Tunisia looks to PPPs to tackle bloated government spending

At the home of the Arab Spring, disillusionment with the outcome of that movement means reform is needed

Credit: Getty

The north African state of Tunisia made history in 2011 as the ignition point for the so-called ‘Arab Spring’.  When market vendor Mohamed Bouazizi set himself on fire in political protest in the town of Sidi Bouzid, he set off a domino effect of uprisings across the region. Bouazizi’s death triggered the departure of the country’s president Ben Ali and ultimately set Tunisia’s economic trajectory on a tumultuous but more democratic course.

Following the revolution, many Tunisians are disillusioned. Inflation remains high and most of the populace struggles with living costs. Corruption is rife and unemployment among the young (15-30 years) hovers around the 30% mark. What’s more, the country’s economic woes have stacked up since the Covid-19 pandemic, with a bloated public sector and sky-high commodities import costs.

Following years of economic stasis, Tunisia entered a new political phase in July 2022 with the adoption of a new constitution introducing a presidential system of government and a bicameral legislative system.

According to the World Bank: “Tunisia remains a country of contrasts: while important progress has been made on political transition toward an open, democratic system of governance, economic transition has not kept pace.”

In response, Tunisia, like many of its Arab peer countries, is turning to PPP mechanisms to jumpstart its economy and rejuvenate its public infrastructure.

The World Bank Group is in the process of preparing a new Country Partnership Framework (CPF) FY23-27 for Tunisia. In June, the World Bank approved the country’s first water-related PPP – the Tunisia Sanitation Public-Private Partnership Support Project.

The project seeks to enhance the quality of wastewater management services in selected areas of the country. It will strengthen the National Sanitation Office (ONAS, a state-owned enterprise), in terms of capacity to manage PPP contracts for the delivery of sanitation services. It will support improved water supply and sanitation services for an estimated two million direct beneficiaries during the 10 years of implementation.

The Tunisian government also recently earmarked several PPPs projects, including Sfax metro; Gargour-Sfax logistics zone; the agricultural production platform of Sidi Bouzid; headquarters of several ministries; the Zaghouan cable car; hydro-mechanical transport of phosphate; and the marina of Sidi Bou-Saïd.

Growing PPP support and sentiment

In 2022, the Tunisian Support Fund for PPPs (TSFP) was created under Article 13 of the Finance Act. It aims to support and develop partnership projects between public structures and the private sector. The fund is financed through a contribution from the Caisse des Dépôts et Consignations (CDC), as well as contributions made to it within the framework of PPP development plans.

The TSFP has been personally mobilised by Tunisian Prime Minister Najla Bouden under the management of the General Authority of Public Private Partnership (IGPPP). The fund has been set up in particular to support PPP studies and coaching services provided by experts and consultancy firms.

Speaking at a PPP event in the Tunisian capital, Tunis, in June, Bouden told reporters: "Diversifying funding sources for public infrastructure projects means seeking innovative approaches that integrate PPPs in particular."

The Prime Minister called for "redoubled efforts to mobilise financing in order to build a high-performance infrastructure network that serves cities and economic areas. The trajectory of development is closely linked to the modernisation of these infrastructures to catalyse investment and consolidate institutions in order to create jobs and improve people's quality of life."

At the same event, Bouden officially announced the TSFP, and highlighted the strengthened capacities of IGPPP.

According to François Conradie, lead political economist at research firm Oxford Economics Africa, Tunisia’s high government running costs have “crowded out” critical investment spending.

Conradie says that Tunisia’s aging infrastructure would benefit from a well-managed and executed PPP model.

“Deteriorating infrastructure and a loss of competitiveness are the main reasons why Tunisia is failing to make the most of its other advantages, such as its human resources and close geographic links to Europe,” the expert says, adding that “intelligently-targeted” PPPs could help boost exports and put the country’s balance of payments on a more sustainable footing.

“While PPPs usually do push up the debt burden… [Tunisia’s] additional debt is contracted on concessional terms, so these projects work out cheaper than they would have if they were financed by raising money on bond markets at home or abroad,” Conradie explains.

Ziad-Alexandre Hayek, chairman of the World Association of PPP Professional Units, speaking at a media roundtable in Tunis in June, said: "African countries have generally reached high levels of indebtedness and need to attract private investment to finance their infrastructure projects. The costs of preparing these projects, which are by definition complex, are high.

“Political leaders see PPPs as procurement rather than development instruments, while African financial markets are not sufficiently developed to meet financing needs. We therefore need to move to an integrated approach to de-risking PPP projects politically, financially and operationally.”

Whether Tunisia can make that leap, the coming years will tell.