Business Brief: Investors See Bright Future for Moroccan Hotel Sector; New Mining Leases Awarded; Challenges to Sustain Growth in Investments; Pharmaceutical Industries Plan to Strengthen Sector; and Artificial Intelligence and Renewable Energy Opening New Opportunities across Africa – Jean R. AbiNade

Jean R. AbiNader
August 15, 2018

Jean R. AbiNader, Moroccan American Center

Jean R. AbiNader, Moroccan American Center

As tourism recovers and shows sustainable growth, investors are returning to the hotel industry sector. Four and five-star hotels, as well as a number of business traveler focused accommodations are planned in the coming three years. Local investors such as CDG, high net worth individuals, and family offices “Are also taking a greater interest in the country’s hotel industry, spurred on by the Government’s aim to increase the number of tourists from 11.35 million in 2017 to 15 million in 2020. It’s a more conservative figure than the previous target of 20 million tourists, after financing challenges resulted in a delay to the “Vision 2020” initiative,” according to an industry newsletter.

Importantly, it points out, “The Government’s new roadmap is expected to have a positive impact on Morocco’s hotel industry by providing new financing solutions, an effective marketing strategy and training for workers.” Allowing fluctuation of the dirham, opening new feeder markets, political and social stability, and general improvements in the hotel sector are all contributing to the optimistic outlook.

“Currently, investment opportunities are to be found in new developments. There is a strong pipeline of new hotels, with Royal Al Mansour due to re-open in Casablanca by 2021, Ritz Carlton in Rabat by 2019, JW Marriott and Hilton Garden Inn in Casablanca in 2020 and 2021, respectively” it noted.

Mining looks to be big business in Morocco as the country has granted licenses to a UK mining exploration company Altus Strategies to explore for zinc, copper, and other base metals. According to the latest report, “Altus’ explorations will take place with an initial three-year term, after which it will be renewable for a further term of four years. Morocco’s mining sector is the most attractive market in the MENA region, according to BMI Research Group, which in April ranked it second after Saudi Arabia, owing to it being the leading global producer of phosphates, silver, zinc, copper and cobalt, in addition to modest volumes of gold.”

State Department Lauds Morocco’s Investment Regime in its 2018 Investment Climate Statements. The annual report, notes that the US is Rabat’s fourth largest trading partner. Its assessment concluded that Morocco is “working hard on encouraging and facilitating foreign investment. It indicates that the North African country is developing exports, macroeconomic policies, trade liberalization, and investment incentives and taking gradual yet promising structural reforms.” Among the deficiencies noted are the lack of skilled labor, weak intellectual property rights protection, an inefficient government bureaucracy, and the slow pace of regulatory reform.

The report highlights that skills mismatch between university graduates and available employment increases their unemployment. “Industrial skills are not prioritized, and skills that graduates acquire are often not transferrable to any real-world working environment, causing gaps between skills supply and demand», argues the same source.”

Pharmaceuticals is a sector that may experience a strong rate of growth in the coming decade, according to a report by the Oxford Business Group. To take advantage of its largest domestic market and its location as a distribution center for Africa, “The Moroccan authorities are restructuring regulations and streamlining procedures in the pharmaceuticals sector with the aim of attracting investment in biomedical research, increasing the supply of affordable medicines, and enhancing logistical operations for the export of domestically manufactured pharmaceuticals.”

For example, Morocco recently adopted a draft decree “Establishing a legal framework for bioequivalence in pharmaceuticals, which defines standards and conditions for conducting studies on both domestically, produced and imported generic medications.” This will support the manufacture and use of generic drugs to meet the growing demand.

A major weakness in the export potential is that only 10% of the local production is exported, and although the greatest potential is in Africa, “Morocco’s exports often have to stop over in Europe before being re-exported to Africa.” So Moroccan firms are setting up operations in other African locations and there are a dozen in sub-Saharan Africa that are distribution centers for generic products.

McKinsey presentation highlights benefits of AI to Morocco. Morocco World News recently covered a presentation done by the global consulting firm that shows various sectors that can benefit from applications of artificial intelligence. Agriculture received a special focus because it can help the sector adjust to the growing impact of climate change, especially in water management and aligning the use of fertilizer, pesticides, and irrigation to maximize production.

The presentation pointed out that “Telecommunications, insurance, and energy sectors each present possibilities for improvement with the implementation of artificial intelligence, by reducing interactions between citizens and administrators” and creating “smoother communication” in bureaucratic processes.” It is also estimated that AI can both eliminate inefficient jobs and create new ones at a might higher rate, including promoting entrepreneurs who master the technology. This is a sobering thought considering the US State Department Investment Climate report pointing out that the preparation of Morocco’s university graduates is inadequate for the new economy.

Morocco’s Gaia Energy poised to be leader in renewables in Africa, thanks to a new agreement with the IFC of the World Bank group. According to the Morocco World News story, Gaia Energy is a Moroccan renewable energy developer, currently active in 10 countries across the continent. The company’s mission is to develop and finance large scale renewable energy projects in emerging markets.

Since nearly half of Africa’s population is without access to reliable power, renewables hold great promise for residential, commercial, and industrial use. The article notes that “Particularly, renewable energy offers an opportunity to accelerate Africa’s access to clean, affordable electricity, while also improving public health by reducing pollution levels. Renewable energy will also create an environment conducive for a burgeoning economy by creating value chains for development and job creation.”

The agreement is a joint project between IFC’s $150 million InfraVentures global infrastructure project development fund and the $130 million Finland-IFC Blended Finance for Climate Program, which aims to encourage private sector financing for climate change solutions.

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