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Facing High Public Employment, Morocco Continues to Build Support for Small and Medium Enterprises – Jean R. AbiNader

Jean R. AbiNader
February 10, 2020

Jean R. AbiNader, Moroccan American Center

Containing the costs of public sector employment while providing a decent level of government services in areas such as education, health care, and security, is a challenge in all of the Arab and African countries. Most recommendations for reducing national budgets include the need to reduce the public payroll both in terms of number of employees and associated costs such as pensions. At the same time, salaries for most public servants remain below what is needed to move solidly into the middle class, which makes governments reluctant to downsize without some consideration of a social safety net, again a cost to the national budget.

Morocco is no exception to this dilemma. As with other countries that are not fossil energy producers, Morocco lacks accumulated foreign reserves to cushion any large shifts downward in the public payroll and can no longer be the guarantor of jobs for college and high school graduates. So since the 90s, employment opportunities generated by the private sector have received more emphasis both from governments and international donors. Yet the challenges remain, and Morocco is a good case study of how outcomes of any programs for job creation are uncertain for a number of reasons.

First of all, many new jobs are capital intensive rather than labor intensive. While Morocco in the largest producer of automobiles in Africa, the sector employs less than 100,000 people and even doubling production would only marginally boost employment as robotics and efficient supply chains reduce the need for many hands to make a car. Secondly, Morocco’s largest sector is services including tourism where there generally are lower wages compared to manufacturing. Another factor is the outsized role of agriculture in the economy contributing up to 20% of GDP in a good climate year. Seasonal agricultural work and greater automation of tasks is reducing the number of people employed in the sector.

More than 564,000 were employed in the Moroccan public sector in 2019 according to the Human Resources Report from the Ministry of Economy, Finance, and Administrative Reform. Six ministries employ 90% of those workers: 48.6% in education, 23.6% in security, 9.5% in the health sector, and 3.5% in the Justice Ministry. The remaining 14.8% are in other ministries. Women account for 34.8% of public sector employees.

Wages and pensions in 2019 amounted to $11.5 billion, with a 4.2% increase year on year. Monthly salaries average around $850. Less than 70,000 employees will retire over the next six years, marking how important these jobs are to families.

To incentivize more private sector employment, the government has initiated a number of projects. Most recently, in line with last year’s new national development plan that promotes decentralized centers for economic growth in every region of Morocco, King Mohammed VI launched in Agadir what is called a “City of Trades and Skills,” which focuses on developing local cadres of workers trained for employment in the local economy. As designed, it will train up to 3,000 students per year in various skills including industrial manufacturing, digital and offshoring, management and commerce, tourism and hospitality, health, construction, agriculture, fisheries, agro-industry, and handicrafts. By 2023, it is planned that there will be 12 of these Cities located in all the regions costing some $378 million. Agadir is the first to be initiated with others planned in Rabat, Sale, Kenitra, Nador, and Laayoune by 2021.

These projects will be complemented by programs promoting foreign language acquisition, entrepreneurship, and small business development to be housed in an “Innovation City” in each location to include business incubators, an R&D facility, and formal linkages to nearby industrial estates.

In addition to the support for modernizing the agricultural sector mentioned in a previous blog, the new leadership at CGEM, the country’s largest business organization of manufacturers and exporters, made clear that its priority is to support entrepreneurism and new business development. Chakib Alj, the new president, noted that “Moroccan entrepreneurs are suffering and need to be reassured. This is what we are working towards. We are not going to lie to ourselves, the local economy is not in good shape. Economic operators do not doubt the country’s potential, they want to relaunch a new approach and a new global dynamic!”

Among his concerns is the downturn in the economy due to some $41.5 billion owed to the private sector by the government, causing a cash flow challenge to many firms. Increased tax inspections to increase government revenues have also heightened the insecurity of companies. “We are in a down cycle, and problems are multiplying,” he opined. Alj feels strongly that CGEM must play a key role in facilitating access to financing and restore confidence that the government can pay its bills.

He believes that it is critical to increase the country’s growth rate and “find ways of boosting the competitiveness of SME, especially very small businesses, increasing the volume of exports, and creating sufficient jobs. Alj pointed out that “An economy cannot prosper if its VSEs and SMEs suffer. In this case, they represent 95% of the economic fabric. Yes, the banks must play the game and be more courageous, they must grant credits according to the viability of each project and not only on the basis of the sector of activity or the size of the company. I also call on large companies to take an interest in these projects and help SMEs.”

His attitude and proven success in the private sector, along with the team he is assembling at CGEM, augers well for building stronger business capabilities in the Moroccan private sector.

 

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