Morocco’s Automotive Industry Leader in Intra-African Trade

A new report by the World Economic Forum has put the spotlight on Morocco’s thriving automotive sector, showing that the North African country’s industrial sector is increasingly becoming a continental trailblazer in terms of intra-African exchanges.

The report, published on January 26, explores pathways to drive economic recovery in the African continent through the African Continental Free Trade Area (AfCFTA).  It reviews intra-African trade and current African efforts to meet local and global demands by focusing on the automotive industry as a strategic sector.

Titled “Connecting Countries and Cities for Regional Value Chain Integration: Operationalizing the AfCFTA,” the document looks at the ways through which the AfCFTA agreement can bring a new window of opportunity for Africa to ramp up its manufacturing sector.

The African Union launched the African Continental Free Trade Area (AfCFTA) on 1 January 2021, hoping for the agreement to accelerate intra-African trade and boost Africa’s trading position in the global market. 

The World Economic Forum reports that by reducing barriers to trade, the economic prospects of “a continent of over 1.3 billion people with a combined gross domestic product (GDP) of $2.5 trillion” will be boosted. 

If Africa were to increase its share of global trade from 2 to 3%, this one percentage point increase would generate approximately $70 billion of additional income per annum for the continent, adds the report.

In 2019, intra-African trade totaled $137.6 million, approximately 4.7% less than in 2018. Only 16% of total African exports and 12% of total African imports were to and from African countries in 2019. 

However, the new agreement is expected to increase intra-Africa trade from about 13% to 25% or more through better “harmonization and coordination of trade liberalization.”

Morocco’s automotive industry as a leading African supplier

Morocco featured among Africa’s top 10 supplying markets in recent years. In 2019, the value of Moroccan exports to other African countries amounted to $2.24 million. This number represents approximately 3% of the total shares of Africa’s aggregation. The North African country is the seventh-largest supplier of automobile vehicles, parts, and accessories.

In addition to being a primary regional supplier, “Morocco’s automotive experience presents valuable lessons” to the sectors in other African countries, according to the report. 

In fact, the report adds, Morocco’s automotive vehicle production revenue was $10.5 billion, the equivalent of 25% of Morocco’s total exports in 2019.

The World Economic Forum attributes this success to the offshore banks active in Morocco’s export free zones. The offshore banks offer customized financial packages for local and foreign investors in the automotive industry, supporting both onshore and offshore projects. The public-private investment of key infrastructure in the production of automobiles, as well as corporate tax exemptions, are all contributing factors. 

The overarching factor of success, according to the report, is Morocco’s industry leadership which works towards “the future of mobility. ” 

The country’s industrial sector is “anticipating the technologies of tomorrow” and working towards “the global transition of the industry to the Fourth Industrial Revolution,” concludes the report.