MOROCCO'S EL DORADO - FRANCOPHONE AFRICA

UNCLAS CASABLANCA 000093 SIPDIS SENSITIVE STATE FOR NEA/MAG COMMERCE FOR NATHANIEL MASON E.O. 12958: N/A TAGS: ECIN ECON EINV PGOV SOCI MO SUBJECT: MOROCCO'S EL DORADO - FRANCOPHONE AFRICA REF: A. CASABLANCA 10 ¶B. CASABLANCA 26 ¶1. (SBU) Summary: To fuel its expansion in Francophone Africa, Morocco's largest companies - Attijariwafa Bank, Banque Morocaine du Commerce Exterieur (BMCE),and Maroc Telecom - are employing a calculated strategy, which entails buying controlling stakes in key sub-Saharan African firms, and pursuing deals in smaller, low visibility countries in the region. Morocco's majority stake in Francophone Africa's largest banks and telecom firms, in conjunction with King Mohammed VI's economic diplomacy, provides Morocco with leverage for its Sahara policy. While Morocco's business ventures have generally been successful, some companies have arguably taken disproportionate risks in their acquisitions. (Note: Throughout, Africa is used as shorthand for Francophone Africa. End Note.) End Summary. -------------- Business Strategy in Africa -------------- ¶2. (SBU) Morocco's largest companies - Attijariwafa Bank, BMCE, and Maroc Telecom - are utilizing a calculated strategy, which entails buying controlling stakes in key sub-Saharan firms and pursuing deals in smaller, low visibility countries in Africa in order to fuel their expansion in the banking and telecom sectors. (Note: Over the past decade, much of Morocco's investment in Francophone Africa, like its trade, has been concentrated in a few countries such as Senegal, Mali, and Mauritania. End Note.) Hicham Alaoui, director of BMCE's Risk Management office, said "This sub-Saharan strategy has certainly brought BMCE quite a bit of profit". The Bank's activities in the region account for close to 10 percent of its total net income, added Alaoui. ¶3. (SBU) The extent to which this policy is officially supported and encouraged by the Government of Morocco was evident in King Mohammed VI's recent visit to Equatorial Guinea. Accompanied by a large trade delegation, the visit produced an agreement that will see Morocco's Tanger-Med Agency assume responsibility for managing the port of Malabo. Such high-visibility visits and the accompanying investment, Attijariwafa Bank's Idriss Maghraoui observes, have also brought Morocco political benefits. Government officials, like the King, strongly believe that Morocco's business ventures in Africa will enhance the country's ability to garner and maintain support on its Sahara policy. Yet Yahia El Farah of the Institute of African Studies at Rabat's Mohammed V University cautions against conflating Morocco's foreign policy with its commercial actions abroad. -------------- A Partnership, Solidified -------------- ¶4. (SBU) Morocco's largest companies are aggressively deploying this expansion strategy in Africa. Maroc Telecom, the country's largest telecommunication firm, is rapidly buying control stakes in some of Africa's largest telecom firms such as Mauritania's Mauritel, Burkina Faso's Onatel, and Mali's Sotelma to name a few. "Sub-Sahara's telecommunications sector is the most dynamic segment of the continent's economy, the most flexible and therefore the most desirable", says Lahcen Kourss of Maroc Telecom. ¶5. (SBU) Meanwhile, Morocco's commercial banks have also sought opportunities in the Francophone region. Attijariwafa Bank, Morocco's largest bank, and a French financial group, Credit Agricole, announced in November 2008 that the Bank would acquire the French firm's banking stake in Africa. Credit Agricole's operations in Africa consist of Societe Ivorienne de Banque (51 percent stake), Union Gabonaise de Banque (59 percent stake),Societe Camerounaise de Banque (65 percent stake),Credit du Congo (81 percent stake), and Credit du Senegal (95 percent stake). Attijariwafa Bank is already present in Senegal through two subsidiaries that are currently being merged - Attijari Bank Senegal and CBAO - to form Senegal's largest bank. ¶6. (SBU) Similarly, BMCE has relied on a strategic acquisition of the Bank of Africa (BOA),the rapidly rising West African multinational bank, to fuel its expansion. In May 2008, a 70 million Euro loan from the International Financial Corporation helped BMCE acquire 35 percent of the capital of BOA, to which it added a 7.5 percent share in September. BMCE is expected to have a controlling stake in BOA in the upcoming months, which will expand its influence to 12 countries in Africa. BMCE also holds a 20.7 percent share in Mali's largest bank, BDM. -------------- Risky Business -------------- ¶7. (SBU) While Morocco's business ventures have generally been successful, some companies have arguably taken disproportionate risks in their acquisitions. The rating agency Standards & Poor flagged such expansion as a "source of risk" in its otherwise generally positive assessment of the Moroccan banking sector in February 2008. Outside observers also question the amount that Moroccan banks have paid for some of their acquisitions. Oxford Business Group, for instance, noted that Attijariwafa's July 2008 bid of 60 million Euros for a Malian bank outstripped its closest rival by nearly 40 percent. ¶8. (SBU) There are also other risks to Moroccan expansion in Africa. Poor governance and regulatory burdens remain serious limitations to investment in the region. Ongoing difference over management with Air Senegal International, the Senegalese flag carrier set up as a joint venture between Senegal and Morocco's Royal Air Maroc (RAM),illustrate that business disputes in Francophone Africa can be costly, in terms of both time and fees. RAM has been seeking to extricate itself from the agreement since 2007, thus far without success. -------------- Comment -------------- ¶9. (SBU) Morocco's expansion into Africa has been emphasized over the past year as part of a strategic move to diversify Morocco's international presence away from its more traditional, saturated, European markets. Reftels discuss Morocco's emerging economic ties with India and Russia. Millard