Share the article
twitter-iconcopy-link-iconprint-icon
share-icon
AfricaFebruary 2 2005

Euro-Med pact drives reforms

Merger moves in Morocco and the promise of privatisation in Algeria give hope for a more vibrant banking sector in the Maghreb region, writes Jon Marks.
Share the article
twitter-iconcopy-link-iconprint-icon
share-icon

Ten years after the EU and its mainly Arab southern Mediterranean neighbours committed themselves to a Euro-Mediterranean Partnership (EMP) agreement – widely known as the Barcelona process, after the host city of the 1995 conference – the Maghreb states of north Africa are still waiting for the sort of economic take-off that the creation of a Euro-Med free trade zone promised. Algeria, Morocco and Tunisia know they are condemned to working with their more powerful neighbours to the north, though, and that is driving a new generation of financial sector reforms and consolidation, represented in the creation of a new Moroccan “national champion”, Attijariwafa Bank.

North African economies and corporates are edging along the road to reform, although change has been slower than many would like, even in well-managed economies such as Tunisia’s, where the banking sector is still dominated by local interests.

Marseille conference

Speaking at the first Euro-Mediterranean Investment Summit conference, held in Marseille on January 13-14, Morocco’s finance minister Fathallah Oualalou said: “Since 2001, there has been an improvement in the Moroccan investment situation, linked partly to privatisation but also to structural reforms.” However, reflecting a degree of disenchantment in the south about the pace and rewards of the Barcelona process, he added: “What is needed now is a greater opening by Europe – to bring down non-tariff barriers… and to open its markets wider to our agricultural and textiles products.”

North African leaders are concerned that the creation of a new Euro-Mediterranean economic space opens the way for big corporations to penetrate their fragile markets, to the detriment of local companies. This concern lies behind a recent spate of moves in Algeria, Morocco and Tunisia to bring in foreign investors and expertise, and create bigger, stronger banks and other national champions to compete. It is also leading to the introduction of private equity and other techniques that have so far largely bypassed the Maghreb.

At the Marseille conference, François Pontet of French specialist Siparex said: “There are perhaps only 40 risk capital operations in the whole [Arab] Mediterranean region and many of them need the backing of the European Investment Bank or [French agency] Proparco.” Tunisia has proved to be a market leader via Tuninvest and a number of closed-end funds. And in Morocco, BMCE is a partner in the innovative Capital Invest.

Such potential is encouraging European banks, several of them based in Marseille, to look again at the region. The old port gateway to north Africa has become a fast-developing city that is vying with Barcelona for the title of “Mediterranean capital”, which means becoming a hub for business and finance with the southern rim.

Morocco is resurgent

Moroccan markets entered 2005 on an upbeat note, after several years in the doldrums following the deceleration of privatisation and financial market reforms that began in the mid-1990s. The national stock exchange, the Bourse des Valeurs de Casablanca (BVM), showed renewed signs of life even before the national fixed line operator, Maroc Telecom, launched an initial public offering (IPO) for 15% of its equity in mid-December. Chairman Abdeslam Ahizoune says the IPO produced “unprecedented” investor demand. It was 21 times over-subscribed, with unexpectedly high institutional demand from Western institutions. The latter were allocated 30% of the offering and this tranche was 50 times over-subscribed.

Healthy Arab investor appetite signals the potential for drawing Gulf Arab funds into the Maghreb – a trend that has accelerated in the climate of suspicion following 9/11. Mr Ahizoune says he is “most pleased about the level of interest from US, European and Middle East investors”.

In the second half of December, the value of Maroc Telecom shares rose 27%. Traders said the price could go higher still, suggesting that it might eventually settle at about Dh120 ($14) – more than Maroc Telecom’s “anchor investor”, Vivendi Universel, initially paid for its shares in the previous information communications technology (ICT) boom.

Consolidation moves

The long-awaited consolidation in the number of banks, insurance and other companies in the Moroccan financial services sector seems to be under way at last. The year opened with the formal start-up of what the Casablanca business newspaper L’Economiste calls “deux mastodontes” (two big beasts): the merged RMA/Al Wataniya insurance giant and the new Attijariwafa Bank, created from two major local institutions, Banque Commerciale du Maroc (BCM) and Wafa Bank. RMA Wataniya has a 23% share of the insurance market, allowing it to compete as Morocco opens up to foreign competition – a requirement under its agreements with the EU and World Trade Organization (WTO).

Attijariwafa Bank is entering what management calls an “integration phase”, running until December. According to Moroccan calculations, it will be the Maghreb’s biggest bank and number eight in Africa. It has a regional growth strategy and is creating a new banking subsidiary in Senegal.

Algeria has been the most laggardly reformer among the three Mediterranean Maghreb states but its economy has the biggest potential to open up now that Abdelaziz Bouteflika has been re-elected as president with a big majority, and the macro economy is very stable. In an interview with The Banker, presidential adviser and former minister Mourad Medelci says: “With foreign reserves at around $42bn [thanks to high oil prices], we are looking to make those reserves work, using them to relaunch the economy by encouraging private investors and developing infrastructure through public/private partnerships.”

Algerian policy

In a policy statement in mid-December, finance minister Abdelatif Benachenhou said that three state banks would be opened up to private investors, and he promised to reintroduce the stalled hydrocarbons law. He did not name the three banks to be privatised. However, Mr Medelci names them as the giant Banque Nationale d’Algérie (BNA), Crédit Populaire d’Algérie (CPA) and Banque de Développement Local (BDL).

Staoueli-based minnow BDL has been regarded as a candidate for privatisation since soon after its creation in 1985. The long-established CPA has been mooted as a privatisation candidate – with France’s Société Générale the most likely buyer if an acceptable deal could ever be hammered out. And BNA is a major player that will give the eventual foreign partner a big footprint in the Algerian market.

So far, efforts to privatise Algerian banks have come to nothing, but Mr Medelci says that he expects talks with potential partners on all three banks to start in 2005 and to conclude in 2006. He confirms that talks with SocGen about CPA had “started”.

The three banks account for about 50% of the public banking market, says Mr Medelci. “BNA and CPA have been chosen partly due to the nature of their business.” They are regarded as less dominated by the public sector and policy concerns than others, he says. The latter include Banque Extérieure d’Algérie (BEA), which is house bank to state hydrocarbons company Sonatrach, and Banque de l’Agriculture et du Développement Rural (BADR), on which many farmers depend.

“All public financial institutions will eventually have to be privatised, with the introduction of commercialised management,” says Mr Medelci. BEA, BADR, the CNEP housing bank, insurance companies and other financial institutions will all be put on a commercial footing, in preparation for opening up their capital in the future. Eventually, their shares could be sold on the Algiers stock exchange – a grey market (there is, as yet, no fixed institution) on which shares in some state companies and domestic government bonds can trade.

If the government can meet these commitments, it will be appreciated by foreign partners, who have been waiting for a breakthrough in largely stalled microeconomic reforms. A recent IMF staff mission emphasised “the urgency of undertaking banking sector reform”, calling on the authorities “to intensify their efforts to rehabilitate financial relations among public banks and public enterprises, and to strengthen banking supervision considerably”. The IMF concluded: “The transfer of control of several public banks to reputable foreign banks is essential to inject fresh know-how into the Algerian marketplace.”

Was this article helpful?

Thank you for your feedback!

Read more about:  Africa , Algeria , Africa , Morocco , Africa , Tunisia