Small businesses dominate Morocco's economy, low productivity persists

While Morocco boasts a high density of small businesses, dominated by micro-enterprises, the economy remains significantly influenced by a small group of large corporations, which do not surpass 0.5%, says a recent joint study by the Moroccan Observatory of Very Small, Small, and Medium-Sized Enterprises (SMEs) and the World Bank Group (Morocco Branch).

The report said that micro-enterprises constitute a staggering 88% of the country’s formal economy. 

This high density is attributed to a dynamic entrepreneurial ecosystem, with Morocco creating an average of 3 limited liability companies per 1000 inhabitants in 2022.

The report said that despite a surge in new business creation between 2017 and 2021, the overall growth trajectory of these businesses is relatively weak. 

There is a notable dearth of high-growth firms, which are typically the engines of job creation in developed economies.

A key finding of the study is the low productivity of Moroccan businesses. While productivity tends to increase with a firm’s age, this trend plateaus after just five years for a significant portion of businesses. 

This low productivity of Moroccan businesses is in stark contrast to developed economies where productivity is often correlated with both size and age.

The report attributes this low productivity to several factors, including market distortions that fail to reward the most productive firms and inefficient allocation of resources. 

These distortions, the study says, hinder the growth of high-performing firms and negatively impact job creation.

The study, which drew on data from the Bank of Morocco, the National Social Security Fund, the General Directorate of Taxes and the Moroccan Office of Industrial and Commercial Property, employed a benchmarking methodology to compare Morocco’s business environment with international standards.

The report noted that while Morocco’s entrepreneurial ecosystem is vibrant, there is a need to address the underlying challenges that hinder productivity and growth. 

They highlighted the importance of creating an environment that fosters the growth of high-performing firms and promotes efficient resource allocation.