Morocco’s Global Network Continues to Grow

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Islamic Banking and High-Value Investments Attract New Partners

In a country like Morocco, which imports more than 95 percent of its energy, relies on a variable agricultural sector for upwards of 20 percent of its GDP, and works with international partners for large-scale infrastructure and economic development projects, public-private partnerships (PPPs) are an important option in creating the best model for attracting investments. These partnerships help to create the economic environment that both international and domestic investors are looking for – a stable, reliable financial system that treats profitability and performance as equally important.

In fact, Morocco’s power sector, back in 1997, inaugurated its first private sector owned power company and has continued the trend ever since. Now Morocco is poised for a complete shift to public-private partnerships for power, water treatment, electricity generation, hydrocarbons exploration and production, and refining, among other infrastructure projects, such as the high-speed train from Tangier to Casablanca.

What makes Morocco’s strategy significant is that the government recognizes that its role is not to manage but to regulate, participate in the financing, and make sure that local sensibilities are taken into consideration in project development and execution, and that projects conform to the national strategy for the sector.

The energy sector continues to attract international investors, ranging from the contract with Temsol in 2007 to provide power to more than 690 rural villages, to the 2013 award to the ACWA-led consortium building the CSP solar power plant in Ouarzazate, to the recent contracts with the French consortium building the high-speed train that is responsible for providing power for the rail system.

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New partnership for desalination in Morocco

New partnership for desalination in Morocco

And there is a new player in the private-public partnerships in Morocco. This past week, Abengoa, an international company that applies innovative technology solutions for sustainability in the energy and environment sectors, began construction of a desalination plant in Agadir. Once again, Morocco is playing its part through partial financing provide by InfraMaroc, the infrastructure arm of CDG Capital – the pension fund investment authority.

The project plans to supply 100,000 cubic meters per day of drinking water to the half-million local residents, which will also spur tourism and agriculture, the main economic drivers of the region. This is an innovation for the National Office of Electricity and Energy (ONEE), which until this time has ventured primarily into wind farms and hydroelectric power generation.

It is the first PPP in the sector and will be the largest capacity desalination plant in the region, according to Abengoa. The capacity of the plant can be doubled as the demand increases. Given the difficulty in predicting adequate rainfall, this is a boon to the economic stability of the region, and fits Abengoa’s goal of working in areas that face increased challenges in securing adequate supplies of drinking water.

Financing Development

While these are important accomplishments and show the results of well-designed PPPs, still more needs to be done to secure investment capital. As promised last year, Morocco is opening up its financial system to include Islamic finance, which focuses on lending related to equity rather than debt.

According to a recent article in the UAE paper, The National, “Morocco is poised to have its first full-fledged Islamic bank as early as September as the only North African country rated investment grade seeks to tap the $1.8 trillion industry.” What is significant in the statement is that while other countries, such as Tunisia, may have Islamic banks, only Morocco has an investment grade rating. This is critical, since investors, being masters at risk mitigation, will look at those countries where there is sufficient expertise, credibility, and viability in the financial system before investing.

The bank is Dar Assafaa, owned by AttijariWafa Bank, and it will be the country’s first fully compliant Islamic financial institution. This follows the law passed in January that regulates Islamic financial products and provides the regulations for establishing local and foreign Islamic banks.

Mohamed El Kettani leads AttijariWafa Bank into Islamic Banking

Mohamed El Kettani leads AttijariWafa Bank into Islamic Banking

According to the chairman of the Moroccan Association of Participative Financiers, Said Amaghdir, “Morocco’s financing needs are huge, especially in project finance, and the stability we enjoy here will act in favor of Morocco.” The association estimates that total investment in Islamic financial products will reach $7 billion by 2018, much of it in capital goods and services, including housing, infrastructure, vehicles, and equipment.

The president/CEO of AttijariWafa, Mohamed El Kettani, noted that “Islamic finance may account for as much as 10 per cent of the total banking assets within 10 years.” He added, “We are already a market leader and we aim to stay the leader under the new law.” Investors are already signaling their enthusiasm for the new venture. “There’s political will with the government adopting this law and preparing for the sukuk [Islamic bonds] issuance,” said Montasser Khelifi, a Dubai-based senior manager at Quantum Investment Bank. “With Tunisia suffering from the Arab Spring, North Africa was relatively unattractive, while Morocco remains attractive for European investors.”

Morocco continues to put together all the ingredients for continuing to attract partners for meeting its development goals. It has the international reputation, track record, experience, regulatory environment, and now expanded access to project finance to continue its progress.

 

”Morocco’s Success Is Our Success”

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Dentons Selects Casablanca Finance City for Regional Africa Office

Dentons, the world’s largest law firm, will officially launch their African headquarters in Morocco in April,. After a series of mergers over the past five years—most recently with the largest law firm in China—the firm now boasts more than 6,500 lawyers and professionals in more than 50 countries across the globe, including 18 in Africa.

With so many offices around the continent, why did they choose Morocco rather than other countries in West and Central Africa?

According to Dentons partner and head of the Africa practice Thomas Laryea, “There are three reasons that support this decision. First of all, we took a look at financial flows for investment in Africa and saw the amount of transactions through Morocco to Africa. This has broad business and legal opportunities for Dentons. Secondly, the commitment by King Mohammed VI to Africa is real. In addition to the many agreements signed with countries in the region, a really good signal was the decision by the Africa 50 Fund to locate in Morocco. Finally, we took a look at what can be done through Morocco to Africa, ranging from the infrastructure network to financial services and IT investments. Morocco is tied very closely to the region we want to serve from this office.”

Thomas Laryea Heads Dentons Africa Practice

Thomas Laryea Heads Dentons Africa Practice                    Photo Credit: Twitter

“Make no mistake,” he said. “Morocco’s success is our success. We are fully committed to this strategy for Morocco and for Africa and believe that we can play a key role, through our global offices, to find the right business partners anywhere in the world.”

Laryea identified a number of sectors in which Dentons thinks it can be helpful, both in terms of its legal services and in bringing together resources across borders. “I’m particularly interested in the power sector since there is such a huge need, [and] therefore opportunities. Power Africa, the Administration’s blueprint for what can be done, overlooks the need for localized solutions, ones that take into consideration all three factors defining a power project – construction, fuel, and access to a grid for storing and distributing power.” He would like to see more effort devoted to defining off-grid, regionally focused solutions that can be done more quickly, cheaply, and overcome the obstacles posed by a constrained national power system.

Laryea is also optimistic about other sectors including manufacturing, renewable energy, and infrastructure, where cross-border partnerships can meet financing and technology needed for projects. Dentons is bullish on Morocco because the country has demonstrated its seriousness in building regional partnerships and opportunities in many sectors, from tourism and social housing to healthcare and manufacturing. And Dentons believes that it can play a role in supporting how Africa moves ahead to meet its development needs.

Bridging US-Morocco Entrepreneurship

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Portland State University Alum Working on Partnership with the University of Marrakech

Ahmed Abidine is a global-minded millennial Moroccan with a strong sense of social entrepreneurism. Over the past year, while working on his advanced degree at Portland State University’s (PSU) School of Business, he won the school’s Pitch Fest for the best presentation by a social entrepreneur. A public event, the audience also participates in the judging, which makes the award even more impressive.

His winning project is both entrepreneurial and beneficial to the community. Ahmed was inspired by his leather-working grandfather and designer/seamstress/teacher mother to create, design, and manufacture a line of handmade luxury handbags. What is quite special is that he has a production partnership with Morocco’s Deaf Artisan Group of Marrakech that offers deaf people training and education to become self-sufficient. Ahmed told me that his solution addresses two challenges for Moroccan handicraft projects to be competitive: attaining sufficient quality for global sales and education and training for the craftsmen/women.

So through this project he does both – create a viable product while raising the skills of the workforce. But it is not an easy path. It took two years, working with the Chamber of Moroccan Artisans where a friend was studying the sustainability of Morocco’s leather industry for his Master’s degree, which brought Ahmed to the University of Cadi Ayyad (UCA).  His top priority now is linking a new program on international entrepreneurship and business exchange between PSU and the University, which is located in his hometown of Marrakech.

Next for the PSU-Morocco Partnership

Social entrepreneur and business start-up

Social entrepreneur and business start-up

Ahmed is keen to promote entrepreneurship in Morocco. He told me that there are hundreds of young people at the University and in Marrakech who are actively engaged in trying to build businesses that can mean employment for the country’s youth. He said that “the seeds have been planted but have not been harvested,” due to a lack of access to financing and support for the entrepreneurial spirit. This is why the proposed joint program is so important. He found a willing counterpart in Professor Abdelaziz Baçaoui who heads the incubator and entrepreneurship program at UAC.

“Entrepreneurs are about creating solutions – not sitting in a classroom and letting someone else take the initiatives,” Ahmed stated. He believes that a lot can be done by bringing coaches and mentors from PSU to meet with the counterparts and students and share knowledge about building research and business cases in support of entrepreneurs, including changes to curricula, how to maximize the impact of an incubator, and what would a long term partnership involve.

The PSU-UCA “international entrepreneurship and business exchange” will be launched on Friday, March 20 and sessions will continue through Sunday, March 22. The goals of the event include exploring opportunities for bilateral trade and investment, establishing academic exchange programs between the schools, setting up the Marrakech Center for Innovation and Entrepreneurship, and strengthening the start up community in Marrakech through, among other efforts, encouraging exchanges between entrepreneurs in Morocco and the US.

The program has three components. The first day will feature presentations from both sides on their respective start up communities, followed by an exploration of the growth industries for trade and investment. The second day will focus on building and rehearsing pitches to be made by Moroccan entrepreneurs to the coaches from Morocco and the US. On the final day, the teams will make their presentations and awards will be made to the winning teams.

Marrakech is certainly a vibrant city with scores of businesses yet to be developed by entrepreneurs who see opportunities where others see challenges. As Ahmed says, there is a long way to go but this event has the potential to catalyze into an annual program of international scope. A number of private and public sponsors from the US and Morocco have signed on as partners and this should enable this innovative project the lift it needs to become a sustainable event.