This post was originally published July15, 2011
MENA Mining (V): Morocco (2)
Looking at the issue of investment attractiveness of Morocco, let is first trace the country-specific concerns.
This page from TMCNET provides some information: Morocco risk: Legal & Regulatory Risk – a bit outdated data from THE ECONOMIST INTELLIGENCE UNIT that among other, cites: “The 1995 investment code established a level playing field for local and foreign investors for most sectors of the economy. Foreign investors do not need a joint venture to operate in Morocco and can set up wholly owned subsidiaries. A local lawyer, or a local lawyer found through an international firm practising in Morocco, is a necessity for any foreign investor given the continued weakness of local commercial law.”
In November 2009 Morocco joined the OECD Declaration on International Investment and Multinational Enterprises. As an adherent to the Declaration, Morocco commits to providing national treatment to foreign investors and to promoting responsible business conduct.
The World Bank Group provides this data on ease of doing business in Morocco:
However, according to the World Bank data, the measures to protect investors in the country are moving at a rather slow pace:
Source: Doing Business 2011: Morocco
In recent years, the Government executed the following:
DB2011: Protecting Investors: Morocco strengthened investor protections by requiring greater disclosure in companies’ annual reports.
DB2010: Getting Credit: Access to credit was strengthened with a new private credit bureau that began operating in March 2009.
DB2009: Getting Credit: The right of borrowers to inspect data on their creditworthiness was guaranteed, increasing their ability to control the accuracy of the information used by financial institutions in assessing their risk profiles.
Paying Taxes: The corporate income tax rate was reduced from 35% to 30%, effective 2008.
Trading Across Borders: Document requirements for importing and exporting were simplified, reducing the time to import by 1 day.
DB2008: Dealing with Construction Permits: The time needed to obtain new licenses for construction firms was reduced by 10 days, by establishing a one-stop shop in Casablanca to provide better communication between the relevant agencies.
Registering Property: The property registration process was complicated by adding the requirement to check several tax agencies, rather than just one, in order to obtain a tax clearance certificate. The reform is being implemented nationwide, and adds three procedures to the process of transfer.
Trading Across Borders: A new risk-based inspections system was introduced, causing the time to export to decrease by 2 days, and import by 4 days.
Source: Business Reforms in Morocco
The Moroccan Investment Development Agency Web-site Invest in Morocco is a descriptive source of information on the subject, however, there is no material on investment in mining. But you may find details of investor incentives and protection of investors (however, the site does not allow to download “Investment Incentives Factsheet” and there is no access to the Website of CNEA):
· The contribution of the state to certain investment expenses: Investment Promotion Fund;
· The contribution of the state to certain expenses for the promotion of investment in specific industrial sectors and the development of modern technologies: the Hassan II Fund for Economic and Social Development;
· Exemption from customs duties under Article 7.I of the Finance Act No. 12/98;
· Exemption from import VAT under Section 123-22 °-b of the General Tax Code.
· Treatment of permitted investments
· Free transfer of capital and income
· The non-expropriation of investment, except for public utility reasons and following a court decision (on a nondiscriminatory basis and to pay a prompt and adequate compensation)
· Disputes with recourse to domestic courts or international arbitration at the choice of the investor
A look at the Industry-Specific features:
As I mentioned in the previous post, the mining sector in Morocco has a long history, but it is clear that in the past the emphasis was made on the phosphate mining (93% of mining production in 2009).
The mining business in the country is governed by the Mining Law (1951) and by the executive orders under supervision of the Directorate of Mines. ( Morocco Investment Charter 1995) . Lately there had been a number of initiatives reported on revising the legal framework on the mining sector, but very little data is available on the progress.
Morocco is in the process of privatizing state-owned mining assets and has opened investment opportunities to foreign companies. This can be done in two ways: Joint Ventures with the government; or 100% foreign-owned ventures.
Morocco is characterized by abundance of small scale mining entities. In fact this is very distinctive for Africa, as this UN report states: “Artisanal and small-scale mining (ASM) - ASM is an integral part of rural Africa. The number of artisanal and small-scale miners is very large, the skills and finances limited, and the operations technologically deficient. The result is often catastrophic in economic, social, environmental and health terms.” Morocco has between 12,000 and 15,000 ASM, (mostly in underground or open pit mines, producing less than 5,000 tons of products annually) – this is about 40% of domestic production. The government is supporting the development of small-scale and artisanal mines with a program designed to integrate artisanal mining activity in the mining system, provide technical assistance, training of staff of small companies; develop relevant financial schemes. One of the objectives is to increase the chances of exploitable deposits on an industrial scale.
A brief overview of Tax Incentives:
• Are payable on mining permits (rates fixed by decree).
• Payable upon the issuing or renewal of exploration and mining permits, and at the beginning of each year for extended operating concessions and permits.
Incentives for mining companies
• Customs duty and tax exemptions on imported equipment.
• A 50% reduction on company tax or income tax for mining companies that export their mining products, whether directly or indirectly.
• The mining company may set up a tax-exempt reserve fund for exploration and development investment equal to as much as 50% of fiscal profits, with a ceiling of 30% of turnover.
• The Moroccan Parliament enacted a new Mining Code. It took effect at the beginning of 2005.
The government’s incentives for mining industry are summarized in this slide from Maya Gold and Silver Inc. in its corporate presentation:
According to news and analysts’ reports, the Government is expected to continue to establish joint ventures with international companies; to increase the mining sector investments by both minor and major mining companies. Significant attention is provided to improvements of Morocco's physical infrastructure. There are plans develop infrastructure that would benefit mining sector, including The Moroccan High-Speed Rail Master Plan . The government stepped up its spending on basic infrastructure to MAD400bn (US$47.26bn) for 2008-2012, up from just MAD80bn (US$9.45bn) for the previous period. (This document provides a brief overview for the subject: YOUR GUIDE TO MOROCCAN INFRASTRUCTURE ).
I would like to conclude this short overview with a specific example that I think illustrates potential of the country:
To demonstrate the mineral capacity of Morocco, here is the table from the TECHNICAL REPORT AND RESOURCE ESTIMATE ON THE ALOUS COPPER-SILVER PROPERTY MOROCCO For ODYSSEY RESOURCES LIMITED - there still undeveloped sites for silver-copper deposits in this particular area