Some prominent issues include the increasing cost of land, which is needed for warehouse and storage facilities, and the grey market of unlicensed providers operating in the domestic segment.

GREEN CHARTER: With the hosting of COP22, Morocco launched a green logistics charter on November 11, 2016. It has now been signed by more than 50 transport and logistics firms, as well as a dozen sectoral professional associations and federations. The charter, developed in partnership with the Moroccan General Business Confederation, aims to mobilise key actors in the logistics and transport sector to promote environmentally friendly business practices. This will be achieved by establishing green regulations and policies, and promoting the use of renewable energies by investing in new wind farms and the continued enlargement of the Noor solar power plant (see Energy chapter).

PARTNERSHIPS: Private sector involvement is also on the rise across the broader transport sector. In aviation, private players have long held concessions for retail and lounge management. For the first time, however, there are two PPPs under active consideration, with feasibility studies ongoing in relation to hotel services and the refurbishment of business service facilities at Mohammed V International Airport in Casablanca. These studies are expected to come before the relevant Inter-Ministerial Committee for a decision, which would open up the possibility of launching a tender process should the projects get a green light, with a view to investment commencing in 2018.

Private participation is similarly becoming more prevalent in urban transport. Future operation of the Casablanca tram network was designated to a private sector concessioner in June 2017, while a tender process was launched at the end of 2017 for the operation of the city’s bus network from 2019 onward. Likewise, authorities at the ADM are likely to consider PPP agreements for the delivery of much of the ongoing motorway extension programmes.

REGULATORY REGIME: Steps are also being taken to improve the regulatory environment “The fact that Morocco still doesn’t have a dedicated legal framework regulating the logistics sector continues to have a negative impact on the sector,” Ipsen Logistics’ De Mirbeck told OBG. “Fortunately, the AMDL is working with experts at the World Bank to develop legislation that will have a more global reach, regulating all the key actors in the sector. This is crucially important.”

The ANP, in particular, has signalled that 2017 was an important year in terms of strengthening governance, redesigning operations and improving port fees, launching a study for the revision of the ANP’s current tariff system and acting on other findings from the Port Competitiveness Observatory.

“Moroccan Customs have enhanced their administrative procedures and sped up operations. Nonetheless, this remains a critical area for further improvement to position the country as a hub for business in the region,” Ouaziz told OBG. With respect to the grey market, he added, “The authorities need to tackle informality in the logistics sector so that firms of all sizes can compete on a level playing field. This would also improve safety and reliability in the sector.”

OUTLOOK: While the delivery of flagship mega-projects attract many of the headlines, it is the continued investment in the kingdom’s port facilities, road network and airports that is likely to prove most beneficial for long-term development, particularly as they improve connectivity for freight movement. The location of free trade zones close to deepwater ports is a prime example of joint-policy thinking, and there have been calls for the establishment of similar zones near airports that have sufficient freight capacity.

Once projects already under construction or at the planning stage have been delivered, Morocco should be well on its way to making its mark as a regional and continental transport and logistics centre. Investment in hard infrastructure, however, will need to match the equally important efforts of improving efficiency in soft infrastructure, including the legal and regulatory frameworks and the country’s Customs procedures.