Tunisia finds itself at a critical juncture as it endeavours to harmonise its economic progress with environmental sustainability and social equity. With its commitment to curtail primary energy demand by 30% and attain 35% renewable energy in electricity generation by 2030, the nation has established ambitious objectives to combat climate change, fortify energy security and modernise its economy.

The long-term objective of achieving carbon neutrality by 2050 is indicative of Tunisia’s acknowledgement of its role in the global transition toward a low-carbon future. But the realisation of these objectives requires systemic changes across economic sectors, infrastructure and governance frameworks.

At the core of Tunisia’s energy transition are its micro, small and medium-sized enterprises (MSMEs). These enterprises are foundational to the national economy, contributing over 50% to GDP and employing approximately 70% of the private sector workforce. Their economic importance is particularly pronounced in rural and underserved regions, where they are pivotal in driving local economies and providing critical livelihoods.

But MSMEs confront substantial impediments, including constrained financial resources, antiquated infrastructure and regulatory challenges, which impede their potential to catalyse a transformative energy transition. This column summarises the prospects for the integration of MSMEs into Tunisia’s energy transition and the current impediments that outcome. It also proposes strategies to encourage a fair, equitable and environmentally sustainable transformation.

MSMEs: A pillar of Tunisia’s economy

MSMEs are integral to Tunisia’s economic and social fabric. These enterprises operate across a wide range of sectors, including agriculture, manufacturing, trade and services. They are particularly prevalent in rural and peri-urban areas, where they often serve as the primary drivers of economic activity. Beyond their economic contributions, MSMEs play a crucial role in reducing regional disparities, fostering innovation and promoting social cohesion.

But MSMEs in Tunisia face significant barriers that hinder their ability to grow, innovate and embrace sustainable practices. These challenges include constrained access to capital, a paucity of technical expertise and a reliance on outdated technologies.

Moreover, the high cost of energy imposes a substantial financial burden on many MSMEs, further curtailing their capacity to invest in modernisation and efficiency enhancement. Addressing these challenges is imperative to unleashing the potential of MSMEs as drivers of economic growth and sustainability.

Tunisia’s energy landscape: progress and persistent challenges

The energy sector of Tunisia continues to rely on fossil fuels, with natural gas constituting the predominant source of electricity generation. Renewable energy sources, such as solar and wind power, currently contribute a mere 5% of electricity production, significantly below the government’s declared targets.

This reliance on fossil fuels carries profound economic and environmental ramifications, encompassing vulnerability to global energy price fluctuations, substantial greenhouse gas emissions and mounting pressure on finite natural resources. In response, Tunisia has initiated programmes to promote renewable energy, including the Tunisian Solar Plan, feed-in tariffs and incentives for private sector investment.

But the implementation of these initiatives has been sluggish, hindered by bureaucratic delays, regulatory inefficiencies and inadequate infrastructure. State-owned enterprises have a dominant presence in the energy sector, which restricts competition and innovation. Inadequate energy infrastructure persists in rural and underserved regions, exacerbating existing inequalities and hindering the feasibility of decentralised energy solutions.

Barriers to MSME participation in the energy transition

MSMEs encounter a multitude of obstacles that hinder their full engagement in Tunisia’s energy transition. A pronounced financial obstacle stands as a primary impediment. Despite their long-term cost savings potential, renewable energy technologies require substantial upfront investments that many MSMEs lack the financial capacity to make.

Conventional financial institutions, such as banks, frequently impose stringent eligibility criteria, substantial collateral requirements and protracted application processes, effectively excluding smaller enterprises from accessing traditional financing mechanisms. Efforts to address these challenges, such as the SUNREF credit line, are hindered by limited awareness and cumbersome administrative procedures.

Regulatory challenges further exacerbate these difficulties. Lengthy permit processes, opaque regulations and inconsistent policy enforcement create uncertainty for businesses seeking to invest in renewable energy.

The pre-eminence of state-owned enterprises in the energy sector impedes private sector participation, thereby reducing opportunities for competition and innovation. In addition, the regulatory framework in Tunisia does not adequately address the unique needs of MSMEs, resulting in their disadvantage in accessing incentives and support programmes.

A dearth of technical knowledge and skills among MSME owners and employees presents an additional barrier. Moreover, many enterprises are unaware of the financial and environmental benefits of renewable energy adoption and energy efficiency improvements.

Even in cases where awareness is present, the dearth of skilled personnel to implement and maintain these technologies serves as a significant impediment to their adoption. This skills gap is particularly pronounced in rural areas, where access to education and training opportunities is more limited.

Inadequate infrastructure further hinders MSMEs’ capacity to participate in the energy transition. Tunisia’s energy grid, which is designed for centralised fossil fuel-based generation, is ill-equipped to handle decentralised renewable energy systems. Inadequate energy access and obsolete distribution networks in rural and underserved regions present substantial impediments to economic activity and growth.

Opportunities for MSMEs in the energy transition

Notwithstanding all these barriers, the energy transition offers a singular opportunity for MSMEs to catalyse economic growth and social progress while contributing to environmental sustainability. The adoption of renewable energy would result in a substantial reduction in energy expenditures for MSMEs, thereby enhancing their competitiveness and resilience to price volatility. Energy efficiency measures enhance productivity and profitability, enabling businesses to reinvest savings into innovation and expansion.

The renewable energy sector offers substantial potential for job creation. For example, solar and wind energy projects require skilled workers for installation, operation and maintenance, thus providing critical opportunities for Tunisia’s young and underemployed population.

Women, who are often underrepresented in the labour market, can also benefit from targeted training programmes and employment opportunities in the renewable energy sector. In rural areas, the implementation of decentralised renewable energy systems has the potential to empower local communities, enhance energy access and stimulate regional economic development.

Technological advancements, such as energy storage, smart grids and digital solutions, offer additional opportunities to improve energy reliability, efficiency and affordability. MSMEs that adopt these innovations can position themselves as leaders in the transition to a sustainable economy. International partnerships and collaborations with multilateral organisations can accelerate these advancements by providing access to financing, expertise and technology.

The role of public policy in supporting MSMEs

The Tunisian government can play a pivotal role in fostering an enabling environment for MSMEs to thrive in the context of the energy transition. While several policies and programmes are already in place, there is a pressing need to expand and strengthen these initiatives to address the evolving challenges and opportunities faced by smaller enterprises.

Financial support mechanisms must be scaled up and tailored to the specific needs of MSMEs. This includes the provision of subsidies, tax incentives and low-interest loans to reduce the upfront costs of adopting renewable energy technologies and energy-efficient equipment. Simplifying application processes and enhancing awareness about existing resources will further improve accessibility and encourage greater participation in these programmes.

Regulatory reforms are equally crucial to minimising administrative barriers and fostering private sector investment. Streamlining permit processes, improving policy transparency and aligning regulations with the specific needs of MSMEs can drive innovation and facilitate the adoption of renewable energy solutions. In addition, investments in modernising energy infrastructure are essential to ensuring equitable access to sustainable energy resources, particularly in rural and underserved areas.

Education and workforce development are another critical area where the government can make a significant impact. By collaborating with private sector stakeholders, as well as national and local governments, training programmes can be developed to equip workers with the skills needed to implement and maintain renewable energy systems. These programmes should place a priority on inclusivity, creating opportunities for women, youth and marginalised populations to play a meaningful role in the energy transition.

By expanding and strengthening existing policies, the Tunisian government can unlock the full potential of MSMEs in driving a sustainable and inclusive energy transition.

Ensuring social equity in the energy transition

It is imperative that social equity be prioritised as a fundamental aspect of Tunisia’s energy transition. To this end, policies must be implemented that address regional disparities by directing investments to underserved areas and ensuring that vulnerable populations benefit from renewable energy projects.

Community engagement is a critical factor in fostering trust and local ownership of energy initiatives. A comprehensive and just framework for transition, one that emphasises procedural, redistributive and restorative justice, would be instrumental in ensuring that the energy transition is inclusive and equitable.

The government must also implement policies to mitigate the social impacts of phasing out fossil fuels. The implementation of retraining programmes for workers in traditional energy sectors, in conjunction with investments in community-led renewable energy projects, has the potential to empower local populations and enhance social cohesion. These measures can be instrumental in ensuring that the benefits of the energy transition are widely shared, thereby reducing inequalities and promoting social stability.

The path forward

Tunisia’s energy transition presents a transformative opportunity to empower its MSMEs while addressing systemic challenges, fostering innovation and ensuring inclusivity.

To create a more supportive ecosystem for MSMEs, the government must make priorities of targeted regulatory reforms, such as streamlining permit processes and reducing bureaucratic barriers. These changes will establish a more business-friendly environment, enabling small enterprises to adopt renewable energy solutions and contribute to sustainable growth.

Investments in modernising energy infrastructure, particularly in rural and underserved regions, are equally crucial to facilitate renewable energy integration and ensure equitable energy access for MSMEs.

Tailored financial mechanisms are essential to support MSMEs in overcoming the high upfront costs associated with renewable energy technologies. Expanding and simplifying access to low-interest loans, grants and subsidies specifically designed for small enterprises will encourage broader participation in the energy transition.

In addition, workforce development programmes must focus on equipping MSME employees with the skills needed to implement, maintain and scale renewable energy systems. These programmes should actively promote inclusivity by creating opportunities for women, youth and marginalised groups, recognising the diversity and potential of MSMEs.

International collaboration can further strengthen MSMEs by providing access to financing, advanced technologies and expertise. Tunisia should actively engage with global and regional energy initiatives to align its MSME policies with best practices, fostering knowledge sharing and innovation. Community engagement is also vital to building trust and ensuring local ownership of renewable energy projects, which can be particularly impactful for MSMEs operating in underserved areas.

A just framework for transition that specifically addresses the needs of MSMEs is critical. This should include strategies to mitigate social and economic disruptions, such as retraining workers in traditional energy sectors and supporting economic diversification in regions reliant on fossil fuels. Transparent monitoring and evaluation mechanisms will help to assess the impact on MSMEs and adapt policies to their evolving needs, ensuring their inclusion in the transition process.

Conclusion

MSMEs are the backbone of Tunisia’s economy and must be central to the nation’s energy transition strategy. By addressing their unique challenges and leveraging their potential as agents of change, Tunisia can ensure that MSMEs drive innovation, create jobs and promote sustainable development. A fair distribution of the transition’s benefits across all regions and communities will secure a future where MSMEs thrive as leaders in a prosperous, inclusive and sustainable Tunisia.