The idea of doing business in Tunisia might seem ill-advised right now. The major credit rating agencies have issued dreary assessments of the country’s economic future, while inflation, unemployment, and many other key economic indicators suggest that any investment here could be quite precarious. Two and a half years after Ben Ali was forced from office, statisticians count 800,000 unemployed people. Moreover, according to the Tunisian National Institute of Statistics, one-third of high school graduates are jobless.
Headlines may make the situation seem desperate, but there may also be opportunities. Underneath these numbers lies a huge potential. Young entrepreneurs can make the best of these bad conditions.
Here are eight good reasons to consider business opportunities in Tunisia:
1. A Do-it-Yourself Attitude
During the first half of this year, at several tech events and entrepreneurial summits in Tunisia, I met dozens of young people, most of them nearing graduation or having just graduated. Over and over, they told me the same thing: The government cannot do anything for me now. I need to do it myself.
This in itself is reason enough to consider starting your own business in Tunisia: there are people with huge potential out there waiting for an opportunity. And these are not people dreaming of a simple 9 to 5 job, as has been the case for generations in Tunisia. They know that if they do not rely on themselves, they will either have to go through the long and hard process of being recruited abroad, or wait for months to get a good opportunity in the shrinking Tunisian economy. This has given young Tunisians a survivor instinct, as they are driven and would do anything to overcome the unemployment crisis. Being able to work with such motivated people certainly is much more interesting and less risky for one’s own business.
2. The Private Equity Market is Flourishing
More than ever, people in Tunisia do not fear harassment for being involved in commercial projects in general, specifically in high-return projects. Tunisians remember that, before the revolution, underground business commitments were dictated by the ex-president’s family prior to each big deal or as soon as a project began to show promising results. Such aggressive and forced concessions stressed investors and led to stifling many high-potential business opportunities.
The Tunisian Diaspora has been especially fearful of investments for these reasons. Now that this is past, however, slowly but surely more investments are underway and there is money available for quality startups. I have been involved lately in discussions about financing different kinds of projects and have been surprised by the willingness of funders on one side to back good profile project basing on realistic market analysis and promising ROI (return on investment) and on the other side the easiness of dealing with relatively high investment tickets.
3. Consumers Enthusiastic for Innovation
Because many business opportunities were stunted under the dictatorship, people are now thirsty for new things. The Tunisian is a bon vivant and an enthusiastic discoverer. The door is open for startups to innovate and bring new products and services to the market. People will not hesitate to test new products that address their needs.
There is a high tendency of buzz and hype in Tunisia that can benefit well-planned startups. Products, providers, or services are often deserted for others as soon as they appear. These new products are forgotten themselves as soon as others come up. While this may seem like a grand risk for startups, until the markets for these new innovations are saturated, there will be plenty of opportunity. Just think of the first internet cafés back in 1996; it took more than ten years until the market was saturated and these businesses are still operational.
As a matter of fact, there is a considerable lack of ˜over-the-top’ services in Tunisia. This includes online booking services, enabler platforms such as real estate portals, and mobile IP services in the flourishing smartphone market. Such businesses are a rarity in Tunisia, and if they happen to exist, the user experience is usually not up to par.
There is an extreme need for many services that still do not exist due the lack of infrastructure and online payment solutions, although the needed investment for such projects is quite low and easily manageable compared to physical goods or agro-projects. I have seen many good smartphone apps kept in the drawer as their developers did not have the ability to upload them into the Google Play market or to iTunes because Tunisian currency restrictions prevent them from transferring the yearly fee of less than a few dollars a year! This problem has been raised, but still awaits a solution which could solve many daily problems Tunisians encounter while simply sitting on a PC or playing with a phone.
4. Vibrant Civil Society
It would have been simply impossible some years ago to create an association that cared about entrepreneurs or entrepreneurship in general. Prior to creating an association, founders had to be politically scanned, which led students, experts, and most of all angel investors to hibernate. Immediately after the old system crashed in 2011, one of the first administrative processes that became easier was the creation of associations, which is now consists of a simple formal declaration before recognition.
Free of political harassment and administrative hurdles, thousands of people began to discover civil society work and hundreds if not thousands of new associations have been created. Among these, several are dedicated to entrepreneurship, the biggest one being SUST (Start-Up System Tunisie), the association that has introduced the well-known Startup Weekend events. During Startup Weekends, people with ideas come in on Friday with the simple goal of leaving Sunday with a clear business plan and first draft of a proposal that will aid their communications with funding institutions. Entrepreneurial associations help with expertise and human resource power in the creation phase of startup ventures, leading to less failure and more motivation. As an entrepreneur in post-revolution Tunisia, despite all challenges, you will never walk alone.
5. The Beginning of the Incubator Era
Incubators – physical, co-owned spaces dedicated to startups – are beginning to see promise in Tunisia.
These spaces allow startups to share their experience with each other, and provide needed infrastructure such as internet connection, meeting rooms, and administrative staff; details that appear small at a first glance but are of huge importance for new businesses.
The business model of incubators is quite simple: usually, the incubators’ holders offer three to six months incubation for a small share of the startup, say 10 to 20 percent depending on its value.
Incubators scale their investments, meaning the cost of backing ten startups is not ten times the cost of backing one startup but rather three to five times the individual cost. Financial risk for the incubator’s managers is covered by the fact that if one out of all incubated startups is successful, it is going to cover all costs spent on lame ducks.
The first and most famous incubator founded in Tunisia is Wiki Startup and other incubators are on their way to be launched. Whether entrepreneurs want to create their own startups without taking high financial risks or whether investors want to diversify their portfolios while minimizing the risk of investment, incubators are the solution and are growing in Tunisia.
6) Too Few High-Level Positions for Too Many Qualified Candidates
Though this point may be biased by the many experiences of friends and acquaintances, it reflects somehow the hard facts: there are too many well-qualified candidates for too few top positions, particularly for those returning to Tunisia after half a life spent abroad.
Due to politics and the non-transparency of recruitment processes under the old regime, top corporate positions used to be assigned to certain persons and were not the dream of young Tunisian managers working abroad. Immediately after the ex-dictator flew, masses of young, talented Tunisians came home, overwhelming the market with excellent skills while appropriate positions remained very scarce. The hope of attracting new companies to invest in democracy, however, soon disappeared as dozens of top companies left the country due to political uncertainty or a lack of security. Competition for getting a job has thus been very fierce, and logically many good people have been eliminated in the recruitment process.
Waiting for economic opportunities in a transitional post-revolution phase can last a while. For these young entrepreneurs wanting to get a foothold in Tunisia, pursuing a startup becomes a necessary step and not an option. If qualified Tunisians can overcome this psychological hurdle, there exists a mass of trained and capable employees able to drive these future startups.
7. Risky Investments See Greater Payoff
The reason why an investor gets more for his investment than a bank is straightforward: risk! While a bank does not invest before seeing a well-documented business plan and secure assets for reimbursement, venture capitalists and angel investors accept more risk when they invest. It is not uncommon that investors commit quite large amounts of capital on the basis of a PowerPoint presentation alone.
It is not new that the situation in Tunisia is very risky, especially after credit-rating agencies have downgraded Tunisia multiple times in the last two years. Investors do not always see the whole picture from a mathematical perspective. Now has come the time for risk-averse investors in Tunisia and since there is not a lot of cash on the market, investors can get the maximum pay-off for a relatively small up-front cost. With detailed planning, healthy portfolio diversification, and a careful choice of the entrepreneurs who are going to drive the business, investing in Tunisia can be exciting and a big economic win.
8. Inflation: Savings Should Not be Passive
Inflation is a fact in Tunisia. Official numbers say it has exceeded six percent, but some financial experts speak of it being 12 percent or more. Rumors are growing that money is about to be printed very soon to address the problem of not more being able to access international funds and credit, which until now has usually been needed to pay salaries. It is not rocket science to understand that this would cause even higher inflation rates as money devaluates.
Let us explain this in a very simple way. More money on the market with the same low levels of production and goods leads to higher prices. This means that what could be paid by your savings today could not be afforded tomorrow, as money loses its value. While people think their money is safer during this unstable period if it is kept in banks, they overlook the fact that the value of their savings will steadily shrink and be significantly lower after just a few months.
Old-school experts argue that there are well-known secure assets that can protect against inflation, foremost among them gold, which has high market liquidity, but also other metals and real estate. Well, of course these are secure assets, but their prices in most cases are not affordable for young people with limited savings. So what then?
A less conventional way to secure the money’s value could be to invest in a diversified portfolio after good bargaining on shares to be acquired. As stated previously, the cost of equity will be higher than the interest rates of passive money, and should be calculated in a way that it is adjusted to the inflation rate to be able to secure the money’s value. For the short term, I would suggest a healthy mix of blend equity and adequate real returns, but depending on the country’s circumstances, we may have no chance other than to push the economy by investing and leveraging production. That, or we could just wait for the crash.
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