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23 June 2017 03:55 (South Africa)
Business

Countries as Companies: Morocco’s use of technology for development

  • Greg Mills & Dickie Davis
    Greg Mills & Dickie Davis
  • Business
Main photo: Rabat Technopolis (Wikimedia Commons)

Morocco’s hi-tech story is about applying existing technology to create business opportunities and improve governance and service delivery. By GREG MILLS and DICKIE DAVIS.

‘Think of your country as a company,” says Larbi Belarbi, a man who helped to bring Renault to Morocco. “As such you need to think of your advantages in the selection of what you do: The location of your market and ease of trading with it, the critical mass of skills and productivity and low costs of your workforce, and the efficiency of your infrastructure. And you need to adapt government to suit, improving each of these areas in making the business case to invest.”

Ten kilometres outside Rabat, on the Tangier-Casablanca highway, is Technopolis, an incubator campus for start-up companies. Inside the glass and concrete buildings just alongside the International University of Rabat, congregate 50 fledgling industries, attracted by low rents, good connectivity, the availability of finance to scale up their activities, and mentoring. Another 260 IT start-ups cluster 90kms way at the Casablanca Technopark, opened in 2001. A third similar park, in Tangier, opened in 2015. 

Photo: Casablanca Technopark

While innovation is essential and rewarding, Morocco shows that application is at least as important, for more jobs, as better governance. Job creation is not primarily about new technology, but about policy and people.

The Aéropole aviation free zone 30kms outside Casablanca is home to 100 companies, including subcontractors Matis, Aircelle, Snecma, Sagem and Teuchos to big names such as Boeing, Bombardier and Airbus, employing 11,500, and turning over $1-billion, or 5% of Moroccan exports.

As Morocco aims to get a bigger manufacturing slice of the 35,000 aircraft to be constructed worldwide in the next two decades, the sector is targeting the doubling of its employment and output by 2020, in part by increasing the proportion of locally-produced components in its assemblies to 35%.

Morocco’s car industry, too, is on a roll.

In 2005 Renault acquired a manufacturing plant in Casablanca which, in 2015, produced 62,000 cars. In 2011 it opened a $1-billion new factory near Tangier which produced 229,000 cars in 2015, the bulk of its market a short ferry ride away to Spain, and thereon to France and Germany. The factory’s aim is to build 330,000 units by 2020, a nearly tenfold increase in just 10 years. In 2016 Renault signed a second $1-billion investment to increase local content to 65%. PSA Peugeot Citroën is slated to open a $620-million plant in Kenitra in 2019, aiming at an output of 200,000 cars in three years. There are plans for a third manufacturer, adding to the 150 automotive subcontractors already based in Morocco.

Photo: Moroccan employees work in the new Renault factory in Melloussa, 30 km (19 miles) from Tangiers February 9, 2012. French car maker Renault opened a sprawling low-cost Moroccan factory on Thursday, taking aim at strong European demand for no-frills vehicles in a bid to buck the overall decline in the region's car market. REUTERS/Stringer

Total automotive exports reached $5.3-billion in 2015, making it the country’s top foreign exchange earner after remittances from the five million Moroccans living abroad, some $7-billion, but ahead of the other big “export” sectors of tourism, agriculture and phosphates. Responsible for 100,000 jobs already, and potentially another 90,000 by 2020 when Morocco aims to export $10-billion in parts and cars, the sector is a big success story.

This triumph is no fluke or quirk of geographic fortune.

Industrial growth has been built on the country’s proximity to European markets, relatively cheap labour (Moroccan car workers earn about half of their European counterparts when productivity is factored in), trade agreements with a 1.5-billion market including the US and Europe, its efficient logistics, and tax and other incentives.

But at its root are both policy changes and government action.

Ahmed Chami worked for Microsoft for 11 years before becoming Morocco’s Minister of Industry, Commerce, Industry and New Technologies. “The major challenge,” he clarifies upfront, “is that we have it to create 200,000 jobs in Morocco each year to absorb our graduates.’”

When he came into government in 2007, “we had two things to work on”, he says.

The first was “to secure the macro-economic foundation. This included reducing government debt, inflation and fiscal and balance of payment deficits, and improving our foreign exchange reserves. Once we had that in place, we had to think about the drivers of development. In the 1990s, we had one-and-a-half engines of growth: one was tourism and half was agribusiness.”

This situation, he stresses, had to change.

To achieve diversification, and provide for its 33-million citizens, the government had to focus on improving infrastructure. “As a sector by itself” this would both increase growth and act as an enabler. The result is that Morocco’s highways, ports and rail system are much improved from even 10 years ago, while it has just switched on the first phase of a $9-billion 580 megawatt solar-electricity plant, the world’s largest, at Ouarzazate. 

Other plans had to come to light too. Government embarked on complementary schemes to grow tourism numbers, with 10-million annual visitors in 2015, four times more than 20 years earlier, and a “Green Morocco” strategy to boost agriculture.

Yet, still more was required.

Since “no country developed without industry”, with the help of consultants, Morocco scrutinised 80 manufacturing sectors, coming up with six priorities: Aeronautics, cars, offshoring, textiles and apparel, electronics and agro-industry. Echoing the thoughts of Belarbi, “We had to think of Morocco as a company, identifying,” says Chami, “things at which we could be good and could be profitable.”

While there was already an Emergence industrial strategy in place by the time he arrived, Chami’s role was to “turn the strategy into practice, from Powerpoint to Word, or perhaps into Microsoft Project”, he laughs, given his background. A road map of 111 actions known as Le pacte pour l’ émergence industrielle involving nine ministries was signed in February 2009.

“What made it possible,” he reflects, “was not only that it had an owner in our ministry, but that it involved the private sector along with a team of ‘super-heroes’ in my ministerial cabinet.”

The budget for the project was linked directly to delivery on its jobs’ target of 220,000 per annum. This did not guarantee success. “In general, the administration is terrible,” Chami muses, “with people used to working in a strict hierarchy and in silos. To get things done we had sometimes to do things personally, to cut through protocol.”

A similar approach was taken to the application of technology, for which the government envisioned four roles: Social transformation, such as through the 80% subsidisation of laptops for students, reaching so far 140,000 beneficiaries. This was funded from a telecom fund to ensure universal access in rural areas.

A second role for technology was in e-government, in for example paying taxes, making appointments, and registering permits. A third was through the use of IT to improve the competitiveness of small- and medium-sized (<$10m in turnover) companies.

And, finally, to create the conditions “to permit one day for there to be a Moroccan Microsoft or Google”, the government came up with the Maroc Numerique (Moroccan Digital) fund to finance start-ups at the Technoparks, and also to promote IT, Business Processing and Knowledge Processing Outsourcing at five offshoring facilities in Casablanca, Fes, Rabat, Oujda and Tétouan.

To make this idea a reality, the government established a range of incentives. The Free Zones in Tangier, Kenitra, Oudja and around Casablanca’s aeronautics park, have cheaper rents, zero income tax for the first five years and 8.75% for the next 20. In the Technoparks and offshoring facilities, rent is similarly cheap, telecom costs lower, bandwidth bigger and speeds faster, and personal income tax less than half (20%) the rate outside (44%). Training costs are also reimbursed. Up to 20% of capital investment in the auto sector could also be met by government’s Hassan II Fund.   

All this required a champion, “the King himself”, says Chami.

Mohammed VI has been central in driving change across Morocco’s economy and politics since his accession in 1999. The country’s early moves towards liberalisation and privatisation were however given sharp impetus by the 2011 Arab Spring, which prompted the drafting of a new constitution with devolved powers across the 1503 municipalities, 78 provinces and 12 regions. Morocco faced a crisis, and so far it has used it well.   

Of course the situation is far from perfect. Job creation for graduates has tapered off to around 60,000 annually, from a peak of 130,000 in 2011 shortly before Chami, who is about to take up the post of Ambassador to the European Union, left the ministry.

And much more will have to change to ensure Morocco can continue to address its considerable social pressures. “All these things have to work with the right people,” he says, “otherwise it’s all just theory.” Morocco’s education system suffered from political interference in the 1980s when “government tried to fix a system that was working” by introducing Arabic at the centre, moving away from French. The negative impact of such changes has been compounded by a trend, he notes, where the brightest people do not go into public service.

All this is linked to a wider concern about social inclusion, where migrants from the rural areas can become marginalised at the periphery of the city, have large families, underachieve educationally, and drift into menial jobs and sometimes crime.

There are other challenges. Wages and productivity, along with logistics costs, continuously focus the attention of manufacturers. Morocco’s benchmarks in the car industry are, for example, less the developed markets of Europe, rather Turkey and Romania. The continued health of the European market is also a cause for concern, as are the effects of non-traditional competitors such as Tesla. Perhaps the greatest challenge is, however, strategic; the perception of security across the Middle East and Islamic world.    

Still, while many countries face the same pressures of social and economic changes, and have laid out a vision and even plans to diversify and modernise their economies, far fewer ever do it.

The fourth edition of the Innovation Prize for Africa held in 2015 attracted 925 entries from 41 countries. The top prize went to a Moroccan scientist for  developing a  natural alternative to livestock antibiotics. So far, however, Morocco’s hi-tech story is about applying existing technology to create business opportunities and improve governance and service delivery.

The economist George Stigler said, “If you never miss a plane, you’re spending too much time at the airport.” Morocco’s hi-tech path offers a useful example to the rest of Africa seeking to create much-needed jobs through diversification, where outputs should rule over process.

While Morocco is also making the investments necessary to innovate itself, it has made a promising start employing the inventions and ideas of others. No futuristic flux capacitors or continuum transfunctioners are essential for this new future; rather dollops of political will, good policy, and capable, high energy leaders. DM

Dr Mills and Major-General (rtd) Davis have been in Morocco for the Brenthurst Foundation.

Main photo: Rabat Technopolis (Wikimedia Commons)

  • Greg Mills & Dickie Davis
    Greg Mills & Dickie Davis
  • Business

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