Morocco begins construction of new tech city in Tangier

Morocco has kicked off construction of a high-tech city in Northern Tangier. This comes after China Communications Construction Co (CCCC) and its subsidiary, China Road and Bridge Corp (CRBC) and Morocco-based BMCE Bank signed a memorandum of understanding in April for the development.

The agreement to construct the city known as Tanger Tech Mohammed VI was signed after the withdrawal of China’s Haite group with which BMCE and the northern regional council had expressed interest in 2017 to develop the city in the next 10 years.

“There were disagreements on the ownership of the city among other issues. Our partners are Chinese but this does not mean that the city belongs to Chinese,” said Ilyas El Omari, head of the northern Tangier-Tetouan-Alhoceima region.

Tanger Tech Mohammed VI

Tanger Tech Mohammed VI city will be constructed in three phases covering up to 700 hectares out of 2,000 hectares in total. Work has already started to connect the city to roads, electricity, water and rail. The government of Morocco will grant tax incentives to companies operating in food industries, automotive, aeronautical, renewable energy, chemical and textile.

The tech city will also benefit from its Tanger Med Port which is currently still being expanded to enhance trade, additionally Tanger Med launched new terminals on Friday therefore increasing its container handling capacity to about 9 million making it the largest in the Mediterranean Sea. There is hopes that the tech city will attract investments worth US $10bn and create over 100,000 jobs.

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This was mainly fuelled by two large deals in the sector in that period – Exxon Mobil’s acquisition of a 25 percent stake in ENI East Africa for $2.8billion, and Assala Energy’s acquisition of Shell Gabon for close to $1billion. The Mining and Metals sector, which had accounted for some of the largest share of deal activity in previous years, was the second largest target sector in 2017, accounting for about 20 percent of total M&A values. Volume and value of M&A in SSA (Source : EY) Three key factors behind the slowdown in M&A in SSA in 2017: 1. Macroeconomic and political uncertainty According to EY’s Africa Attractiveness Program (May 2017), 2016 was the worst year for the continent in nearly 20 years. The continent experienced low economic growth, on the back of falling commodity prices, currency volatility and high inflation. As a result, the “Africa Rising” narrative tapered off and investors held back. This trend seems to have carried on in 2017, with investors continuing a cautious stance on dealmaking in the continent. In addition, political uncertainty in some of the major African economies – Nigeria, South Africa and Kenya – has also contributed to investor apathy, resulting in them adopting a “wait-and-see” attitude to dealmaking in the continent as a whole. 2. Slowdown in inbound M&A from international investors International investors in particular have seemingly taken their feet off the deal pedal in SSA as they focus on more inward looking developments and uncertainties in their home markets. For example, the UK’s focus on Brexit and the ongoing political uncertainty in Europe has meant most investors in those regions are focusing more on domestic issues rather than on pursuing international M&A opportunities in Africa. 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Although opportunities do exist, most are seen as too small, not investible, or not well packaged enough into sellable assets. The lack of readily available data also hampers investors as they cannot accurately assess risks to complete due diligence processes. This is an ongoing problem and is likely to continue to be a challenge in the short to medium term. On the other hand, Development Financial Institutions (DFI’s) are playing a key role in bridging this gap as they lead the way in investing in early stage businesses in Africa (and other emerging markets), and up-scaling them to a level where larger private equity players are more comfortable to make secondary investments. Looking Ahead While investors are approaching M&A in SSA with greater caution, the continent remains an attractive proposition in the medium to long term as it still evidences strong fundamentals for high growth potential. 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