Morocco Developing Investment Mechanism for Job-Creating SMEs Amid Economic Growth Concerns

Morocco’s Economic Boom Falls Short of Job Creation

Despite Morocco’s impressive macroeconomic performance over the past two decades, this growth has not resulted in significant job creation, according to Jesko Hentschel, the World Bank’s Country Director for the Maghreb and Malta.

“Among middle-income and emerging economies over the last 20 years, Morocco is notable for its macroeconomic stability, political stability, and long-term risk management,” Hentschel remarked during an event at the Policy Center for the New South (PCNS) in Rabat

However, Hentschel highlighted a lag in net job creation, which has led to a declining activity rate—the percentage of people aged 15 to 64 working outside the household—over the past 15 years. This decline has contributed to a rise in long-term unemployment, with rates increasing from 8-9% to 14% in the first quarter of 2024.

Several factors contribute to this issue. Technological advancements and changes in trade demand a higher skill level from workers, which many young Moroccans possess. However, the job market hasn’t expanded enough to accommodate this skilled labor force. Additionally, while Morocco boasts high-growth sectors such as automobiles, textiles, aeronautics, agro-industrial industries, and tourism, these industries have not generated sufficient new jobs .

Hentschel pointed out that Morocco has a lower proportion of ‘gazelles’—high-growth firms that create a significant number of jobs—compared to other countries. Only about 1-2% of firms in Morocco fit this category, whereas in other countries, this figure can be as high as 10%. Understanding the dynamics and growth potential of the private sector is crucial for shaping effective public policies.

In his opening speech at the PCNS, Hentschel emphasized the importance of research in understanding labor market trends and their broader economic implications. “I am very pleased that we now have a research base and studies starting to emerge in Morocco,” he added.

Abdelaaziz Ait Ali, a principal economist and head of the Research Department at PCNS, echoed Hentschel’s views, noting that Morocco is part of a global trend where economic growth does not necessarily lead to increased employment. Ait Ali explained that in recent years, the relationship between growth and job creation has changed dramatically. “In the past, economic growth used to create around 30,000 jobs, but now it’s much lower—almost half,” he said

A significant factor is the changing dynamics of economic activity. Historically, agriculture was Morocco’s largest employment sector, but its share of employment dropped from nearly 46% in 2004 to 30% in 2022. “The agricultural sector is becoming more capital-intensive due to various government policies since the Green Plan,” Ait Ali noted. These reforms have increased productivity but reduced the need for labor.

The manufacturing sector has also evolved. Previously, industries such as textiles and agro-industry were more labor-intensive. Now, Morocco’s major industries—automotive, aeronautics, and fertilizers—are becoming more capital-intensive, reducing their reliance on labor.

This transformation in the labor market reflects broader global trends, prompting economists to reconsider the models used to understand economic policy. Understanding these shifts is essential for devising strategies that can effectively address the employment challenges facing Morocco.

Morocco Establishes Investment Framework to Boost Job Creation in SMEs

The Moroccan government is actively working on a new ambitious decree to bolster investment in small and medium-sized enterprises (SMEs) and direct state investment aids to create jobs, announced Younes Sekkouri, Morocco’s Labor Minister. This initiative, discussed during an event in Rabat, is a significant part of the government’s broader strategy to combat unemployment and enhance vocational training.

The decree aims to establish a dedicated investment mechanism for SMEs, ensuring that state investment aids are allocated based on job creation by these small businesses. This targeted approach seeks to address structural problems in the public sector and ensures that investments empower smaller enterprises crucial for local economies.

Sekkouri emphasized the integral role of both public and private investments as primary job providers. He highlighted that public investment has significantly increased, with figures rising to MAD 300 billion ($30 million), aiming to create jobs through a strategic and localized approach.

A key aspect of this initiative is the shift in perception and utilization of employment budgets. The government’s decentralization efforts play a crucial role in this strategy by regrouping ministries and working closely at the territorial level to address regional needs and improve job distribution and investment.

Moreover, the minister outlined plans to enhance vocational training and apprenticeship programs. He highlighted the current gaps between available jobs and suitable profiles and stressed the need for greater private-sector involvement in vocational education. One innovative project is the creation of “cities of trades and skills,” which are specialized hubs providing practical, high-quality vocational training across various sectors, including aeronautical, automotive, and digital industries.

The speech also underscored the importance of apprenticeship programs within companies, where apprentices split their time between classroom learning and on-site training. This model is designed to better integrate apprentices into the workforce and ensure they receive hands-on experience alongside theoretical education.