UAE-based Sahara Group, expands into Moroccan Market

Sahara Management and Marketing Consultancies, subsidiary of UAE-based Sahara Group, has signed a joint venture agreement with the Morocco based 'Arab Gulf Agency for Media and Communications for reciprocal representation rights, according to which Sahara will represent the Morocco-based agency in the UAE, and the latter will represent Sahara in Morocco.

The signing ceremony was attended by Mr Fahad Ahmed Al Deeb, Vice President of Sahara Group, who signed the agreement with Mr Mohammed Ayat Bou Silham, Executive Manager of Arab Gulf Agency for Media and Communication”.

Both parties agreed that Sahara will commence a promotional campaign for the second edition of the Gulf Investments Forum, scheduled to be held in Rabat on 19-20 November 2009. Participants in the forum will come together to discuss existing opportunities in Morocco's industrial, technology, real estate, tourism and energy sectors.

The forum aims to encourage GCC firms and businessmen to enter the Moroccan market, which presents untapped opportunities in various economic sectors, particularly in light of the special incentives offered by Moroccan government to Arab investors. This has enhanced the country's appeal to Arab investment, particularly GCC capital, which has been injected into Morocco's vibrant market over the last few years. But the value of the relatively modest Arab investment in Morocco accounts for only ten percent of total foreign investment, and is restricted to the tourism and real estate sectors.

The amount of foreign direct investment (FDI) pumped into Morocco in 2006 was estimated at $25bn, according to official statistics issued by the Office Des Changes, with French investors leading the way, followed by their Spanish counterparts. The industrial sector attracted 36% of total foreign investment, followed by the tourism and real estate sectors with 32 percent and 16%, respectively.

Commenting on the agreement, Mr Al Deeb said: “Morocco enjoys one of the region's largest markets in terms of its appeal to foreign investors. Today, we are witnessing competition among businessmen and firms looking to enter this market and capture a slice of its diverse investment opportunities. This urged us as a leading management and marketing consultancy firm to be present in this market and offer our media, marketing and management services to potential clients."

“Arab Gulf Agency for Media and Communication is an ideal partner that is well positioned to represent us in the Moroccan market, due to their broad experience in the market, and their quality customer service. Sahara, in return, will extend all possible support to make this agreement a success”.

Mr Silham said: “We are delighted to join hands with one of the largest management and marketing consultancies firms in the UAE and the region. We are confident that this will open new vistas for our company in the GCC region, in a way that will serve the interests of both firms.”

“We are currently focusing our efforts on the 2nd Gulf Investments Forum, and we are confident that Sahara will offer the most reliable services to reach the largest segment of interested investors. The forum is supported by the Moroccan government and has drawn the attention of public and private sector firms, which we look forward to seeing in this forum,” he added.

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North Africa's Regional and Global Integration Seen as Solution to External Shocks

IHS Global Insight Perspective  

-A deeper integration among Maghreb nations will yield great benefits, in the form of higher growth and lower unemployment; in addition, an FTA with both the EU and the United States could sharply increase foreign direct investment (FDI).

-The Maghreb nations thus stand to gain tremendously by forging closer economic relations with the European Union and the United States.

-Political reforms are expected to be slow in the next few years due to differences between Algeria and Morocco over the Western Sahara, but economic reforms could accelerate over the short and medium terms.

Economic Growth: Performance in 2008 and Impact of Global Recession

The Maghreb nations performed relatively well in 2008, despite a slowdown in the world economy. Among the region’s oil exporters, Algeria experienced a boost to growth in 2008, to 3.6% from 3.4% a year earlier, driven by robust non-oil-sector growth due to strongly expansionary government policy. Both the construction sector and services linked to infrastructure projects grew robustly. The Algerian economy is expected to post a slower growth rate in 2009, a reflection of tough conditions in the world economy, sharp corrections in the price of oil during the year, and tighter rules governing foreign investment. Nevertheless, the Algerian government can continue to expand spending in the short term to support non-oil sectors, thanks to its large stock of international reserves.

Reserves stood at US$140 billion at end-March 2009, more than doubling the amount posted 36 months earlier. Among the more-diversified economies in the region, Tunisia's economic growth eased slightly to 4.6% in 2008, from 6.3% in 2007, as the Eurozone economies slowed during the year. Eurozone nations sunk into a severe recession in 2009, hurting Tunisian export and growth. Despite difficult domestic and external conditions the government continued to implement structural reforms, albeit at a slow pace to minimise social discontent.

Meanwhile, healthy expansion in non-agriculture sectors in Morocco, especially in telecommunications, financial services, and construction, led to a sharp acceleration in growth to 5.4% during 2008. Growth was modest in the previous year because of a strong contraction in agriculture. The Moroccan economy is expected to weather the global recession given exceptional performance in the farming sector in 2009. Yet growth should moderate given slowdown in non-oil sectors, lower merchandise exports, remittances from abroad, tourism receipts, and FDI.

Overall, the Maghreb region expanded 4.9% in real terms during 2008. The ongoing global financial crisis has reduced short-term growth prospects for Maghreb nations, and IHS Global Insight expects the region to grow 2.2% in 2009. This is still a remarkable performance given the severe deteriorations in world economic conditions which have led to the failure of a few major companies and the collapse in the housing market in industrialised nations. Economic conditions in the Maghreb could be improved if integration among countries could be deepened. Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF) recently stressed the importance of deeper integration among Maghreb economies, which he believed was the best protection against the effects of external crisis.

Regional and Global Integration Could Boost Growth and FDI Inflows

Political tensions between Maghreb countries remain high, with Algeria and Morocco taking a different stance on the Western Sahara territory. In the past the region has focused mainly on anti-terrorism measures, sometimes to the detriment of economic reforms. Maghreb nations could benefit greatly from enhanced economic integration within the region and with the international economy.

Regional trade exchanges are currently very low: For example trade between Morocco and Algeria represent only 2% of the total trade exchanges of the two countries. According to data published by Algeria's National Data Processing and Statistics Centre, the country's trade surplus with the other four nations of the Arab Maghreb Union (UMA) has almost doubled in 2008 compared to 2007.

Yet Algerian exports to the UMA stood at US$1.3 billion, compared with total merchandise exports of US$78.6 billion, while imports from the other Maghreb countries amounted to US$387.5 million (as opposed to an overall import bill of US$37.4 billion). By creating a larger market, a regional integration would yield great benefits, in a form of higher growth and lower unemployment. The overall unemployment rate for the region is estimated at 15—25%, with very high unemployment among urban women and young college graduates. A regional integration could create the market dynamics for a better absorption of the total labour force. Meanwhile, per-capita real GDP in the Maghreb could increase by an additional 50% by 2015 through deeper integration and reform, according to a recent study by the World Bank.

Markets in the Maghreb remain fragmented and will require integration and openness to achieve development. In turn, the large market of more than 75 million consumers which could be created by deeper integration could make these countries more attractive to foreign investment. Some reports suggest that total Maghreb inward FDI stock would rise moderately if only a deeper integration among Maghreb nations was pursued.

If in addition to regional integration, a full fledged U.S.-EU free-trade agreement could be reached, the stock of FDI could increase by an additional 70—80%. Thus Maghreb nations also stand to gain tremendously by forging closer economic relations with the European Union and the United States. In such a scenario GDP in the region could grow by an additional 2—4%.

Outlook and Implications

The immediate effect of the ongoing global financial crisis on Maghreb nations such as Algeria and Morocco has been modest. Nevertheless the resulting global recession has had a bigger impact on the Maghreb economies: Export revenues, FDI inflows, remittances from expatriates, and tourism are expected to feel the impact of the worldwide recession. With North African nations facing a sharp slowdown in 2009, the future of the Maghreb region resides in economic reforms and integration. Political reforms are expected to be slow, with differences between Algeria and Morocco impeding on these reforms.

On the other hand, economic reforms are expected to pick up in the next 12—36 months. Like Tunisia, we expect other North African nations to sign economic agreements within and outside the Maghreb block, boosting trade exchanges and FDI inflows. A deeper regional integration will be a first step toward cushioning the Maghreb economy from adverse external shocks. In the longer term we hope to see the existence of an EU/U.S./Maghreb FTA.

Energy and electricity: Morocco/Tunisia/UAE

(C) 2009 The Economist Intelligence Unit Ltd.

The Abu Dhabi National Energy Company (Taqa) is planning further expansion in North Africa, where it first established a presence in 2007 when it acquired the 1,350-mw Jorf Lasfar coal-fired independent power project (IPP) from CMS Energy of the US. Taqa’s managing director for North Africa and the Middle East, Majid Iraqui, told the UAE-based Khaleej Times, that the company is proposing to expand Jorf Lasfar, as well as bidding, in partnership with Spain’s Iberdrola, for a 300-mw wind farm IPP at Tarfaya, on Morocco’s Atlantic coast. Taqa has also indicated that it has applied to prequalify for the 350-500-mw Bizerte combined cycle power station project in Tunisia, which will be carried out on a build-own-operate (BOO) basis. The deadline for applications was the end of March (BME Mar 1st-15th 2009)

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MOROCCO: Dakhla Wind Farm Attracts Small Fry

Played up in Morocco’s pro-government press, projects for wind farms in the Dakhla region are being promoted by companies of very modest proportion. Representing a total investment of over DH 17 billion (EUR 1.5 billion), and covering many thousands of hectares, the programs ought to generate several hundred MW of wind power.

Will the output be exported to Europe?

Up to now, Germany’s Altus AG, which wants to build two wind farms with a total capacity of 672 MW with Morocco’s A.M. Wind, has carried out a dozen wind projects in Germany with a combined capacity of under 100 MW. The company will need to raise no less than EUR 1.3 billion if it wants to push through its Moroccan projects which cover 15,000 hectares. And, for the moment, nobody knows the names of investors behind Africa Renewal Energy and A.M. Wind, the Moroccan concerns keen on building wind farms at El Faro and Tawarta.

As for Gotoga Brokers, registered in Valladolid in Spain, it is known primarily at the moment for being involved in a land dispute against another firm specializing in renewable energy, Pevafersa. Gotoga Brokers plans to invest DH 753 million to build a wind farm covering 900 hectares.