At the crossroads of an important trade route, Morocco has been attracting interest from around the globe and is high on the list of many investors
Morocco’s strategic location bordering Spain, Algeria and Western Sahara, coupled with free trade agreements with the United States, Europe and Middle Eastern countries, have made it an ideal hub for exports. Add to that low labour costs, free trade zones and tax exemptions for all locally purchased capital goods and machinery over the first year of business and you have a perfect start-up environment.
At the crossroads of one of the world’s most important trade routes, Morocco has been aggressively improving its infrastructure and expanding the Tanger-Med port, one of the busiest in Africa.
Only 10 miles away from Europe, Tanger-Med is connected by railway and highway to free zones and industrial parks and was critical to Renault’s $1.4 billion factory investment in Tangier –the French car manufacturer’s new export-focused plant in the region.
Morocco’s self-propelled drive to put itself on the global map seems to be paying off, having lured international giants such as Bombardier Aerospace, Delphi, GDF Suez, Acciona and Del as well as the UAE’s telecoms company Etisalat and energy firm Taqa, in recent years.
Deep cultural similarities and close diplomatic ties with many African nations has also smoothed the path for Morocco’s entry into French-speaking markets.
But there is still plenty of room for development in a country with a population of 34 million people, of which more than half are under the age of 25.
“Due to steady economic growth, Morocco’s middle class has been growing over the last decade. Yet the products and services offered have not kept up with the pace of increased income,” says Adil Hajjoubi, managing partner of Rabat-based AlShall Morocco Consulting and Investments.
He says Morocco still lacks top quality office space, industrial and logistical sites, retail stores and housing for lower and middle classes, which could translate into potential property investment opportunities. Retirement homes are also in demand.
“Attracted to the good weather and low cost of living, an increasing number of Europeans are retiring to Morocco. Developing retirement homes that are staffed with well-trained employees can be a very profitable venture,” says Hajjoubi.
As incomes rise, more Moroccans are sending their children to private schools and demand is growing for good-quality education at all levels and for products like quality pharmaceuticals. This deficit presents an opportunity to invest in solid healthcare businesses, which explains Abraaj Group’s recent involvement in Moroccan pharmaceutical manufacturer Steripharma.
“In Morocco, where local consumption is still low compared to other markets in north Africa, there is strong demand versus low penetration of generics, which creates the opportunity to develop high-quality products at affordable prices,” says Ahmed Badreldin, partner and head of Abraaj Group Mena region.
Economic growth has also led to a higher energy demand and the government is aiming to more than double its capacity to 14,500 megawatts by 2020, of which 42 per cent will come from wind and solar. As a result, renewable energy businesses have been flocking from across the globe to take advantage of these developments.
When it comes to exports, the opportunities are as diverse as Morocco’s landscape yet there is still potential to export more to the GCC region.
“Morocco is already exporting products to the UAE but could do better, especially in some of the niche products like high-end fashion, which are similar to tastes in the UAE, as well as agribusiness and handicrafts,” says Noureddine Sefiani, former Moroccan ambassador to the Russian Federation, Kazakhstan, and Greece.
Besides free trade incentives, Morocco offers benefits including a corporate tax break during the first five years of business and a 17.5 per cent rate thereafter.
For offshoring facilities, the government offers telecom costs at 35 per cent below market price and training grants of up to $7,000 for Moroccans in the first three years of employment. Foreign investors can also obtain credit from local banks, which are largely in compliance with the international banking standards set by the Basel Accords.
With an estimated 10 million tourists visiting every year, eight UNESCO world heritage sites and $41 billion in foreign direct investments made between 2005 and 2010, Morocco’s tourism sector has proven a viable prospect.
The Moroccan Investment Development Agency offers lucrative incentives for six tourism investment schemes while regional investment centres throughout Morocco’s 16 administrative districts are putting great effort into facilitating company formations.
Every market will have its challenges and in Morocco red tape and language could be the stumbling blocks. “While Arabic is the official language in Morocco, French is the language of business. It can be frustrating for non-French speakers to do business in Morocco as most inter-company communications and even government documents are in French,” says Hajjoubi.
To succeed in this huge $90 billion economy, he advises companies to study the market well, understand the regulations in their specific investment area and get independent advice from a local, well-reputed firm as the first step to a successful entry into doing business there.