As interest groups lobby for greater control over Morocco’s thriving black-market trade, officials are showing new interest in understanding the informal sector — both in order to better fight it, and in order to learn from its remarkable success. Earlier this year, the prominent Moroccan business federation CGEM (Confédération Générale des Entreprises du Maroc) commissioned a series of studies of informal markets in Morocco, beginning with a close examination of Casablanca’s infamous joutiya (flea market). The market, Derb Ghallef, is both a center of distribution for black market goods and services in Morocco, and also a microcosm for how informal markets function in developing economies.
Well-known throughout Morocco and highly popular among consumers, Derb Ghallef is Morocco’s most prominent commercial center. But one could not possibly call it a mall. In appearance, it is more like a shantytown. Approximately 2,000 outlets open onto narrow alleyways, run-through by long ditches only sometimes covered with planks or cardboard. Most stores occupy a space of just 12 square meters, and are made of tin, zinc and wood scraps. There is even a ramshackle mosque amidst the hawkers, its minaret made from green-painted cardboard and stray materials.
Politicians, businessmen, and researchers want to know: how does a market that is not even on the electrical grid generate sales figures of over $140 million? How can the value of an electronics shack made from zinc scraps with no plumbing exceed, by double, the value of Casablanca’s most expensive commercial real estate, like the so-called ‘Golden Triangle’?
Market’s evolution
Derb Ghallef began in the 1920s as a shantytown near the center of Casablanca, hastily thrown together for a population swelling with rural migration and a rising birth rate. After an absent-minded welder accidentally burned down the area in the 1950s, the community resettled at a nearby site, where they created a flea-market and auction house for used goods.
At no point in its history had the market or community any legal right to this land. As an official from the Agence Urbaine de Casablanca told the local press, “from a purely urbanist point of view, Derb Ghallef is an illegal space, since there is no authorization for it.” For decades, the terrain has served as a cash cow for corrupt officials who contracted it out, even though any proceeds from its use should have belonged to a group of inheritors. In 1982, communal officials united with the land’s inheritors to force the market out and develop the land. When talks failed to achieve the desired goal, a second fire destroyed the community under quite suspicious circumstances. The merchants were given another provisional authorization to set up nearby, and have remained at that site ever since.
Elements of each earlier phase — the shantytown aesthetic, the noise and bustle of the auction block, the bargain prices of the flea market — are defining features of today’s Derb Ghallef. More recently, however, globalization and Moroccan immigration have revolutionized the supply side. TV satellite dishes and European contraband hit the market in the 1980s, entering through the Spanish enclaves of Ceuta and Melilla and the porous Algerian border. Moroccan migrants to Italy smuggled in suits, shoes, and textiles, which they sold in bulk to the merchants of Derb Ghallef. Now, in the 21st century, immigrants in Germany, the Netherlands, and Belgium furnish the market with PCs, cell phones, and PlayStations, right as Chinese imports were penetrating its furniture, electronics, and clothing stores. In recognition of the market’s high potential for distribution, even the formal sector has moved in. Appliance companies opened retail outlets in the Derb, where consumers can buy a Sony TV or Sierra refrigerator with receipt and warranty. The formal sector currently accounts for about 20% of the market’s trade.
Derb Ghallef has earned a reputation as Morocco’s “Silicon Valley,” on account of its latest-generation technology and its savvy technicians who can unlock the latest iPhone for use with Moroccan telecom operators, and who repair all sorts of electronics. Numerous vendors sell pirated software for under $2. From medical instruction to three-dimensional design for architects, to the latest in gaming, Derb Ghallef makes these programs — prohibitively expensive to all but the richest Moroccans — accessible to the mass market. “I can’t afford to spend $100 on educational software for my children,” one vendor of electronics said, in defense of pirating. “But does that mean they don’t deserve to learn?”
A Moroccan business model?
There are several advantages to shopping at Derb Ghallef. First, the market is a one-stop shopping destination like Wal-Mart or Carrefour, a place where one goes to find anything and everything at once. The market also rapidly adapts to changes in demand. Resourceful sellers use word-of-mouth as well as their international contacts to quickly respond to shifts in buying trends, which more structured commerce circuits are much slower to achieve (often due to legal constraints). Sometimes, its ability to swiftly adapt supply to demand can have political consequences. Sociologist Jamal Khalil, who conducted the recent study on the market, noticed spikes in the market’s distribution of inflammatory Islamist DVDs during the first and second Gulf wars.
However, Derb Ghallef’s chief commercial asset undoubtedly is unbeatable prices. “In the Joutia, one finds brand-name products with more choices and for 15% less than at Marjane [Morocco’s leading hypermarket],” one merchant reported. Ambulant sellers, unburdened by rent, put pressure on shopkeepers to keep prices low. Cheap Chinese imports also drive down prices. Buyers can also negotiate prices, place orders, or pay installments on pricey items. Personal contacts are key to buying and selling in Derb Ghallef, and personal connections also enhance the market’s adaptability. Customers may request a new phone or computer part, leaving their phone number with the vendor, who will rapidly locate the item and then call back. They may buy on a credit negotiated with the vendor, based entirely on a system of trust.
In some ways, the market’s commercial success is grounded in the grand traditions of Moroccan trade. Its narrow, packed alleys, where kitchen-ware supplies are clustered together in one area and electronics in another, recall the layout of classic medinas in Fes and Marrakech. Furthermore, trust is still valid currency in this informal market — human warmth may earn you a lower price or an easy payment arrangement.
On the other hand, the market has highly modern features and reflects a spirit of individualism that Khalil believes is characteristic of the new Morocco. With only themselves to rely on, the merchants and repairmen of Derb Ghallef have proven remarkably resourceful and efficient. They have also had expanded opportunities and quicker upward mobility than their colleagues in the formal sector. As Khalil explained, “At the official Apple store, they have salaried technicians who come from 8:30am to 12pm and from 2:00pm to 7:00pm. Whether they achieve results, or don’t achieve results, they’re paid at the end of the month. [For] the technician at Derb Ghallef it is necessary that he achieves results. He is directly concerned; you bring him your Mac, he has to fix it. This spirit that we find in Derb Ghallef, if we could develop it elsewhere, would generate better entrepreneurs, better technicians. The interesting concept is that here are people in a difficult position: maybe they have a high school diploma or not, maybe they didn’t finish their schooling, and they had odd jobs… But they wound up in a market where they could advance quite rapidly. It’s too bad in a way, because those who have university diplomas, maybe even an engineering degree, are not as efficient.”
Beat it or join it
The merchants of Derb Ghallef have created a nexus of commercial and technological innovation and a paradise of smuggled, pirated, and counterfeit goods. The market is more efficient and more personable than the formal market, a promising alternative model of commerce and distribution. Moroccan authorities are torn between shutting it down and reproducing its success. But in securing important trade deals with European and American enterprises, Morocco faces new pressures to minimize the flourishing informal trade that takes place within its borders.
On March 29, 2008, local authorities from the prefecture of Casablanca seized and destroyed 80,000 pirated discs, including music, computer-programming software, and DVDs. The sting operation’s principal target was Derb Ghallef. The Moroccan Copyright Office (Bureau Marocain du Droit d’Auteur, or BMDA), one of the driving forces behind the raid, aims to eliminate the sale of illicit CDs in the metropolis. The BMDA’s CEO, Abdellah Ouadghiri, said in a statement, “certainly, a single raid or even several cannot thwart the pirating phenomenon, but the essential thing for us is to establish a sense of responsibility among citizens and raise their consciousness of copyrights.”
However, the local population still enjoys its access to the latest in Western media and entertainment, and raids are ineffective in getting to the source of the problem. One disc seller remarked, “As long as there exist huge pirating factories and sellers of machines that make 50 copies at the same time, we will never defeat this kind of commerce.”
Microsoft and others are pressuring Moroccan authorities to suppress the informal sector, but the kingdom must be careful not to throw the baby out with the bathwater. If the informal sector features greater innovation and a more efficient distribution model than imports like American-style shopping malls and supermarkets, authorities should take their cues from this Moroccan business model as they develop formal commerce in the country.
