Adnène Zghidi, Managing Partner, BDO Tunisia, on the challenges faced by Tunisia’s SMEs following the revolution: Viewpoint

Adnène Zghidi, Managing Partner, BDO Tunisia

The Jasmine Revolution in 2011 obviously had a noticeable impact on the more vulnerable actors in the Tunisian economy – most clearly, on small and medium-sized enterprises (SMEs). Between the opportunities created by the country’s historic event and the threats that came about from such a major upheaval, Tunisia’s SMEs had to suddenly and quickly orient their compasses to a new reality.

This was most evident in the wake of the revolution, with a number of SMEs insufficiently prepared for the unexpected upheaval, their weaknesses exacerbated by a structural financial imbalances and insufficient capital. These firms are small – in some cases, very small – yet the challenges they faced were not a result of their size but rather linked to a range of problems stemming from their financial structure, their mode of governance, the limitations of the Tunisian market and the lack of support. As a result, they have been impacted by the economic downturn that hit the country over the course of its transition period – a period of uncertainty that has lasted three years.

There were plenty of challenges beyond the financing issues or social tensions caused by the revolution. Smaller firms were impacted by theft and vandalism during the initial months of the revolution, in some cases leading them to halt their activities for long periods of time. Similarly, SMEs have been affected by the increase in commodity prices and the expansion of the informal economy. In some cases, firms – especially those that were focused on Libyan consumers – have had to definitively close their doors due to the instability in their target market.

The economic importance of this to Tunisia is clear: in what could broadly be defined as an example of family capitalism, some 500,000 SMEs currently comprise more than 97% of the total companies operating in Tunisia. However, what is a threat for some has proven to be a great opportunity for others, who have been able to rapidly adapt to the new socio-economic and geopolitical context, positioning themselves in new niches and market segments – in everything from franchises and concessions to privatised assets – that were previously monopolised by the old regime. These companies certainly felt the pressure of rising wages and other constraints, but succeeded thanks to the roll-out of strategies that helped not only guard their potential but, more importantly, develop new export opportunities. This has required restructuring and careful monitoring – accompanied by a targeted strategy and specialised advice – but ultimately it emphasised the flexibility of many of the country’s SMEs, who benefit from well-qualified human resources, in the face of change. This has helped create a new perception of Tunisia’s SMEs.

Globally, the potential of Tunisian SMEs can increasingly be seen through their contributions to the national economy in terms of both job creation and their ability to support operations – through competitive subcontracting and value chain participation – for larger companies. These companies, which are now in a transmission phase, are calling for new funding mechanisms, such as development capital companies and private equity firms. Certainly, SME financing remains a major problem to be solved in every phase of the business life cycle, but support and assistance in each phase is crucial to maximise every chance of success in this particular Tunisian context.

Corporate financial services, transaction services and financial engineering have now become specialties of Tunisian audit firms, which have developed the expertise that is necessary to meet these new needs and accompany the leaders in this delicate phase of change, transmission and adaptation. The potential of Tunisia’s SMEs in the wake of the Jasmine Revolution should ultimately be measured by their true value, in the sense that these companies constitute the heat of the Tunisian economy, serving as an important lever for activity across all sectors.

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Adnène Zghidi

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The Report: Tunisia 2016

Economy chapter from The Report: Tunisia 2016

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