Morocco’s Arab/African option

Morocco is trying to position itself as a gateway for international investors wanting to expand into Africa. Can it succeed? Published in The Middle East, 10 December 2014

At the height of the Arab Spring, in September 2011, Morocco and Jordan were both offered membership of the GCC, in what looked like a rather desperate attempt by the Gulf states to draw the region’s monarchs closer together at a peculiarly threatening time.

The plan, which always seemed a bit outlandish, has gone nowhere. These days, if it is mentioned at all by Moroccans, it is often accompanied by a wry smile. Instead, many in Morocco seem more interested in defining themselves as African rather than Middle Eastern.

“We are an African country,” says Said Ibrahimi, chief executive officer (CEO) of the Casablanca Finance City Authority. “We have ties with the Middle East but we are more African than Middle Eastern.”

“Apart from oil what do we buy from the Middle East? Not much,” says another senior business figure from Morocco. “We have ties of language and religion with the Middle East and we welcome Middle East investors to Morocco. However, from an economic point of view we are more integrated with Africa. Moroccan companies are very much involved in Africa, but they are not involved in the Middle East.”

In many ways such statements simply reflect the geographic and economic realities. Morocco is of course part of Africa, but while it also belongs to the Arab world it is a long way from the economic heart of the Middle East. Rabat is closer to New York than it is to Abu Dhabi or Dubai and its most important trading partners lie in Europe to the north rather than among the other Arab countries to the east.

“Morocco generally falls between the cracks between London, Paris and Dubai,” says Tarik Senhaji, director general of the Moroccan Fund for Tourism Development. “Technically we are in the MENA region but we feel African, European, Arabic, many different things.”

The Moroccan government and its business community is now trying to harness that sense of being as much African as anything else by making a concerted effort to establish the country as a business and finance hub for Africa.

At the heart of that strategy is the country’s commercial capital Casablanca, which is home to Casablanca Finance City and the Casablanca Stock Exchange. Senior executives from both bodies, along with other members of Morocco’s business elite, gathered in London on 22 October to put the message to UK-based investors at a conference called Morocco, Africa’s Business Gateway.

“The aim is to showcase Morocco as an investment destination in Africa and also as a gateway for companies seeking to establish a headquarters or to have operations in Morocco to cover the rest of north, west and central Africa”, explained Karim Hajji, CEO of the Casablanca Stock Exchange.

One element which should help to support this strategy came in June, when the Moroccan bourse signed a wide-ranging deal with the London Stock Exchange. This will bring modern technology to the exchange and, it is hoped, help to increase liquidity and attract more listings to the market, including share offerings from companies in other African countries.

However, the battle to change the perceptions that international investors have of Morocco will not be easy. Among the major hurdles it faces is the fact that Morocco is not usually categorised as an African country by international businesses, but rather as part of the MENA region. If it is considered an African country at all then it is generally just classed as part of Francophone Africa.

On the other hand, Moroccan companies are often well versed in doing business in Africa. For example Maroc Telecom, which is majority owned by the UAE’s Etisalat, has subsidiaries in Burkina Faso, Gabon, Mali and Mauritania. Morocco’s largest bank, Attijariwafa Bank, operates in 12 other countries around the continent and the national airline, Royal Air Maroc, has one of the more extensive route networks on the continent, serving 29 international destinations in west, north and central Africa from its Casablanca hub.

Given all this, for those interested in making financial investments, buying into Moroccan stocks could be one way to gain exposure to some of the more vibrant African economies.

“There are many Moroccan companies which are actively involved in sub-Saharan Africa either directly or through affiliates in banking and insurance, real estate, mining, telecoms or transportation,” says Hajji. “So Morocco is an ideal investment destination for investors seeking exposure to Africa’s growth potential.”

For companies wanting to set up operations around the continent, the depth of experience that Moroccan businesses have could also be useful, particularly in the French-speaking countries that many companies in the English-speaking world tend to shy away from.

“A lot of people in London look exclusively at Anglophone Africa, but I think that Morocco and Casablanca can be used as a bridge in order to do business in Francophone Africa,” says Senhaji.

Casablanca Finance City has hit upon the idea of using the phrase ‘greater northwest Africa’ as a way of explaining its core target region. This is an area that stretches as far west as Libya and as far south as the Democratic Republic of Congo. In all, this region encompasses some 550 million people in 28 countries and has an economy worth some $1.2 trillion.

However, this strategy means that Casablanca is going up against some well-established investment hubs serving at least some of the same areas, including Johannesburg, Nairobi, Lagos and Abidjan.

On the surface, Morocco has some advantages. It can point to political and economic stability, a decent regulatory environment, improving infrastructure and good connectivity. However, Casablanca also needs to develop an entire ecosystem of professional services companies and others to support investors and international companies looking for a regional headquarters.

Some firms have been setting up in recent years. Among those to have arrived recently are international law firms like Clifford Chance and Baker Mackenzie, both of which opened offices in Casablanca office in 2012. Boston Consulting Group set up its first office in Africa in Casablanca in 2010.

In all there are now about 60 companies, law firms, accountancy firms and consultancies in Casablanca Finance City. That provides a good foundation, but there is clearly still plenty more to be done. But perhaps the biggest challenge of all is simply to persuade international businesses to even consider Casablanca as a viable base for their African operations. That will take time and perseverance, as Moroccans acknowledge.

“The biggest challenge is getting the story across,” says Senhaji.