The growth of the Moroccan private equity sector in light of recent changes to the statutory regime
“For more than a decade, Morocco has been committed to a process of economic and social modernisation, by improving the business environment and opening the country up to international investment.”1
A boom in the Moroccan private equity sector
Morocco’s Law No. 58-22, amending and supplementing Law No. 41-05 on undertakings for collective investment in capital (OPCC), is part of a proactive process – which is already well underway – to make the country more attractive to businesses both legally and economically.
As introduced and passionately championed by Nadia Fettah, the Minister of Economy and Finance, the draft law seeks to “strengthen the role played by private equity in supporting economic development and improving the competitiveness of SMEs and supporting the operationalisation of the Mohammed VI Fund for Investment.”2
The Mohammed VI Fund for Investment (M6FI), whose action plan provides for investment of MAD120 billion between 2023 and 2026,3 is the cornerstone of the plan to revitalise the capital markets. The idea is to divide them into sectoral and thematic sub-funds operating in specific market segments on the basis of mechanisms tailored to their remit.
Although the M6FI is a substantial and welcome step, it does need an attractive legal framework to establish a favourable investment environment.
Law No. 58-22 on OPCC is undeniably working towards achieving this objective by increasing access to opportunities to invest in OPCC while regulating investments through streamlined and clearer procedural rules.
The introduction of OPCC with streamlined operating rules (OPCC-RFA)
The principal and pioneering innovation of Law No. 58-22 is the introduction of a new form of undertaking for collective investment in capital.
Section II-bis of Law No. 41-05, as amended by Law No. 58-22, enshrines a new statutory regime for “OPCC with streamlined operating rules”, which are also referred to as OPCC-RFA.
The creation of a new category of investors – “Professional Investors”
The introduction of this new statutory regime reflects a major paradigm shift. Access to opportunities to invest in OPCC has to date been restricted to investors termed qualified investors. Now it’s been significantly expanded to cover a newly defined category of “Professional Investors”.
Article 22-3, which sets out a detailed definition of the term “Professional Investors”, is drafted broadly and flexibly. The definition includes qualified investors, the management companies of OPCC, and legal persons who meet certain thresholds laid down in the Article.
The goal of lawmakers is to create an attractive legal framework, making it possible to raise private capital in support of the Moroccan private equity ecosystem. Correspondingly, the creation and constitution of OPCC-RFA is subject to less draconian rules which provide for derogations.
The grant of loans by OPCC-RFA
Law No. 103-12 on credit institutions and similar entities creates a banking monopoly in Moroccan law. In light of the strictness of lawmakers with regard to these provisions, few derogations are permitted.
But a specific derogation has been included for OPCC-RFA, a further notable aspect of the new Law. Article 22-10 expressly authorises OPCC-RFA to grant loans, provided that their management rules allow them to do so.
The exemption from the minimum allocation requirement
The flexibility of OPCC-RFAs is also demonstrated by the fact that OPCC-RFAs are not subject to the minimum allocation requirement set out in Article 6 of Law 41-05.
As a reminder, the minimum allocation requirement means OPCCs must have at least 50% of their assets invested in securities of unlisted Moroccan companies (equity securities, debt securities or securities giving access to capital).
By exempting OPCC-RFAs from the minimum asset allocation requirement, Law N° 8-22 gives OPCC-RFAs greater flexibility in their choice of investments (particularly investments in foreign companies).
Procedural efficiency
Law No. 58-22 also introduces other changes that are just as significant in procedural terms. Again with a view to promoting the Moroccan private equity sector, the new Law modifies the procedure for granting approval to management companies. The aim is to augment the role played by the Autorité Marocaine des Marchés de Capitaux (AMMC) while accelerating the approval procedure.
Increased attractiveness
This reform is part of Morocco’s ongoing efforts to develop its private equity ecosystem. Welcomed by many political and economic actors, the constitution of the Mohammed VI Fund for Investment needed a legal framework conducive to raising private capital. The new Investment Charter and the reform of the Law on OPCC will indisputably contribute to achieving this objective and ensure that Morocco’s legislation is ground-breaking in the African context.
1 OECD report, Strengthening business integrity in Morocco, 6 December 2018.
2 According to Mustapha Baïtas, a government spokesperson, at a press briefing on 8 March 2023.
3 According to the report on public institutions and undertakings (EEP) accompanying the draft budget bill for next year (PLF 2024).
