The days when it was enough to develop an investment plan to obtain the Treasury guarantee in order to raise loans are well and truly over. Public companies must now commit to specific objectives, or even to an evolution of their economic model. The former Central Guarantee Fund, transformed into a Company Guarantee and Financing Company, is leading this revolution on behalf of the Treasury. At the end of 2023, the outstanding amount of Treasury guarantees amounted to 155.6 billion dirhams.
The reform of the Treasury guarantee system is one of the key elements in the restructuring of the State portfolio and its role as shareholder. It is also linked to the central role of public companies in investment. Thus, a total of 138 billion dirhams are planned for 2025.
Guarantee on a case-by-case basis
The major change in the former Central Guarantee Fund (CCG), known under its commercial brand Tamwilcom, is the most visible aspect of this reform, but it is not the most radical. In addition to its historical activity with the private sector, Tamwilcom now requires the signature of the Treasury by providing guarantees to the creditors of public companies. But be careful, it is not a question of giving him carte blanche either, warns the Ministry of the Economy and Finance.
The direct State guarantee or indirect, via the National Company Guarantee and Financing Company (SNGFE) is granted on a case-by-case basis, in return for specific commitments from the company’s management.
Basically, a program contract will be required which can bring about an adjustment to the margin, or even a transformation of the economic model of the company which is requesting the Treasury guarantee. This is the doctrine initiated by Mohamed Benchaâboun during his time at the Ministry of Finance. The guarantee provided by SNGFE on behalf of the State is not free. In addition, it is dependent on the prior green light from the Ministry of the Economy and Finance.
According to our information, the guarantee commission paid by the beneficiary can go up to 2% of the total amount of financing mobilized, depending on the profile of the applicant. At the end of 2023, the outstanding Treasury guarantees amounted to 155.6 billion dirhams, including 124.8 billion dirhams for external borrowing. This is not surprising because companies with public participation do not present the same risk profile. If multilateral donors like the ADB or the World Bank do not require a State guarantee for a locomotive like OCP for example, they only lend to entities like ONEE, ONCF or ONDA if the Treasury provides them with some “coverage”. But so far, there has been no major disaster on the debt maturities of public companies, reassures the Ministry of Finance.
“These companies regularly pay debt service, whether guaranteed or not,” our source adds.
SNGFE’s guarantee commitments, finalized at the end of 2023, show an evolution in claims in line with forecasts. Overall, the level of claims is below expectations, assures the Ministry of Finance.
Guardrails
This small revolution is taking place under the radar of the monetary authorities, Tamwilcom being subject to the prudential rules of the banking sector. Bank Al-Maghrib ensures that the regulatory capital requirements are in line with the off-balance sheet commitments and the risk hedging system of the former CCG.
Thus, and within the framework of the target plan in terms of prudential coverage linked to the company’s commitments, three levels of coverage are put in place: a first level consisting of a priori allocations, established on the basis of the prudential rules of Bank Al- Maghrib, and assimilated to an ex-ante provision.
If we are to believe the Ministry of Finance, the budgetary allocations to the SNGFE make it possible, today, to cope with any extreme shock in terms of worsening claims. A second level relates to the “reserve fund” established by the law creating the SNGFE. This is fueled, among other things, by its profits which the State shareholder has undertaken not to touch. The last and third level of the dike of the prudential system relates to the company’s equity.
As part of the continuous monitoring of the risks linked to the guarantees it grants to companies, the former CCG presents every six months to the Ministry of Finance a report on the evolution of the risks linked to commitments benefiting from State guarantees, on the levels of possible losses and the deployment of the risk coverage system.
This ou pas this?
Public guarantees, as contingent liabilities of the State, do not constitute a Treasury debt. What would be a latent debt for a private company would therefore not be for the Treasury. It is the Ministry of the Economy and Finance which affirms this. But this position is not shared by everyone, and in particular not by organizations which ensure budgetary orthodoxy.
Half-heartedly, at Finance, we nevertheless recognize that “these guarantees constitute a source of budgetary risks, since they can result in the reimbursement of certain installments of the loans backed by the guarantees having been the subject of request for a face-off”.
Abashi Shamamba / ECO Inspirations
