Africa’s investment needs · Is Morocco the next financial hub?

Paul Goldschmidt, member of the Orientation Council of the Thomas More Institute

12 mai 2014 • Opinion •

As was emphasised during the recent EU – Africa summit in Brussels, investment is one of the keys to Africa’s economic development; its infrastructure needs alone are estimated to amount to some 90 billion dollars annually… If some African countries are enjoying currently a remarkable and encouraging rate of growth, the fact is that, as a whole, the continent’s participation in world production and trade remains too modest (3% of world commerce).

However, the major geopolitical upheavals of recent years, in particular the progressive emergence of a multi polar world, evidenced by the rapid growth of the BRICS, have already had a profound incidence throughout Africa. New types of partnerships have been negotiated allowing for an acceleration of infrastructure investments, the need for which is acute if Africa is to meet successfully the double challenge of a demographic explosion and a substantial increase in its population’s living standards.

New tools, in particular financial ones, are needed to face this challenge. Having recently joined the Global Financial Centres Index (ranked 62nd in the world and 2nd in Africa) the Casablanca Finance City (“CFC”) initiative in Morocco, is putting itself forward as the up to date financial hub that the continent so badly needs. Let consider this further.

Without dwelling on the point, one should, nevertheless, recall Morocco’s well earned reputation for political stability in the area as well as its deliberate choice of a constructive relationship with the West (United States and Europe).  The country enjoys a unique relationship with the EU evidenced by the “advanced status” it was granted back in 2008. It also enjoys a particularly favourable geographic location at the crossroads between Europe, Africa and enjoying a wide transatlantic façade.

Satisfying the ambitions of CFC require a clear and operational legal framework.  Morocco has met this prerequisite by adopting in 2010 the law instituting CFC which confers all management aspects of the project to the Casablanca Finance City Authority (CFCA): strategy, conception of an integrated offer, management of the real estate component (100ha on the site of the disaffected Anfa airport), promotion of CFC towards institutions and investors, advice and institutional and logistical support of CFC’s “partners”. The governance of the project appears robust and well conceived.

However, it is in the field of the maturity of its financial service’s infrastructure that CFC stands out in Africa. Morocco has, to date, entered into free trade agreements with 50 countries (among which 6 in Africa); in addition, nearly 20 investment promotion and protection agreements and around ten financial cooperation agreements have been signed on the continent. Furthermore, the Casablanca Stock Exchange is proving extremely dynamic: it adhered to the World Federation of Exchanges in 2010, becoming its 52nd member and the 4th in Africa; it also obtained the ISO9001 certification. Market capitalisation amounts to 55 billion dollars ranking 4th on the continent and includes 76 listed companies. The banking sector is wide open with 11 of its 19 certified banks boasting foreign shareholders. Moroccan based banks are very active in Africa operating already in 18 countries. Finally, with the aim of increasing Casablanca’s appeal as a financial centre, CFC has concluded four partnership agreements with the financial centres of Singapore, Luxemburg, London and Paris.

This environment underpins CFC’s global financial offer and nurtures the dynamics of both vertical and horizontal integration. Indeed, CFC aims at facilitating contacts within a single ecosystem between the multilateral development agencies active in Africa, companies considering local operations, providers of capital as well as professional service providers. For Africans it is by all means a significant advantage to be able to access in a single location, all types of stakeholders involved. In parallel, CFC, whose objective is to draw within its orbit highly qualified professionals, assists each party in assembling the complementary skills needed to carry out projects, whatever their size or complexity. Thus, whether it concerns industrial or commercial ventures, promoters should be able to access locally institutions capable of offering financial support, establishing joint ventures, providing advice in political, legal, regulatory, fiscal and accounting matters or insurance and logistical services, etc.

It is fairly obvious that the CFC initiative offers interesting opportunities. As in any investment it remains, however, indispensable to weigh carefully the non negligible risks associated with each project and the availability of sufficient funding to carry it out successfully. Nevertheless, few centres offer a comparable comprehensive set of advantages to take advantage, within an appropriate environment, of the many opportunities for productive investment throughout the African continent.