83 %. That’s the proportion of businesses operating informally in Morocco, according to the latest World Bank report on economic activity in the Middle East and North Africa (MENA). A staggering proportion – significantly more than found in countries such as Jordan (50%) or Lebanon (40%).
This figure alone sums up the way in which the Moroccan economy is trapped; it operates largely off the radar, beyond the grasp of policy schemes that aim to encourage productivity or innovation.
When performance doesn’t pay off
But the report also reveals something more troubling: Morocco’s most productive companies are not gaining ground. Between 2016 and 2019, their productivity increased by 2% (and even by 8% in services). Worryingly, this had no effect on their market share. In other words, performance no longer pays. The least efficient companies – informal, poorly funded and unregulated – are enjoying an increasing share of the market. This is due to an absence of real competition and natural selection based on quality.
For the Bretton Woods institution, this mass of informal economic activity feeds a vicious circle. Companies are circumnavigating regulation, stagnating in productivity, but continuing to grow, a situation caused by both administrative constraints and a lack of incentives. Few businesses are attempting to formalise in a complex regulatory environment with inimical tax practices, limited access to financing and a culture of mistrust towards institutions. In such contexts, for many micro-businesses, informality is not a choice but a condition of survival in an environment they perceive as inhospitable. The report suggests that the state brings various informal business models (some being viable, others not) under the umbrella of regulation. This will include designing policies that are salient, targeted and inclusive.
What the World Bank report underlines is that there is room for improvement. It’s imperative to target the right players. In Morocco, very small businesses (VSEs) – despite being in the majority – remain excluded from the structures which allow for investment and the promotion of growth. This is not because they don’t want to grow, but because almost everything in their environment appears designed to keep them on the sidelines.
Support, but only for some
Abdellah El Fergui, President of the Moroccan Confederation of Small and Medium-sized Businesses, is convinced that as long as these companies are not integrated into public policy, no economic strategy will be able to bear fruit. » We continue to design measures without consultation, without taking into account the realities on the ground, and then we are surprised at their ineffectiveness », he laments.
« How many VSEs manage to achieve between 1 and 200 million dirhams in sales, after the series of crises we’ve been through? »
The latest scheme dedicated to VSEs was unveiled two weeks ago in the new investment charter. Long-awaited by small businesses, who were hoping at last to be able to invest in order to grow and heal the wounds left by successive crises, the scheme was a disappointment upon publication. Many felt excluded from the outset, sidelined by eligibility criteria deemed inaccessible and tailored to much more well-established businesses.
« We’re talking about a scheme that targets companies with sales of between 1 and 200 million dirhams. But how many very small businesses today can claim such a threshold, after the series of crises we’ve been through? » asks El Fergui. For the President of the Moroccan Confederation of Small and Medium-sized Businesses, the answer is clear: almost none.
The scheme provides for three cumulative subsidies worth up to 30 % of the initial amount invested: an employment bonus, a regional bonus and a sector bonus. On paper, nothing shocking. But in practice, « very small businesses are excluded from the outset by the eligibility criteria themselves », he laments.
« You can’t talk about transparent governance when those who devise the rules are also those who benefit from them »
What’s more, for El Fergui, the negotiation process of the scheme also raises concerns. « No meetings were organized with us. All discussions were held on the premises of the CGEM, where many ministers’ relatives sit. You can’t talk about transparent governance when those who devise the rules are also those who benefit from them », he says.
Such a lack of consultation is nothing new. It comes on top of a promise that has remained unfulfilled for over a decade: that of reserving 20% of public purchases for small and medium-sized businesses, as stipulated by law since 2013. Twelve years later, the implementing decrees have still not been published.
The route ahead
Meanwhile, in the run-up to the 2030 World Cup and the 2025 African Cup of Nations, Morocco is stepping up calls for public investment. But then again, VSEs are watching the train go by. With no appropriate support policy, no banking support and no cash advance, they are de facto excluded from public procurement contracts. « We’ve left small businesses to fend for themselves. And now that there’s money to invest, we’re surprised that they’re not ready, » El Fergui complains.
This paradox – investing massively while marginalizing the structures that form the backbone of the Moroccan economy – undermines ambitions to move the national economy up a gear. For Abdellah El Fergui, the solution is clear: rethink the architecture of public support, starting with the needs of the smallest players. This means reviewing eligibility thresholds, relaxing criteria for access to subsidies, setting up appropriate pre-financing mechanisms, and above all, putting an end to announcements totally disconnected from the facts on the ground.
This plea is in line with the recommendations of the World Bank, which calls for a more detailed understanding of the Moroccan economy. Formalizing viable businesses, supporting those that can grow and redirecting policies towards concrete needs: what is required is a paradigm shift as much as a change in policy.
Written in French by Safae Hadri, edited in English by Theodore Griffin
