The white lattice tower of Casablanca Finance City — the zone intended to become Morocco’s economic capital — was the only one on the skyline in 2019. And it remains the only completed building there. But it has since been joined by a host of cranes and half-built residential and commercial blocks.
Located on the site of the old city airport, the CFC was launched in 2010 to establish the country as a “gateway to Africa”, and to take advantage of its political and geographical proximity to Europe.
But, while 200 companies in sectors such as telecoms, infrastructure and transportation have now signed up to join the financial hub — with 35 already the tower — interest in the project has slowed as Covid-19 swept the globe, frustrating its medium-term ambitions.
In 2020, only 15 companies signed up for the CFC status, compared with 40 on average in previous years.
Morocco’s economy is still recovering from losses in 2020 and the bounceback so far has been led by external demand from the EU, especially for automobile and agri-industrial exports, according to Javier Diaz Cassou, an economist at the World Bank.
In addition to the impact of the pandemic, Morocco has also gone through legislative changes aimed at removing the country from the EU’s “grey list” of countries that are deemed to lack transparency and to have unfair tax competition rules.
Many of the rule changes concern the CFC’s tax regime, in particular. Under the new law, effective from January 2021, CFC companies will be subject to 15 per cent corporate tax after a five-year exemption period, up from the previous rate of 8.75 per cent. In addition, those businesses are not subject to regulation on the movement of capital in and out of Morocco and are not obliged to hire local staff.
However, Said Ibrahimi, chief executive at the CFC, says: “The decline [in interest from companies] was not due to the CFC new tax regime, but rather due to the [Covid] crisis. He adds that the regime is now compliant with EU rules. “[Due to the pandemic] we were forced to stop our international roadshows and all trips were suspended for over a year.”
Morocco reintegrated into the African Union in 2017, after leaving the group more than 30 years earlier when the AU accepted the disputed Western Sahara territory as a member state.
The kingdom’s pivot south — where the government has encouraged local companies to look for opportunities on the African continent — was largely politically driven initially, says Isabelle Werenfels, north Africa specialist at the Berlin-based research institute Stiftung Wissenschaft und Politik (SWP).
The shift had “the goal of getting Morocco’s claim over the Western Sahara accepted”, she suggests, referring to the country’s disputed claim to sovereignty.
“And, then, over the last decade it became economically interesting due to growth numbers in Africa and Morocco’s frustration with the absence of economic integration within the Maghreb and restricted access for goods and persons to Europe.”
Greenfield investment flows out of Casablanca increased from $61m to $5bn between 2010 and 2015, mostly to Sub-Saharan Africa, according to fDi intelligence, a Financial Times sister publication. However, 2020 was marked by a stark year-on-year decrease in Morocco’s outbound foreign direct investment to $492m, down by 45 per cent, most of which affected investments in the African continent.
According to an internal survey, CFC companies experienced a 30 per cent decline in turnover during 2020. Following the broader pattern in other countries, businesses in the hospitality and aviation industry were hit most severely by the pandemic while the telecoms sector fared well.
Even though Europe was more severely hit by coronavirus than Morocco, the resources available for recovery programmes in Africa have been more “limited and incomparable with the measures put in place by developed countries”, says CFC’s Ibrahimi.
Nevertheless, he notes that some countries have been able to take advantage of the crisis to restructure global value chains and strengthen regional integration via the African Continental Free Trade Area (AfCFTA). The $3.4tn economic bloc came into effect in January and aims to facilitate the movement of goods and services on the continent and boost intra-Africa trade.
While the pandemic was marked by a drastic decrease in investment, it pushed ‘south-south’ economic partnerships — in sectors ranging from medical equipment, agricultural technology and renewable energy — further up Morocco’s agenda, explains SWP’s Werenfels.
As international supply chains became less reliable, “there was this discussion that Africa should produce for Africa, and Morocco picked up on that as it is in a good position to deliver on this in various domains”, she says.
Moroccan fertiliser company OCP launched an emergency programme in Africa during the pandemic, for example, and Morocco started producing its own masks and medical equipment, which it sent to African countries.
Given that some CFC companies are still working remotely and have rescheduled projects in Africa, including plans to set up offices in Casablanca, the city is “adapting to the new normal” and opening representative offices in Dubai and London.
“Even though our companies are not back to their normal activity trend yet, we noticed a slight recovery in 2021,” says Ibrahimi.
