206th. issue - April 1, 2008

Islamic Banking Instruments Make Timid Debut in the Maghreb
Islamic financial instruments continue to attract consumer attention, with the central element of being interest-free products in compliance with Islamic Sharia law. According to financial sources, the value of funds involved in Islamic banking worldwide grew by an average of 15% annually over the past three years. Some analysts estimate Islamic banking to be worth some $500 billion, with the Middle East controlling a quarter of those assets. Kuwait is reportedly the biggest contributor. In North Africa, the value proposition around Islamic banking has yet to be clearly articulated. The first offerings are being made available in Morocco, but banks are reluctant to engage into this space as technical problems remain to be solved.

Unclear Value Proposition of Islamic Banking in Morocco
The first financial institution to offering Halal-class products in Morocco was Attijariwafa bank (AWB). Its products were made available as early as October 2007, and other competitors followed its path, yet with prudent steps. Six months later and very little progress has been made. With the exception of AWB, all other banks have been rather cautious about the performance of their Halal products. They include BMCE Bank, Banques Populaires, BMCI, and others, who remain discreet about their Islamic banking activities.

First Islamic Bank to Open in Mauritania
Mauritania has a new bank and it will offer exclusively Islamic financial instruments. The bank, Al-Wataniya, is owned by Mauritanian businessman Mohamed Ould Noueigue. The bank will compete with the existing dozen banks, including the two foreign financial institutions, France’s Societe Generale and Paribas.

CNEP to Sell Cardif Insurance Products in Algeria: The Beginning of Bancassurance
The Algerian bank and former savings institution CNEP (Caisse Nationale d’Epargne et de Prévoyance) has inked a partnership agreement with the French insurance firm Cardif. The agreement will allow Cardif to use CNEP’s network to distribute its products and services on the Algerian market. Cardif is a subsidiary of French financial group BNP Paribas.  

Delays in the Implementation of Drug Reimbursement Program in Algeria Lead to Higher Out of Pocket Cost
The cost of medicines is up on the Algerian market and households are increasingly facing difficulties to squeeze more out of their budgets for their drugs. Structural problems, inter-department feuds, and an expensive Euro are destabilizing the nation’s drugs subsidy program and delaying its official implementation.  

North Africa’s Newest Drug Route
More than 2,000 pounds of cannabis (20 quintals) were seized recently by Algerian customs stationed at the Bechar borders. The seizure is another record broken in less than one week, providing new indications of accelerated activity in drug trafficking in the region. Official sources believe drug traffickers have been working to open up a new route to distribute their products in Tunisia and Libya transiting via the Algerian southern provinces of Ouargla, El Oued and Illizi. The new routes toward the eastern Maghreb are believed to be the result of a redeployment of traffickers as seaport authorities in southern Europe and in the northern Algerian cities like Oran, Algiers, Skikda and Annaba have imposed stricter controls and disrupted the long-established channels.

Morocco to Lower Income Tax, as Debate over Minimum Wage Continues
Morocco is preparing to reduce the income tax for the second time, after the reduction that occurred in 2007. The next income tax reduction will be implemented in two phases, one in 2009 and the second in 2010. In 2009, wage earners will benefit from a 2% reduction affecting all wage levels. The upping of the ceiling of the wages that will be fully exonerated from the income tax will also be introduced in 2009, moving from the current ceiling of MAD 24,000 per year to MAD 27,000. This is equivalent to those who will receive an income of MAD 2,250 per month (up from MAD 2,000).

Capital Markets: The Casablanca Stock Exchange in 2007 and Outlook for 2008
The Moroccan equity market continued on its upward trend in 2007. The CFG25, an index established by the Casablanca Finance Group to measure the stock exchange performance, rose 26.0%, or close to the average market increase of the past five years (27.3%). The CFG25 rose by an exceptional 57.4% in 2006. Most of the market gain in 2007 took place in the first four months of the year (31.6% up by May 8, 2007), driven by the anticipation of strong corporate annual results for the previous fiscal year, combined with an upbeat outlook for 2007. This report looks at the performance of the Casablanca Bourse and what analysts expect for 2008.

Commodities and North Africa: Agriculture: Shielding Consumers with Self Reliance
Algeria has nearly doubled its milk import, growing spending from US$700 million in 2006 to $1.3 billion in 2007. Rising commodity prices also are affecting the milk market, which has not only affected consumers in source countries but also in importing countries. The rise in milk prices is also in line with increases in other agricultural commodities, such as wheat, which have affected the Algerian import budget in substantial ways. This added spending is undoubtedly negatively offsetting the gains made in oil and gas exports, which in dollar value are reaching all time record highs, only to be re-sent back abroad to cover food imports.

Commodities and North Africa: How Rising Prices Lead to Shifting Habits
When prices of a crop increase and consumers cannot afford it, they shift to another one, with all the challenges to their culinary heritage. A historical example of such event occurred in the 1980s when the Algerian government favored heavily the planting of potatoes instead of wheat. The results took less than a year to be felt. Local markets were flooded with potatoes, a less desirable product in Algeria kitchen, which saw their prices drop. In contrast, wheat-based products, from couscous to pasta, which were then the primary products in the Algerian kitchen, became scarce and expensive, forcing individuals to shift their eating habits and diets to potato-based meals.

Commodities and North Africa: Morocco: Out-of-Control Subsidy Spending
The end of Prime Minister Driss Jettou’s reign in the Moroccan cabinet ended with mushrooming government spending. The deteriorating finances are not just a Morocco-specific problem, but many countries of the same economic level faced growing troubles to cover the ever rising cost of commodities in the global markets.

Commodities and North Africa: When the Basic Staples are out of Reach
Blaming the Global Markets or the Failed Domestic Policies? Wheat is one of the most consumed cereals in the world. With an explosion in global consumption, estimated at 100 kilograms per year per capita, equivalent to 220 LBS, combined with stagnation in production, wheat prices exploded as a result, creating tension in the market.

StatoilHydro Gives Sonatrach Access to US LNG Market, Makes Discovery in Algeria
The Algerian petroleum firm Sonatrach has made a significant entry into the US liquefied natural gas (LNG) market, reinforcing its partnership with Norway’s StatoilHydro.

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CONTINUOUS ANALYSIS

IN THIS ISSUE

North Africa’s New Drug Route

Morocco to Lower Income Tax, as Debate over Minimum Wage Continues

Assessing Morocco’s Most Vulnerable Population

Oil for Detainees

Libya to Release LIFG Members from Jail    

Libya without a Government? 

GFH to Set Up $3 billion Economic Development Zone in Algiers

First Islamic Bank to Open in Mauritania
   

Unclear Value Proposition of Islamic Banking in Morocco
 

Islamic Banking Instruments Make a Timid Debut in the Maghreb
 

CNEP to Sell Cardif Insurance Products in Algeria: The Beginning of Bancassurance

The Casablanca Stock Exchange in 2007 and Outlook for 2008

Delays in Implementation of Drug Reimbursement Program in Algeria Lead to Higher Out of Pocket Cost

Subsidizing Consumption:

Morocco: Out-of-Control Subsidy Spending
  

Tunisia: Revisiting the Role of the Subsidy Fund and Realignment of Domestic Prices
   

Agriculture: Shielding Consumers with Self Reliance
   

How Rising Prices Lead to Shifting Habits
   

When the Basic Staples are out of Reach

ENERGY/MINING

StatoilHydro Gives Sonatrach Access to US LNG Market, Makes Discovery in Algeria

North Africa Petroleum Round Up

North Africa in the Global Economy