JOSHUA NOTT: Morocco’s battery factory: a guide to geopolitical hedging

If the second half of the 20th century was defined by a contest between two great powers, the 21st century is the time of the rising middle powers — states characterised by their pragmatism, ambition and desire not to pick a side.

Opportunistic, agile, competent and master negotiators, these states work to secure the best deal irrespective of the counterparty. Their strategies, straight out of a “how to run a hedge fund” guide, involve cutting deals and making trades that look a lot like the “long straddle” — ensuring that no matter the market turn (whether towards the US or China) they will receive some upside. 

One of these rising powers, Morocco, has played a particularly astute hand in making the most of a multipolar world. In September CNGR Advanced Material, a Chinese battery firm, quietly announced a $2bn investment in a Moroccan battery manufacturing facility. The deal, a partnership with Al Mada (an investment vehicle owned by the Moroccan royal family), sees the creation of a battery manufacturing site in Jorf Lasfar — a port city to the southwest of Casablanca. By the fourth quarter of 2024 lithium iron phosphate (LFP) batteries will start leaving the factory’s doors. When fully operational the facility will churn out batteries for more than 1-million electric vehicles (EVs) a year. 

The agreement is as simple as it is clever. Needing to diversify its economy, create jobs and attract foreign investment, Morocco’s government struck a deal with a Chinese battery maker looking to avoid US trade barriers. For its part, CNGR will benefit from doorstep access to the European market while exploiting Morocco’s status as a free trade partner to the US. Under current trade arrangements Moroccan battery exports are eligible for subsidies for EVs sold in the US of up to $7,500 per unit. In short, the deal sees a Chinese company, based in Morocco, accessing the US market on preferential trade terms. 

If you thought such a move would dissuade Morocco’s Western suitors from investing in the country, think again. As of 2022 the US overtook France as the country’s top investor, with a net flow of investments hitting 7.4-billion dirham ($761m). US investments in Morocco now represent more than 30% of the overall influx of foreign direct investment. 

Morocco isn’t just striking deals for battery manufacturing. In 2022 the UK’s Octopus Energy signed up to the Morocco-UK Power Project Xlinks, which will see the laying of four 3,800km subsea cables connecting the UK to a huge renewable energy farm in the Moroccan desert, a critical component of the UK’s transition to net zero. The site will supply 3.6GW of reliable, clean power for an average of 20 hours a day. As for the solar panels powering the project, these are likely to be Chinese made (in whole or in part). At the close of 2022 the world’s largest solar module manufacturer, LONGi, announced plans to introduce its new generation of solar cells, the Hi-MO 6, to the Moroccan market as part of a broader push into North Africa. 

Where Morocco is playing the geopolitical hedging game like a Wall Street pro, SA’s investment strategy looks akin to that of an amateur retail investor. If the SA government is not careful in its engagements with autocratic regimes such as Russia and Iran, it will lose its preferential trade status under the US African Growth & Opportunities Act (Agoa). Exclusion from Agoa would remove a vital hedging instrument from SA’s deck. As the country looks to the US-Africa trade summit in Johannesburg in November, its officials may want to take a leaf out of the Moroccan playbook.

• Nott (@TheAfricaBrief) works for a venture facility for public benefit and is based in London. He writes in his personal capacity.