Country Profile — Tunisia

Tunisia offers a gateway into the growing North Africa region and is slowly repairing the damage to its reputation after the testing times of recent years. Martin Clark reports.

Tunisia puts its troubles behind it

A small North African country of 11.5 million people, sandwiched between Algeria to the west and Libya to the east, Tunisia is nonetheless an important regional market for the UK.

While trade and investment flows are comparatively modest, Tunisia is more prosperous than its neighbours and, for the most part, has enjoyed a higher degree of political stability than its peers.

Facing out to the Mediterranean Sea, it has long been a strategic location through the ages, once home to the famed ancient city of Carthage.

Indeed, empires have been and gone throughout the centuries with the Romans, Arabs, Ottoman Turks and colonial French understanding its significance as a regional hub and gateway to the Med.

Tunisia was also a key territory in the battle for control of North Africa during the Second World War, in which British troops played a decisive role, leaving an imprint that will last forever.

Today, its primary trading partner is the European Union (EU), with imports dominated by machinery and transport equipment, followed by textiles and clothing, chemicals, and fuels and mining products.

After securing independence from France in 1956 — French and Arabic are both official languages — the country enjoyed a long period of stability, in contrast to the fighting that plagued neighbouring Algeria in the post-colonial era.

This allowed Tunisia to advance both economically, a move that resulted in the establishment of vital new industries such as the energy sector and tourism, and in other areas too, with the advocacy of women’s rights.

Challenges and setbacks

That’s not to say there have not been major challenges along the way, which continue into the present day.

In 2011, the country faced mass political upheaval with long-serving president Ben Ali ousted in a popular uprising, another casualty of the so-called Arab Spring that struck much of the region.

This reflected a general dissatisfaction among the populace manifested by high unemployment, rising food prices, corruption, as well as a lack of political freedom.

It resulted not only in unseating the president, but ensuing strikes and protests also closed in much of the country’s energy infrastructure as well, stifling the economy in the process and slamming the brakes on growth.

More recently, sporadic terrorist attacks continue to undermine the country, notably its tourism industry — this included a series of attacks in the capital, Tunis, during the summer.

Foreign holidaymakers were only just returning to Tunisia after the infamous Sousse beach and Bardo museum shootings of 2015, for which Isis extremists claimed responsibility.

The Sousse beach massacre, at the tourist resort at Port El Kantaoui, claimed the lives of 38 people, the majority of them Britons.

The Foreign & Commonwealth Office (FCO) says while the government has improved protective security in major cities and tourist resorts, threats still remain.

It recommends no travel to many remote border areas, especially along the Libyan frontier, which forms part of the vast Sahara Desert, a major feature of Tunisia’s barren southern landscape.

The tourism sector

The tourism sector remains critical for Tunisia’s overall economic wellbeing, generating foreign exchange inflows and raising its profile internationally in the wider world.

While it has been through a tough time, there are — or at least were — marked signs of a revival.

Until the summer attacks, UK visitor numbers were forecast to surge from around 140,000 in 2018 to an estimated 200,000 in 2019, according to tourism chiefs.

That’s still way down on peak figures, about 440,000 arrivals in 2014, but a massive reversal from just 27,000 Brits in 2017, two years after the Sousse attack.

UK visitors, however, represent only a small, albeit significant, part of the nation’s overall tourism make-up.

In total, tourism officials are aiming to host a total of nine million visitors during 2019, up from about 7.4 million in 2018, reflecting the strong upward trend.

Though all figures will no doubt fluctuate, tourism bosses hope to recapture lost ground and start to match peak tourism numbers again within another few years, citing improvements to security and new investments in hotels and infrastructure.

On the ground, investment is happening. Last year, tourism giant TUI, citing the sector’s “comeback”, opened its first TUI Blue hotel in Djerba, the first of its new luxury lifestyle brand properties in the country.

Economic growth

The tourism revival could not come quick enough for a government looking to turn around an economy that has struggled to make headway since the abrupt political transition eight years ago.

Tunisia is still tasked with high inflation and unemployment, receiving ongoing bailouts from the International Monetary Fund (IMF), as part of a US$2.8 billion rescue deal agreed in 2016.

Politicians are faced with some vexing questions and unpopular decisions though: from raising the retirement age for civil servants and freezing public sector wages, to hiking fuel prices and imposing social security taxes on employees and employers.

At a time when political dissatisfaction still remains high, these are hugely sensitive issues.

Indeed, tensions may further surface with parliamentary elections scheduled for October, which, at the very least, may hold back potential investment decisions further.

Average growth has been modest: for much of the past 20 years, gross domestic product (GDP) growth has averaged just 3 per cent, nowhere near enough to have a big impact on development.

One advantage is Tunisia’s level of diversification compared to peer states, as well as its strong relationship with the European Union (EU), where the bulk of its exports (about 80 per cent) are sent.

Major exports include food products, as well as textiles and apparel, petroleum products, chemicals, and phosphates,

Energy sector

Another important industry, and one that has provided much of the focus for UK investors through the decades, has been the energy sector.

Shell is now the largest single investor after its 2016 acquisition of Britain’s BG Group, which had established a formidable presence in the gas business, accounting for about two-thirds of all domestic production.

The Anglo-Dutch oil giant is now believed to be looking to divest this part of its business — which includes two offshore gas fields, Miskar and Hasdrubal, as well as an onshore production facility — as part of a global rationalisation of its portfolio.

Analysts have estimated that any sale could be worth around US$500 million.

While Tunisia does not boast the resources of its near neighbours Libya and Algeria, its comparative stability and openness to investment have appealed to oil and gas companies, including UK junior explorers Upland Resources and Serinus Energy.

According to the nation’s industry minister responsible for the energy sector, Slim Feriani, Tunisia will almost double gas production this year, from around 35,000 barrels of oil equivalent per day (boepd) to 65,000 boepd, with the start-up of the southern Nawara gas field.

This US$700 million project is led by Austria’s OMV and Tunisian national oil company ETAP.

Bit by bit, like tourism, it is an industry still recovering.

In a May update, London-listed Serinus Energy said it was ramping up operations in Tunisia after a prolonged period of restricted activity “due to difficult social conditions in the country”.

It is reopening the Chouech Es Saida field and is allocating investment in the Sabria field later in the year.

Other initiatives

Phosphate output is also expected to climb from 3 million tonnes to 5 million in 2019, according to officials.

Like the tourism sector, this is still way down on past highs: production hit about 8.2 million tonnes in 2010, but slumped in the wake of the 2011 revolution.

Away from these traditional sectors, Tunisia is exploring new opportunities such as renewable energy.

The government intends to launch bids to attract investors to build 1,900 megawatts of clean electricity from solar and wind power in the coming year.

Likewise, efforts have been made to beef up the country’s digital and physical infrastructure as well.

UK mobile giant Vodafone last year signed a Partner Market agreement with Tunisie Telecom, the first of its kind in North Africa, which outlines various areas of collaboration such as strategic and operational support in consumer, technology, and procurement over three years.

Tunisie Telecom serves both consumer and corporate customers with more than a million fixed customers and 4.5 million mobile users.

While security concerns linger, Tunisia is nonetheless a familiar market in many ways for UK firms given the strength of British investment there and the package holidays industry.

It is also one that is less than three hours flight time away, with departures from London and Manchester.

UK firms have the support of organisations such as the Tunisian British Chamber of Commerce to access local networks, as well as the experience of those already active on the ground.

A challenging market in some ways, certainly for the smaller exporter, but an important one in a North Africa region with clear long-term growth potential given its growing, youthful population, rising aspirations and proximity to Europe.