Morocco’s Moves to Improve Economy Are Paying Off

Country Continues to Improve Growth Results

Although the overall economic news in North Africa is mixed, due to the impact of the decline in oil prices and a lackluster rainy season, Morocco’s economic diversification priorities are enabling it to balance out the negatives with continued growth and development.

One sign of the economy’s health is that, as Reuters reports, “Morocco’s central bank cut its benchmark interest rate on Tuesday to 2.25 percent from 2.5 percent, loosening monetary policy for the first time in more than a year to boost growth hit by one of the worst droughts in the past decade.” The outsized impact of the agricultural sector on the economy affects both the country’s gross domestic product, revised downward from 2.1 to 1%, and gainful employment, as fully 40% of the workforce is engaged in the agricultural sector.

On the other hand, since Morocco imports more than 90% of its energy needs, its economy is benefitting from the drop in energy prices by reducing deficits, supporting cutbacks of energy subsidies, and enabling policy makers to consider a broader range of options in promoting growth. This good news is supplemented, of course, by the continued growth in the renewable energy sector, which will further drive down oil and gas imports and contribute to increased foreign reserves through export sales to neighboring countries

“We don’t have any concerns regarding inflationary pressures … So we can give some support to the economic activity,” Central Bank Governor Abdellatif Jouahri told reporters. The bank last cut rates in December 2014. In line with IMF recommendations, additional structural reforms are being implemented, including a more flexible exchange rate, reducing the euro’s weighting in the currency basket, and more emphasis on targeting inflation.

According to the article, “Morocco has already done more than most North African countries to make painful changes required by international lenders to curb its deficit, such as ending fuel subsidies and freezing public sector hiring. The government still controls the prices of wheat, sugar and cooking gas.”

Banking and Auto Manufacturing Sectors Drives Harder into Africa

In an FT article, Finance Minister Mohamed Boussaid spoke about the changes in the financial sector that are boosting growth. He noted that Moroccan banks are in 22 African countries, and about 17% of their activities are in Africa. “Europe will always remain a primary partner for Morocco, but Africa is now seen as the future in terms of growth and economic potential.”

Hassan el-Basri, head of risk at Banque Centrale Populaire (BCP), which has large holdings in seven sub-Saharan countries, says their impetus is that “These countries represent a real growth potential given the level of banking penetration, which remains one of the weakest in the world.”

The banking sector is dominated by BCP, Attijariwafa Bank (AWB), and Banque Marocaine du Commerce Exterieur (BMCE), which together hold 65% of the country’s banking assets. While this may be dangerous in some countries, the article noted that “most acknowledge that strong regulation by the central bank has so far contained this risk.”

Risk will be further mitigated with new players entering the financial sector as there are opportunities beyond the large company portfolios held by the Big 3. Minister Boussaid indicated as much, saying that “We are concerned by financing, especially of SMEs, which do not have enough capital.” By addressing their needs and with new mid-sized players in the sector serving the middle class, financial services will become even stronger.

blog biz2The success of automobile manufacturing is another star in Morocco’s African economic strategy. As reported by the FT, it is now, along with aeronautics manufacturing, the largest contributor to the country’s GDP. The Renault factory in Tanger produced 229,000 cars in 2015 and is the largest car factory in Africa. Jean-Francois Gal, director of the factory, notes that “We are in a perfect location at the gates of Europe,” and the bulk of its output is shipped to markets in France, Spain, and Germany.

The plant has created more than 7000 jobs and attracted some 150 supply-chain manufacturers that supply Renault and export to Europe and other markets. This extensive network attracted Peugeot Citroen to invest in a plant in Kenitra, on the Atlantic Coast north of the capital Rabat, with an initial capacity of 90,000 vehicles, mainly for the African market.

The goal for the sector, according to Hakim Abdelmoumen, president of the Moroccan Association for Automotive Industry and Trade, is 90,000 jobs by 2020, in addition to the 100,000 that already exist. This rapid expansion of the industry is having an important side benefit – attracting expatriate Moroccans with managerial and technical experience to return from overseas and lend their talents to this important sector.

In diversifying its economic base, moving up the value chain to industrial manufacturing, and developing agricultural strategies that encourage better use of technology, irrigation, seed selection, and production and marketing, Morocco continues to build positive economic indicators that facilitate growth and competitive strength.

US Companies See Opportunities in Morocco’s Agricultural Sector

Atlanta Forum Provides Key Contacts

One can’t help but be skeptical when hearing about another business conference extolling the promise of opportunities abroad. It is not uncommon to ask “So what?” when looking for results that justify the expense of attending events while coming away with glossy brochures, a fistful of business cards, and tenuous promises of quick responses.

So we did something different at the US-Morocco Trade & Investment Forum in Atlanta on October 13. Most of the time was allocated for companies to talk with presenters, other companies, and government officials, with an emphasis on building face-to-face relationships so essential to doing business.

Well, how did that turn out? I can only give you my perspective and reflect on emails I received following the Forum, but I think they made the right decision – put people with mutual interests in a room and let them talk business. It worked out fine. I moderated a panel on agriculture, agri-business, and water management. Not unimportant to a country like Morocco where upwards of 40% of the workforce is in the farming sector and, in a good year, the sector contributes more than 18% to the country’s GDP.

In the room were representatives of Coca-Cola bottlers and distributors in Morocco, whose business affects some 70,000 Moroccan employees and their families. Given that Coca-Cola sources as much as it can locally, they are major players in the sector and in the economy. More importantly, Coke provides a great deal of technical assistance to local businesses to grow supply chain products and services, building the next generation of entrepreneurs.

From the Moroccan government, we heard from three very competent representatives: Mrs. Asma El Kasmi from the National Office of Electricity and Potable Water (ONEE), Abdeslam Ziyad, who directs strategic planning at the Ministry of Agriculture, and Soufiane Larguet, Director for Strategies and Statistics at the Ministry. All presented current data and projected opportunities in their areas of specialty.

The US and Moroccan private sectors included private equity investment firms, a foundation and company specializing in agriculture and water projects in Africa, a leading producer of organic and specialty food and cosmetic oils, several agro-industry firms, and a working farm that provides overseas technical assistance in a broad range of areas including improving seed, water management technologies, and food security processes.

­­­­­­One of the highlights of the session was the opening remarks by Gary Black, Commissioner of the Georgia Department of Agriculture. His presentation on the industry in Georgia and his insights into potential bilateral links has already led to discussions with Moroccan Ambassador Rachad Bouhlal on an exchange program between food security experts in Morocco and Georgia. Commissioner Black’s rational is that a thorough understanding of the food security (read FDA and USDA in the US) guidelines in the marketplace facilitates trade. This was borne out by several participants who spoke about the difficulty of navigating food and argan and olive oil exports to the US, despite the US-Morocco Free Trade Agreement.

A positive follow up is that several of the US participants in the room have already begun to the in touch with counterparts in the government and private sector in Morocco. And Moroccan companies are clearly interested in pursuing relationships that ease the process of exporting into the US. It is a beginning of an important exchange of ideas, proposals, and discussions about concrete business and investment opportunities that will continue for some time.

Morocco’s Long-term Water and Power Strategies are Paying Off

photo credit: Marta P

Moving ahead at Regional and National Levels

Despite continuing warnings of ongoing water crises through the Middle East and North Africa (MENA), there are valuable examples for the region coming out of Morocco to combat evident shortages in groundwater supplies and related food and energy issues. This is a national priority for the country, and for several years now, through the efforts of OCP Group affiliates, more attention is being focused on the food-energy-water nexus that the US government has identified as one of the strategic areas to be addressed for reducing conflict and promoting development.

Through its Plan Vert Maroc, the government has instituted a broad range of programs for small and pmv 3large farms to increase the use of water conservation technologies, crops, and methods to husband the variable water resources that have a significant impact on Moroccan agriculture, which accounts for upwards of 20 percent of the country’s GDP.

Recent media reports also highlight what is going on in Morocco in both the energy and water sectors to plan more efficiently for the future. It is well known that “Morocco’s national energy strategy is targeting to raise the share of renewable energy to 42% of the total installed capacity in the country by 2020, with solar, wind and hydro each contributing 14%,” as detailed by seenews.com.

What is most important in its report is that the cost of solar-generated electricity is falling rapidly and may soon “achieve ‘grid parity,’ meaning that it will be able to generate power at a levelized cost of electricity (LCoE) at or below the cost of purchasing power from the electricity grid.” Given that subsidies for renewable technologies are a major barrier to utilizing more solar-based technologies, this is good news for the government and even better news for consumers.

Solar power presents opportunities for entrepreneurs

Solar power presents opportunities for entrepreneurs

There are many benefits of solar power, generated both by large facilities and smaller technologies being introduced to reduce energy costs for food producers. If costs are competitive with hydrocarbons, it has a broad impact, from reducing costs of harvesting, production, and distribution of crops, to conserving vital water resources – the nexus of food-energy-water.

According to the World Bank, “Water over-use is also a concern for Morocco, where farmers have increasingly shifted from diesel pumps to liquefied gas subsidized by the government.  Solar pumps could reduce costs for farmers by as much as two-thirds, depending on the regional cost of fuel.” This is part of a larger government strategy that ties subsidies to farmers for cost-saving solar equipment with micro-irrigation systems designed to reduce water consumption. “This way, the government ensures the efficient use of depleting water resources…In areas where water is scarce, the government could reduce equipment subsidies and encourage farmers to generate solar power for sale to the grid, like a cash crop in order to repay their portion of the loan.”

It is strategic policies put into action that encourage investors to look to Morocco, which again is a leader in Africa in attracting Foreign Direct Investment. According to MEED, Morocco is “regarded as safest and most stable in North Africa “despite being both smaller and less hydrocarbons-rich than its neighbour Algeria. Last year, Rabat was Africa’s third-largest recipient of FDI. The 67 projects it attracted accounted for 9.1 per cent of all new schemes in Africa and 9.5 per cent of all jobs created.”

Morocco’s has a remarkable and long-term commitment to dealing with issues such as energy costs and the efficiency of its agricultural sector; it also has an overall strategic vision as well as projects across sectors ranging from food and energy to tourism and technology. It is this that gives the country the competitive edge to be a leader in promoting economic growth in Africa.

Morocco in Africa – Delivering the Bread Basket

Feeding Africa’s Explosive Growth Requires Regional Cooperation

Recent articles underscore the importance of Morocco’s initiatives in West and Central Africa, specifically in the agricultural sector. In a World Bank blog, Jean-Christophe Maur, a Senior Economist in the Growth and Competitiveness Program at the World Bank Institute, argues that the Economic Community of West African States (ECOWAS), which enjoys a strong working relationship with Morocco, must do more to promote regional solutions. His blog, Feeding West Africa: An Agenda for Regional Trade, points out that “In West Africa, home of nearly 300 million people, agriculture employs 60% of the labor force. However, despite great potential, the region is increasingly dependent on food imports to meet its consumption needs; food imports have more than tripled in the past 10 years.”

This fact alone emphasizes the importance of King Mohammed VI’s initiatives to enhance agricultural cooperation with ECOWAS states (Burkina Faso, Ghana, Togo, Benin, Nigeria and Niger) as well as neighbors throughout Central and West Africa. Over the past three years, he has visited more than a dozen African countries, and signed agreements related to agriculture and human development that include Moroccan services and resources integral to a regional strategy of collaboration.

As Maur sees it, “Not exploiting regional complementarities represents a missed opportunity. West Africa can help feed itself. The physical nature of West Africa’s agro-ecological zones alone provides a strong rationale for regional collaboration, with soil and rainfall patterns cutting across neighboring countries and creating natural, cross-border economic markets.”

And what is Morocco’s role in this? On the macro level, its annual International Agricultural Exhibition (SIAM) in Meknes each spring brings together farmers, scientists, companies, experts, government officials, and water/irrigation specialists, among others, from all over Africa and elsewhere to discuss latest developments to improve productivity and sustainability of agricultural sectors in Morocco and Africa.

In an address to the African Development Bank, King Mohammed VI spoke to the need “to ensure food security for all our African peoples and to reduce our dependence…through the creation of a common African agricultural market.” Since the agricultural sector employs close to half of Morocco’s labor force and provides up to 19 percent of the country’s GDP, it is a national priority. The outsized role of agriculture means that it has a significant impact on the economy in general.

This is similarly true in West Africa, which would gain significant benefits from closer collaboration in the sector. As Maur wrote, “A more regional approach towards agricultural policy would bring countries the familiar gains from trade, including lower prices and greater variety for consumers, higher prices for producers in many cases, as well as solidarity mechanisms through which excess supply can easily connect with excess demand anywhere in the region.” With more attention to addressing challenges regionally, greater resources and efficiency can be realized that would “boost yields and generate productivity gains that can be transmitted all along the value chain.”

Morocco Adds Value to the Supply Chain

OCP Group provides crop specific fertilizer for Africa

OCP Group provides crop specific fertilizer for Africa

Morocco is already having an impact on the agricultural sector by providing greater access to fertilizers tailored specifically for African markets. Business leaders accompanied the king on his visits to African countries, and OCP, the phosphates giant, has been leading the charge on agricultural cooperation. Of particular note is a MOU signed with Gabon that provides for a pooling of Gabonese gas resources and Moroccan phosphoric acid production units in Gabon and Morocco, which, together with a total capacity of two million tons of fertilizer, will “eventually have the ability to cover at least 30% of the continent’s total demand. Fertilizer products will be marketed and transported from Morocco and Gabon through regional distribution channels which will also be boosted as a result.”

This initiative was noted in an article by Francis Ghilès, an Associate Senior Researcher at the Barcelona Centre for International Affairs: Morocco‘s Progress is Slow, Shaky but Real. He wrote that “OCP Group is seeking to bring African producers of raw materials and feedstock together, bypassing the tradi­tional role of Western companies in the value added chain: phosphates from Morocco, gas and potash from other Afri­can countries could be marshalled to manufacture fertilizers in Africa at an affordable price for local farmers. Fertilizer prices on the continent are among the highest in the world and, as a result, farmers use a fraction of what their peers elsewhere use. Meanwhile the percentage of arable land is declining while the population is surging.”

The article points out that OCP Group has become a world leader in the industry and has gradually moved from producing phosphate rock as a commodity up the value chain to phosphoric acids and fertilizers, and is increasing its role in Africa, “the company’s other new fron­tier. Food production and processing may be more recession-proof than other sectors as world population continues to increase and millions of people are lifted out of dire poverty.”

While analysts often comment on the vibrant growth in Africa and how its population is projected to double by 2050, less has been written about the food-energy-water nexus that is critical to balanced and sustainable growth in Africa. Morocco is demonstrating that it shares its future with the continent and is committed to the survival and success of African countries, as neighbors, markets, and partners.

Morocco Gathers Recognition as Gateway to Africa

*Report from Thomas More Institut Praises Morocco’s Efforts*

Yet another prominent source has issued a report noting the importance of Casablanca Finance City’s strategic role in Morocco’s campaign to become a key center for business development in Africa. The Thomas More Institut, with offices in Paris and Brussels, recently published, in its Tribune series, the report Morocco: The Hub of African Financial Integration?” Although the question is rhetorical, it is important to have a clear understanding of Morocco’s capacity to build the legal, financial, physical, and services infrastructure required for such an undertaking.

The report was authored by Paul Goldschmidt, whose 50+ year career spans leadership roles at Goldman Sachs, the European Commission, and the European Investment Fund – someone intimately acquainted with the challenges Morocco faces. His assessment is that Africa has great potential as well as challenges, and it is international and regional partnerships with expertise and local sensitivities that are key elements in realizing its future. Among Africa’s strengths he mentions: high economic growth rate, young population feeding a growing workforce, and extensive natural resources that provide the engines for future growth, if harnessed effectively leading to a diversified economy. He mentioned the key role of “its untapped land reserves which are amongst the most important in the world (estimated at about 60%).”

Thomas More Institut report on Morocco in Africa

Institut Reviews Morocco’s Financial Leadership in Africa

Among the most significant challenges Africa faces is grinding poverty that depletes its human resources as “47% of the sub-saharan Africa inhabitants still live under the poverty threshold (1.25 dollar PPP/day).” This has generated enormous demands on social services, education, savings, and technical and physical infrastructure. In addition, the unstable political context continues to undermine efforts to attract investors and upgrade human resources. Finally, Goldschmidt notes the “persistence of endemic corruption” abetted by the “weaknesses of institutions guaranteeing the rule of law” that discourages investors and the “misappropriation of a large part of the economic benefits in favour of a privileged few at the expense of the vast majority of the local populations.”

Improving Africa’s Investment Environment

At the top of the requirements identified by Goldschmidt is the need to strengthen institutions through significant reforms, coordination with international organizations, and improving human assets. There is a similar need to make large-scale investments in physical infrastructure across all sectors, especially energy and transport, which are needed to add value to the exploitation of natural resources. “According to the World Bank, the continent’s needs for infrastructure alone are in the order of 93 billion dollars annually.” The development of effective financial services for local and international players is mentioned as a necessary vehicle for ensuring the long-term “improvement in living standards that should result from [Africa’s] development potential.”

It is this analysis that leads Goldschmidt to conclude that Morocco is “the African country that best meets all these criteria,” which he defines as “a stable political environment, an optimal geographic position relying on efficient physical infrastructures, an operational legal framework, and a sufficiently development infrastructure of services…” As a result, he believes that Morocco should “constitute the location of choice for establishing decision centres covering the continent as a whole.” He dismisses the notion that North Africa is somehow distinct from the rest of Africa, stating “Quite to the contrary, Morocco has the potential of becoming a financial hub of major importance for the development of the entire African continent.”

It is Morocco’s economic performance over the past 20+ years that gives it this prominent role. It has established preferential trade agreements affecting more than 50 countries; it has direct access to international financial markets; it is emerging as a player in Islamic finance; it enjoys close economic and diplomatic relations with the EU, Middle East, and throughout central and west Africa; and it has adopted a long-term strategy to serve as a major hub for African business development exemplified by the Casablanca Finance City (CFC) and the King’s visits to countries throughout the region.

CFC is clear in its mission – to become the major financial and economic hub in the region, stretching from Francophone Africa down the Atlantic coast. It has operationalized international standards for attracting investors, protecting investments, and bridging project services from conception to implementation. Morocco has more than 60 double taxation agreements and more than two dozen agreements for the protection of investments. Its administrative arm, the CFC Authority (CFCA) has partnership agreements with financial centers in Singapore, Luxembourg, London, and Paris  — “evidence of the trust and support of those countries in CFC’s vision, and the belief that Morocco has important strategic strengths justifying its position as an economic and financial hub.”

As the report concludes, “Even if there is obvious room for further improvement in specific areas, no other centre in Africa offers today such a complete range of benefits for initiating in a conducive environment, the many product investment opportunities in Africa.” Morocco’s strong efforts to enhance its regional role through maximizing its presence as a financial services center, coupled with its continuing internal economic, judicial, and labor reforms are critical ingredients in positioning itself as the location and partner of choice for business in Africa.

Focus on the food-water-energy nexus promotes smarter environmental policies

Who will benefit from investments in Africa’s underused arable land resources?

Experts agree that Africa has the capacity to feed itself and become a major exporter of food globally on the basis of coherent and integrated policies that incorporate the impacts of the food-water-energy nexus. Enormous foreign investments are being made in agro-industries in Africa yet few benefits seem to have percolated across those populations living on less that $2 a day. While transparency and a weak regulatory environment are key challenges, without strategic choices and policies dealing with the links among food, water, and energy, this may end up being another tragic case of resource exploitation that undermines the aspirations of the African people.

Projected population and urbanization growth rates for the next 20 years and increased per capita consumption due to the expanding middle classes throughout Africa are already dramatically affecting the continent. This in turn will impact global food, water, and energy resources. Many of the limitations on solutions derive from the reality that natural resources are finite. Yet others, including pollution, overuse/abuse of water supplies, poor agricultural practices, massive subsidies for inefficient industries, and similar constraints are driven by uneven and short-sighted priorities that seek short term benefits without attention to medium and longer term impacts.

Africa is particularly key to the global discussion of the food-water-energy nexus for at least three reasons: trends in population and economic growth that demand greater efficiencies from the continent’s ecosystem; its position as a major geographic and geo-economic hub with its long coastlines, abundant aquatic life, burgeoning hydrocarbon profile, and underutilized arable land; and its vulnerabilities ranging from security threats to exploitation by domestic and international actors that impede its capacity to maximize its options.

Framing the discussion to move towards solutions

In his testimony before Congress in January 2014, James Clapper, US Director of National Intelligence remarked that “competition for and secure access to national resources (e.g. food, water, and energy) are growing security threats…Many countries important to the United States are vulnerable to natural-resource shocks…Demographic trends, especially increasing global population and urbanization, will also aggravate the outlook for resources, putting intense pressure on food, water, and energy.” The US is not alone in this concern. Europe, the Middle East, and South Asia are particularly vulnerable to shifts in the security and stability of Africa. One only has to look at the piracy issue – diminishing along coast of East Africa, now a growing threat in the Gulf of Guinea and beyond.

Sub-national conflicts, such as the Western Sahara stalemate between Morocco and the Algeria-backed Polisario Front, are increasingly focused on resources as sovereignty issues become more about exploitation and distribution than identity. Northern Mali, the Niger Delta, Somalia, Ethiopia/Eritrea, and the Congo are long-simmering and often violent explosions driven to a significant degree by resource control issues. Yet no matter which party dominates, the more essential and basic concerns with food, water, and energy are still core challenges to the continent’s economic and human development.

As global demand begins to outstrip productivity gains, it is even more imperative that Africa, with its huge underutilized resources, becomes a stronger advocate and manager of its natural resources. There is no better starting place than policies and programs that integrate the food-water-energy nexus into infrastructure, sectoral, and security planning. From the potential for conflict over the impact of changing the Nile River’s (or any shared water source) upstream configuration, to migration resulting from climate change and overuse of water or degradation of arable land, to the clear link between volatility in food prices and stability, the indicators for increased conflict over resources is clear.

This scenario, with all its complexities and nuances, makes it imperative to build multilateral frameworks in concert with Africa to address the fool-water-energy nexus. The key begins with acknowledging that every delay robs Africans of another day to engage stakeholders from rural farmers to city-dwellers, from the public and private sectors, and international NGOs and foreign and technical assistance programs to build the local and regional solution options.

Slideshow photo: Green Prophet1/Flickr.

Weaving Together the Neighborhood: How Progress Grows through Regional Integration

King of Morocco building strong transactional network among West Africa partners

There may be political issues on which political leaders disagree, but one common goal unites them – generating jobs, especially ones that change citizens from low wage earners to middle class workers. This is the revolution that is being projected for Africa, and one of its interlocutors may well be King Mohammed VI of Morocco.

On his recent visits to Mali, Guinea, Cote d’Ivoire, and Gabon, the King presided over the signing of more than 80 agreements. As details emerge, their specificity and substance deviates from the usual niceties of “will work towards” and “intend to” that characterize more diplomatic and non-impactful documents.

While the crucial next steps of financing and project management included in the agreements cannot be overlooked, it is also worthwhile to understand the strategic direction in which they will take Morocco and its partners in the coming decade. Setting aside the security and religious/cultural accords, there are discernible patterns in the agreements that make it clear why international donors should consider Morocco’s expertise in the region when funding triangular aid projects.

Mali, Cote d’Ivoire Agreements

In Mali, the first order of business was a series of agreements to strengthen the financial sector through advanced skills training, human resources, and enabling a more modern infrastructure. Mutual interests in commercial transactions, tax regulations, and investments were also addressed, as well as industrial cooperation in mining, and cooperative programs in health care. In all, 17 agreements were signed.

The same concentration on economic, social, and human development was evident in the 26 public-private partnerships signed in Cote d’Ivoire, which included government and private sector-funded initiatives. Of potentially great benefit to both countries are protocols affecting the fishing industry, including the joint construction of an unloading point in the town of Locodjoro, uniform clearance procedures between three Moroccan ports (Dakhla, Agadir, and Casablanca) and Abidjan, construction of a fish processing plant, and a joint committee to implement the agreement on sea fisheries and aquaculture. In terms of jobs and human development, there are agreements to build social  housing units, tourism projects, a pharmaceutical manufacturing facility, more scholarships for higher education in Morocco, greater scientific and research collaboration, and a series of government and bank-related accords focused on project funding, credit access for business, and tourism, export, and trade promotion.

Accords in Guinea and Gabon

In Guinea, 21 bilateral agreements were signed, and the pattern of building on Morocco’s strengths to best serve regional economic integration continued. Several technical agreements were signed to facilitate trade and investment by eliminating double taxation and tax evasion. Once again, the fishing industry received special attention. Formal mechanisms were set up between the relevant ministries for cooperation and capacity building for staff in Guinea’s Department of Fisheries and Aquaculture. The two allies also agreed on the construction of two developed landing points, cooperation of sea fisheries, the merchant navy, and maritime transport. The construction of 6,000 units of low-income housing was announced, as well as accords on technical training, support for small business development, and banking cooperation. Two special projects were highlighted: a state-of-the-art Moroccan military field hospital to provide surgical and advanced medical care for Guineans and a joint venture to build a flour mill near the capital to address local needs.

On the last leg of the king’s trip, in Gabon, there was no let-down in the level of activity. The 24 agreements that were signed covered agriculture, health, housing, vocational training, finance and banking, transportation and tourism, and stronger legal cooperation. Some of the more prominent accords include cooperation on food safety standards, the merchant marine and maritime transport; long-term collaboration on tourism development; scientific and technical cooperation on mining; real estate development; social housing; a license to Maroc Telecom to operate a 3G/4G network; expanded scholarships for university students; and a tax and customs agreement. A noteworthy project on the humanitarian front was the visit of the King and President Ali Bongo Ondimba to the Libreville Cancer Treatment Institute, a joint project with the Lalla Salma Foundation for Cancer Prevention and Treatment, headed by the King’s wife. The two leaders also presided over a new strategic partnership, as Morocco and Gabon signed a $2.3 billion joint-venture fertilizer project that will promises to significantly increase agricultural output and improve food security in the region.

Implications for regional development

The bottom line is that these programs are driven by the need for results: to elevate the capacities of countries in the region to cooperate at a higher level on financial issues, transport and maritime concerns, human and social development, industrial and agro-industrial projects, trade and investment, and a range of educational and tourism efforts, among others. The King certainly recognizes that he has a key role to play, and that his leadership will be judged by his ability to set  a clear direction for Morocco’s growth and development. Through his continuing efforts to extend this vision through regional partnerships that support and benefit the African people, he is firmly committed to the future of Africa.

Slideshow photo: abdallahh/Flickr.

Facing Challenges in the Food-Water-Energy Nexus

The fragility of water resources and how it impacts energy and food are moving rapidly to the top of the world’s environmental agenda. This should come as no surprise. A key principle in understanding core issues in the Middle East is that all Arab societies, bar none, have evolved around maintaining water supplies and managing their relationship to food, land, and survival. This is not uncommon given that human habitats emerged in regions where water was plentiful, accessible, and provided the means to sustain basic food production, transportation, and oftentimes defensible settlements.

A recent article carried by Voice of America made note of a meeting of Agricultural Ministers and other top officials from the Middle East/North Africa (MENA) region in Rome at the UN Food and Agriculture Organization (FAO) to discuss the newly launched  Regional Water Scarcity Initiative. One estimate “warns the availability of fresh water in the region could drop by 50 percent by 2050.” While the existing impression may be that this is more of a problem for the desert rich countries of the Gulf, the reality is that growing populations are depleting water resources throughout the region, with little prospect of replacing damaged, drained, and destroyed aquifers. The Regional Water Scarcity Initiative aims to identify and streamline policies in agriculture water management. The FAO says these are policies “that can significantly contribute to boosting agriculture productivity, improving food security and sustaining water resources.”

In a press release, the FAO’s representative in Egypt Pasquale Steduto remarked, “This region is already known to be very scarce [in water supplies] – one of the most scarce in the world.  But we are observing that there is an acceleration and an intensification of water scarcity that in the next 40 years will bring this scarcity to the highest intensity in history.” The FAO reports that in the previous 40 years “per capita freshwater availability in Near East and North African countries plummeted by two-thirds.” Steduto says it’s a complex situation. “Several things are coming into play from the population [growth], but also climate change. So, we need to be ready to address all the challenges that will come and the region will face in the coming years,” he said.

According to the FAO report, the chief culprit seems to be the agricultural sector, which uses more than 85 percent of the “available rain fed, irrigated, and groundwater resources.” With the rapid growth in populations, the demand for food is outstripping current agricultural capacity and underscores the link between water, food, and the energy needed to make future growth sustainable.

Food Demand Will Continue to Escalate Costs

Cognizant of the need to view food, energy, and water as interrelated parts of the ecosystem, the IMF’s Research Department cooperated with New York University’s Center for Technology and Economic Development, and Morocco’s OCP Policy Center for an in-depth analysis of the “causes and socio-economic challenges of food price volatility” February 25-26 in Morocco. Experts from around the world examined the conceptual, policy, and operational issues related to food in the marketplace. According to IMF Deputy Managing Director Min Zhu, “The conference will enhance our understanding of the drivers of food prices and thus help devise policies to improve food security and keep inflation in check…This is of great importance to many, indeed all, of our member countries.”

The conference examined both the causes and socio-economic challenges of food price volatility, ranging from “drivers of food prices and policies to ensure food security to defining the appropriate monetary policy response to food and fuel price fluctuations.”

 And for the Future?

As James Clapper, US Director of National Intelligence (ODNI), testified to Congress in January, “competition for and secure access to national resources (e.g. food, water, and energy) are growing security threats…Many countries important to the United States are vulnerable to natural-resource shocks…Demographic trends, especially increasing global population and urbanization, will also aggravate the outlook for resources, putting intense pressure on food, water, and energy.”

It is inevitable that Morocco has become a central player in the food-water-energy nexus policy discussion as it works to reconcile four overlapping conditions that shape its future: heavy reliance on imported energy, increased population and urban migration taxing local services, fluctuations in rainfall that have a significant impact on GDP, and the need to create employment opportunities at all levels. Timing is critical for reducing or ameliorating Morocco’s challenges in all these areas, and only a coordinated and integrated strategy will reduce dependency on imported fuels, increase capacity to service rapidly growing cities, continue to expand and enhance water management strategy and generate jobs from the introduction of new and more efficient technologies across the food-energy-water sectors.

Morocco is not waiting for a prescription to emerge from multinational organizations and think tanks. The Kingdom is reaching out to experts, analysts, practitioners, thought leaders, and a range of stakeholders to assess its assets and challenges and mobilize support for its grassroots and national strategies. Its 2020 national energy plan is already underway, making extensive investments in renewable energies. Morocco has pioneered two major agricultural plans that include the utilization of extensive water management technologies, as well as enhanced agricultural production technologies. And it is working with the European Bank for Reconstruction and Development (ERBD) to promote the use of small scale renewable energy products by consumers and small business. Overall, the integration of these efforts is a promising start to addressing the food-water-energy nexus.

From Analysis to Action – How to Address the Food, Water, Energy Nexus in Africa

Over the past five years, foreign and security policy makers have become more attentive to the need to treat natural resources policies in terms of how they intersect with each other. No topic is more important than the food-water-energy “nexus” that was addressed by a conference at the Atlantic Council on February 12. Working from a draft paper, the discussion was divided into three sections: “Core Nexus Principles,” “The Nexus in Practice I: Transatlantic Perspectives,” and “The Nexus in Practice II: the Case of Africa.”

In Morocco, though environmental conditions may not be as dire as in other African countries, there are challenges in addressing this “nexus” in both the short and long term. For example, in any given year, the production of food depends on adequate rainfall and its management. Annual rainfall has a significant impact on the GDP share of agricultural production, which swing from 9 percent during periods of low rainfall to upwards of 17 percent in a good year, and the agricultural sector is the largest employer in the country. Reducing the impact of these swings requires more efficient use of land, fertilizer, recycled water, farming and irrigation techniques, and similar factors – all of which require inputs of energy, whether solar, wind, or fuel sourced, not to mention sunshine!

Morocco is fortunate that most of its environmental factors are largely internal, as no rivers originate in any of its neighbors. However, as an energy importer of more than 95% of its needs, the country cannot avoid the potential for a short term financial catastrophe if a “perfect storm” occurs that lifts energy and imported food prices way beyond the country’s capacity to manage them. It is the same for Morocco’s neighbors in Africa, whether energy rich or not, as the water-food-energy nexus demands dedicated attention in the next decade and beyond to manage supply. This is especially significant in the face of the growing demands of young and urban populations who have legitimate demands for services and want the government to meet these needs without mortgaging their futures.

 How to Move Ahead

Over the next month, I will report on the key issues raised during the conference and examine policy implications for Morocco and Africa, where most forecasts project significant growth in the coming decade. Expanding economies and rising numbers of consumers are generating increased demands on the food-water-energy nexus that cannot be overlooked. “One recent estimate predicted global demand to rise as much as 35 percent for food, 40 percent for water, and 50 percent for energy by  2030…The global demand for food might rise by as much as 70 percent or even more by 2050” according to the draft paper “Addressing the Food, Water, and Energy Nexus.”

Treating food, energy, and water resources as interconnected elements avoids policies and practices that might lead to misdirected investments, lagging economic sectors, and poor development choices. “The potential losses from ignoring interdependencies might be catastrophic, ranging from greater volatility in food and energy markets to absolute scarcities of water and food.”

It is in the face of these challenges, Morocco, with its growing leadership role in human development projects in Africa, is taking a key role in this solution-centered policy discussion on the nexus that is at the heart of the conference. As the Stockholm Environment Institute paper on the same theme notes, “Focusing on the nexus interdependence encourages policymakers, business and community leaders, and producers to think systematically about ecosystems, build coherent policies using multi-stakeholder structures, focus on improving resource productivity, treat waste as a resource, and internalize externalities.”

Drawing on global experts from the US, Africa, and Europe, the conference emphasizes that “despite the justified concerns about threats arising from scarcities, there exist ample opportunities to embrace forms of multilateral cooperation in order to avoid resource-related conflicts…For countries in Europe, the Americas, and Africa, therefore, the key challenge is to construct systems that build the political and technical capacity to understand, monitor, and address possible nexus-related problems before they begin to decay national and/or transnational stability.”

The search for practical solutions that address these food-water-energy requirements to avoid shocks to local, national, and international security and stability will be addressed in future blogs.

Adding value to a traditional sector – Morocco farms on!

Quite often, when observers look at economic development in emerging markets, the emphasis is on expanding IT-related projects, renewable energies, and other sectors that are not at the whim of climatic factors. Yet in countries such as Morocco, where there is sufficient rain to support a robust agricultural sector, there is much to be said for making food commodities and value-added food products a priority. Agriculture absorbs upwards of 40 percent of the workforce, contributing 14-20 percent of GDP in a good year. The country has invested heavily in water-management projects (dams and reservoirs) to try to control its resources more efficiently.

In 2008, Morocco launched its Plan Maroc Vert, to encourage investments in and best practices by both large and small farms. As noted in Plan Maroc Vert’s website, agriculture:

  • Contributes 19 percent of the GNP, 15 percent from crops and 4 percent from agro-industry
  • Employs more than 4 million rural inhabitants, including 100,000 jobs in agro-industry
  • Provides revenues for 80 percent of Morocco’s 14 million rural dwellers
  • Provides food security for the more than 32 million Moroccan people.

Given the vital importance of this sector, it is not surprising that Morocco has made agriculture a core component of its economic growth strategy. In addition to Plan Maroc Vert, the National Human Development Initiative (INDH) includes marginalized urban and rural areas under its broad umbrella targeting communities for development programs. And the international community has responded favorably to these programs. Through the 2007 Millennium Challenge Compact with Morocco, the largest awarded by the US at the time, $328.7 million was allocated to “stimulate growth in the agricultural sector and reduce volatility of agricultural production including funds to:

  • Rehabilitate existing olive trees and expand production of olives and almond trees;
  • Move small farms from high water-use, low-value cereal grains to low water-use, high-value and drought resistant commercial fruit tree species; and
  • Support improvements to increase irrigation efficiency and productivity of olive and date trees.”

Similar support is being provided by the World Bank in the form of last month’s $203 million Development Policy Loan, the second in a series designed to support “key reforms envisaged in the national Plan to strengthen domestic markets, help small farmers, enhance agricultural services, and improve the delivery of irrigation water.” This is in addition to two grants already awarded from the World Bank’s Global Environment Facility. The first—$4.35 million—from the Special Climate Change Fund, is for integrating climate change adaptation measures to build resilience to climate shocks. The second—$6.4 million—will help small farmers implement land and biodiversity conservation measures in marginal areas so that agricultural intensification can be compatible with environmental preservation. And just this week, President Francois Hollande of France announced a grant of $26 million to support the second plank of the Plan Maroc Vert, which emphasizes achieving economies of scale by aggregating small farms into more competitive and efficient units for production, processing, and distribution. More details of this ambitious and essential plan are available at www.ada.gov.ma.

I am writing about agriculture in Morocco to create more awareness of how farming is critical for creating jobs that Moroccans need, and not just to keep farm families engaged. Morocco is the world’s largest exporter of phosphates, critical to the glob Adding value to a traditional sector – Morocco farms on!al food industry. It sits at the northwest corner of the Sahara, a key corridor for distribution of foodstuffs throughout west and central Africa. Its least developed areas are rural communities with poorly utilized agricultural and grazing land due to traditional inheritance practices and lack of recording and registration of land titles. It is not surprising that these areas have the highest rates of illiteracy, poorest health statistics, and the least developed infrastructure. Morocco is using an arsenal of programs and projects to turn this around, but the core necessity is to make the agricultural sector more productive, profitable, and market efficient—moving from commodities to value-added products.

There are a wide range of applications of ITC technology that will benefit a more rational agro-industry, from water conservation and irrigation techniques to better use of seeds, fertilizers, and crop rotation. And this hasn’t even begun to mine the real opportunities in producing downstream value-added food stuffs that will move seasonal workers into more permanent employment. The chart below indicates that Morocco is doing well exporting basic food commodities. It is reasonable to assume that its farmers will achieve much higher profit margins if they move further up the value chain towards higher-value products.

Image The US should continue to support the growth, diversification, and maturation of the agri-industry in Morocco through stepped up efforts to increase participation of the US private sector. Creating more jobs, developing more profitable products, streamlining farm to table distribution, and global marketing are obvious business opportunities for US companies that have generations of experience in building a vibrant agricultural sector. The timing is on target for both countries to realize greater benefits in strengthening ties in this sector.