Market Monitor

Green Morocco: Opportunities in agriculture

Morocco has been very successful at enhancing agricultural processing activities through its Plan Maroc Vert, or Green Morocco Plan. The sector has become more attractive for international investments, but issues related to climate change and land fragmentation remain challenges to faster sector growth

 

A combination of geographical conditions coupled with close proximity to key European markets have made Morocco a regional agriculture player. The sector is critical for the country, accounting for roughly 15% of GDP and 38% of employment. Agriculture is so intertwined with the economy that annual GDP growth rates often vary according to weather patterns.[1]

In 2008 Moroccan authorities launched Plan Maroc Vert, which aimed to increase the sector’s resilience by raising the economic value-added of agriculture, increasing mechanisation and agro-industrial processing, and reducing vulnerability to climate change. The plan expanded irrigated areas and diversified crops and, overall, mobilised MAD104bn ($10.7m) over the decade to 2018, with 60% supplied by the private sector.[2]

Since 2010 the value of the kingdom’s exports of agrifood products has almost doubled; in 2018 shipments totalled MAD57.3bn ($5.9bn), roughly 21% of the country’s total exports, with the majority of products shipped to the EU.[3]

The implementation of Maroc Vert has been accompanied by rising interest from international investors. For Gulf countries in particular, which depend on imports for over 85% of their food requirements, Morocco offers the potential to produce high-quality agricultural goods in a politically stable environment with investment-friendly regulations. For Morocco’s agro-industrial producers, increasing exports to the gulf allows the sector to reduce its dependency on EU markets.

 

Natural Advantages

Rather than allow foreign investors unregulated control over large swathes of agricultural land, Morocco instead aims to provide something more valuable: a stable economic partner with a track record in agricultural production and a link to export markets.The kingdom’s law does not currently allow foreigners to acquire agricultural land, but sector investors can circumvent this obstacle through lease agreements and partnerships with domestic firms. The state has opted to attract foreign investment and know-how to operate within its existing agricultural system, viewing it as a way to modernise the sector and raise value-added production.

A number of Gulf investors have established partnerships with the Moroccan government or local firms. Abu Dhabi-based agro-food conglomerate Al Dahra signed a partnership agreement with the authorities in 2015 to develop 560 ha of olive production. In 2017 the company announced it would invest a further $15.6m to produce apples and high-value flowers in Azrou, 90 km south of Fès, for export markets in the Middle East, Africa and Europe.[4]More recently, Al Dahra Morocco secured a MAD55m ($5.6m) loan from the European Bank for Reconstruction and Development (EBRD) to build an olive processing plant to produce olive oil for export.

Morocco’s varying geography allows agro-industrial investors to diversify production across the year. Another Emirati conglomerate, Yas Holding, established its Moroccan subsidiary, Elite Harvest Maroc, in 2015 and now has farming operations in six different locations – in Kenitra, Sidi Yahia, Fès, Sefrou, Marrakech and Béni-Mellal – which allows it to produce a variety of seasonal fruits, including apples, pears, peaches, berries, figs and pomegranates.[5]

Investment in agriculture capacity is also being channelled through regional financial institutions. In mid-2019 the Arab Authority for Agricultural Investment and Development, which aims to strengthen food security in Arab countries, signed a deal with Moroccan producer Orbis Agro Industry to set up several agro-industrial projects. These will include a 900-ha production area for different types of berries in the Gharb Region, and the establishment of an olive production and processing operation.[6]

Agro-industrial links between the Gulf and Morocco have also been strengthened by Cosumar, Morocco’s sugar producer and largest agro-industrial player. The firm established a joint venture with Saudi Consolidated Brothers and Industrial Project Development Company to build an 850,000-tonne-per-year sugar refinery in Saudi Arabia. The plant, scheduled to begin operating in March 2020, will service the Saudi market and the broader Gulf region.[7]

Besides export markets in Europe and MENA, Morocco-based agro-industrial producers can also benefit from a growing domestic market aligned with the expansion of the middle class. In 2018 Morocco’s domestic food retail industry was worth $19.4bn.[8]

 

Funding support

Because the government views agro-industrial processing as a key generator of employment, support for food-processing capacity increases is set to continue. Several instruments financed through the Agricultural Development Fund have been used to encourage high-value agricultural production and exports by the private sector.

In 2017 the authorities signed an agreement with the agro-industrial sector with the goal of helping to mobilise investment. Set to be implemented over the 2017-20 period, the deal – or “contrat-programme” – established investment commitments of MAD12bn($1.2bn). [9]It aims to improve conditioning, distribution and transformation infrastructure for agro-industry and add an additional MAD13bn ($1.3bn) in annual exports.

Additionally, the World Bank has allocated a $200m financing package to the sector in 2017-23. The goal is to strengthen market efficiencies, increase the participation of small producers and improve distribution channels geared towards exports. This is likely to raise the quality of potential partnerships as foreign investors look to aggregate agro-industrial production.

 

 Trade, climate and land concerns

Despite the potential for closer cooperation between Morocco’s agricultural sector and Gulf investors, some challenges lie ahead. In 2017 Rabat opted for a neutral stance on the regional conflict between several gulf countries and Qatar, offering to send food to the blockaded country. Since several Emirati producers are betting on Morocco’s agricultural sector, and investment from other GCC countries has continued to flow into other sectors of the economy, it seems that the country’s stance has not impacted agri-investment ties too negatively for the time being. However, a worsening of the political environment in the gulf might lead to a potentially negative background for GCC investment in Morocco.

Another challenge might come from the growing impact of climate change. The authorities are attempting to mitigate the risks through water-management policies, increased irrigation infrastructure and promotion of crops with lower water requirements, but droughts, desertification and soil erosion are swelling problems for the sector. Lack of sufficient rain in 2015, for instance, affected agricultural production so heavily that it led to a 1.5% reduction in GDP growth the following year.[10]

Land fragmentation has also typically been a constraint to development. On average, agricultural plots in Morocco are less than one ha in size, which makes it hard to achieve the necessary economies of scale required for a profitable agro-industry. The authorities have been expanding the use of private-public partnership agreements, in which larger plots of land are allocated to investors for the growing of specific crops. During the implementation of Maroc Vert, 816 agreements were established, covering over 108,000 ha of land, according to government figures.[11]

 

Healthy outlook, nonetheless

Barring any unforeseen, large-scale events, Morocco’s agro-industrial sector is likely to maintain its growth dynamic.

The development of a new sector strategy for the post-2020 period, bodes well for international investors with financial capacity and readily available export markets. Since policymakers view the creation of sufficient employment opportunities as a critical development priority, the coming sector policy is likely to extend the benefits of agriculture development to small land holders and isolated communities that have seen the least benefits from the implementation of Maroc Vert over the past decade.

Because agriculture is a key earner for such an important part of the population, investment projects that aggregate existing growers into value-adding production chains are likely to see a higher degree of support than agro-industrial ventures that simply focus on securing the control of land for Greenfield projects.

 

Francisco Serrano is a correspondent and consultant, with experience in the Middle East and Latin America. He has written for different publications, including Foreign Policy and World Politics Review, and advises clients regarding risks and opportunities in several emerging markets.


Sources:
[1] Country Results Brief, Morocco – African Development Bank; and Le Secteur Agricole Marrocain – Tendences Structurelles, enjeux, et prespectives de développement, Ministry of Agriculture
[2] http://www.ada.gov.ma/fr/principales-realisations-du-plan-maroc-vert”>http://www.ada.gov.ma/fr/principales-realisations-du-plan-maroc-vert
[3] https://www.leconomiste.com/flash-infos/produits-agroalimentaires-plus-de-57-milliards-l-export”>https://www.leconomiste.com/flash-infos/produits-agroalimentaires-plus-de-57-milliards-l-export
[4] https://www.jeuneafrique.com/138776/politique/maroc-avec-les-monarchies-du-golfe-un-mariage-de-raison/”>https://www.jeuneafrique.com/138776/politique/maroc-avec-les-monarchies-du-golfe-un-mariage-de-raison/; https://lematin.ma/journal/2017/al-dahra-holding-investit-156-millions-de-dh-pour-la-production-de-pommes-et-de-fleurs-haut-de-gamme/270860.html; and https://lematin.ma/journal/2020/berd-finance-producteur-marocain-55-millions-dh/329290.html
[5] https://www.yasholding.ae/index.php/subsidiaries/elite-harvest-maroc/”>https://www.yasholding.ae/index.php/subsidiaries/elite-harvest-maroc/
[6] https://www.leconomiste.com/article/1047917-investissement-maroc-vert-attire-toujours”>https://www.leconomiste.com/article/1047917-investissement-maroc-vert-attire-toujours
[7] https://www.cosumar.co.ma/wp-content/uploads/2019/09/rapport-annuel-2018-.pdf”>https://www.cosumar.co.ma/wp-content/uploads/2019/09/rapport-annuel-2018-.pdf
[8] https://apps.fas.usda.gov/newgainapi/api/report/downloadreportbyfilename?filename=Food%20Processing%20Ingredients_Rabat_Morocco_6-10-2019.pdf”>https://apps.fas.usda.gov/newgainapi/api/report/downloadreportbyfilename?filename=Food%20Processing%20Ingredients_Rabat_Morocco_6-10-2019.pdf
[9] Le Secteur Agricole Marrocain – Tendences Structurelles, enjeux, et prespectives de développement
[10] https://www.worldbank.org/en/news/feature/2016/11/17/5-things-morocco-is-doing-about-climate-change”>https://www.worldbank.org/en/news/feature/2016/11/17/5-things-morocco-is-doing-about-climate-change
[11] https://www.lavieeco.com/dossiers-speciaux/plan-maroc-vert-un-bilan-positif-qui-confirme-le-potentiel-de-lagriculture-comme-gisement-demplois/”>https://www.lavieeco.com/dossiers-speciaux/plan-maroc-vert-un-bilan-positif-qui-confirme-le-potentiel-de-lagriculture-comme-gisement-demplois/

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