A dark 2017 for small Moroccan enterprises

More than 8,000 Moroccan companies declared bankruptcy in 2017.
Sunday 11/02/2018
Construction site in the port city of Mohammedia. (Saad Guerraoui)
Most affected. Construction site in the port city of Mohammedia. (Saad Guerraoui)

CASABLANCA - More than 8,000 Moroccan companies declared bankruptcy in 2017, prompting the head of the confederation of very small, small and medium-sized enterprises to urge the government to heed his call to address conditions creating hardships for smaller businesses.

Most of the 8,088 Moroccan companies that went bankrupt last year were small and medium-sized companies (SMEs), resulting in a loss of more than 40,000 jobs, a study by the business intelligence website Inforisk said.

While 90% of the companies declared themselves in liquidation, 10% went into receivership. The sectors most affected were commerce, construction and real estate. The overall bankruptcy figure was 8.5% higher than in 2016 and three times the number of company failures registered in 2009, the study reported.

Abdellah el-Fergui, president of the Confederation of VSE/SMEs, estimated that the real number of companies filing for bankruptcy protection was more than 10,000 in 2017.

“Almost 4,000 firms declared bankruptcy in the first trimester of 2017 alone,” he said. “Plenty of VSEs are dormant too waiting for their financial situation to improve.

“Morocco is not doing enough to support VSE/SMEs compared to other neighbouring countries, such as Spain. These firms represent 98% of the country’s productive fabric but, unfortunately, they have been left out by the government.”

“Two years of local and parliamentary elections have taken their toll on many VSE/SMEs as payments have been delayed, sending dozens of VSEs into liquidation,” he said.

The 5-month political deadlock in Morocco after elections in October 2016 postponed the approval of the 2017 budget, a delay that affected the country’s economy.

Fergui said the government should reform the labour code, which he said was not adapted to VSE/SMEs.

“Many companies are being sued by their employees and slapped with hefty fines that deeply affect their financial resources,” he said.

Fergus has made many recommendations to Moroccan Prime Minister Saad Eddine El Othmani to overhaul the sector and boost VSE/SMEs.

“We warned Othmani that 2017 would be a critical year for VSEs and called for a 2-year fiscal amnesty to allow them to participate in tenders,” he said.

Tax authorities in January announced the total or partial cancellation of penalties, fines, surcharges and recovery costs related to duties and taxes assessed before January 1, 2016, and which remained unpaid as of December 31, 2017, in accordance with the 2018 Finance Act.

Those concerned may benefit from a 50% reduction, provided they pay the remaining 50% by December 31, 2018.

Fergui said the measure was not enough to help firms through the financial difficulties.

“We asked the government to give certificates to companies, which owe outstanding payments and fines to the tax authorities and the national social security fund, to take part in the tenders but our request was not met,” he said.

Since the appointment of Moulay Hafid Elalamy as Investment, Trade and Digital Economy minister in 2013, Morocco has focused on large projects in the aeronautics and automotive sectors, among others, luring big multinational companies and parts suppliers. That policy left behind the VSE/SMEs, the backbone of the North African country’s economy.

In 2014, Elalamy set out an industrial acceleration strategy to create a new relationship between large firms and SMEs that would give the latter “security, sustainability and perspective.”

“The main challenge is to instil in SMEs an approach of innovation and improvement of quality by offering these companies access to investors, financing and markets,” he said at the time.

Fergui said VSE/SMEs did not benefit from the large projects “because multinationals have their own suppliers.”

“The government still has not done anything for VSE/SMEs to integrate them within this industrial development despite the launch of a strategy for VSEs in 2013,” he said. “The industrial acceleration strategy has so far benefited only the big firms.”