“European banks have refused to invest in Africa for a number of reasons, including stringent regulations on high-risk assets and a collapse in commodity prices, which has been reflected in many African economies,” warned Stratfor Center, an American geopolitical intelligence platform and publisher.
“Moroccan investments in Africa are very strong compared to other countries in the continent,” said the American Center in a recent report released on Friday. “Moroccan banks have expanded significantly in the continent and now have sub-banks and shares in more than 20 African countries”.
The Center for Strategic Outlook said that this increased interest gives it greater appetite for risk, exposing itself to low-level domestic sovereign bonds that rely on commodity exports. This behavior can be partly attributed, according to Stratfor, to the competitive local market in Morocco, which does not allow for the growth of the Kingdom’s ambitious banks.
He pointed out that Fitch’s 2017 report highlighted the fact that Moroccan banks are eager to invest in African countries, their low capital reserves and the poor quality of their assets are all factors that make them particularly vulnerable to economic volatility and profits of Moroccan banks from sub-banks across Africa.
If Morocco’s domestic capital markets remain strong and its public debt remains low, any future recession will have an impact on African economies that will inflict heavy losses on banks and put Morocco at a much weaker position than it was a decade ago.
He pointed out that one of the obstacles facing the goal of Morocco to gain international influence is the high unemployment rates in the country, especially among young people, which amounted to 27%, adding that Morocco’s investments abroad have no direct benefit to young Moroccans looking for Direct Employment.
Morocco’s decision-makers recognize the urgent need to expand their development agenda to include unemployed youth, the Stratfor report said, adding that in recent years they have decided to reduce financial support for energy to channel funding to boost employment.
But if Rabat fails to make significant progress and address the causes of potential turmoil, the US Strategic Outlook Center adds, it may have to delay its ambitious expansion targets on the continent to address its internal instability.