A recent study on effects of climate change on the tea sector in Kenya - the world's largest exporter of black tea - has revealed several challenges related to changing weather patterns in the East African country that has seen farmers and multinationals seek alternative solutions.
65-year-old Mostafa Terrab is internationally recognised. He was endorsed by Hassan II in the early 1990s when he joined the royal cabinet. Terrab remains a great state representative and is passionate about contributing to his country’s position on the world stage.
The Moroccan fertiliser giant OCP, which has been under his leadership since 2006, has been totally transformed ($6.1bn in turnover in 2020). It is now diversifying its activities, modernising its infrastructure and governance and investing in research and development.
In this second part of our interview with the Terrab, the CEO looks back to 2020, a year that was marked by his group’s expansion to the Indian and South American markets and renewed tension in the Sahara with the Polisario.
How is OCP doing after a year marked by an unprecedented pandemic, the end of which is not yet in sight? Your turnover, which was up by 4% in 2020, seems to indicate that your group has managed to cope with this period of uncertainty.
Mostafa Terrab: Indeed, the world is facing an unprecedented pandemic within a global context that is marked by openness and the almost unfettered movement of people and goods. At a time when national authorities have declared a health emergency and taken preventive measures to deal with the effects of the pandemic, the group has organised itself to ensure resilience of our operations.
Staff who were not essential to production were allowed to work from home and a Business Resilience Center (BRC) was created. The exemplary mobilisation and commitment demonstrated by all of our employees and subcontractors ensured that production and the supply chain ran smoothly.
The growth in our turnover within the context of a low cycle, which was also marked by a complaint filed by our US competitor, is remarkable. We quickly adapted to a global market, where our activities are naturally linked to the food sector. In addition, we have worked hard to reduce our production costs. I would like to take this opportunity to thank OCP’s employees for their commitment.
Yet the price of fertiliser was not particularly high. You compensated by winning new markets.
We are a global player with customers on five continents and one that is also fully integrated within the entire phosphate value chain. I’ll give two examples. The first is India, which is our traditional customer for rock and acid. This large country, just like everywhere, experienced lockdowns that affected its fertiliser production.
We reacted quickly by supplying our Indian customers with fertiliser, which in turn benefited agriculture and farmers as the country was experiencing an exceptionally favourable monsoon season.
The second example, Ethiopia, is a key partner in Africa. We are working to meet the country’s demand for fertilisers, which is growing steadily, to ensure food security and support its agricultural exports.
Regarding the low prices that you mentioned, 2020 was also the year in which our initial investment plan, which consisted of tripling our production capacity, came into full effect and enabled us to achieve record levels of production, thus validating our counter-cyclical investments.
What are your objectives for this year? Is increasing fertiliser sales in Asia and South America one of your priorities? Do you want to further increase fertiliser sales (and decrease rock sales)?
First of all, the OCP Group is an integrated player across the entire fertiliser chain, from phosphate rock to fertiliser, including phosphoric acid, which is an intermediate product used in the manufacture of fertilisers and other food or technical uses. Integration makes it possible to be flexible and adapt to the variety of global demand.
Moreover, our sales are balanced across the four continents, with Oceania integrated into our Asia sales network. Under the guidance of His Majesty the King, we are working to develop phosphorus, which is a strategic resource for life, in a responsible manner and for the benefit of all humanity. Our strategy is adapted to meet our customers’ demands and is part of the global food security chain.
In mid-2020, your American competitor Mosaic filed a complaint in the US accusing your group of selling subsidised fertiliser. After an investigation, the authorities ruled in favour of the complainant and decided in March to impose customs duties of 19.97% on your exports. Pending this decision, you suspended your sales to the US. Will you resume your exports?
Let me first correct you: this was not a complaint about selling subsidised fertiliser, a practice that consists of selling products for below the cost of production and that can be penalised! This reproach did not concern commercial practices.
I will not give my opinion on the US authorities’ decision. However, as soon as the decision to impose tariffs on our products was announced, we reaffirmed our intention to continue to serve US farmers. We are evaluating all possible options so that we can decide on how best to continue to serve the entire North American market.
This surcharge was motivated by the fact that OCP has free access to Moroccan subsoil, which greatly reduces your production costs. Do you understand where this argument is coming from?
I told you that I would refrain from commenting on the US administrative authorities’ decisions. To answer your question and clarify matters for you, I would like to point out that we are a public company, which is largely state-owned.
We have replaced the monopoly tax – which was in place when OCP was established as a public establishment – with a dividend policy that allows public companies to remunerate their shareholders. OCP is also subject to the common regime of taxation and levying of taxes. In the current circumstances, OCP’s status in regards to shareholders and as a taxpayer has changed.
2020 has been marked internally by additional savings efforts and you have announced that you want to continue along this path. Was OCP not strict enough in managing its expenses until now?
For more than 12 years, we have been working constantly on what is called cost leadership. It is a continuous effort. Our actions are constantly aimed at adapting our resources to the goals we set ourselves. Product and environmental quality, customer satisfaction and operational excellence are objectives at the heart of our strategies – which are themselves constantly being adapted. Consequently, we wage a constant battle to ensure competitiveness through innovation and cost control.
Although OCP is 95% state-owned, it has acquired the status of an autonomous company. Yet, in a number of cases, there is a feeling that your group is involved in public policies. This year, your donations to fight against Covid-19 were very generous ($339m). Is it OCP’s role to support the state?
First of all, as I mentioned earlier, OCP has gone from being a public establishment to a limited company, which includes all the usual standards of governance including a board of directors and committees.
As for the Covid donation, let me tell you how proud we were, like many companies – including private ones – and other individuals, to participate in this national drive. You can’t possibly think that private companies, which are major contributors to the national solidarity effort, were ordered to do so! Our action was not dictated to us by anyone. I would also like to add that many of our employees spontaneously and freely contributed as well.
OCP operates the Boukraa mine in the Sahara. Are you concerned about the renewed tensions with the Polisario that have been going on since November 2020?
As a business leader, I refuse to be drawn into territorial disputes. What I can tell you is that we exploit Boukraa’s phosphate resources, just like a good father would. We have regularly provided our own funds to ensure the continuity of the mine’s operations, processing infrastructure and logistics.
We have supported the growth in numbers and skills of our employees from our southern provinces and, when Phosboucraa is profitable, we never pay a single dirham in dividends. All profits are reinvested locally. We are engaged in a colossal investment programme worth more than $2bn – one that involves port, phosphate processing, transformation into fertiliser and accompanying investments in production capacity and human capital.
We have created a technology park that also houses the Université Mohamed-VI-Polytechnique [UM6P], with research and development capacities in renewable energy and agriculture in arid and saline environments.
The Polisario has often used the fact that the Sahara appears on the UN list of non-self-governing territories to have ships seized. Is this still the case?
The Moroccan political authorities are in charge of defending the legitimate and superior interests of the nation that is under His Majesty the King’s supreme authority. The whole nation is behind the sovereign. As for abducting ships, the South African experience has proven how futile this type of piracy is.
The US has just officially recognised Morocco’s claims over Western Sahara. Is this development noticeable elsewhere?
A large number of countries have expressed their support for Morocco’s autonomy plan as the most viable way of solving the Sahara conflict.
Obviously, US recognition is a decisive step, and, as you have certainly noted, many countries have opened consular offices in our southern provinces.
In November, OCP welcomed Nadia Fassi Fehri as head of digital transformation and a member of your board of directors. Does your group need to have more women in positions of power?
Our group is proud to have welcomed Nadia Fassi Fehri, whose skills are widely recognised in the Moroccan talent market. She and a number of other talented people have joined the group, both at the corporate and UM6P levels, to strengthen our managerial and transformation capabilities.
Fehri is our chief transformation officer but is not a member of our board of directors. We feel that gender parity is an important performance indicator and many of our female employees are in top management.
Did you know that many women work in production, which has long been a male-dominated sector, as production managers, both in mining and in industrial processing, and even drive large machines? It should also be noted that women now make up half of our engineering positions. All of Morocco is committed to this path, which involves including women in making our country wealthy.
In the last few months, your staff has undergone a major reshuffle, which is not the first time. What is the purpose of these changes? Are regular reshuffles necessary in a group like OCP?
As in other large companies, we adapt our organisation to the strategic imperatives of the moment and we give young talent a chance by making sure that we constantly mobilise the collective intelligence of the entire group.
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