Camden Advisory

Posts by tmourgues

  • WAPPP Quarterly Magazine Q1/2022

    Wappp quarterly 7 q1 2022wappp-quarterly-7-q1-2022.pdf (1.91 Mo)

    WAPPP Quarterly magazine new issue is available. It includes PPP units presentations and a series of articles about the latest trends in PPPs.

    Thibaut Mourgues, Chief Editor

  • PPPs and smart infrastructure

    What are smart infrastructure and smart cities?

    Smart infrastructure is no longer just a buzzword but an operational reality. This has been made possible by technological advances in recent years in areas such as data collection processes, data treatment (artificial intelligence) and communication networks which are all part of the internet of things (IoT). 

    According to the Royal Academy of Engineering of the United Kingdom, “A smart infrastructure is a smart system that uses a data feedback loop to improve decision-making regarding a matter. A system that can monitor, measure, analyze, communicate and act based on data collected by sensors.”

    Based on the definition, the Royal Academy makes a distinction between semi-intelligent infrastructure (data is collected but the system does not make any decision ; typical example would be city traffic map); intelligent infrastructure ( data is collected and support human decision process; for example, traffic information is provided to the drivers to help them adapt their itineraries); and smart infrastructure (data is collected based on which the system takes decision autonomously). Typical examples of smart infrastructures are smart networks (for example an energy transmission network) or smart buildings (when operations such as heating, lighting or security are handled by automated systems).

    Why the global surge of interest in smart infrastructure?

    According to Nexus, the benefits are:

    • Self control
    • Cost efficiency
    • Reliability
    • Safety and resilience
    • User interaction and empowerment
    • Sustainability

    Compared to traditional infrastructure, smart infrastructure is able to adapt to the changing needs and changing environment, to communicate individual knowledge to the network and to optimize the decision-making process in a way the human mind alone would not be able to achieve.

    To succeed smart infrastructure should not be exclusively designed by engineers for technological benefits; on the contrary, it should be a tool to support cities master plans and long-term objectives for the benefits of all stakeholders (such as users, citizens, NGOs, service providers, City government and others).

    More comprehensively smart infrastructure is part of a global move toward a more interconnected society. This includes trends such as e-government, e-governance, social inclusion, distance services and smart economies  . In this sense, smart infrastructure is related to smart mobility (transportation networks with real time monitoring and control systems), smart environment (pollution control), smart services, smart governance (use of technology for design and delivery of services), smart people (creativity and innovation), smart living (improved quality of life), and smart economy (economic growth through technology).

    The Smart Cities Council considers that smart infrastructure shall help cities to embody three core values: livability, workability, sustainability. This council led by private firms such as IBM or Huewei is a good example of the commitment of the private sector to support the move toward smart cities by providing technical advisory services and spreading best practices to the cities governing bodies.

    According to a report of economic consultants, the global smart cities market size was valued at USD 98.15 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 29.3% from 2021 to 2028.

    What PPPs for smart infrastructure?

    PPPs being a method for delivery of infrastructure, they can be implemented with any type of infrastructure. The smart factor from the strict PPP point of view does not require any revolution in the concept of PPPs. In On the other hand, it is important to determine in which context and under which conditions PPPs are best suited to deliver smart infrastructure.

    The traditional arguments in favour of PPPs remain true with regards to smart infrastructure: when adequately designed and implemented, PPPs allow to alleviate financing constraints, transfer risks to the parties best suited to bear them, take advantage of private sector know-how and skills to reduce cost and delays and improve quality.

    However, a particular emphasis should be paid to certain areas when talking of smart infrastructure. The specificity of the ICT is the extremely quick pace of technological change. When a road or a power plant can operate over decades with minimal requirement in maintenance, an ICT system is due to become outdated in a short timeframe.  Obviously, technology firms are in a better position than the public sector to mobilize, fine tune and implement technology.

     Cities need to understand the drivers of technological change as well as the gains and limitations of an intensive use of technology.

    Contracts should focus on the results that are targeted rather than on a precise description of the means and the equipment to be implemented. Although the result-oriented mindset is a tendency of recent PPPs, this approach is vital in smart infrastructure projects. For one because cities may not have the expertise to assess by themselves the best technical solutions, and for two because the pace of change will render obsolete in the future the technical solutions that may appear best at one point of time.

    For this reason, PPP contracts should emphasis emphasize flexibility and make sure that the private partner will be able to adapt the technical solutions with time. Contractual incentives, particularly in terms of remuneration, should guarantee that the private partner will constantly monitor market developments and envisage the deployment of innovation when it makes sense under all dimensions (users point of view, commercially, financially, etc.).  In this context of constant change and adaptation, a cooperative approach based on mutual trust between the city (including other stakeholders such as NGOs and users’ representatives) and the private partner becomes crucial to success. 

    Different types of PPPs may be structured in relation with to smart cities. The traditional model based on project finance, with the creation of a Special Purpose Vehicle that receives either payment from users or from the public Partner are to be considered when the project involves investment into assets that are clearly identified as well as the cash-flows associated with them. It allows for the mobilization of private funding and a strong transfer of risk. Besides this traditional model, the revenue sharing model is growing in popularity. Under this scheme, an ICT vendor implements a technological solution for a City and is repaid through the cost savings generated by the solution until the vendor has achieved pay-back, including a profit rate agreed in advance.

    According to Paul Jacobson, PPPs should be examined under 2 axes: the revenue earning capacity, and the capex. The sweet spot for PPPs is formed by projects with high revenue potential and high capex. On the opposite, projects with low revenue generation and low or medium capex should rather be procured by means of EPC contract followed by a service contract if necessary.

    In practice, as analyzed by McKinsey, a considerable number of smart cities projects have already benefitted from PPP contracts, especially in fields such as:  energy management (distribution and grid, metering, street lighting, energy efficient buildings), network infrastructure, transport (car and bikes pooling, integrated multi-modal transport, etc.), traffic management systems, utilities management, CCTV and surveillance, as well as e-governance. This list will no doubt grow in the coming years.

    Smart infrastructure has become a key component of the future of large and small cities at the global scale. PPPs are without  doubt one of the best available instruments to design, finance, build and operate it to the benefits of all citizens as the expertise and creativity of private sector in this specific area is acknowledged by all and largely unrivaled.



  • PPP bidders compensation: best practice or waste of public money?

    More and more countries have started to compensate unsuccessful PPP bidders (or even  rejected unsolicited proposal sponsors). The involved amounts are far from insignificant:  as example, Canada Rail project paid up to Can $2 mln to cover an unsuccessful bidder’s verifiable costs incurred during best and final offer stage. Not only the principle of compensation is subject of controversy but also -granted agreement on the idea- the amount of the adequate compensation has been subject of debate: insufficient compensation may jeopardise the purposes of the compensation, while on the other hand exaggerated compensation wastes away public funds, may result in increased costs of PPP project, motivate windfall profit behaviour from the side of the private sector and contribute to a lack of confidence in the entire PPP program. Let’s try to put some light on this complicated matter.


    Why to compensate unsuccessful PPP bidders and unsolicited proposals sponsors?

    High tenders participation costs

    Participations costs in a competitive dialogue may easily reach up to 0.5%-2% of the total investment, in certain cases even more.

    According to a study requested by Infrastructure Australia to KPMG, following to a detailed review of bidding costs for PPP projects, bidders typically spend about A$2.5 million for projects with a capital value between A$250-300 million, A$5-6 million for a A$1 billion hospital, and A$30 million or more for a large A$2 billion plus economic infrastructure project.

    The UK National Audit Office estimates that on average the bidding costs account for 2.5-3 percent of the total project costs. In the case of the Edinburgh Infirmary hospital PPP (Scotland), the bidding costs amounted to GBP 7.4 million, or 3.8% of the total investment cost.

    The size of the project, its complexity, the duration of the dialogue, the level of definition of the propositions, the quality of teams and also the capability of the public sector to formulate its needs are some of the factors influencing the budget of a private sector partner.

    The case for compensation

    In view of these high costs, compensation is seen as a way to strengthen the attractivity of the tender for the private sector and thus improve the quality of the proposed offers.

    More specifically, compensation aims:

    • To attract large enterprises active in PPP sector on the global level. Those large enterprises tend to prioritise most attractive markets, with full or partial reimbursement of tender costs considered as an attractivity factor.
    • To attract mid-size companies, which could experience difficulties in “digesting” the losses if they are unsuccessful. Indeed high bid costs discourage potential bidders to an extent which is materially affecting competition and, consequently, the value for money which Governments can obtain from PPPs
    • To improve the quality of the presented offers, encouraging the participants to invest more in the preparation of their bids.
    • To give credibility to public sector’s initiative. Compensation represents a sign of strong commitment of the authorities in the PPP program, and their intention to go on with it (and not simply to “test the market” followed with tender cancellation)

    Bid compensation doesn’t necessarily mean increased project cost for the public partner, since in absence of the said compensation, all tender participants will incorporate their participation costs into their proposals, as well as the costs incurred on the other markets where they were unsuccessful.  On the other side, public sector should avoid the situation when compensation works as an indirect grant to bidders simultaneously participating in tenders in different markets, resulting in an indirect subsidy to the markets that do not compensate bidders. Careful review of PPP markets should be carried out to make sure this is not the case.

    Compensation is an exception to the principle not to remunerate the participants in the public procurements, since the costs of tender participation are usually considered as transaction costs borne by all the entrepreneurs. This exception is justified by the high preliminary expenses customary in PPPs projects with significant design requirements.

    Why compensating an unsolicited proposal sponsor?

    The case for compensation may look a little more difficult to make with regard to an unsuccessful unsolicited proposal.

    However it is generally agreed that the compensation for a proponent of an innovative idea serves as a sign of appreciation of private sector initiative from the Government side and encourages further submission of unsolicited proposals.  It also serves as remuneration of the value of the intellectual property incorporated in the proposal. From the point of view of public finances, the indemnity to the unsuccessful bidder corresponds (at least partially) to the gain or saving from the fact that one part of the project preparation was done by the proponent of the idea. 


    To pay or not  to pay?

    Bid costs compensation is not the only way available to reach certain objectives for the public sector. In any case it should not be granted automatically (the public sector should retain discretion to pay where and when it considers appropriate) and should be justified on a case by case basis. We suggest considering:

    • The expected competition.  Are we looking to attract local/national SMEs? Is there any risk that the project won’t attract any interest on the local market?  
    • Incentives to improve the quality of the offer. The compensation may induce the candidates to present more elaborated, more innovative bids, sometimes with the elements of intellectual property for which the compensation may represent a sort of indemnity, and increase the chances to gain Value for money. If the project is particularly demanding in this area, compensation may play a positive role.
    • Cost of preparation. If the project is characterised by a particular complexity or it is  anticipated that the competitive dialogue will be unusually long,  compensation might be more useful than in other situations.

    Once again, compensation is only an option, not an obligation for the public sector, and should be paid only in case when the Public sector appreciates the value of the proposal and wishes to encourage the efforts of the private sector.

    In case of an unsolicited proposal, the compensation should be paid only at the end of the award process, when the proponent of the innovative idea participated in the ensuing tender but did not win it. Obviously if the proponent of an unsolicited proposal is awarded a contract, preparation costs are not to be specifically compensated. If it is eliminated, a compensation could be paid under conditions that (i) the public sector considered the idea innovative before the launch of the tender, (ii) the proponent presented a compliant bid, responding to the requested criteria, and (iii) the tender authority decided to pay a compensation. 

    No compensation should be paid in case of direct negotiations, since it would encourage opportunistic behaviour from the private sectors side.


    How much to pay?

    It is important to calibrate the amount of the compensation: a low amount may fail to reach  the compensation initial objectives, on the other hand an exaggerated amount will create inefficiency of public expenses, increase the price of the PPP project, motivate windfall profit behaviour from the private sector side and might negatively affect PPP program in its whole

    The public sector should estimate the percentage of costs that it is going to pay to the bidders. In practice an indemnity in the range of 20%-50% of the incurred costs may represent a sufficient amount. 

    What method to use to calculate the amount of the compensation?

    International practice proposes two major methods to calculate the amount of indemnity.

    • One solution is a fixed amount “honorarium”, which is widely considered as a “simpler” solution for reimbursing unsuccessful bidders.
    • Alternatively compensation maybe calculated as a percentage of expenditures. The incurred costs should be properly proven. and the amount covering the costs is also limited by a certain cap.

    Both methods have their advantages and disadvantages. A “honoraria” may look like a simpler option but setting the fixed amount is not easy and definitely demands certain experience to avoid opportunistic behaviour from private sector. On the other side the disadvantage of the incurred costs method is its complexity and reduced private side incentive to control expenses.  

    If the percentage of incurred costs method is chosen, how to audit the expenses?  The public sector might need to hire an external auditor or assess itself the submitted expenditures to verify the reality and reasonability of expenses, whether they are linked directly to the offer and only to this offer, and whether they contributed directly to its quality. To ensure consistency, public sector should verify simultaneously the costs submitted by all the bidders. This approach will allow to identify possible substantial differences between bidders, which in certain cases may seem unjustified

    If the proponent of innovative idea participated in the tender but was eliminated, the level of innovation may also influence the compensation amount: the public sector should either identify the value of the proposal for the Government or define the development costs of similar offer if it would have been completed by the public sector, which is not easy. Additionally the public sector should take into account that the proponent can commercialise the innovation on the international market. In this case the incurred costs for a design that can be marketed internationally should not be covered by the domestic authority.

    Solving the Hamlet dilemma

    Bidders compensation is one of the most acute PPP controversies, along with the desirability of unsolicited proposals. We hope to have made the case for a well thought and carefully considered bidders costs compensation policy. Bid compensation to the proponent of an unsolicited proposal subsequently eliminated during the tender process is a complicated issue and should be treated with additional care. Transparency, publicity as well as regular review and evaluation are key pillars to solve the Hamlet like dilemma that Governments face on a daily basis: to pay or not to pay, and most importantly, understanding why and how - a daunting challenge even for a post Shakespearian Government.   


  • L’évaluation des sociétés en Afrique : Vers une réduction de l’incertitude par l’émergence de standards méthodologiques

    La croissance rapide de l’Afrique impressionne les observateurs et attire les investisseurs. Dans un contexte de ralentissement de l’économie chinoise et d’atonie de l’Europe, les grands acteurs du  Private Equity se tournent de plus en plus vers le sud du Sahara. Les investissements qui en découlent  devraient générer une série de retombées positives : meilleure intégration à l’économie mondiale, accélération de la croissance, création d’emplois, diffusion des meilleures pratiques, qui vont contribuer à leur tour à enclencher un cercle vertueux… Ces mécanismes nécessitent cependant un bon fonctionnement de l’ensemble de l’écosystème (tel que l’environnement juridique, la mise en œuvre des contrats, la fiscalité), parmi lesquels, de manière peut-être un peu méconnue, la capacité des opérateurs à évaluer financièrement les sociétés africaines avec la précision requise.

    L’évaluation financière des sociétés africaines rencontre en effet des difficultés spécifiques, qui  peuvent se décomposer en trois grandes catégories :

    • Des pratiques de management souvent opaques. Cela va du système de double comptabilité, plus répandu qu’on ne le pense même au sein de grandes structures, à une gouvernance d’entreprise défaillante.
    • Des marchés financiers insuffisamment développés. Cette contrainte affecte la capacité d’identifier des transactions comparables susceptibles de servir de références dans le cadre d’une approche d’évaluation par les multiples : autant les économies développées se prêtent à une approche comparative grâce à l’identification d’une large gamme de transactions similaires en terme de secteur, de taille d’entreprise, de type d’opération, etc., autant cette entreprise est malaisée en Afrique où les transactions sont beaucoup plus rares. 
    • Un niveau de risque difficile à cerner. L’Afrique est sujette à de brusques variations du risque politique, souvent en lien avec les cycles électoraux. La mauvaise qualité de l’environnement des affaires entraine également un haut niveau d’incertitude dans une  série de domaines : risque juridique et règlementaire, faible protection de la propriété intellectuelle, fréquence des affaires de corruption, etc.

    Sur le plan méthodologique, les évaluations s’appuient traditionnellement sur trois catégories d’approches : l’une basée sur l’estimation des revenus futurs actualisés ; la seconde sur les références au marché (approche dite des multiples) et la troisième sur l’actif net réévalué. Dans le domaine du PE, si aucun consensus ne se dégage sur la pertinence absolue de telle ou telle méthode, c’est généralement sur les approches de marché que les opérateurs tendent à s’appuyer le plus. Comme on vient de le voir, cette pratique est à la fois plus difficile à mettre en œuvre en Afrique et moins pertinente du fait de la rareté des transactions ; les opérateurs accordent donc proportionnellement davantage de poids à l’approche  par les cash-flows.

    L’approche par les cash-flows actualisés requiert de retenir un taux d’actualisation, généralement égal au cout moyen pondéré du capital. Si le calcul du cout moyen de l’endettement ne pose pas de problème de principe, ce n’est pas le cas du cout des fonds propres.  L’approche du Medaf, qui reste la plus courante, implique de déterminer une prime liée au risque de marché, ainsi que le risque spécifique du titre, approché par le beta estimé. Les insuffisances des marchés financiers africains, peu efficients, rendent ces estimations très difficiles : les divergences d’appréciation sur le niveau des primes de risque de marché et de risque spécifique peuvent conduire à des écarts considérables sur le résultat final d’une évaluation.

    En pratique, l’approche du Medaf est souvent modifiée pour tenir compte de résultats empiriques qui  tendent à démontrer que les sociétés de petite taille performent généralement mieux que les grandes, ce qui doit être pris en compte à travers une prime spécifique. Ce point est important pour l’Afrique où la taille moyenne des entreprises reste très inférieure à celle des marchés développés. D’autres facteurs de risque ont été identifiés par la pratique et justifient l’ajout d’une prime spécifique : il peut s’agir de la dépendance excessive à l’égard d’un dirigeant, d’un client ou d’un fournisseur, ou encore de l’absence de track-record suffisant. Là-aussi la détermination du niveau des primes à appliquer est sujette à une certaine subjectivité.

    Quant au risque pays, il peut s’apprécier à travers le spread entre les émissions obligataires en euro ou en dollar sur les marchés émergents et les émissions obligataires sur les marchés développés en tenant compte de la notation de crédit, en ajoutant ce spread au taux d’actualisation à retenir ; toutefois on connait aussi une approche alternative consistant à affecter les cash-flows d’un coefficient correcteur. Ces deux méthodes peuvent conduire à des résultats sensiblement différents, sans compter que les troubles politiques peuvent se traduire par un sentiment subjectif de risque politique plus élevé que ce que montreraient les seules données de marché.  

    On notera aussi, du fait de la faiblesse des références de marché, la difficulté à évaluer la valeur terminale, qui constitue souvent une part substantielle de la valeur totale dans l’approche par les cash-flows. 

    Les incertitudes méthodologiques dont on a cité quelques exemples ci-dessus se traduisent  par de larges divergences d’appréciation entre acheteurs et vendeurs, et donc par une plus grande difficulté à conclure les transactions. Toutes choses égales par ailleurs, le degré plus élevé d’incertitude et donc de risque, pèse sur l’appétit des investisseurs.  Le développement du marché passe dès lors par une réduction progressive du risque d’évaluation. Nous proposons plusieurs pistes pour cela :

    • Une transparence accrue dans les méthodologies conduisant à une plus grande homogénéité des méthodes et des approches ;
    • Des échanges plus fréquents au sein de la profession afin de définir des standards communs et de réfléchir aux spécificités des économies africaines qui méritent une réflexion organisée ;
    • Une meilleure coopération entre spécialistes réalisant des prestations d’évaluation afin de contribuer à mettre en place des standards de marche ;
    • La création d’un groupe de travail spécialisé au sein de l’International valuation standards Council (OVSC) qui se consacrerait aux spécificités des marchés émergents afin de faire émerger des standards reconnus par la profession.

    Continent en devenir, l’Afrique a vocation à attirer bien plus de capitaux que ce n’est le cas aujourd’hui. Nous espérons avoir montré qu’une action concertée des professionnels de l’évaluation financière peut faciliter cet objectif et contribuer à faciliter le développement du marché.


  • Des hubs financiers pour l’Afrique ?

    Plusieurs pays émergents ont annoncé leur volonté de mettre en place une stratégie visant à devenir un centre financier international (International Financial Hub). En Afrique, au-delà du cas particulier de l’Afrique du Sud, la liste comprend le Maroc, Maurice, et même le Cap Vert ou le Botswana. Bien sûr, ces pays n’ambitionnent pas de devancer Londres, New-York, Singapour ou Hong-Kong. Ils rêvent cependant de donner à leur place financière un rôle qui dépasse largement celui du financement de leur économie nationale, pour s’affirmer sur la scène régionale.  Atteindre ce rêve symboliserait le passage d’un cap pour le continent africain, qui pourrait ainsi prouver sa capacité a mieux trouver sur place les clés de son développement.

    Les facteurs qui éveillent l’intérêt pour ce statut de centre financier ne sont guère difficiles à deviner :  rayonnement international, création de richesse et d’emplois dans le secteur financier mais aussi celui des services (conférences, hôtellerie, transports, tourisme, centre d’affaires, etc.), meilleure attractivité économique, amélioration du climat des affaires susceptible de générer des investissements structurant pour l’ensemble de l’économie, les avantages attendus se déclinent à l’envie. A terme, la finance peut espérer prendre une place significative dans l’économie domestique (10% du PIB pour le Royaume-Uni).

    Quelles peuvent être les chances de réussite dans un contexte de compétition internationale  féroce, où les places sont chères ?  Elles passent par une juste vision du marché, et probablement une stratégie consistant à se positionner sur l’approche la plus pertinente. Le site (rapport GFCI) identifie ainsi trois  types de business models, qui recoupent en réalité des stades de développement différents selon trois axes :

    • La connectivité (degré d’intégration aux autres centres financiers et au marché mondial);
    • La spécialisation (qualité et profondeur des services offerts dans les différents sous-secteurs, banque, gestion de fonds, assurance, services professionnels, gouvernance) ;
    • La diversité (richesse de l’offre disponible).

    En associant profondeur et diversité, on peut classer les centres dans un tableau à double entrée, selon leur caractère mondial ou local/régional d’une part, et selon leur profondeur et leur diversité. La véritable compétition se déroule ainsi entre centres aux caractéristiques comparables. Si aucun pays africain ne peut espérer, même à moyen terme, atteindre une position mondiale alliant profondeur et diversité, les objectifs pour être réalistes, doivent viser à une prééminence régionale et une spécialisation dans les niches les plus accessibles. Mais même ainsi limitée, la réussite d’une telle stratégie nécessite une vision de long terme, la capitalisation sur les avantages comparatifs et l’absence de gros points faibles susceptibles de remettre en cause les politiques les mieux élaborées (à titre d’exemple, on peut penser que le Cap Vert aura du mal à compenser sa localisation très périphérique). Stabilité politique, attractivité et sophistication du cadre législatif et règlementaire, qualité des infrastructures de base, respect de l’état de droit, sont autant de prérequis au développement de la sphère financière.

    Au vu de ces éléments, on voit mal comment la place de Johannesburg pourrait être contestée par un rival continental dans les décennies à venir. Cela n’exclut pas cependant la percée de concurrents ambitieux sur des marchés de niche. Le Botswana, si dépendant de l’économie diamantaire, pourrait-il mettre en avant ses bons résultats au classement Doing Business ? Maurice, au-delà de son image de paradis fiscal, peut-elle élargir son offre de niche actuelle?  Pour notre part, nous sommes prêts à prendre le pari que le Maroc est bien positionné pour devenir un relai financier important pour l’Afrique subsaharienne. Mieux que ses partenaires d’Afrique du Nord : l’Algérie est encore empêtrée dans un système largement socialiste ; la Tunisie, si elle peut s’appuyer sur une main d’ œuvre bien formée et de bonnes infrastructures, n’a pas mené de politique véritablement active dans ce domaine, d’autant que les années post-révolution du jasmin ne s’y sont guère prêtées. Quant à l’Egypte, elle parait encore vouée à une longue période de soubresauts politiques. Reste donc le Maroc, qui a compris que son développement passe par une offensive en direction du sud, et notamment des pays francophones. Les banques marocaines ont réussi depuis plusieurs années une stratégie d’internationalisation dans cette direction. La Bourse de Casablanca est l’une des plus dynamiques d’Afrique et les observateurs ne manquent pas de saluer la gestion de Casablanca Finance City comme une incontestable réussite. Il faudra néanmoins faire preuve de beaucoup de continuité dans l’effort pour  atteindre des résultats durables et significatifs. Reste aussi à coordonner le développement de la finance avec l’économie réelle afin de s’assurer qu’elle produise des retombées effectives pour les populations. Un marché financier efficace pourrait ainsi se traduire au Maroc par un accès plus aisé à l’entrepreneuriat, l’encouragement à la prise de risque et le de développement de grands projets industriels, plutôt que par une spéculation tournant à vide sur des produits virtuels… Cette vision « industrielle » de la finance donnerait aux entreprises marocaines des ressources solides pour se projeter dans la sous-région et créer de la richesse et de l’emploi. De la même manière, la consolidation d’un hub conforterait les atouts traditionnels du Maroc relatifs au tourisme et l’hospitalité.

    Le pari est loin d’être gagné (à long terme, il devra veiller à mieux s’ouvrir à la langue anglaise, améliorer la formation de ses professionnels, maitriser le développement des infrastructures) mais le Maroc fait assurément partie des concurrents les mieux placés pour devenir un acteur de la finance plutôt que pour en subir les contraintes.  C’est tout le continent africain  qui ne pourra qu’en bénéficier. 

  • Crowdfunding, the latest revolution in finance?

    The word "Crowdfunding" is believed to have been created in 2006. In 2013, 3 bn USD in debt could be raised by crowdfunding, a figure that could double in 2014. Such astonishing figures, even in the world of finance where innovations are an everyday phenomenon, are clearly the trademark of a revolution that could drastically change the way corporates get finance. Is this revolution here to stay?
    Basically crowdfunding consists in using internet based crowdfunding platforms to collect a number of most commonly small donations to fund projects.  While in a way crowdfunding has always existed under the form of approaching family and friends, the development of internet has turned it into an incomparably more powerful instrument. Any compelling funding proposal may find at no cost a global audience to support a good project.  The original concept consisted in charity donations; in a second stage, the creative industry successfully used the concept: movie, music, and other artistic projects could be financed without the recourse to well-established producing companies.  The public was happy just to facilitate innovative products, or possibly to get some reward as concert ticket.  Since a couple of years, crowdfunding is commonly met among all sorts of ventures, mostly tech projects but not only and can work as securities. Alternative schemes may also be designed to forego the legal restrictions that prevent the public offer of securities. For example, some firms sell micro-intellectual property rights valid for any sale which takes place in a small geographical area… To sum up, crowdfunding may be used on the model of a charity, of the proposal of a reward, but also of debt and equity, in short fulfill all the financial needs of a start-up.
    The fascination for crowdfunding has been fuelled by success stories such as Pebble, a company that provides e-Paper watch for i-Phone and Android: they intended to raise 100 000 USD and eventually collected over 10 million USD. Although this story is clearly more the exception than the rule, a platform such as Kickstarter raised 145 million in 2012, and may have over 700 competitors worldwide. 
    In view of the boom, public authorities have understood that crowdfunding represents a reservoir that should be exploited, and that unjustified legal restrictions should fall. For example in the US, potential investors to invest in small businesses were required an annual income of over 200 000 USD or a total wealth in excess of 1 million USD. In addition the number of shareholders of a small business was limited and small businesses could not advertise for investors. The JOBS act signed in April 2012 allows small businesses to sell their equity on a crowdfunding platform and investors can invest 10 000 USD or 10% of their income (which is lower) to fund projects.  However the legislation requires the SEC to pass the corresponding regulations, which has not been done so far. The EU commission is also planning to enact a Directive by the end of 2013 which will have to be transposed in the respective national laws by the member States within 3 years.
    For companies that require small seed capital, typically inferior to 100 000 USD, crowdfunding looks like an attractive option. It may well end up out-crowding venture capitalists. One limitation is that it may create risk of theft of intellectual property, of the ideas being copied, a risk maybe exaggerated by many entrepreneurs developing a certain paranoia with commercial secrecy. In practice, this fear is not likely to be well grounded in many instances. Crowdfunding allows to obtain results extremely quickly, which shorten the implementation delays of a project. This is sufficient to grant a decisive competitive advantage to the company that benefits from being first on the market. Another limitation is that when the company has grown and wishes to raise venture capital or private equity, the presence of a great number of small shareholders may be an obstacle to the attraction of an institutional investor.
    On the other hand, the advantages of this new approach to start-up finance are clear. For the entrepreneurs, it is a low cost solution which exposes them to the reality of the market. Investors are very often potential clients which will have a long term relation to the company. In addition this tool demonstrates total flexibility and unrivalled rapidity, which are ideal attributes when you try to launch a new business on fast moving markets – as all modern markets.
    We also believe crowdfunding to open new opportunities in developing markets where access to finance is often a bottle neck. Thanks to the power of internet, good projects get immediate access to billion potential investors and bypass the limitation of the local financial intermediaries. Discrimination between the rich and the poor who do not have family and friends to help them, gaps between the well-connected and the lonely genius, all these factors which may limit the development of successful projects may increasingly become something of the past.
    Still in its infancy, crowdfunding has to develop all its potential. This will require more legal reforms, consolidation of the platforms, and increased capacity building for entrepreneurs to learn how to use this new tool efficiently. But the way is open and free.