Setting up an end of year sale

14 June 1996

PRIVATISATION is a key component of the economic reform programme, promising simultaneously to raise revenues for the state, boost the Casablanca stock exchange and impress the international financial community with Morocco's willingness to tackle tough economic issues. However, it has not been all plain sailing. The programme was stalled for months by differences within the government. Only recently has it started to pick up again, but key ministers are promising a flurry of activity for the second half of this year.

Privatisation Minister Abderrahmane Saaidi has promised to deliver revenue of MD 5,000 million from the sale of assets in the financial year that starts in July. He has also said he wants to widen the scope of the programme by expanding it to include virtually all state-owned companies.

'The current ministry thinking is that there are very few companies that would not be put on the list,' says a Privatisation Ministry official. The minister will present a draft law to parliament before it retires in June to approve a new list of companies to be sold off. One notable absentee is the phosphate extraction operation of Office Cherifien des Phosphates (OCP), which is still considered to be a strategic industry. However, Saaidi has hinted that he regards this as only temporary, and that OCP's downstream operations will be included in the current programme of sales

Lucrative sector

Parliament will also be asked to approve the privatisation of telecommunications company Office National des Postes & Telecommunication (ONPT). International companies are eager to invest in this lucrative sector, but a sale faces strong domestic opposition. 'We have mostly been concerned with building a political consensus for the privatisation. We are now down to niggling details like how many years the company should be granted a monopoly,' the official says. This could be anything up to seven years, he adds.

There is still no word on how much of the company the government plans to sell. Potential investors say they will only buy a strategic stake if they can have management control, hut parliament is not expected to accept a proposal that removes the government's right to veto company decisions. A partial sell off could go ahead in the first half of 1997, but the government is not relying on earnings from a sale in its 1996/97 budget.

Another prime asset likely to come under the hammer is the national flag carrier, Royal Air Maroc (RAM). This proposal still needs approval from parliament, but it has already won the support of Finance Minister Mohamed Kabbaj, who informed parliament during his budget presentation on 11 May that he wanted to see the airline added to the privatisation list.

Kabbaj and Saidi have not always been in accord on the privatisation programme and their differences have been blamed for the delays of recent months. Saidi has a broad brief to devise and implement a privatisation scheme quickly; Kabbaj has the traditional authority of the finance ministry to defend. The privatisation bond was devised by Saaidi as a way of raising money for the treasury before the actual sale of shares in state-owned companies went ahead. It was originally planned to fill a gap in the 1995 budget, but as it implied forward borrowing it had to gain the approval of the Finance Ministry. This was not immediately forthcoming. When it was finally offered on the stock exchange, demand was so strong that the government raised the offering from an initial MD 1,500 million to MD 1,700 million. The high conversion rate of the bonds in the subsequent privatisation of refinery company Societe Marocaine des Industries du Raffinage (Samir) prompted the sale of a second tranche. The second offering in early May raised a further MD 1,000 million for the treasury. The release of an international tranche of bonds has been planned for several months, but analysts say this has failed to secure Finance Ministry approval.

The privatisation of 30 per cent of government shares in Samir in March is to be followed by the sale of a controlling stake of 35-51 per cent to a strategic investor. Tender documents are likely to be issued in June and interest is already running high: 'They are beating the door down,' the ministry official says.

France's Total, Royal Dutch/Shell and the local consortium Afriquia are understood to be interested. The sale will raise a further MD 2,000 million-3,000 million. At the same time, the government is looking for a buyer for a controlling stake in Societe Cherifienne des Petroles (SCP), Morocco's other large refiner. This project, expected to raise at least MD 250 million, is to be presented to parliament in the current session.

The government will offer two more industrial companies on the stock exchange before the summer holidays. Next in line is 30-40 per cent of steel company Societe Nationale de Siderurgie (Sonasid) and fertiliser company Fertima. Prices have yet to be announced, but financial sources expect the two companies to fetch up to MD 500 million together.

Busy schedule

If everything goes according to plan, there will be a busy privatisation schedule on the Casablanca bourse from September to December. The following companies are to be offered:

Banque Nationals pour le Developpement Economique - some 10 per cent will be offered on the stock exchange first. A controlling stake will subsequently be sold to an international bank Compagnie Nord Africaine & Intercontinentale d'Assurances - the amount to be floated has yet to be decided Banque Centrale Populaire an estimated 40 per cent will be offered to the public. A controlling stake is destined for a single investor Car assembly plant Socite Marocaine de Constructions Automobile - the decision is not firm yet, but the government is planning to offer 20-25 per cent around October.

The three financial institutions together should raise MD 2,000 million while other public companies are to be sold by tender. The ministry is in final negotiations to sell Societe Marocaine de Stockage (Somas), which has oil and gas storage facilities all over the country. It has received bids for five mines; the local ONA Group, already active in mining, is among the main contenders.

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