The president of the Moroccan Association of Capital Investors (AMIC) recently met with members of the parliamentary delegation of the Committee for Economic Cooperation and Development of the German Federal Parliament. He went back to the important things at this meeting and detailed the goals of the association.
You had the opportunity, on June 7, to meet, in your capacity as President of AMIC, the delegation of the German Federal Parliament, on the occasion of its first visit to Morocco, after the normalization of relations between the two countries. What topics of common interest were discussed?
This meeting was organized by the team of the KFW Office in Morocco, for which I appreciate its participation in the development of national investment. Discussions focused on the role of private equity in the implementation of our New Development Model (NMD) and on the support that German cooperation can bring to this industry.
What ways have been explored to optimize cooperation between Germany and Morocco in your field?
These discussions allowed me to highlight the absolute need of rethinking cooperation to favor support for private investment in Morocco. As you know, investment in the Kingdom has shown, more than 10 years now, one of the highest rates in the world, approximately 30% of GDP, while the world average is at 20%. However, at this level of investment, we should have growth rates and job creation comparable to Asia.
However, we limit 5% average growth. According to all experts, the lack of efficiency is mainly due to two aspects. The first has to do with the preponderance of public investment, which represents two-thirds of the investments, 245 billion dirhams provided by the 2022 finance bill, while it represents, typically, less than 15% elsewhere. The second aspect relates to the trend of private investment, which represents the third and is not sufficiently focused on sectors that create jobs and additional value. To revitalize private investment, and therefore overcome the challenge of economic recovery, we must do what the country does best in terms of investment: build national investment capital.
CGEM goes in the same direction, as its White Paper for the implementation of the NMD recommends, in particular, to strengthen the equity of companies operating in strategic sectors for Morocco. Especially since private equity has experienced very good growth in the country in recent years. Exactly, the management teams are experienced and efficient. As for the OPCC legal and regulatory framework, it is stable, under the supervision of the AMMC, and continues to be adapted. In addition, we see a continued increase in fundraising by local management teams, as well as investments in unlisted SMEs.
Moreover, 1.2 billion dirhams were invested in 2021 for 30 companies, as it is known that 1 dirham invested in the private equity of a fund can generate up to 7 dirhams of investment by the invested company. It is not to forget the expansion of Moroccan investment capital to the innovation capital stage (seed & venture capital), thanks to the Innov invest initiative of the Ministry of Finance, supported by TamwilCom. In fact, 18 out of 30 companies invested in 2021, i.e., 60% of investments in the number of companies, have invested innovation capital.
What about the effects of Private Equity?
All studies clearly show the positive effects of private equity. Let us mention, first of all, the improvement of the financial structure of the invested companies, by strengthening their equity and improving their debt capacity, and therefore the investment capacity, in the long run (I remember here the report from 1 to 7 between the investment fund and the invested company). Private equity also makes it possible to improve the institutional and managerial capacities of invested companies, but also strengthen their social and environmental responsibility as well as the innovation and flexibility of their business model. The best description of these external positives is given in the midst of the pandemic crisis: companies investing in private equity recorded growth of 1% in 2020, while, in the midst of the crisis, Moroccan companies experienced, on average, a decrease in activity of 30% and national GDP contracted by 6.3% in 2020.
So how to strengthen private equity in Morocco?
Given the current economic situation, the main flaw of the market has to do with capital recovery (or turnaround capital). There are many high-potential SMEs and ETI in strategic sectors for Morocco, whose investment capacity is limited by the financial situation exacerbated by four successive exogenous shocks (Covid, Ukraine, drought and imported inflation).
To cover the failure in this market, it is necessary to support the emergence of capital recovery instruments, mediated by equity and mezzanine debt. The goal is to restore the financial structure of the targeted SMEs and ETI to enable them to continue to invest and support them technically and financially. In this sense, it is a question of repositioning their business model to enable them to fit into the new post-Covid and post-war local global value chains in Ukraine (in particular vis-à-vis Europe which is not who wants to rely on Russia or China for its strategic imports). The energy transfer of SMEs and ETI is also important in this regard, by investing, in particular, in carbon-free self-production and energy efficiency systems, to carry out the entry into the Carbon force Tax in the European Union an opportunity and a lever of competitiveness for companies established in Morocco.
In addition, the digital migration of these SMEs and ETI and their transition to the sectors of the New Economy will bring them more competitiveness and allow them to remove logistics barriers and barriers to geography. It will also need to maximize socio-economic impacts on the environment, on the development of economic sectors that create jobs and value, on the development of poor territories, as well as in terms of gender equality. , youth inclusion and reduction. of the informal sector, especially. This is our main message on German cooperation, and beyond that, with the EU, whose key officials we also met on several occasions, in May and June, through the EU Delegation to Morocco.
The essentials for investment development
To boost national investments, AMIC is launching a call for contributions by European development financial institutions (KFW, EIB, EBRD, AFD/PROPARCO, FMO, etc.) to recovery funds. capital, because market failures are deep in the field of restructuring/turnaround of companies, while the effects in terms of value creation and jobs are very significant.
It is also necessary to support the modernization of the fiscal, legal and regulatory framework of Moroccan private equity, through the abolition of VAT on the charges of private equity funds, the acceleration of the reform of the OPCC law, but also thanks to the introduction, of the law in SA , of legal instruments of investment capital and, in particular, stock warrants (BSA).
On the other hand, it is a question of supporting the simplification and digitization of administrative procedures, especially the administrative path of the investor, the improvement of access to public markets, especially for VSMEs, in by eliminating certain award recognition criteria in public tenders. We must also expedite the introduction of changes in the law to payment deadlines, and support access to competitive and good-quality land.
Abbas Aït Ider / ECO Inspirations