Morocco has quietly transformed from a peripheral market into a heavyweight in African equities. A decade ago, it accounted for just 15% of the MSCI Africa (ex-SA) Index; today, it represents more than half. For the Old Mutual African Frontiers Fund, this shift underscores a core principle: long-term investing in Africa requires agility and depth of insight. We are building exposure to economies and businesses that can deliver sustainable growth over time.

Our motivation for investing in Morocco is rooted in its structural stability and evolving opportunity set. Inflation is under control, interest rates are among the lowest on the continent, and GDP growth is trending above its historical average. These fundamentals, combined with reforms and infrastructure investment ahead of the 2030 FIFA World Cup, create a supportive backdrop for select sectors. Yet, Morocco’s market seldom screens as “cheap”. Valuations are high, and dividend yields are modest compared to peers. This is why our approach matters: we rely on rigorous, on-the-ground research to identify companies with genuine growth potential rather than broad exposure to the index.

The African Frontiers team prioritises countries where policy, demographics, and corporate innovation intersect to create durable returns. Morocco fits this profile – but only in pockets. Our recent research trip illustrates how we separate signal from noise. From retail modernisation to healthcare expansion and digital payments, the stories we uncover are shaping the fund’s positioning for the next decade.

Morocco has seldom ranked as the most exciting African country to invest in. Earnings growth expectations typically lag other African markets. Its dividend yield is almost always lower than other African markets and its Price-to-Earnings ratio (P/E) is less attractive.  The latest inflation print is just 0.1% year-on-year, well below the double digits of other African countries. Its market P/E is close to 20x, while most of the other large Africa countries are single digit. Often an outlier in Africa, even Morocco has until recently seen itself differently from other African countries. It even applied, unsuccessfully, in 1987 to join Europe. In 2017 it finally joined the African Union. 

Today, Morocco is more relevant for the African investor.

Although there was some recent unrest among youth, upset by the spending on new football stadiums at the expense of health and education, the king generally keeps the country stable. The low interest rates in Morocco mean that it is not burdened by interest payments taking the lion’s share of the revenue collected. Said differently, the chart shows that Morocco only spends 2% of GDP on interest payments compared with Egypt at 13%.

Despite starting the year screening lower than other African markets, Morocco delivered strong returns in 2025, particularly in the first quarter. Morocco returned around 22% in local currency and 36% in US dollar. Morocco’s currency is largely pegged to euro, so its returns benefitted from the euro’s strength in 2025. 

At a more granular level, the strong performance was more stock specific than broad-based. The chart below shows the wide range of returns for some of the larger companies in 2025.

Some of the possible reasons for the overall returns being strong:

• The Bank al-Maghrib’s, Morocco’s central bank, policy rate was cut during the year. It is now back to pre-covid level. Falling interest rates makes equities more attractive. At 2.25%, Morocco’s benchmark rate is the lowest in Africa. With one-year treasuries offering around 2.5%, it is little wonder that investors are turning to the stock exchange to find some yield. According to our calculation the dividend yield of the market is 3.1%.

• Morocco has exchange controls, making it challenging for Moroccan investors to take money out of the country. This leads to inflated local demand for investment opportunities. In 2024 Moroccans were given an amnesty for undeclared assets and income at a 5% contribution rate. This also brought money into the formal channel from early 2025. The Moroccan tax authority estimates that there was more than $40bn of undeclared assets. The amnesty formalised only $200m, but even this small amount made a material difference in a stock market that trades just $20m per day.
• Excitement about co-hosting the 2030 Football World Cup, and pick-up in infrastructure investment ahead of the event, has bought the bulls out.

The strong showing of the Casablanca Stock Exchange has had a positive side-effect and increased liquidity. The higher valuations have drawn some private companies onto the stock exchange, as private owners look to cash in on the boom. A small medical equipment business called Vicenne listed in July 2025, CMGP Group is a company that provides services and products to the agricultural industry listed in December 2024. Cash Plus, a payments business and SGTM, a general construction company listed in December 2025. 

Following the strong showing in 2025, we think there are more favourable opportunities in the rest of Africa than in Morocco. With valuations seldom attractive in Morocco, the positions in the Old Mutual African Frontiers Fund tend to be where we see the best growth opportunities.

LabelVie is a food retailer. Shifting consumers from informal to formal retail (modern distribution) should provide a growth tailwind. Currently only around 20% of grocery sales are through corporate-owned supermarkets and convenience stores. By comparison modern distribution has more than 60% share of South African food sales.  LabelVie has recently started targeting the lower end consumer through new small format outlets called Supeco. In the six months to June 2025, 44 new Supeco stores were added. Over the first nine months of 2025, LabelVie reported 13% revenue growth, a good outcome in an environment where inflation is close to zero.

Hightech Payment Systems is a software provider to the financial services industry. HPS has over 500 customers (such as banks, telcos and retailers) in 92 countries. It is transitioning its revenue model from being a project based business to “Software as a Services” (SaaS). Rather than reporting a large upfront revenue, HPS will have more regular revenue over time from each client. This transition has had a negative impact on results over the last two years, but this will reverse going to 2026. At the same time the move to digital payments from cash (across many of the markets where it operates) will provide a tailwind.

Akdital is a private hospital group that is benefitting from regulatory change that allows private companies to own a hospital group. Since 2020, Akdital has expanded its hospital beds by around 50% each year. Akdital has gone from 600 beds in 2020, to 4 000 beds in 2025.  In my 30 years of investing, I cannot recall any other business that has rolled out at this pace. It has taken its presence from just one city in 2020 to now 21 cities across Morocco by mid-2025. There will be teething issues along the way, but these will be offset by the critical mass benefits kicking in. The roll-out is not yet complete - Akdital is guiding to a further 50% capacity to be added by 2027, or 6 000 beds. Akdital is trading at around 30x P/E, so much of this growth outlook is being reflected.

Morocco is in a relatively good space at this time:

• Inflation is under control 
• GDP growth outlook of around 4.5% is above the 3% trend level 
• The deadline of preparing for FIFA 2030 will provide a tailwind for the next three years or so

So while the market does look fully priced, we are comfortable for the Old Mutual African Frontiers Fund to have select positions in the best growth stories.