Given Tunisia’s location in the centre of North Africa and its proximity to Europe, the country’s transport sector plays a vital role in its economy, and improving the efficiency of the transport network will continue to present new opportunities. The country’s well-connected port and air infrastructure have historically formed the basis of its competitiveness in global markets as well as its ability to leverage labour cost advantages. At home, government-directed, transport-focused construction projects account for a large chunk of public spending as part of a drive to mitigate regional disparities, encourage urban mobility and increase international connectivity.
Structure & Modernisation
State-owned enterprises (SOEs) such as the National Railway Company (Société Nationale des Chemins de Fer Tunisiens, SNCFT) and Tunisair have traditionally been the sector’s major players. There is an underlying need for modernised transport infrastructure to increase Tunisia’s edge on the global stage. To assist the transition, the government has introduced policies and laws, including public-private partnership (PPP) legislation passed in 2015 aimed at promoting transparency, efficiency and effectiveness in public spending. Nevertheless, since the start of 2018 five successive fuel price hikes have hobbled the performance of SOEs, resulted in tariff rises, exposed inefficiencies and accelerated calls for reform. Increased incidences of civil action also occurred as citizens voiced their dissatisfaction with high costs and a shift towards privatisation, highlighting the challenges faced by the sector and the economy as a whole. Even so, the ongoing transition is expected to create significant opportunities in the sector, especially after the conclusion of the November 2019 presidential election, which has, in the months leading up to it, caused a slowdown in administrative procedures.
The development of the transport sector has been supported by largely Western – especially European – international institutional donors, such as the European Investment Bank (EIB). In recent years the country has received assistance from a wider range of partners, including the African Development Bank (AfDB) and investors from Turkey, China and the Middle East. As such, the government plays a central role in the evolution of the sector as the main local partner and coordinator.
Despite an expansionary budget in 2019, however, spending on transport infrastructure as a relative share of total investment has decreased over the past two years. Moreover, foreign investment has fallen since the ousting of President Zine El Abidine Ben Ali in 2011. According to the Foreign Investment Promotion Agency, the transport sector attracted TD382.7m ($132.9m) in investment in 2017, with the vast majority, or TD382.4m ($132.8m), sourced from foreign investors. That year foreign investment in transport accounted for 1.7% of total FDI.
The state now faces a number of challenges related to the implementation of many previously announced infrastructure projects. Indeed, several tender processes put forward as part of a multi-sector infrastructure blueprint running from 2016 to 2020 have yet to be finalised, and administrative blockages are set to be compounded by the upcoming elections.
Nevertheless, federal officials announced in September 2018 that the government would tender TD13bn ($4.5bn) in PPP opportunities in sectors such as energy and transport. The PPPs would involve the construction of a deepwater port at Enfidha and a light railway in Sfax over the next 10 years. The partnerships will also cover projects related to water, the environment and technology.
Transport is set to dominate state disbursements over the next two decades under the National Transport Master Plan for 2040, which prioritises the expansion of transport networks. Officials hope the initiative will make it easier to mobilise private and domestic investment in the sector. The plan earmarks TD67bn ($23.3bn) for structural reforms and sustainable development through extensive artery development. Launched in 2016, the blueprint is co-funded by the AfDB and aims to enhance service delivery, and ensure efficiency, effectiveness and sustainability. As of July 2019 the initiative was awaiting parliamentary approval. According to local media reports, the master plan is aiming to upgrade the sector through the execution of 47 yet-to-be-announced ventures that leverage existing PPP laws. The strategy will target specific segments, and comprises 19 railway, 18 road, six port and four airport projects.
The second-largest chunk of funding from the National Transport Master Plan is set to go towards road infrastructure. This is largely due to the fact that Tunisia’s roads, particularly in its urban centres, are a key source of mobility. According to Tunisie Autoroutes, the state concessionaire, the established network is made up of 19,650 km of roads, 80% of which are paved, while rural tracks span 52,000 km, of which 21,000 km are covered in asphalt. The country also has a 640-km highway network that has been managed by Tunisie Autoroutes since 1986. The company experienced financial difficulties in recent years due to budget shortfalls and rising fuel prices, registering between TD40m ($13.9m) and TD42m ($14.6m) in losses in 2018, with the value fluctuating depending on the exchange rate at the time of foreign currency loan repayments. However, in 2019 Tunisie Autoroutes implemented cashless tolls to improve revenue collection and is set to receive TD180m ($62.5m) from the state to continue its existing projects. The toll highway network includes a 247-km connection between Tunis and Sfax, a 51-km link between Tunis and Bizerte in the north, and a 67-km route between the capital and Oued Zarga. In its development master plan an outline was included to expand Tunisia’s highways to more than 1000 km by the end of 2020; however, delays in the implementation stage have slowed the process.
Even with the slowdown in highway expansion, significant progress has been made. In December 2018 a $98.4m deal was inked with the Kuwait Fund for Arab Economic Development to rehabilitate 148 rural roads totalling 912 km across 22 governorates. In May 2019 a 155-km motorway between Gabès and Sfax was inaugurated. Work on a connection from Tunis to Jelma in the Sidi Bouzid governorate in central Tunisia, a 186-km road running inland south of the capital, commenced in July 2019. At TD1.6bn ($555.7m), the project will receive 48% of its financing from the EIB, 28% from the Arab Fund for Economic and Social Development, and the remaining 24% from the government. In total, there are seven major road projects totalling some TD688.4m ($239.1m) planned for the second half of 2019.
More widely, plans are in place for the Trans-Maghreb Highway project. As of 2017 a budget of $1.8m has been set for the necessary preliminary studies for a road to connect Algeria, Tunisia, Libya and Mauritania, and facilitate the movement of people, goods and capital across the region. Once completed, the highway will connect 55 towns with a total population of 60m; however, security challenges in the region are likely to further delay the project, which has been in the works since the 1990s.
Tunisia’s railway network is owned by the SNCFT and covers much of the country. The public company is responsible for operating and maintaining the main regional network, suburban rail lines in Tunis and Sousse, and low-density secondary tracks. In total, Tunisia is home to 2268 km of rail lines, including 496 km of regular track and 1762 km of 1-metre gauge track. Until 2010 rail traffic was reasonably stable, with the SNCFT carrying about 10m tonnes of goods per year, including 7m tonnes of phosphate – which accounted for 40% of the company’s turnover – and 40m passengers. However, following the revolution in 2011, phosphate traffic fell sharply, hitting the company’s bottom line. National and intercity passenger traffic also declined, due to social unrest and the resulting economic slowdown. Cargo and passenger traffic have partially recovered yet remain below 2010 levels, with passenger traffic at 40m in 2017 and goods averaging 3.8m tonnes per year. The slowdown in traffic since 2011 has significantly affected the SNCFT’s finances and deteriorated the state of the country’s rail infrastructure, with repercussions on travel times and the general quality of service. According to local media in April 2018, only approximately 1850 km of the rail network is currently functional, with many trains over 30 years old.
As such, the subsector requires significant material upgrades and performance improvements in the short term, although a fully fledged privatisation looks unlikely for the time being. Instead, the SNCFT will work with international donors and experts to develop its network, building on previously established relationships. In December 2017 the public company received a €160m loan from the European Bank for Reconstruction and Development (EBRD) to finance enhancements in the national railway.
Over the longer term rail is set to absorb around 40% of the funds earmarked by the National Transport Master Plan for 2040, with the segment’s 19 projects amounting to TD28bn ($9.7bn). The SNCFT plans to electrify the main network, modernise its standard-gauge track, upgrade the signalling systems, and build high-performance lines in order to connect with Tunisia’s neighbours and better integrate governorates with key industrial transportation projects.
These projects include the construction of a rail terminal connecting the upcoming deepwater seaport of Enfidha and terminals at the Sra Ouertane phosphate mining complex in the Ksour region, as well as new lines connecting Tunis to Kasserine, Enfidha to Kairouan and Gabès to Medenine. In addition, there are plans to purchase 110 new trains, 10 of which had already been purchased by June 2019. Meanwhile, a memorandum of understanding signed between Tunisia and China in February 2019 will cover studies for the construction of a segment of a trans-Maghreb rail line connecting Tabarka on the north-west coast to Ras El Jedir on the border with Libya.
Tunisia’s urbanisation and its attendant pressures on traffic have underscored the need to improve transport infrastructure options inside Tunisia’s cities, especially in Tunis and Sfax. In the absence of a more developed public transport system, urban motor vehicle usage has swelled in recent years. The National Institute of Statistics estimates that approximately 96,000 new vehicles were registered in 2017, and local media reported that over 51,000 new vehicles were registered in 2018. The introduction of so many new automobiles on the road has imposed significant pressures on the existing network. The severity of the recent fuel price hikes borne by both individual and collective motorised commuters has resulted in frustration around the slow pace of infrastructure development. While flagship projects aimed at easing congestion and improving connectivity are in the pipeline, many have become bogged down by financing issues.
However, a number of pledges announced by both the government and international donors in recent years are expected to alleviate this problem. In June 2019 Hichem Ben Ahmed, the minister of transport, told local press that the first phase of the Rapid Rail Network, a long-delayed $2.8bn intercity rail project in Tunis, would be ready after the summer of that year following an injection of extra funding. Notably, in May 2019 an additional €1.5m was pledged by the government of France through the French Development Agency (Agence Française de Développement, AFD) for urban transport development in Tunisia. The first line of the Rapid Rail Network will connect Tunis to Bougatfa. Under plans released by the EIB, the network’s five express railway lines are expected to move approximately 600,000 people per day between the city and its suburbs once complete.
Another major urban mobility project is the development of Sfax’s transport system, a TD2.8bn ($972.5m) venture comprised of two metro and three high-speed bus lines spanning a cumulative 70 km across the city. The initiative was launched in 2015, and as of July 2019 it was in the consultation phase. Significant funding for the project is expected to come from the EIB, the EBRD, the KfW Development Bank and the AFD. Construction of the first metro line is anticipated to start in 2020, with the line operational by 2022. Officials expect all metro and fast bus lines to be completed by 2030.
The main conduit for tourism is air travel, a vital industry for the country’s economic development. While political instability in 2011 and successive terrorist attacks in 2015 curtailed the flow of foreign visitors, arrivals have begun to pick up. In 2018 the number of foreign visitors rose by 14.3% to a record 8.3m. Meanwhile, over the first four months of 2019 around 2.2m foreign arrivals were recorded, representing an 18% year-on-year (y-o-y) increase. The steady stream of tourists is not expected to slow, with the Ministry of Tourism and Handicrafts is expecting the number of arrivals to reach 9m in 2019.
Tunisia’s main airport, however, has almost reached capacity. The country’s air traffic is very concentrated, with the Tunis-Carthage and Enfidha airports accounting for as much as 90% of air transport activity. To ease congestion, construction on an expansion at Tunis-Carthage International Airport will commence in 2020, which will increase capacity to 7.5m passengers per year. There are also discussions about whether a new airport should be built north of Tunis to accommodate growing traffic.
Tunisair flies 29 aircraft and controlled approximately 36% of the domestic market in 2018, serving destinations across Europe, West Africa, the Middle East and North America. However, despite registering a 20% y-o-y revenue surge totalling TD1.2bn ($416.8m) in September 2018, the airline has been hobbled by fuel cost hikes, dwindling services and a bloated payroll for its workforce of around 7500. As such, in recent years the company registered successive losses that reportedly amounted to a TD842m ($292.5m) over the 2011-17 period.
The airline’s bottom line is now at further risk because of an open skies agreement between Tunisia and the EU that would allow low-cost airlines to fly into Tunisia. The negotiations for the agreement were finalised in December 2017, but its implementation at Tunis-Carthage International Airport – Tunisair’s main hub – has been delayed to allow the carrier to restructure itself. Sami Blidi, the corporate strategy and planning director of Tunisair, told OBG that multiple measures were being taken to achieve this. In May 2019 a technical committee created by the office of the prime minister announced that the airline will cut 1200 jobs over the next three years; deploy smaller aircraft for high-frequency, low-cost flights; cut non-performing destinations; curtail its ambitions to expand in West Africa; and introduce administrative changes aimed at improving operational flexibility. In addition, five new Airbus A320neo aircraft are due to be received in 2021 and 2022.
A number of airlines offer freight services, including Tunisair, along with dedicated freight carriers. In January 2018 Express Air Cargo launched 25 new cargo routes from Tunis to destinations in Africa and the Middle East. According to the World Bank, in 2017 the country’s transported air freight increased to 12.2m tonnes times km travelled.
Ports & Sea Trade
Tunisia’s port infrastructure is central to its manufacturing activities and, as such, is one of the most important transport segments. According to figures from the Ministry of Transport, as of 2015, 98% of the country’s trade passed through its ports, of which 70% is conducted with the EU. Out of a total of seven domestic commercial ports, the main seaport, Radès, handles the majority of commerce, accounting for 25% of total trade and 60% of container traffic. Ministry of Transport figures showed that as of 2015 the segment consisted of 500 local and international firms, with approximately 6000 direct government employees.
In 2018 commercial port activity rose by 7% to 30.7m tonnes, from 28.6m tonnes in 2017, according to the Merchant Marine and Ports Authority. Export activities rose by 22% and imports by 2% in 2018, compared to a rise of 1% and a decrease of 2% for exports and imports, respectively, in 2017. While the segment’s performance has improved in some ways, challenges remain. According to the ease of doing business index in the World Bank’s “Doing Business 2019” report, Tunisia’s rank for trading across borders – a proxy for commercial transport and logistics infrastructure – fell from 96th to 101st. The report notes that for exports, border compliance takes 50 hours and costs $469, while documentary compliance takes three hours and costs $200. For imports, border compliance takes 80 hours and costs $596, while documentary compliance takes 27 hours and costs $144. Although the country was some way behind high-income OECD countries, Tunisia’s results fared well compared to MENA averages. Such high costs are pushing some shipping companies to broaden services offered across the value chain, including onshore processing, novel storage methods and terrestrial delivery to reduce overhead. Nevertheless, Tunisia remains an attractive option in the region. “While some changes need to be made in order to compete with Morocco or Egypt, Tunisia’s labour expertise is high and logistics remain cost-competitive,” Mohamed Larbi Rouis, general manager of global wiring supplier LEONI, told OBG.
Officials are working to address the impediments to expansion. “The ports segment is undergoing significant changes in order to improve service delivery,” Youssef Ben Romdhane, managing director of maritime infrastructure at the Ministry of Transport, told OBG. At an administrative level, the Tunisie TradeNet platform, commonly known as TTN, is an online onestop shop in operation since 2000 that launched an electronic invoice system in 2019 to harmonise, simplify and speed up shipping and Customs procedures across the country’s ports. Meanwhile, given the close trading relationship, existing maritime policy is being reviewed to bring it closer with EU directives.
In terms of infrastructure, the long-awaited TD3.3bn ($1.1bn) venture to build a 3000-ha deepwater port at Enfidha – one of Tunisia’s largest construction projects – is set to proceed in late 2019. Six firms have been shortlisted for it, and the government is looking to enter into a PPP to manage the port through a new concessionaire. The Enfidha deepwater port is scheduled to commence operations at the end of 2022. Likewise, a tender has been launched to build two new shipping quays at Radès, expanding the port’s cumulative total by 530 metres after its inauguration in 2023. However, the fact that both Enfidha and Radès ports’ operations are being considered for at least partial privatisation has provoked significant unrest from labour unions. Along with state budget shortages – particularly notable as the Enfidha project is set to be 75% state funded – this could delay developments in the short term.
A new passenger terminal at La Goulette in Tunis is expected to revive the country’s cruise industry, which fell from just under 1m tourists in 2009 to zero in 2015. New, smaller terminals at Bizerte and Sousse, and the transfer of chemical processing activities from Sfax to Skhira are envisaged. According to the National Transport Master Plan, a new deepwater port is also under consideration in the north-west.
Labour disputes over privatisation, job cuts and rising fuel costs have underlined the sense of transition within the sector. This shift looks to be a necessary step as Tunisia’s ability to grow and optimise its international logistical capabilities will determine its regional and global competitiveness over the coming years. Growing its internal and regional trade links with its African neighbours and trading partners across the Mediterranean will build momentum, and, in the long term, the transport sector will be poised to deliver significant opportunities for future growth.