The President of the Moroccan Capital Investors Association (AMIC) recently met with members of the parliamentary delegation of the Committee on Economic Cooperation and Development of the Federal Parliament of Germany. He returns to the essence of this meeting and defines in detail the goals of the association.
On June 7, as President of the AMIC, you had the opportunity to meet with a delegation from the German Federal Parliament during her first visit to Morocco following the normalization of relations between the two countries. What topics did common interests discuss?
This meeting was organized by the team of the KFW office in Morocco, to which I thank for their participation in the development of national investment capital. Discussions focused on the role of private capital in implementing our new development model (NMD) and on the support that German cooperation can bring to this area.
What ways have been explored to optimize cooperation between Germany and Morocco in your field?
These discussions allowed me to emphasize the absolute need to rethink cooperation in order to support private investment in Morocco. As you know, investment in the Kingdom for more than 10 years shows some of the highest rates in the world, about 30% of GDP, while the world average is about 20%. However, with this level of investment, we need to have growth and job creation rates that are comparable to those in Asia.
However, we limit average growth to 5%. According to all experts, this lack of efficiency is mainly due to two aspects. The first concerns the vast majority of public investment, which accounts for two-thirds of the investment, 245 billion dirhams provided for in the 2022 financial bill, while elsewhere it is, in most cases, less than 15%. The second aspect concerns the trend of private investment, which accounts for another third and is insufficiently focused on sectors that create jobs and add value. To boost private investment and thus succeed in tackling economic recovery, we must do what the most investment-efficient countries do: develop national investment capital.
CGEM is moving in the same direction, as its White Paper on NMD implementation recommends, in particular, strengthening the capital of companies operating in Morocco’s strategic sectors. Especially since in recent years the country has developed very favorably private capital. In fact, management teams are experienced and efficient. As for the legal framework of the OPCC, it is strong, under the supervision of AMMS and constantly adapted. In addition, we are seeing a steady increase in fundraising by local management teams, as well as investments in SMEs that are not listed on the stock exchange.
Moreover, in 2021, 1.2 billion dirhams were invested for 30 companies, knowing that 1 dirham invested by the fund in direct capital can generate up to 7 dirhams of investment of the invested company. This is not forgetting the expansion of Moroccan investment capital to the stage of innovation capital (seed and venture capital), thanks to the initiative Innov invest Ministry of Finance, supported by TamwilCom. In fact, 18 out of 30 companies invested in 2021, ie 60% of investments in a number of companies, were invested in innovation capital.
What about the impact of private capital?
All studies clearly show the positive impact of private capital. Let us recall, first of all, the improvement of the financial structure of the companies in which they are invested, by strengthening their equity and improving their debt capacity, and hence investment, in the long run (I recall here report 1 to 7 between fund investments and investor companies ). Private capital also helps to improve the institutional and managerial capacity of investor companies, as well as strengthen their social and environmental responsibility, as well as the innovation and adaptability of their business model. The best illustration of these positive externalities was given in the midst of the pandemic crisis: companies invested in direct capital recorded growth of 1% in 2020, while in the center of the crisis Moroccan companies fell by an average of 30% and that national GDP fell by 6.3% in 2020.
So how do you strengthen private capital in Morocco?
Given the current economic situation, the main disadvantage of the market is the recovery of capital (or working capital). There are many high-potential SMEs and ETIs in Morocco’s strategic sectors, whose investment capacity is limited by the financial situation, which has deteriorated due to four consecutive exogenous shocks (Covid, Ukraine, drought and imported inflation).
To cover this market failure, it is necessary to support the emergence of capital recovery instruments that provide share capital interventions and debt obligations. The aim is to restore the financial structure of the target SMEs and ETIs so that they can continue to invest and support them technically and financially. In this sense, it is a matter of repositioning their business model so that they can fit into the new post-Covid and post-war local global value chains in Ukraine (particularly in relation to Europe, which no longer wants to depend on Russia or China for its strategic imports ). The energy transition of these SMEs and the ETI is also important in this regard, investing in particular in carbon-free systems of own production and energy efficiency to ensure the entry into force of the carbon tax in the European Union.
In addition, the digital migration of these SMEs and ETIs and their migration to the sectors of the new economy will make them more competitive and will eliminate logistical barriers and geographical constraints. It will also be necessary to maximize the socio-economic impact on the environment, on the structuring of sectors of the economy that create jobs and value, on the development of disadvantaged areas, as well as on gender equality, youth involvement and reduction of the informal sector, in particular. This was our main message to German cooperation and not only to the EU, with whose key officials we also met several times, in May and June, through the EU Delegation to Morocco.
Basic for investment development
In order to strengthen national investment, AMIC calls for contributions from European financial development institutions (KFW, EIB, EBRD, AFD / PROPARCO, FMO, etc.) to capital recovery funds, as market failures are profound in company restructuring / turnover and impact on the cost and job creation is very significant.
It is also necessary to support the modernization of the fiscal, legal and regulatory framework of Moroccan private capital by abolishing VAT on direct investment funds, accelerating the reform of the OPCC law, and introducing legal instruments of investment capital and, in particular, stock warrants ( BSA).
On the other hand, it is about supporting the simplification and digitization of administrative procedures, in particular the administrative path of the investor, improving access to public markets, in particular for VSME, by eliminating certain discriminatory criteria for awarding in public tenders. We also need to speed up amendments to the law on payment deadlines, maintain access to competitive and quality land.
Abbas Ait Ider / ECO Inspirations