Olive oil, cereals, fruit and vegetables, and dates have long been the foundation of agriculture in Tunisia. Efforts are being made to modernise the sector through the development of agri-business, yet agriculture remains largely dominated by small family farms. In this context, initiatives to reorganise production to boost efficiency and equity are being implemented, notably in the form of cooperatives.
The devaluation of the dinar has had mixed impact on the sector, driving up the cost of imported raw materials and machinery, but helping olive oil exports rise dramatically. The product has potential for even further growth, particularly in terms of higher value-added organic olive oil. The olive oil segment is therefore a priority for the government, with sector bodies looking to improve irrigation, boost productivity and effectively market the product in bottled form.
Tunisia benefits from a Mediterranean climate in the north and a semi-arid environment in the interior. Almost two-thirds of the country’s land is put to agricultural use. Of this area 31.1% is used for pasture, 18.3% is arable land and 15.4% is for crop cultivation. Farmland is spread over three areas: the more temperate north, which accounts for the majority of fresh fruit and vegetable growth; the fertile Sahel coast in the east and the interior, where most of the country’s olive groves are located; and the south, where dates are grown. Tree crops dominate Tunisia’s farm landscape, covering some 2.4m ha in 2017, followed by land for cereals at 1.2m ha, according to the National Observatory of Agriculture (Observatoire National de l’Agriculture, ONAGRI). In terms of production volume in 2017, cereals posted a combined 1.9m tonnes, tomatoes counted 1.3m tonnes, citrus fruits 560,000 tonnes, olives 500,000 tonnes, onions 447,000 tonnes, peppers 429,000 tonnes, potatoes 420,000 tonnes and dates 260,000 tonnes. For animal products, eggs counted 2bn that year, milk output was 1.5m tonnes and poultry was the most-produced meat at 187,000 tonnes. According to ONAGRI, there was a notable increase in the output of dates in 2018, which rose to 305,000 tonnes. The country also produced 1.5m tonnes of olives and around 280,000 tonnes of olive oil that year. Early estimates for the world’s 2019/20 olive oil season were published in Spain in July 2019, indicating record Tunisian production of 350,000 tonnes. Given the cyclical nature of olive cultivation – where a year with a strong harvest is invariably followed by a smaller harvest the next year – two years of high production would be a considerable boon to the country.
While attempts to modernise and upgrade the olive segment are ongoing, the Ministry of Agriculture, Water Resources and Fisheries announced a new national strategy in January 2019 to boost citrus fruit production as well, aiming for 650,000 tonnes by 2030.
Agriculture plays an important role in Tunisia’s economy. Along with the fishing industry, it accounted for TD10.7bn ($3.7bn) or 9.7% of GDP in 2018, according to the World Bank and the National Institute of Statistics (Institut National de la Statistique, INS). The sector grew by 9.8% that year, largely as the result of high olive oil sales. INS figures show that the sector’s contribution to GDP fell by 0.7% year-on-year (y-o-y) in the first quarter of 2019.
The sector is also a significant source of jobs, with 488,600 people – 11.8% of the workforce – employed in agriculture in 2018. Nevertheless, this figure has fallen steadily over the last decade, with agriculture’s share of employment declining by an average of 1.3% per year between 2007 and 2017. Speaking to international media in January 2019, Abdelmajid Ezzar, president of the Tunisian Union of Agriculture and Fishing, said employment in the sector fell by 2.8% in 2018, with 12,000 people leaving agricultural employment. According to Ezzar, these losses largely arose from increasing costs and inefficiencies in the use of land.
Costs are indeed rising. The devaluation of the dinar has seen the price tag of imported farm machinery, such as tractors, rise by 300% since 2014, Amel Ghali, credit director at the National Agricultural Bank ( Banque Nationale Agricole, BNA), told OBG.
Although 15.4% of the country’s cultivated land, or 1.2m ha, is dedicated to cereals, Tunisia currently depends heavily on imports to meet demand. Indeed, in 2017 cereals made up almost 40% of total food imports, with the country having to import around 61% of its cereal needs, according to the INS. Demand for cereals reached 4.1m tonnes in 2017, 40.3% of which was for durum, 33.8% for wheat and 25.9% for barley.
In 2018 drought negatively affected domestic production, with cereal output falling by 12% to 1.4m tonnes; consequently, 68% of demand was satisfied with imports. Nevertheless, following favourable precipitation across the main geographic areas of grain cultivation in late 2018, in addition to more accessible seed and fertiliser, cereal production is expected to increase to around 2.1m tonnes in 2019, according to the UN’s Food and Agriculture Organisation (FAO). Early figures show the country on track to meet this figure, with a 4.5% y-o-y volume increase in the first two months of 2019. Furthermore, while statistics from the Cereal Office show an average of $203m spent on importing cereals each year, a July 2019 estimate by Samir Taieb, the minister of agriculture, foresees the import figure falling by $70m for the year.
To improve Tunisia’s food security, the government is pursuing a number of policies to reach 2.7m tonnes of domestic cereal production per year. This strategy includes subsidies for inputs and technical assistance to support irrigation, coupled with guaranteed farmgate prices. Around 700,000 ha of durum and wheat were planted for the 2019 harvest, while 620,000 ha of barley were planted, according to the FAO.
Tunisia is the world’s fourth-largest producer of olive oil, with output of around 280,000 tonnes in 2018, representing a 180% increase over the prior year, according to ONAGRI. Meanwhile, olive oil accounted for 43.5% of total food exports that year, with 77% of shipments going to the EU, according to the National Office of Oil (Office National de l’Huile, ONH). The segment is an important source of jobs. It employs 309,000 workers – around 65% of whom are farmers – and provides direct or indirect livelihood for over 1m people. In addition, more than 200 private traders and exporters are employed in the industry. The segment comprises 1750 oil presses, 15 oil-refining units, 14 extraction plants and 40 bottling factories. In order to increase the value-added component of the olive oil industry, the segment is transitioning towards the increased export of bottled olive oil. A modest 18,700 tonnes of bottled Tunisian olive oil were exported during the 2017/18 season, with nearly 90% of volume being sold in bulk quantities to be blended with other olive oil and resold under a European label. According to the January 2019 bulletin of the ONH, the country planned to raise bottled oil exports by 17% to 22,000 tonnes for the 2018/19 season. Increasing such exports would pay major dividends to the agriculture sector and broader economy, with the price per tonne of bottled olive oil being 37% higher on average than that of bulk olive oil, according to data from the ONH for the period of November 2018 to May 2019. As of January 2019, Canada was the leading import market for bottled Tunisian olive oil, followed by the US and France.
Nevertheless, significant investment is needed to ensure a successful transition to this higher value market. This entails greater productivity and quality control in production, but also the improvement of supply chains and greater product advertising in destination markets. Expertise from abroad can help Tunisia reach its goals. “Foreign participation in Tunisia’s olive oil sector is no longer perceived as a threat to local development, but rather as a way to enhance quality and the competitiveness of the industry. As such, Tunisia is open to private partnerships,” Chokri Bayoudh, president and CEO of the ONH, told OBG.
In this vein, the government has launched a $300,000 scheme in collaboration with the FAO to develop olive oil cooperatives and improve farming techniques. “The programme aims to provide farmers with training on international best practices to produce sustainable, high-quality olive oil,” Ahmed Bougacha, programme officer at the Tunisia FAO office, told OBG. “We are also building a detailed cartography of the county’s olive-growing regions to better develop a long-term strategy covering the entire supply chain.”
Moreover, Tunisia is seeking to develop its organic offering, boasting around 255,000 ha of certified organic olive oil plantations in 2018, according to the Switzerland-based Research Institute of Organic Agriculture. This puts the country ahead of other olive oil-producing nations such as Italy (235,000 ha) and Spain (195,000 ha). Organic olive oil commands a market price around 30% higher than conventional olive oil.
In order to boost yields across the sector, efforts are under way to increase investment in irrigation and educate farmers about the best ways to utilise and conserve water resources. According to the Agriculture Investment Promotion Agency (Agence de Promotion des Investissements Agricoles, APIA), the public body overseeing investments, there is an average 4.8bn cu metres of water available to Tunisia each year, 80% of which is used for agriculture. In 2017 only 456,100 ha of cultivated land was irrigated, or 10.6% of the total, according to ONAGRI. However, in May 2018 the World Bank estimated that up to 40% of water used in the sector was lost due to inefficient irrigation.
To improve water use in the sector, the government launched the Irrigated Agriculture Intensification Project in May 2018. The six-year scheme aims to rehabilitate and improve the country’s irrigation infrastructure, while increasing institutional oversight of the network and boosting training among farmers. The project is expected to cost around $170m and the World Bank has agreed to contribute $140m to support the initiative. Additionally, the FAO is pursuing a water efficiency and sustainability programme for a number of developing MENA states, including Tunisia, as part of the UN’s 2030 Agenda for Sustainable Development. Bougacha told OBG that the project will entail developing an accounting system to measure water usage and educating farmers on the sustainable use of water resources.
The private sector is also playing an important role in promoting irrigation and better water management. A pilot programme is under way at the Domaine Fendri olive plantation near the coastal city of Sfax to use artificial intelligence to improve its irrigation system. The project is being developed by the local start-up iFarming, which estimates that the technology could reduce water usage by 40% and raise output by 20%.
Officials have also been making efforts to improve the legal framework and expand financing options to improve irrigation, responding to calls from industry on where hurdles lie. “Financial institutions need to allocate more credit to farmers so they are able to invest in modern solutions to boost productivity,” Raouf Ghariani, general director of local farm equipment supplier Espace Vert, told OBG. Under the 2016 Investment Law – which came into effect in April 2017 – agricultural investments, including irrigation, can benefit from a government grant covering up to 50% of costs. According to APIA, TD48.9m ($17m) was invested in irrigation projects in 2018, up 38% from TD35.5m ($12.3m) in 2017. Wala Toumi, agronomist at the domestic agri-business firm Poulina Group, told OBG that irrigation could expand at a faster rate by streamlining the application process for such funding. In addition, Abderrahmane Cheffai, president of APIA, told OBG that once the new Business Climate Law is enacted application procedures for irrigation projects should become more streamlined.
In 2018 a total of TD719.3m ($249.8m) was invested in agriculture projects with a value greater than TD200,000 ($69,500), according to APIA. This marked a 3.7% increase on the previous year. The largest share – TD436.8m ($151.7m), or 61% of the total – went to mechanisation efforts. Meanwhile, investments in projects with a value under TD200,000 ($69,500) increased by 85% to reach TD101.2m ($35.1m). Irrigation projects accounted for 46% of these investments, while the rejuvenation of olive groves accounted for 10%.
The financing of these projects has also undergone changes, largely as the result of greater support from the government. While 66% of large-scale projects were self-funded in 2017, this fell to 50% in 2018, with the other half made up of a combination of government grants and bank loans. Greater access to finance saw the total number of agricultural investment projects increase by 25% in 2018. A major slowdown occurred in the first two months of 2019, but this was largely the result of reforms to investment grant committees, according to APIA. The number of projects fell from 1811 in January and February 2018 to 1299 in the same period of 2019, while the value of such investments decreased from TD77.1m ($26.8m) to TD9.6m ($3.3m). With the restructuring of regional grant committees coming to an end and public financing of agricultural projects expected to expand further, investment is forecast to rise over the medium term.
Although Tunisia remained a net importer of agricultural products in 2018, the country’s overall trade deficit fell by 63% to TD501m ($174m), according to ONAGRI. This performance was driven in part by a 48.1% increase in exports to TD4.9bn ($1.7bn). All of the country’s main agricultural exports had a strong year. Olive oil exports grew by 111% to TD2.1bn ($729.4m), date exports grew by 33.4% to TD744.1m ($258.4m), tomatoes grew by 22.2% to TD78.4m ($27.2m) and the export of citrus fruits grew by 7.1% to TD22.6m ($7.8m).
Meanwhile, agricultural imports continued to be dominated by cereals at 40% of the total, followed by sugar and vegetable oil. Demand for cereals, particularly barley, rose by 17% in 2018 to TD2.1bn ($729.4m). Vegetable oil imports fell by 24.1% to TD480m ($166.7m), although this was partially offset by an increase in soya grain imports for domestic processing into oil. Additionally, sugar imports fell by 10.4% to TD611m ($212.2m).
The deficit rose again in early 2019, reaching TD365m ($126.8m) by the end of April, compared to a surplus of TD219.5m ($76.2m) during the same period of 2018. A rise in international grain prices coupled with a weaker dinar saw the value of imports grow by almost 19% y-o-y. The volume of trade is expected to rise considerably over the longer term if a landmark free trade agreement is signed. Negotiations for the Deep and Comprehensive Free Trade Area (DCFTA) with the EU began in October 2015, but the Tunisian government is still conducting studies on the potential impact of the deal and engaging in discussions with civil society and the private sector. Some stakeholders believe the sector remains too underdeveloped to sign a deal at this time. “For Tunisia to fully benefit from the DCFTA, the country needs to significantly improve its infrastructure,” Mohammed Mahjoub, development manager of the domestic fruit company Sadira, told OBG.
Europe already represents 60% of Tunisia’s trade and accounts for 70% of its foreign investment. The DCFTA aims to deepen and expand this relationship and provide greater access to the European Single Market.
Agri-business accounted for 3% of GDP in 2018 and 20% of value added in the country’s industrial sector, according to the INS. At the end of 2018 the segment comprised 1102 companies, of which 20% were exporters and 109 had foreign shareholders. Agri-business is also a large and growing source of jobs, with the segment employing around 75,000 people, representing 15% of all industrial employment. Noureddine Agrebi, director-general of the competitive business cluster of Bizerte, told OBG that strong growth potential for the industry lies in bottled olive oil and packaged dates for export markets. Nevertheless, the sector faces a number of obstacles, notably a lack of integrated supply chains and irregular access to raw materials. Alongside investment in mechanisation and improved irrigation, agricultural cooperatives and business clusters are being increasingly promoted to support development. However, per a report by the FAO in June 2017, only 6% of the country’s agricultural producers belonged to a cooperative at the time.
This low level largely stems from unfavourable experiences with poorly devised cooperatives during the 1960s, Bougacha told OBG. According to the FAO, the expansion of cooperatives could play a significant role in not only increasing productivity, but also reducing poverty and boosting social inclusion in Tunisia. Furthermore, a number of start-ups are pioneering the application of digital technologies to the sector.
As advancements in irrigation and mechanisation are boosting efficiency and profitability, considerable improvements in infrastructure are still required, as is the organisation of farms and supply chains to ensure long-term development. Boosting competitiveness so that producers and exporters are able to take advantage of the opportunities provided by the DCFTA is particularly important. The government has a vital role to play in achieving these objectives in terms of investing in infrastructure and logistics, providing a robust legal framework and improving access to financing to stimulate further private investment.
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