MOROCCAN SOEs GOVERNANCE

By Ahmed EL-KASMISenior Auditor, Head of section

April 18-21, 2016 Paris

Contents SOEs brief presentation SOEs distinction criteria Legal and institutional framework Strategy and vision State role as a stakeholder Governance weaknesses Recommendations as to SOEs governance

SOEs: brief presentationMain figures (end of 2015)

256 State Owned Enterprises. 442 subsidiary corporations and public undertakings. Total Investment : MAD 71.6 billions (26.3% of Gross fixed capital formation)  Six SOEs made, between 2010 and 2014, 56% of the total investment, 56% of the total

sales revenue and 64% of the total added value. Added value  : MAD 72.7 billions (7.9% of GDP(920 Billions))  Sales revenue  : MAD 198 billions Operating cash flow : MAD 42.2 billions Staff   : 129,545  Staff cost : MAD 30.9 billions Total assets   : MAD 1.001 billions

Exchange rate (April 17th, 2016): $1 = MAD 9.40

2%

8% 8%

12%

21%

15%

4%

30%Sectorial distribution of the 256 SOEs (end

of 2016)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

32.30

40.90

49.50

66.50 67.70

67.8068.90

77.5078.00 71.60

76.50

SOEs investment growth (billions MAD)

2013 2014 2015 2016 (f)

190.1198

211.2223.8

72.5 72.7 71.4 74.7

SOEs sales revenue and added value (billions MAD)

sales revenue added value

2010 2011 2012 2013 2014

29.95 29.39

34.8031.63

34.12

8.88 10.48 11.49 13.329.78

Transfers State /SOEs (Billions MAD)

Transfers State to SOEs Linear (Transfers State to SOEs) Transfers SOEs to State Linear (Transfers SOEs to State )

2008 2009 2010 2011 2012 2013 2014 2015

121.1135.4 149.5

158.7174.6

185.8214.7

249.7Indebtedness (2015) source of weakness • debts: MAD 249,7 billions (25% of GDP)• debts in foreign currency: MAD 160,3 billions (66% of total debts)• increase by more than 32% compared to 2004• Debt of nine SOEs represents 65% of the total debt

SOEs distinction criteriaThe Moroccan SOEs are characterized by a diversity. Many criteria can be used to distiguish a variety of SOEs such as : Legal status. Percentage of the State ownership interest. Type of business. Public service domain or commercial business. Competitive business or monopoly position. Level of dependence of the State subsidy. Entity size. Etc.

Legal and institutional framework The State trusteeship over the SOEs have its roots in:

the constitution, the State act (loi organique) n°13-065 concerning the government functioning. SOEs creation acts (public establishment by law, public enterprises by law or

decree) . Ministries decrees concerning their organization and missions.

Article 89 of the Constitution states that " The Government exercises the executive

power. Under the Government Head authority, the government implements its

program, ensures the execution of laws , has the administration and oversees

public institutions and compagnies and possess the technical supervison "

Legal and institutional framework Article 6 of the Organic Law n°13-065 concerning the functioning of the

Government said that the Presidency of public facilities board is ensured by the

Head of Government or the authority delegated by him for this purpose, and

unless explicitly stated otherwise .

The creation’s acts of the SOEs mention explicitly that the supervision is done by

the State. These acts foresee the SOEs attachment to their ministries.

The decrees that determine the responsibilities of various ministries, give these

latter the prerogatives of setting up and implementing the government policies in

the areas within their fields of expertise.

Legal and institutional framework

the state supervision is to ensure that the SOEs perform their statutory

duties in accordance with their governing laws in harmony with the

sector policies established by the state.

the public policies design is the Government responsibility. Each

ministry have to develop the development and promotion strategies of

their activities. In order to implement these strategies, the Government

intervenes through the Administration and SOEs under its supervision.

Legal and institutional framework The SOEs supervision by the State draws its foundation from their acts of creation.

Thses acts foresee their attachment to a Ministry. This attachment is not hierarchical

because these organizations have, by law, legal personality and financial autonomy.

Instead, this attachment relates to aspects of their intervention strategies and their

consistency with public policies decided by the Government.

it should be noted that in practice, the autonomy of some SOEs, such as universities

is relatively amputated to the extent that they do not have all the required attributes

such as human resources who continue to depend on the budget of their ministries.

Legal and institutional framework

Creation process:

public establishment by law, public enterprises by law or decree.

No sufficient debates and studies before creation.

The process should be revised.

Updating the missions:

SOEs missions overlapping with those of their attachment ministries.

missions not in accordance with the environment.

Missions can be performed by the private sector.

missions to be clarified.

Public portfolio to audit should be extended.

Strategy and vision

Clarified the State role as to SOEs strategy.

Strategic management to be standardized.

Governance entities have to be a space for dialogue

and discussion.

Strengthening the contractualization as a strategic

management tool.

State role as a stakeholder

The state should act as a stakeholder.

Reduce the financial checkings and controls.

Improve the accountability reporting.

accelerate some SOEs liquidation.

Consider the privatization of some SOEs.

Governance weaknesses Strengthening the governance entities role.

Some SOEs have too much members in their boards.

Boards that have ministers as members have problems to have

their meetings board as foretold by the regulation.

Lack in choosing the administrators as members of the board.

Lack in selecting the managers and determining their salaries.

special committees to be setting up.

Recommendations as to SOEs governance

Defining the technical supervision role and expanding it. Review and adapt the management mode of some SOEs. Functioning of the governance entities to be improved. Good practices to be applied such as the good governance code. Generalization of the contractualization between the State and the

SOEs. Apply transparent standards as to appointment and wages. Create a shareholding entity.

Thank you so much Ahmed EL-KASMI

+212 641 991 350 Ahmed.elkasmi@courdescomptes.ma

ahmedelkasmi2@gmail.com

Cour des comptes www.courdescomptes.ma

Secteur 10, zenkat ettoute, Hay Ryad, RabatMorocco