Business Brief: Morocco is a Leader in Greenfield Investments; Urban Growth in Africa Presents Challenges for Africa; Algeria Launches Smart Cities Initiative and New Controls to Ensure Quality of Agricultural Exports – Jean R. AbiNader

Jean R. AbiNader
August 29, 2018

Jean R. AbiNader, Moroccan American Center

According to a 2017 study, Morocco had strong results in FDI supported Greenfield Investments. “Greenfield” refers to a foreign investment that creates a new company and facilities in the target country. Overall, Morocco ranked 14thworldwide, 3rdin Africa after Mozambique and Namibia, and 2ndin the MENA region after Bahrain.

One of the benefits of attracting international investors is to meet the growing needs of the urban populations. As a report in The Citizen concluded, “Millions of people are moving into Africa’s cities every month as most of its countries blaze through some of the fastest urbanization rates the world has ever seen. Economic opportunity is at the top of the list for the reasons why.” Unfortunately, increased urban demographics has not benefited from an accelerated rate of “economic growth because of a lack of physical, commercial and industrial infrastructure, poor transport networks, and many additional costs for investors.”

This is where the role of Foreign Direct Investment (FDI) is critical. It provides the financing for industrial development, encourages the development of private-public partnerships (PPPs) that mobilized local capital, spurs economic diversification, promotes productivity and a highly skilled workforce, and helps the country’s export performance, Morocco’s automobile industry being an excellent example.

According to the report “Countries with large urban populations, trade openness, mobile-phone subscriptions, internet bandwidth, and full electricity supply are more likely to attract the most foreign direct investment.” Interestingly, the research also indicated that low wages are not a key motive for international firms in choosing overseas investments. The report notes that Morocco has two cities among the top five in Africa that have experienced large growth.

Cities Global rank Country $ billions Growth (%)
Cairo 64 Egypt 13.7 -1.25
Johannesburg 69 South Africa 13.2 6.23
Tangier 82 Morocco 10.5 23.84
Lagos 101 Nigeria 9.2 7.23
Casablanca 111 Morocco 8.4 9.38

Despite delays that pushed the project back several years, Algeria has finally launched its “smart cities” initiative. More than 4,000  Algerian, regional, and international participants met at the Smart Cities Global Technology & Investment Summit to discuss ways to “develop more efficient smart cities by “integrating technologies and data to better manage urban resources in areas such as traffic and transport, energy, water and waste management,” according to the organizers.

Under the theme “Start-ups and Innovation Ecosystems” Algeria unveiled plans for building sustainable tech businesses by providing incubators, accelerators, and funding to support entrepreneurs. The summit also focused on “Diaspora Models – Talent Mobilization,” which focused on how “to better utilize new technologies upgrading the acquisition of new technologies, while also leveraging Algeria’s diaspora to develop stronger relations with developed countries.”

The proposed technology lab will provide local and international companies with the type of specialized technical environment “to test smart city solutions across a wide range of fields such as telecoms, health and financial technology.” The innovation hub will consist of “a physical space for tech stakeholders to interact and develop partnerships, which could help local firms through mentoring, while also allowing international players to gain a better understanding of local conditions before potentially entering the market.”

These steps have been augmented by improvements in the country’s ICT infrastructure when Algeria launched its first communications satellite and commenced construction of high-capacity submarine cables. “Despite these improvements, significant progress still needs to be made. The World Economic Forum’s Global Competitiveness Index 2017-18 ranked Algeria 98th out of 137 countries in the category of technological readiness,” commented the report.

The article also mentioned the World Bank’s “Doing Business 2018” report ranking Algeria 166th out of 190 countries, including 145th and 170th in the metrics of starting a business and protecting minority investors, respectively. These challenges are obstacles to attracting investors and qualified professionals. Additionally, access to credit is also critical as Algeria ranked 177th out of 190 in the getting credit metric in the doing business index, with the issue considered a long-term problem for smaller firms in particular.

One sector in which technology can make an immediate difference is improving agricultural exports. After shipments of potatoes and dates were refused by Canada and Russia for not meeting international standards, Algeria announced that a national accreditation organization will test agricultural exports.

The Ministry of Agriculture and Rural Development said that the export of agricultural products will be subject to new regulations to avoid having shipments rejected in the future. Algeria has set up a national laboratory to monitor agricultural exports and it is expected to receive international accreditation by next September.

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