“Large companies pay more slowly than they get paid!”

Payment terms have for far too long been a major concern for companies in Morocco. And the health crisis, which has severely affected economic activity, is adding to the anxiety of economic operators, especially the smallest ones. It was in this stressful context that the Swiss Chamber of Commerce in Morocco (CCSM) held, on 14 April, a webinar entitled “Payment terms: situation and rescue plan”. Taking part in this event, moderated by the President of the Chamber, Christophe de Figueiredo, were: Amine Diouri, Director of Research & Communication at Inforisk, a specialist in business intelligence on Moroccan companies; Ahmed Belfahmi, Head of Division at the Directorate of Public Enterprises and Privatisation (DEPP); and Hicham Alaoui Bensaid, Managing Director of Euler Hermes ACMAR.

VSEs, the main victims

“Small and medium-sized enterprises (SMEs) do not suffer from payment terms to the same order of magnitude as VSEs. As for large companies, the situation is rather paradoxical, insofar as supplier payment periods exceed customer payment periods; in other words, large companies pay later than they receive their money”. Amine Diouri’s conclusion is unequivocal and could be summed up as follows: “when it comes to payment terms in the private sector, it is the law of the strongest! And that explains why inter-company credit exceeded 400 billion dirhams (MAD bn) in 2019, surpassing the outstanding credit granted to private non-financial companies for more than ten years. An ironic situation in which payment terms thus become the primary source of financing for Moroccan companies.

And the health crisis has not helped matters. Quite the contrary, the situation has worsened. “Companies have had much more difficulty recovering their receivables, and payment terms have lengthened further, from 40 to 49 days”, stressed the specialist in business intelligence on Moroccan companies. And for Amine Diouri, if some companies were resilient and managed to get through the 2020 crisis in terms of insolvencies, it was only thanks to State aid, notably through Damane Relance, Damane Oxygène, etc.

The State steps up measures to enforce the law

Public establishments and enterprises (EPP) are the main component of the State in terms of public procurement and investment. And the limits of their payment performance directly affect economic growth, but also the major projects and programmes launched by the State. According to Ahmed Belfahmi, these limits concern in particular the expansion of the public portfolio, the concentration of performance and weak transfers to the State, the risk of over-indebtedness, as well as dependence on the State General Budget (BGE) and the running out of steam of business models. “It is with this in mind that the Ministry of Economy, Finance and Administrative Reform has put in place concrete actions capable of controlling the payment terms of EEPs, with the challenge of maintaining the positive trend in these terms as well as helping VSEs and SMEs overcome cash-flow difficulties”, said the Head of Division at the Directorate of Public Enterprises and Privatisation (DEPP). Among the range of measures implemented by the ministry is support for EEPs through faster budget transfers from the BGE and the activation of procedures to settle their VAT credit, as well as the monitoring of the various supplier complaints filed on the AJAL platform.

The Payment Terms Observatory is also one of these measures. The role of this new body is to bring together the efforts of all the institutional stakeholders involved in the issue, such as the State, CGEM, Bank Al Maghreb and the Treasury General of the Kingdom. One of its flagship missions is to introduce financial penalties against companies that exceed the legal deadlines. “The objective is not to generate revenue, but to enforce compliance with the law. The proof is that the proceeds go to a public fund whose mission is to support entrepreneurship”, Ahmed Belfahmi clarified.

The importance of a good risk prevention system

“In the midst of the pandemic, the risk of non-payment has mechanically increased very substantially, which in Morocco is reflected in particular in a projected rise in business insolvencies”, the Managing Director of Euler Hermes ACMAR, Hicham Alaoui Bensaid, stated at the outset of his speech. For the expert, it is imperative to have a good risk prevention system in order to provide an appropriate and proportionate response to the current economic situation. “It is as much our commitment to structural risk prevention as our financial solvency and that of our shareholders that have enabled us to combine the upstream and downstream parts of the value chain, thus providing a certain comfort in such an uncertain economic climate”, he asserted.

Following the various presentations, the President of the Chamber, Christophe de Figueiredo, moderated a question-and-answer session. An exercise that showed the audience’s interest in this vital subject for our companies.