Rabat to sell 8% stake in Maroc Telecom to offset fiscal deficit

The Moroccan Capital Market Authority said the expected sale would inject $877 million into the state budget.
Saturday 13/07/2019
A sign of Maroc Telecom near a shop in Casablanca. (Saad Guerraoui)
To boost exchange. A sign of Maroc Telecom near a shop in Casablanca. (Saad Guerraoui)

CASABLANCA - The Moroccan government plans to sell an 8% stake in telecommunication giant Maroc Telecom for nearly $900 million to offset the country’s budget deficit despite an outcry from the opposition.

Maroc Telecom, which is listed on the Casablanca and Euronext stock exchanges, is 53% owned by UAE telecom firm Etisalat. It operates in several African countries, including Benin, Burkina Faso, Cote d’Ivoire, Gabon, Mali and Mauritania.

The Moroccan Capital Market Authority said the expected sale would inject $877 million into the state budget.

Abderrahmane Semmar, director of the Department of Public Enterprises and Privatisation, said the state’s sale of 8% of the company was part of the revival of the privatisation programme, which began in 2001.

“This operation comes following the successful completion of the first 6% through a private placement with Moroccan institutions,” Semmar said at a June 19 news conference.

“It is also the most important privatisation operation since the introduction of Maroc Telecom on the Casablanca Stock Exchange in 2004,” he said.

Idriss Berrada, general manager at Attijari Finances Corporation, said Maroc Telecom’s share price stability over the last three years was an indication of resilience and strength compared to the rest of the market and the interest that institutional investors have for it.

Karim Hajji, general manager of the Casablanca Stock Exchange, said the sale would boost the exchange, which has suffered the last few years from a lack of liquidity.

The Istiqlal Party, the second largest opposition party, expressed concern about the way the government was shedding its strategic public separations.

The executive bureau of the Alliance of Istiqlali Economists recalled that Morocco had had some “unfortunate” privatisation experiences, saying: “Experience has shown that the total disengagement of the state from certain companies, such as COMANAV and SAMIR, unfortunately ended badly.”

Omar Balafrej, a deputy of the opposition Democratic Left Federation, criticised the government’s decision to sell the telecom firm’s stake to cover its deficit in a written question to Economy and Finance Minister Mohamed Benchaaboun.

Balafrej said the huge losses related to the choice of a low sale price set at $12.70, while the average share price of Maroc Telecom in the previous year was $14.30.

“The value set by the state will result in the loss of more than 1 billion dirhams ($100 million) from its Treasury, equal to the construction and equipment of 80 community schools,” said Balafrej.

The leftist opposition MP said it was unfortunate that the state was selling its property to offset its financial deficit, instead of accepting the proposal made by left-wing parties that called for imposing an exceptional tax on oil companies that made “abnormal” profits.

The sale price of Maroc Telecom shares to institutional firms under Moroccan law is fixed at $12.70, representing 6% of the stake. The remaining 2% is to be sold to the public for $12.53 per share. Medias24 quoted a source as that the 2% sale was very successful with 25,000 subscribers taking part in the offering with an amount — $3.5 billion — 15 times higher than the offer.

The government’s decision comes as the net flow of foreign direct investment in Morocco reached more than $580 million at the end of April against $760 million, down 23.3% compared to the same period a year ago, the Moroccan Exchange Office said.

The Central Bank forecast this year’s budget deficit to be 4.1% of GDP, slightly more than the government’s projected 3.9%, which would be an additional burden to the state.

The government plans to improve its fiscal deficit through its privatisation programme that would generate a revenue of $1 billion. However, more than half of state’s revenue is earmarked for salaries and contributions as the social dialogue agreement and unions on increasing salaries and family allowances is straining state finances.

The Moroccan treasurer said the increase in family benefits involved more than 380,000 civil servants. The salary increase was to be carried out in three stages — May 2019, January 2020 and January 2021.

Benchaaboun said that 53% of tax revenues would have to cover payroll and pension and social security spending and that payroll costs would reach 11% of GDP.