Analysis
Trade

Macron’s Morocco trip the catalyst for $11bn in deals

November 6, 2024, 4:37 PM

Morocco's King Mohammed VI and French President Emmanuel Macron sign documents in Rabat: Macron’s recent visit saw a thawing of political relations

22 deals signed during visit
Trade worth $15.4bn in 2023
Transport and energy top list

France and Morocco have announced a series of deals, from railways to phosphates to renewables, worth up to $11 billion during a state visit last week by Emmanuel Macron, his first to the north African kingdom since becoming president in 2017.

The 22 deals followed French recognition of Morocco’s claims to the disputed Western Sahara territory, a major diplomatic win for Rabat.

Trade between the two nations rose to $15.4 billion in 2023, largely driven by Morocco’s automotive exports and France’s sales of transport equipment and grain. The ongoing war in Ukraine has made France’s wheat crucial for Morocco’s food security. Spain is another close trading ally.

French companies have invested substantially in low-carbon technology and as a part of the trip a deal was signed to expand the existing Taza wind farm in the north of Morocco. Morocco is planning to source 52 percent of its electricity from renewables by 2030.

To cement the recognition of Morocco’s governing of Western Sahara, MGH Energy announced plans to partner with Petrom, a Moroccan distributor, to produce fuel near Dakhla, the territory’s second largest city.

It will convert wind and solar into green hydrogen and power the conversion of stored carbon dioxide into synthetic fuel. The $5.2 billion project aims to start operating by 2030.

Morocco is also building a port on the Atlantic at Dakhla which it hopes will open in 2030 to allow exports from the country and its west African neighbours.

To the north, TotalEnergies, the French oil and gas major, aims to build 1 gigawatt of onshore solar and wind capacity at Shbika for green ammonia and green hydrogen.

Railways were another target of the Macron trip. Morocco is planning a second TGV line linking Casablanca, the commercial capital, to Marrakech, in the centre of the kingdom. Morocco’s National Railways Office (ONCF) signed an agreement with Alstom, the French engineering champion, to supply high-speed trains and related support.

ONCF also signed contracts with Systra and Egis, engineering consultants, for technical assistance and with Vossloh, specialists in rail switches and fastenings.

Safran, the aircraft engine maker which employs more than 4,000 people in Morocco, announced agreements ahead of the opening of a maintenance facility outside Casablanca.

OCP, Morocco’s phosphate maker, and the French Development Agency (AFD) signed a memorandum on decarbonisation. The two countries also agreed to set up a Morocco-France investment accelerator.

Ties between France and Morocco are close but often fractious. France was the main colonial power in Morocco and two recent events have exacerbated tensions: in 2021 France tightened Schengen visa requirements – since somewhat eased – for visiting Moroccans. Subsequently, France accused Rabat of attempting to spy on President Macron.

France’s new stance on the Western Sahara is thus a major political win for Morocco. It goes some way to ease the pain of a recent European Court of Justice ruling which found that fishing and farming deals struck between the EU and Morocco in 2019 were invalid as Western Sahara interests had not been adequately consulted.

With just a few kilometres separating Morocco from Spain, the country is well positioned to take advantage of that African/European axis.

“Morocco can really position itself to be a bright spot in the region,” James Swanston Mena economist at Capital Economics, told AGBI. “It is a good manufacturing base for outsourcing from Europe.”

Morocco, Swanston said, has worked hard on the green transition which is consistent with EU policy. It has also “Africanised the supply chain”. As well as its own domestic phosphate resources, Morocco is bringing in high grade materials like lithium and cobalt from the continent and making battery production sustainable.

The Moroccan central bank has also announced a significant currency reform which, Swanston said, should make the dirham easier to predict for investors.

The governor of the central bank has said that the intention is to let the dirham float freely by 2026 rather than being determined on the basis of a basket of euros and dollars. “Then, Swanston said, “It will move more like a traditional currency and not be so controlled.”

Swanston said that he expects that the dirham will appreciate by about 3 percent against the euro next year. “This will be good for imports but will not detract significantly from exports as the cost base is relatively low,” he said.