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Mixed Economic News as Morocco Moves Forward in Key Sectors – Jean R. AbiNader

Jean R. AbiNader, MATIC
May 17, 2017

Jean R. AbiNader, Exec. Dir., Moroccan American Trade and Investment Center

Jean R. AbiNader, Exec. Dir., Moroccan American Trade and Investment Center

Fitch Ratings issued a cautionary assessment of Morocco’s banking exposure in Africa. Fez takes center stage in business and economic news with several initiatives announced. The aeronautics sector gets new public-private partnership to boost capacity. And a government agency issues updated statistics on the role of technology in the Moroccan economy.

Looks good on paper. According to a recent bulletin released by Fitch Ratings, Moroccan banks must be careful not to be over-exposed in acquiring assets in Africa. Both the recent acquisition of Barclays Bank in Egypt and greater activity in sub-Saharan Africa were included in the assessment. According to the bulletin, “Moroccan banks that establish or acquire banks in markets with lower sovereign ratings are exposed to the large portfolios of local government bonds that these subsidiaries will typically hold.”

The concern, most recently tied to Attijariwafa Bank’s purchase of Barclays, reflects the quality of domestic sovereign bonds in most African markets, which are below the quality of similar bonds in Morocco, exposing the banks’ bottom lines to greater asset risk as well as to regulatory standards that may be less developed than Morocco’s.

Attijariwafa paid almost three times the book value for the Barclays operations, justified by the value that its African subsidiaries generate: 32% of 2016 net income for BMCE (Banque Marocaine du Commerce Extérieur), 29% for Attijariwafa, and 12% for GBPC (Groupe Banque Populaire Centrale), offsetting weak earnings in the Moroccan market. Profits are also threatened by weak loan portfolios if the assets were to decline in value, or in the case of government bonds, fail to maintain their face valuation. Currently, BMCE has operations in 19 African countries, Attijariwafa in 13, and GBPC in eight.

Fez takes center stage in economic spotlight. As part of the country’s continuing effort to geographically diversify its economic growth, the First Economic Forum of the Fez-Meknes Chambers of Commerce and Services (CCIS) featured an address by Moulay Hafid Alalamy, Minister of Industry, Trade, Investment, and the Digital Economy, in which he reminded the audience that the government had instituted a series of mechanisms to support local industrial development and balanced geographic growth.

The Minister highlighted the country’s success in industrial manufacturing and pointed out that traditional sectors such as textiles and leatherwork are important in adding jobs to the economy. “Thanks to the Industrial Acceleration Plan,” the Minister explained, “Morocco is committed to an integrated and inclusive approach and an irreversible and mastered insertion in global value chains.” He added that “world leaders are opting for Morocco and are developing major projects here. With the integrated and innovative system put in place, these operators will now have more visibility and will be able to carry out their projects under more advantageous conditions.”

While in Fez, the Minister attended the announcement by ALTEN Group, a French company prominent in technology engineering in the ITC sector, that it was moving ahead with expanding its operations in Morocco. According to a story in Morocco World News, the company currently has more than 200 engineers and technicians working on information technology and telecommunications projects for a number of European clients. Its newest project, “The Embedded Systems Automotive and Aeronautics,” will provide outsourcing of engineering services that will create more than 300 engineering positions, mainly in automotive and aeronautical embedded systems.

The ultimate goal is to set up “a competence center of 500 engineers in Fes by 2020, with the goal of reaching 1,000 full-time employees in Morocco.” Pascal Amore, member of the Executive Committee of the ALTEN Group, stressed the importance of the group’s presence in Morocco and the strategic nature of its activities initiated at the Fes Shore Park. “ALTEN, as a global leader in engineering and technology consulting, develops design and engineering projects for major global companies in the fields of information technology, telecommunications, aeronautics, space and the automobile industry,” he said.

Auto sector receives financing boost. At the automobile value chain fair held in Tangier, Minister Alalamy signed an agreement with Société Générale du Maroc and AMICA, the trade association for the automobile sector, which would provide specific financing services for value chain supply companies in the sector.

As the Minister put it, “Our ambition through the signing of this agreement is to enable the automotive sector to pursue the exceptional dynamics it shows, through financing offers adapted to the actors of the automotive ecosystems.” This financial support is essential to meet or exceed the goal of 65% of locally produced materials for the industry. “Through this agreement,” according to the Morocco World News story, “Société Générale du Maroc says that it is committed to supporting the automotive industry throughout the value chain of financial and banking services dedicated to companies: financing offers in the form of operating loans, investment credits, industry DEVcredits (tailored financing), currency financing, leasing, factoring, long-term leasing of vehicles, cash management solutions and also offers dedicated to the employees of companies in the automotive sector.”

Aeronautics sector finds new partners to build workforce competency. Casablanca recently hosted a national conference on “Developing Aeronautical Skills: A New Approach to a New Vision.” The central theme of the program was the need for initiatives to boost the number of qualified workers and how to provide sustainable training efforts in the sector. The event was organized by Mundiapolis University, which signed two partnership agreements with Bombardier and the Moroccan Aeronautics and Space Industries Group (GIMAS). Both agreements focus on developing certification programs for employees in the aeronautics sector and upgrading the support for engineering students at the University through internships, case studies, apprenticeships, and final projects.

The growth of the sector has been quite rapid, with more than 12,000 jobs created and 120 companies generating a turnover of nearly USD 1 billion each year, according to a press release from Mundiapolis. With growing interest from international investors, it is incumbent that the sector has a robust training regime to meet industry needs. Mundiapolis President Amine Bensaid said that, through this partnership, the university’s ambition is to be the best companion for both students and companies by continuously adapting their training programs to the expectations of the job market and the needs of companies.

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