Despite major economic headwinds in 2018, Tunisia’s construction sector looks to be on the upswing. Over the past few years increasing global oil prices coupled with the depreciation of the Tunisian dinar have seen demand for projects decrease and the cost of materials rise. Additionally, upcoming parliamentary and presidential elections in the second half of 2019 are likely to temporarily stoke uncertainty. However, through a number of infrastructure tenders, the state is helping to underpin industry demand.

Size & Structure

Tunisia’s construction industry remains a key part of the wider economy. Estimates for its contribution to GDP vary, but according to data from the National Federation of Construction and Public Works Entrepreneurs (Fédération Nationale des Entrepreneurs de Bâtiment et des Travaux Publics, FNEBTP), the sector accounted for approximately 4% of GDP in 2018, down from 7% in 2016. In line with declining figures, the FNEBTP noted a slight drop in the sector’s size, with a total of 6000 registered companies operating in the industry in 2018, down from 7102 in 2017.

The market remains dominated by domestic firms, which account for nine out of every 10 established companies. FNEBTP figures indicate that the sector remains highly concentrated: around 550 companies have an annual turnover of $11.4m or more, while only around 77 firms employ over 100 people. These larger firms absorb the lion’s share of government infrastructure projects, which make up the majority of contracts driving sector demand. Summing up the challenging environment, Jamel Ksibi, president of the FNEBTP, told OBG that “government investment in public works has remained almost the same in local currency terms since 2010, even though the dinar has lost over half its value. Investments in public-private partnerships (PPPs) have not started yet, as the last legal obstacle has only just been lifted by the Transversal Law on investments in June 2019.” Despite this, a number of indicators are promising. The FNEBTP reports that total declared investment in the industry, including materials, grew by 0.3% to TD3.5bn ($1.2bn) in 2018, comprising 15.5% of total investment in Tunisia. Meanwhile, formal employment in the sector grew by 12.7% to reach 62,548 positions, representing 5.8% of the workforce.


Positive sector growth has been maintained, increasing by 1.4% year-on-year in the second quarter of 2018, according to Tunisia’s National Institute of Statistics (Institut National de la Statistique, INS), while the number of registered construction projects increased by 5.4% to 3748 ventures. However, despite an improving security climate since the terror attacks in 2015, inflationary pressures across the economy have weighed on the sector. Since January 2018 the dinar has lost 15% of its value against the euro. This in turn compelled the Central Bank of Tunisia to revise its interest rate over a series of hikes, which started from 5% in January 2018 to 7.75% in February 2019, making access to finance from local banks costlier.

Large-scale infrastructure projects often contain a foreign funding component, but local financing still constitutes the bulk of backing for domestic projects. As a result, several local construction companies consulted by OBG believe that tight liquidity and payment delays could see them retrench their portfolios, constraining attempts to expand abroad, where inroads had previously been made – most notably in francophone West Africa.

Additionally, the government continues to hold significant power over the demand side of the market. This has exerted downward pressure on tender prices, compelling construction firms to compete more aggressively on prices. “The emphasis on cost means quality has sometimes been sacrificed in the process,” Samir Barkia, the head of strategic studies at global construction and civil engineering firm Societe Generale d’Entreprises de Materiel et de Travaux, told OBG. This is a sentiment echoed by Ahmed Bouzguenda, managing director of real estate development company Société Bouzguenda Frères, who told OBG that low bids have been taken into consideration “without taking care of the quality of the work and of the materials”. At the same time, broader financial issues mean that firms have been putting off tenders due to the perception that they will not be paid in a timely manner.

Land Challenges

On the upside, local infrastructure players note that land expropriation issues, which had been a significant drag on construction in 2017, have improved. Previously, developers had to turn to the private market, where they faced several challenges, including steep competition for limited plots, a complex land tenure regime, limited land titles and profound fragmentation. Rising land prices therefore delayed several infrastructure projects because developers could not acquire adequate land. However, the adoption of legislation in 2016 has sped up the expropriation process of projects considered to be a public interest or utility.

Foreign Participation

Performance could be enhanced by allowing foreign firms to participate in government tenders, thus promoting competition and efficiency. There has been some reluctance by the government to implement this, partly due to the financing inequalities this would bring to the market. For instance, engineering and procurement contracts – a mainstay of construction industry pacts – have yet to be popularised locally despite the existing regulatory framework to do so. Moreover, the PPP law implemented in 2015 has also yet to be fully exploited, mainly as a result of bureaucratic and administrative obstacles.

However, this trend appears to be changing. As well as existing relations with French, Italian and Turkish firms, increasing interest from Chinese developers is likely to spur further foreign involvement. For example, as part of China’s Belt and Road Initiative, in early 2019 designers from the Shanghai-based East China Architectural Design & Research Institute worked with the Tunisian government to develop plans to construct a new diplomatic academy in Tunis. The government will, however, need to ensure that local firms are capable of competing with their foreign counterparts. In addition, allowing Tunisian companies to expand into the international market will be vital.

Building Materials

Domestic cement production and stone mining remain important primary industries. Figures from the INS reveal that the construction materials production index rose by 5.4 basis points from January 2018 to January 2019, with cement production totalling 7.5m tonnes in 2018. Production goes largely to public infrastructure works, with real estate accounting for around 5% of turnover. According to data from local producers Les Ciments Artificiels Tunisiens (CAT-COLACEM), Tunisian companies produce an annual surplus of 4m tonnes, worth approximately TD150m ($52.1m), of which half is exported to sub-Saharan Africa.

New supply projects that will increase the output of cement are moving ahead. In March 2019 the construction of a 1.5m-tonne-per-annum cement plant was under way at Bir Thlathin in the southern city of Tataouine by United Cement Investor, a French group supported by Tunisian, UAE-based and German financiers. The project is expected to cost TD942m ($327.2m), of which TD283m ($98.3m) will be funded locally. The plant is set to provide over 100 direct and indirect jobs once operational in 2022.

Production Challenges

Indeed, low demand and rising prices have affected cement producers. Many of the raw materials needed for construction are imported from abroad, leaving the sector highly exposed to international currency and price fluctuations. Andrea Salinelli, council president and chairman at CAT-COLACEM, told OBG that overall business margins at firms that produce construction materials have been impacted by higher production costs and lower resale prices over the years.

According to Ksibi, boosting cement exports may reduce fixed costs and increase sales volumes. “Local companies are overstocked due to the fall in demand over the past couple of years. Cement is difficult to export because it is a bulk product with low value added. However, the prospect of trade with Africa remains promising due to growing regional demand,” he told OBG. Upgrades to the ports of Radès, Enfidha and Gabès could also facilitate exports, provided that accompanying administrative procedures are harmonised (see Transport chapter).

The cement industry also remains the country’s largest electricity consumer, accounting for 150 MW of demand every month. While the cancellation of government subsidies on electricity consumed by cement producers in 2014 was conceded in exchange for liberalising the price of cement, power prices rose sharply in 2014 and 2015, severely impacting the industry’s margins. However, in 2016 the drop in the value of oil precipitated a 40% fall in power prices. As a result, the segment’s expenditure on electricity has moderated, while the selling price of cement has increased. Nevertheless, the volatility of prices has since led the industry to look at supplying itself directly with power, potentially using alternative sources such as biowaste and other renewables. However, regulatory barriers to entry in the electricity sector and a planned liberalisation of the market is likely to deter producers from investing in their own generating capacity for the time being.

Major Projects & Demand Drivers

Demand remains almost entirely driven by government orders for transport, energy and other large real estate projects. In this respect, Tunisia’s five-year comprehensive infrastructure development plan, which was launched in 2016 and runs through until 2020, remains key (see Economy chapter). The plan focuses on the expansion of historically underdeveloped inland west and south-central regions, although its road expansions, urban railroad initiatives and port developments cover most of the country.

To accompany the programme, the state has signed off on about $6.5bn of committed funding for large infrastructure projects and $8.5bn in additional pledges for more than 50 projects. Among other initiatives, the pledges will fund a 188-km toll highway that links the capital of Tunis with Jelma. In June 2019 the government approved the project’s development plan and works are set to begin before 2020. Also included is a 239-km railway upgrade between Tunis and the city of Kasserine, which has received $112m in financing from the European Bank for Reconstruction and Development, although as of July 2019 the project had yet to progress further.

Already several years late, six companies have now been shortlisted for the construction of the Enfidha deepwater port near Tunis, with the first phase of works set to be completed by 2022. Major port upgrades are also being sanctioned at the Port of Radès, where quays are set to be expanded by a cumulative 680 metres. New terminals are also being built at the Port of Bizerte and the Port of Sousse. Meanwhile, in the health care sector, progress on the construction of 12 hospitals and health centres is expected to take place in 2019.

Private Projects

Separately, some private ventures are taking centre stage in 2019. Central among these is the construction of Tunis Bay, a 523-ha development in the capital city being developed by Alliance Group, a Franco-Tunisian venture. The project will build up to 500 new homes, able to accommodate over 100,000 people, as well as a university, a financial hub, sporting facilities and a marina. The TD1bn ($347.3m) venture has been in development since 2008 and under construction since 2017, with the first phase set to be completed before 2020.

In March 2019 during a visit to China, Zied Ladhari, Tunisia’s minister of development, investment and international cooperation, signed three memoranda of understanding (MoUs) to carry out feasibility studies for seven major infrastructure projects with Chinese firms, to be operated under a PPP framework. The schemes tie into the government’s broader infrastructure development plans, and include the construction of a new administrative city within the Tunis district, a new urban centre at Taparura in Sfax and a metro network in Nabeul.

Under the second MoU, a further three technical studies will be conducted pertaining to the Trans-Maghreb Railway Line, the enhancement of Mahdia along the coast and a sports complex at Sfax. The third MoU concerns a feasibility study for a section of highway connecting the north-western city of Jendouba to the Algerian border.


Elections in 2019 will most probably slow down the implementation of approved state blueprints. As a result, domestic demand will likely be kept afloat by the progress of existing construction sites. Private developments will also probably remain largely subdued as investors consolidate existing projects. According to Ksibi, despite shortfalls in the public sector and the challenging macro-economic conditions at the moment, “the private sector is still undergoing a positive transition,” following the shift to democracy eight years ago. Amid this, there is hope that after the elections a new administration will provide renewed vigour to some of the schemes in place, as well as some of the touted administrative changes that could stimulate growth. Among other measures, easing administrative bottlenecks in trade, lowering Customs and consumption duties, and reducing value-added taxes would be a boon to the sector. Opening the real estate market to international buyers would also boost construction and increase attendant demand for cement and other materials. Overall, in light of its top-down structure, the construction market is unlikely to experience any major transformations in the immediate term. It is, however, expected to pick up going into 2020, as political stability and investor confidence resume.