Tunisia’s economy needs ‘painful’ reforms, says leading businessman
Tunis - Tunisia’s economy needs immediate “painful” reforms if it is to be rescued, Tunisian business leader Hamadi Bousbia said.
“It is a miracle that the country’s economy is still standing but miracles do not last forever,” said Bousbia, chairman and chief executive officer of privately owned Tunisia Beverage Manufacturing Company (SFBT).
“The country’s leaders need to immediately tackle the situation,” he added.
Bousbia is a former central bank deputy governor who experienced first-hand how Tunisia moved from a country with an economy close to bankruptcy in the early 1970s to becoming relatively prosperous in the 1980s.
He and other veteran economists remember the hard times Tunisia went through as it emerged from its socialist economic experience in the late 1960s with almost no hard currency reserves and empty stalls in the market.
With liberal reforms introduced in the 1970s and the Structural Adjustment Programme implemented in the 1980s, Tunisia resumed growth and rebuilt sound economic foundations that enabled it to churn out an average growth rate of 5% for most of the next two decades. A large middle-class emerged, giving the country relative stability before social pressures outpaced economic progress.
Bousbia, who does not hide his pride for turning SFBT from a small French-owned brewer to a large diversified company that is a Tunis stock market blue chip and a rare local firm to have US funds among its shareholders.
SFBT’s capital jumped from $1.9 million in 1980 to $52 million in 2014, with turnover rising from $6.3 million to $164 million. Bousbia slashed costs, including the cost of water (20%) and energy (30%) since 1980, to sustain company growth.
“I have rarely seen such a strong stock like SFBT in the Maghreb and Middle East,” said Kais Kriaa a broker from AlphaMena.
Turning to the country’s current circumstances, Bousbia expressed his frustration over a recent tax bill that lowered taxes on hard liquor pushing down the consumption of beer and wine and putting at risk the country’s vineyards.
He said his company was not consulted about the bill. He does not blame legislators, saying that “democracy is the most difficult thing”.
SFBT draws 35% of its turnover from beer sales and 42% and 14% from soft drinks and water, respectively, but profit margins from the beer business segment are relatively higher, analysts said.
Two million Tunisians are regular consumers of beer, wine and other alcoholic beverages, according to Mohamed Ben Cheikh, chairman of the chamber of alcoholic drinks producers.
Bousbia said there was a tradition of consumption of beer even before independence in 1956. No government has toyed with that tradition. “Banning anything would make it even more desirable,” he said.
More broadly, he expressed disappointment with how the country’s economic and financial crisis is being managed. “They have so far failed to come up with initiatives so as to be on the top of the situation,” he said.
Bousbia was critical of the taxation system, which, he said, stifles the creation of new businesses and does not stimulate expansion of current firms. He decries what he sees as “distrust” of the business sector, regretting the recently discussed “economic reconciliation bill” was not adopted. “Demagoguery killed the bill,” he said.
Bousbia said he strongly believes the subsidies regime is making the budget deficit worse without helping poor families make ends meet.
Tunisia authorities hope economic growth will rise to 2.5% in 2016, compared to 0.5% in 2015. The tourism industry was badly damaged in 2015 by militant attacks at a Tunis museum and a Sousse resort hotel.
Adding to the trouble, the country’s crucial phosphate exports have been disrupted by strikes and protests.
The government has repeatedly floated reforms, including to subsidies, as a means of tackling the deepening economic crisis. Many experts have dismissed such pledges as insufficient to turn the economy around.
“The situation is particularly difficult because of lack of business confidence” both in the security environment and the government’s pledges to carry out reforms. Bousbia said. He cited banking, shipping and air transportation among the sectors that badly need reform.
He also called for a pause in wage-increase demands by unions for three years.