Unbalance China-Kenya economic ties

 

Chinese Foreign Minister Chen Yi meeting with Jomo Kenyatta on his visit to Kenya in February 1964.

Political ties history between China and Kenya

This bilateral relations date back to 14 December 1963, two days after the formal establishment of Kenyan independence, when China became the fourth country to open an embassy in Nairobi. Military exchange between the two countries has been increasing in the past decade. General Liu Jingsong, commander of the Lanzhou Military Region, led China’s first military delegation to Kenya in December 1996; Major General Nick Leshan, commander of the Kenyan air force, paid a return visit in 1997. Kenyan president Mwai Kibaki visited Beijing in August 2005.

In 2013, President Uhuru Kenyatta visited China. He held talks with his Chinese counterpart, Xi Jingping. Kenya and China ended up signing deals worth (US$5 billion).

The Premier of China, Li Keqiang visited Nairobi on his 2014 Africa tour. He and President Kenyatta witnessed the signing of 17 multi-billion deals to fund multiple infrastructural projects and various agreements. This included the establishment of a China-Africa Development Bank.

Economic relations between China and Kenya

Bilateral trade amounted to US$186.37 million in 2002; China exported US$180.576 million to Kenya, while only importing US$5.798 million of Kenyan goods, mainly black tea, coffee, and leather.

Early in 2006 Chinese President Hu Jintao signed an oil exploration contract with Kenya; the latest in a series of deals designed to expand Chinese overseas economic engagement with Africa. The deal allowed for China’s state-controlled offshore oil and gas company, CNOOC Ltd., to prospect for oil in Kenya, which is just beginning to drill its first exploratory wells on the borders of Sudan and Somalia and in coastal waters. No oil has been produced yet, and there has been no formal estimate of the possible reserves.

In April 2007, the Jinchuan Group, a state-owned metal manufacturing group, became the first Chinese company to enter Kenya’s mining sector, purchasing a 20% stake in Tiomin Kenya.

Debt-trap diplomacy

China lent Kenya extensive loans to build a standard gauge railway between Mombasa and Nairobi and highways in Kenya. In 2018, Kenyan President Uhuru Kenyata banned Chinese fish imports in response to public outcry over the unregulated importation of fish from China with Kenyan fishermen lamenting on how the foreign fish had flooded markets. The Chinese government use the Standard Gauge Railway as leverage against Kenya by threatening to completely pull funding for the project as well as threatening to impose trade sanctions. The Kenyan government soon after lifted the ban of Chinese fish imports.

The Kenyan government reportedly waived the sovereign immunity of its largest and most lucrative port,the Port of Mombasa, to be used as collateral for Chinese loans to construct the Standard Gauge Railway. It was reported in late December 2018 that Kenya may soon face default on Chinese loans, which could force Kenya to relinquish control of the port to China.

The Kenyan media has debated whether Chinese loans are worth the risk of falling into debt traps, drawing analogies with § Sri Lanka, and some commentators have argued that these loans could jeopardize Kenyan sovereignty.

From 2000 to 2011, there are approximately 65 Chinese official development finance projects identified in Kenya through various media reports.[16] These projects range from a 108 million USD grant from Chinese government to build the North and East Ring Road sections in Nairobi,[17] to a concessional loan to finance the construction of the Kenyatta University Teaching, Research and Referral Hospital Project in 2011. PRC state-owned China Radio International has operated radio station CRI Nairobi 91.9 FM since 2006.

The Garlic and other tensions arising  in Kenya

Farmers saying that, they are being undercut by producers who ship garlic almost 7,000 miles by sea from the world’s most populous country. They accuse Beijing of “garlic dumping” and say they can’t compete.

“If you go the markets you will see that 80 percent of garlic is from China,” said James Kamau, who runs a support group for fellow farmers.

Munyua and Kamau, 40, are among those who say that China’s growing presence in Kenya is having a negative impact on their lives, culture, and ability to make ends meet.

But garlic is only a microcosm of the impact Chinese influence and investment are having across Africa. Garlic is heaped on a mat beside a roadside stall in Kiawara, Kenya. The agriculture sector employs 40 percent of Kenya’s 49 million people and accounts for 26 percent of its economy.

In recent years, China has offered African countries loans, development aid and vast infrastructure projects as part of the Belt and Road Initiative, a $1.4 trillion network of modern trading routes. Kenya now owes 72 percent of its bilateral debt — or around $5.3 billion — to China. That’s around one-fifth of Kenya’s total external debt. With China holding the purse strings, it has the upper hand in any battle of wills — and garlic is just the latest foodstuff to be at the center of tensions here.

Eunice Ngima runs a small roadside stall selling garlic, onions, potatoes and other vegetables in Kiawara, Kenya.

In October, Beijing’s ambassador to Kenya threatened a trade war after Chinese fish imports were halted amid claims the market was being flooded.

China also threatened to pull funding for the second phase of a railway line connecting Nairobi with the major Indian Ocean port of Mombasa. China financed and built the initial stage of the project at an estimated cost of $3.2 billion, making it Kenya’s most expensive infrastructure project since independence from Britain in 1963.

Around three months later, Kenya relented and scrapped the import ban on Chinese fish. It cited market forces.

‘VIRGIN LAND’

Most garlic farms in Nyeri County, the remote area where Munyua is based, are small-scale operations.

The location of his small plot of land makes it difficult to transport produce after it is harvested in May and November.

Munyua has to rent donkeys to carry the garlic along steep mountain cliffs and through forested valleys before reaching a mud road. Kiawara, the nearest town, is a 30-minute drive away from his farm and a further 4-hour journey from the capital, Nairobi.

Garlic farmer Solomon Wambogo Munyua in his field in Embaringo; Munyua planted his garlic shoots in January, with the help of two workers he hires for the day at a cost of $3 each. There’s ample water supply and rich volcanic soil here on what Munyua calls “virgin land.” His plot typically yields up to 600 pounds of garlic per season — earning him as much as $400, enough to send his son and daughter to school. But he struggles to comprehend why many Kenyan consumers are opting for the rounder and smoother white Chinese garlic bulbs over locally grown produce. While Chinese garlic features larger cloves that are easier to peel by hand than the more intricate Kenyan variety, Munyua believes his country’s crop boasts a key advantage: its taste.

“Kenyan garlic is really sweet,” he said.

Garlic is also grown on an adjacent farm. Cousins James Kariuki Wahome, 36, and Peter Munene Ndurui, 40, rent half an acre of land here.

Garlic farmer Peter Munene Ndururi rests in his field in Embaringo, Kenya. They live around 12 miles from the farm, so every morning they have to pay to jump on the back of a motorbike to get them here.

They arrive around 8 a.m. every day — except Sundays when they go to church — as any earlier in the morning is too cold to work on their plot of land. Whistling young men who sell lunch bags to farmers containing bread, milk and water drop by around 1 p.m., and the cousins continue to toil until around 5 p.m.

“Life is very hard,” Wahome said.

Wahome admits that he often struggles to support his five children due to the price of garlic fluctuating in the local market. The influx of Chinese produce hasn’t helped. One pound of garlic earns farmers around 36 cents “when it’s good,” but that figure can be a low as 23 cents at times, according to Wahome.

Munyua is among the farmers so worried about the imported bulbs that they want the government to take action, as it did with fish last year.

“Chinese garlic should be taxed high so that the Kenyan farmer can earn something,” Munyua said.

CORRUPTION

Garlic is only part of the picture. Kenya exported $96.88 million in goods to China, but imported a total of $3.79 billion. The Kenyan government’s horticultural crops directorate said supply and demand were among the factors when it comes to the availability of foreign garlic.

“As long as we don’t produce enough garlic, we may still continue buying garlic from China,” a spokesperson said, adding that the lack of sufficient farming knowledge and technology and limited machinery were also challenges in Kenya. Kenya currently imports around 50 percent of its garlic, according to official statistics.

Fields of garlic in Embaringo, Kenya. While African governments have embraced China with open arms, Munyua questions whether the “win-win” notion that underpins the relationship is a reality.

“Is it beneficial for the common man?” he asked, claiming that one group benefits the most from China’s presence in Kenya. “The politicians.”

Transparency International ranks Kenya among the most corrupt countries in the world — 144th out of 180 nations on last year’s index.

Charles Gichuhi Ngari, a garlic farmer and village elder, was a child when the British battled Mau Mau rebels in the 1950s.

Charles Gichuhi Ngari sits with his wife, Esther Wairimu Gichuhi, and granddaughter Rose Wamboi Njoroge at their home in Embaringo, Kenya.Nichole Sobecki / for NBC News

The anti-colonial rebels used to hide from the British military not far from today’s garlic farms.

These lush green hills were known as “the white heights,” because they were full of white British settlers who took the best land.

“When black people heard, ‘this is not their land,’ they started fighting for it,” Ngari recounted.

He sees modern parallels.

“I have never gone to China, but China is a superpower,” Ngari said. “I just get up every morning to go to my farm … I see the news, ‘Kenya has borrowed this money from [China].’ I cannot tell you where the money goes.”

He highlighted the lack of local infrastructure that makes it so tough to compete with imports shipped from overseas.

“There is no road here,” Ngari said. “The money has been eaten.”

https://www.nbcnews.com/news/world/china-s-relationship-africa-illustrated-garlic-tensions-n994486

According to Enric Olander on LinkedIn, China often talks about how its relationship with countries in Africa and along its Belt and Road Initiative is “win-win.” In China’s view, that means Beijing provides these countries with badly-needed capital and access to its vast market which, supposedly, benefits both sides equally.

But the situation in Kenya tells a very different story, one where “win-win” increasingly looks like China wins twice.

Consider the following:

1) DEBT: From 2014 to 2018, China’s lending to Kenya tripled to more than $6 billion. While this capital is incredibly important for Kenya to build vital infrastructure projects, these are nonetheless interest-bearing loans that will pay China sizable dividends over the long term.

2) TRADE: Kenya buys a lot from China but China buys almost nothing from Kenya. In 2018, Kenya exported just $97 million worth of goods to China but imported a stunning $3.8 billion. Beijing is going to have to be much more proactive about equalizing the balance of trade or else it just won’t be sustainable for a country like Kenya.

3) MARKET ACCESS: While China restricts the import of a lot of Kenyan agricultural products, there are many fewer limitations on low-cost Chinese imports like garlic & fish that flood the market & put enormous pricing pressure on local producers.

It is very clear,i that most of the African countries China is dealing with may have been having similar issues. Economic tensions ariving due to the bilitary relalationships with China by underdeveloped countries is a negative economic effect. Great attention should be put in place, in order to prevent future occurence of such.  African integration is paramount to strengthened now than never. Unless, all these toxic economic situation will continue. The New-world order is exploitative, African leaders should rise intellectually, forget thinking of dying in office and resist these modern slavery.

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Africa is the least globally integrated continent in the world

 

Africa’s attempts to integrate must adapt to and manage factors such as changing technology, migration from the countryside to cities and Africa’s large informal sector estimated by the African Development Bank (AfDB) to contribute about 55% of sub-Saharan Africa’s GDP. Nonetheless, most indicators point to a continent on the move. This  transition  will  be  facilitated  by  more  open  markets,  improving  infrastructure, access to technology and improved political stability. The Economic Commission for Africa (ECA) became the champion of regional integration, already in the mid-1960s proposing the division of Africa into regions for the purposes of economic development. In April 2001, African Heads of State launched the African Union at Sirte to replace the OAU.

Greater African unity has long been a cherished — but elusive — goal. There is now a renewed impetus to establish closer economic and political ties among the continent’s numerous countries, based on a heightened appreciation of the need for regional integration and a clearer understanding of the reasons for past failures. This series of articles examines some of the central challenges facing the drive for integration, including enhanced trade among African countries, more roads and other infrastructure, reform of regional institutions, greater accountability and popular involvement, and closer coordination of efforts by the public and private sectors.

The idea of better integrating African countries and regions has long been promoted by political leaders in speeches, official conferences and formal treaties, although with only limited results on the ground.The advantages are numerous. Wider regional markets can open up more opportunities for African producers and consumers, beyond the sometimes small markets within their own borders. It can reduce the costs of developing essential infrastructure, including transport, communications, energy, water systems and scientific and technological research, which often lie beyond the means of individual countries. At the same time, integration facilitates large-scale investment by “reinforcing the attractiveness of our economies and reducing the risks.”The momentum for integration has come not only from the top. At many levels of society, people are actively seeking to forge more ties with each other. For some, such links already exist. For many others, they still lie in the future. Africans have also learned from the failures of past initiatives. As a result, many proponents of integration now pursue a less grandiose and more practical approach.

There is only low level connectivity between African economies – although this is gradually improving (Visa Sub-Saharan Africa, 2013). This is largely due to an incomplete legal  architecture  for  regional  integration,  poor  physical  infrastructure  and  one-way trading relationships. Leading African exporters such as Angola, Algeria, Egypt, Libya, Morocco, Nigeria and South Africa have stronger economic links to the rest of the world than with regional neighbours. This represents lost economic opportunities. Integration and connectivity in other regions of the world have spurred growth in the free flow of goods, services, capital, and people. These regional economic activities and investment inter-linkages remain low in Africa.

Supply-side responses must be supported by a dynamic legal framework for regional integration, for both the continent and its constituent regional economic communities (RECs). Africa is not immune to the changing trends in the global economy. Production patterns  are  shifting  as  countries  become  less  specialised  and  trade  becomes  more regional  and  based  on  intermediate  products.  Moreover  Africa’s  middle  class,  now estimated at more than 300 million people and growing at a rate of 3.2% per year since 1983, could provide a formidable source of consumer demand.

With the United States, Europe and Japan all struggling for growth, opportunities are emerging for Africa to grow on home markets and through its own consumer demand. One example is trade in personal and household goods, which experienced the fastest growth among global merchandise of 10% in 2012. Coupled with sustained economic growth, demographic changes are expected to also transform trade. While parts of the world worry about ageing, Africa has the world’s youngest population. Two thirds of its total population is aged under 25. With appropriate skills, infrastructure and the right business environment, Africa could boast a skilled labour force to establish itself as a centre for global manufacturing and services.

Africa must unite not simply to enhance the continent’s weight in global affairs, they say, but also to meet the very real needs of its people. It will free up the time of African businesspeople to do business here. It will lower costs. It will make the African consumer’s plight so much more hopeful. We must build for ourselves. The reasons for sluggish integration within Africa’s regions and highlights a need for greater political efforts and better infrastructure. It  also  argues  that  the  continent’s  growing  middle  class  and  its  youthful  population could become a key source of demand for African produced goods and services as the expansion of African retail and financial services demonstrates.

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How foreign entrepreneurs are spuring domestic finance and economic activities in Malawi

 

Africa adoptability of information technological innovations is rising beyound expectation. Women entrepreneurs are not left out in this huge creative development from the tech world. However, creation of values through technological innovations are spurning good economic tangle to say, also opening up new frontiers in our various markets and monatery exchange channels which results are bringing new ways of doing things and making our young nation a digitalize one.

 

Diaspora entrepreneurs are venturing into African market, due to to technological innovations mass acceptance by entreprneurs and value creators. To be candid, the contributions of diasporas has go beyond financial investment. They encompass raising collective  remittances  to  support  philanthropic  activities  toward  technology  transfer, knowledge  exchange  and  improved  access  to  international  capital  markets.

 

Migrants can help to foster economic growth in their country of origin, by returning to their home country as entrepreneurs, or by funding investment, including start-ups. Inclusive innovations driving women’s business growth Inclusive  innovations  are  empowering  women  entrepreneurs  through  the  use  of  Information computer technologies   in combination with mobile phone ownership asbstated earlier.

As  a  result  of  investment  by  diaspora,  private  and  charity  organisations, informal women entrepreneurs are able to access business education, financial services, business networks  and  real-time  market  information,  all  of  which  are  otherwise  inaccessible  under Africa’s resource-constrained settings.

Women entrepreneurs who make use of such inclusive innovations benefit from new skills, business ideas and opportunities to reach customers and enter new markets. As a result, they increase the profitability of their businesses, invest in local job creation and improve the well-being of their families. The success of inclusive innovations for women entrepreneurs relies on two key factors:

(i) Partnering with local women’s businesses or youth associations for outreach

(ii) Practising inclusive strategies to ensure access and usage by women, especially for those that live in rural areas and are constrained by poor infrastructure, limited decision-making power, high transport costs and low English literacy skills. 

Grow Movement is one of the successful example, where use the of Information computer technologies is make to use in order to foster the business skills of African entrepreneurs in Malawi. The ideas works by matching consultants with entrepreneurs in Malawi to provide them with education on how to improve marketing, book keeping, financial planning and customer relations during free one-on-one sessions via Skype, WhatsApp or telephone.

In oder to reach women entrepreneurs, Grow Movement works in close partnership with the National Association of Business Women in Malawi (NABW). The Grow Movement is a UK-based private network of international volunteer business consultants.

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Exclusive: Tax evasion in Africa, is hindering economic progress

 

Tax evasion occurs when a person or an organization illegally takes purposeful steps to avoid paying a tax liability . A criminal offense under federal and state statutes, tax evasion is considered fraud. Violators can be charged with a felony for tax evasion.

There is a distinction between tax evasion and tax avoidance in real sense; only the latter is legal. Tax avoidance, or using tax law to pay the least amount of taxes possible, is encouraged. In many cases, the tax code offers various tax credits , exemptions and deductions that may be used to reduce or offset taxable income.

Though the IRS may be displeased with the routes people take to lower their taxes, in the context of tax avoidance, these methods are fair game until Congress decides to close these loopholes. Some of these include selling your business to a family member, resulting in an exemption or deduction in estate or gift tax; establishing a company’s tax residence in a different country; and making charitable donations.

There is also a distinction made between tax evasion and negligence. Both are defined as a failure to reasonably attempt to follow tax codes, and both are illegal. The IRS takes into consideration honest mistakes, sparing someone who may have simply misinterpreted instructions. There are certain measures that expose taxpayers to being accused of negligence, such as taking deductions they are not eligible for or keeping inaccurate financial records.

Understanding Tax evasion deeper

There is some ambiguity as to what is considered tax evasion, but certain actions clearly fall under this umbrella. These include:

  • Falsifying Internal Revenue Service (IRS) financial forms.
  • Underreporting income.
  • Compensating employees in cash.
  • Using a fake social security number.
  • Falsifying business income and/or expenses.
  • Claiming a nonexistent dependent (e.g., a child).
  • Using multiple financial ledgers.
  • Underreporting cash tips (typically done by waiters and waitresses).
  • Failing to file returns.

 

The International Monetary Fund (IMF)’s latest Regional Economic Outlook for sub-Saharan Africa (SSA) has important implications for African economies large and small. Apart from projecting that policies currently in place across the region will only yield an underwhelming average growth rate of under 4%, the IMF also estimates that governments throughout sub-Saharan Africa could boost revenue by 5% on average by optimizing the way in which they mobilize domestic resources.

This primarily involves reforming tax policies. African governments should bolster their national coffers by leveraging innovative technologies and simplifying overcomplicated procedures. The incentive to do so is clear-cut. It would result in more money available for critical public services, from health care to education.

An unacceptable deficit

According to IMF data, the average tax frontier (a country’s maximum achievable level of tax revenues) is 7.5% lower in SSA countries than anywhere else in the world. A separate report by the United Nations Economic Commission for Africa (UNECA) estimates African countries lose more than $50 billion each year to illegal financial outflows, most especially through tax avoidance and evasion.

Nigeria represents the epitome of poor tax compliance. That matters all the more as, with its 195 million people, Nigeria is the continent’s most populous country and has big needs. Even so, it has the lowest tax-to-GDP ratio of any nation in the IMF’s report — at just 5.9%.

To put that in context, South Africa has a population three times smaller than Nigeria, but a tax-to-GDP ratio of 24.7%. The result? South Africa collects $57 billion in tax revenues, more than double Nigeria’s $27.5 billion. It is easy to understand this discrepancy when you realize most Nigerians simply aren’t paying their taxes. Nigeria’s National Bureau of Statistics (NBS) indicates the country has a taxable workforce of around 77 million, but government figures show just 14 million pay income tax.Tax evasion is particularly rampant among the country’s wealthiest citizens: Only 214 people in all of Nigeria pay more than 20 million naira ($55,600) in tax.

Nigeria doesn’t fare much better with value-added tax (VAT) and corporate tax. A paltry 9% of Nigerian companies pay corporate tax, while only 12% of registered businesses comply with VAT obligations. With some estimates finding as many as 99% of small businesses are unregistered, those percentages are even lower in reality.

Nigeria has tried to address this problem by introducing the Voluntary Assets and Income Declaration Scheme (VAIDS), which offered temporary amnesty for those who had missed or evaded previous tax payments. While the scheme produced a small uptick in compliance and the government collected $47 million in back taxes in its last six months of 2017, the informal sector of Nigeria’s economy remains too great and tax enforcement remains too lax to harness the country’s full economic potential.

Things are looking more positive elsewhere on the continent. Countries like Kenya are taking the IMF’s advice and testing innovative solutions to boost tax revenue. Indeed, the IMF recently lauded the Kenya Revenue Authority (KRA) for using cutting-edge technology like the Excisable Goods Management System (EGMS). It was developed by Swiss firm SICPA to tag and trace a wide variety of products and prevent both counterfeiting and tax avoidance. The scheme began by tracking alcohol and tobacco, but has since expanded to include non-alcoholic drinks and cosmetics. In parallel, the country’s revenue authority introduced its i-Tax scheme to facilitate online tax return submission by both businesses and private citizens.

Since the introduction of the two programs, the KRA reports tax compliance has risen by an impressive 45%. The revenue authority has also entered the world of smartphone applications with “Soma Label.” This app that allows consumers and retailers – as well as the police – to easily verify a product’s authenticity by just using their smartphones. Of course, these innovations have met with resistance with those who preferred profiting from the loopholes offered by outdated tax schemes. Kenya is not the only SSA country working to increase tax compliance. Authorities in Togo have also tightened up their own approach to tax evasion, although not so much through new technologies as through reassessing policies.

Inadequate of studies on the magnitude of tax evasion in Africa means that little documented information is available regarding its incidence or the use of policy approaches to improve tax compliance effectively  and  efficiently.  A  recent  study  sponsored  by  the  African  Development  Bank  has  helped  to  fill  this  gap.  The  study,  which  was  conducted  in  Ethiopia,  used  a  fully  randomised control trial approach to investigate the magnitude of tax evasion, as well as the best approaches to enhance compliance. The study was undertaken in collaboration with the Ethiopian Revenue Authority.

Field  experiments  elicited  information  from  businesses  by  exposing  well-defined  treatment groups to two types of letters duly signed by the revenue authority. The first letter threatened an audit, while the second, more complimentary letter praised recipients for an exemplary job in paying their taxes on time and complying fully without evasion. The control group did not receive either letter. Researchers then monitored the tax returns of businesses before and after the  experiment  using  available  administrative  data  from  the  tax  authorities.  In  total,  4  500 firms  participated  in  the  experiment.  The  results  showed  that  the  recipients  of  threatening letters increased their tax returns by about 38%, while those in receipt of complimentary letters increased returns by 32%.

The following policy implications can be drawn from these results:

•  Tax evasion in Africa is widespread and perhaps larger than assumed by initial estimates (around 20-30%). 

•  Revenue authorities must be empowered to collect and analyse taxpayer data. For example, third-party  information  relating  to  value-added  tax  can  be  used  to  identify  serial  tax evaders. 

•  To significantly reduce the transaction costs involved in mobilising taxes and decrease tax evasion, authorities should work to improve relations with businesses, conduct periodic evaluations of the utilisation of taxes for social and economic development, and employ incentives to ensure full compliance. 

The Togo Revenue Authority (OTR) is the first in the 14-member CFA franc zone to unify national tax and customs services. Since it was created in 2014, the OTR has successfully streamlined both processes and cut staff numbers by 17%.

This approach has exceeded the IMF’s expectations, as well as those of the Togolese government: Instead of seeing tax revenues drop by 10% as predicted, Togo saw tax proceeds increase by 23% the year after the OTR was created.

Of course, Togo still has considerable economic hurdles to overcome. The tiny nation is currently grappling with a political crisis that has caused growth to slide from 5.1% in 2017 to 4.4% so far this year. Togo is also in the process of replacing its obsolete tax code. The new legislation, scheduled to take effect in 2019, includes measures such as tax relief to encourage small- and medium-sized enterprises (SMEs) to honor tax obligations.

Tightening up tax protocol could pay massive dividends

The problem of state finances and public budgets in SSA countries has many causes. Most of the continent’s major economies are plagued by bureaucratic obstacles, outdated procedures and opaque parallel markets. Implementing a robust tax framework – and ensuring enforcement – is just one step in addressing this sprawling issue. Tax reform is not a silver bullet, but Africa’s economies could take a major step forward for their own growth by combining effective regulation with up-to-date technologies and increased transparency and efficiency.

 

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Morocco still trails far behind in Africa startups ecosystem

As at 2018, Morocco is home to no less than 24 accelerators, incubators, co-working spaces or other types of tech hubs with more than half located in Casablanca alone.

Among these, the work done by organisations like Numa Casablanca, New Work Lab, Jokkolabs, Enactus Morocco or LaFactory could be highlighted. It is also worth mentioning that more tech hubs should come to enrich and support the existing ecosystem.
Such obstacles are in a country where tech startups have the potential to employ young people to build the nation’s internal market, according to a World Bank appraisal for Morocco’s $50 million loan request to finance startups.

While investment in Africa’s startups is rapidly growing, the money going into that sector in Morocco still trails far behind other countries on the continent. In 2017 venture capital funding across Africa reached $560 million, according to Partech Ventures. South Africa was the leading investment destination, attracting $167.9 million in 2017, followed by Kenya ($147 million) and Nigeria ($114.6 million). By contrast, Morocco attracted just $3.9 million in venture capital in 2017, according to Partech.

The World Bank says Morocco still needs better access to capital, greater legal protections, and more business networks.
According to l’Economiste, however, innovative Moroccan project bearers have limited access to financial means to materialize their ideas.

Despite government-assisted initiatives to boost entrepreneurship and information technology-related projects, l’Economiste reports that only 10 percent of Moroccan start ups have had relatively easy access to capital funds.

The remaining percentage faces structural dysfunction in the institutions supposed to oversee the allocation of funds and an “incoherent public policy” that complicate access to investments for startups.

Risk-averse investors sometimes tell project bearers that they prefer to place their money in limited companies—where owners are responsible for their debts to the extent of investment—rather than in capital risk projects like startups, where there is a high risk of losing the money invested.

As innovation is highly correlated with risk-taking, l’Economiste noted, one consequence of Moroccan investors’ risk-averse attitude is that innovative but risky projects almost never get funded.

With the advent of information capital technologies and an increasingly digitized global economy, the newspaper added that Morocco’s financial markets should ease the funding process for startups and ensure the kingdom’s smooth and timely integration into the prevailing financial system.

“Mutual efforts are needed,” wrote l’Economiste, calling for collaboration between young innovators and investors to “change the [sector’s] current direction” and prepare Morocco’s technology sector for the challenges of the digitized economy.

Low innovative ideas by Morocco’s entrepreneurs

While competitiveness and innovation are overly used words in the entrepreneurial jargon in Morocco, it seems like most innovative enterprises are reproducing successful business models proven abroad, especially those from France. The original and untapped ideas have yet to find investors and incubators who are willing to believe in the entrepreneur, offer mentorship and above all fund the project. But despite the complexity of the markets and the scarcity of the resources available, young Moroccan entrepreneurs hustle to create their own jobs, stay in the market, bring value and participate in the development of their country’s economy. It may be a slow process- but Morocco’s entrepreneurs are eager to speed it up.
International organizations are also making their presence felt in the Moroccan scene, helping foster entrepreneurship and the entrepreneurship spirit by setting up competitions and grants. The British Council, the World Bank, the U.S Embassy, etc. provide opportunities for training new entrepreneurs and support their efforts to improve their conditions. These competitions, which are usually focused on themes such as social enterprise, innovation, education and environmental entrepreneurship, have projects that tend to have a tremendous impact on society. However, these programs are not usually widely promoted, and Moroccan entrepreneurs may not be aware of their existence.
Entrepreneurs with a few years under their belt also have to face a number of challenges as their businesses grow.

Mobile operators are helping startups ecosystem

Alongside tech hubs and investors, mobile operators (Maroc Telecom, Orange, and Inwi) are also playing an increasing role in the growing Casablanca and Morocco tech ecosystem.

While several start-ups we met over the week mentioned an on-going collaboration with Maroc Telecom, Orange and Inwi have put in place various initiatives and vehicles to engage and support the local tech ecosystem.

Other organizations positively impacting people’s lives by helping them start a business and benefit from a long-term support include INJAZ Al Maghreb, ENACTUS, Start Up Your Life and MCISE. However, the efforts remain insufficient for the population at large, which is in need of a well-rounded support to sustain their businesses in all regions of the country and sometimes beyond Morocco. Much of the support is focused on the promotion of entrepreneurship and the foundations of starting a business.

International organizations are also making their presence felt in the Moroccan scene, helping foster entrepreneurship and the entrepreneurship spirit by setting up competitions and grants. The British Council, the World Bank, the U.S Embassy, etc. provide opportunities for training new entrepreneurs and support their efforts to improve their conditions. These competitions, which are usually focused on themes such as social enterprise, innovation, education and environmental entrepreneurship, have projects that tend to have a tremendous impact on society. However, these programs are not usually widely promoted, and Moroccan entrepreneurs may not be aware of their existence.

Entrepreneurs with a few years under their belt also have to face a number of challenges as their businesses grow. While development and growth are the main concerns of these entrepreneurs, other cultural aspects also make it difficult for them to thrive quickly in the first years. Just like in most Arab cultures, the importance of having a solid and large network is what helps entrepreneurs ensure income in their early years. Accessing the bigger markets remains an unattainable dream for many, as transparency in tender applications still have a long way to go.

While competitiveness and innovation are overly used words in the entrepreneurial jargon in Morocco, it seems like most innovative enterprises are reproducing successful business models proven abroad, especially those from France. The original and untapped ideas have yet to find investors and incubators who are willing to believe in the entrepreneur, offer mentorship and above all fund the project. But despite the complexity of the markets and the scarcity of the resources available, young Moroccan entrepreneurs hustle to create their own jobs, stay in the market, bring value and participate in the development of their country’s economy. It may be a slow process- but Morocco’s entrepreneurs are eager to speed it up.



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