Tunisia's Fragile Balance: Navigating Governance Risks and Renewable Energy Opportunities in a Volatile Emerging Market

Tunisia stands at a crossroads. Since President Kais Saïed's 2021 self-coup, the country has seen a dramatic erosion of democratic institutions, with political opponents jailed, media freedoms curtailed, and civil society organizations stifled. Yet, amid this instability, Tunisia's economy is quietly pivoting toward renewable energy and infrastructure projects that could attract investors willing to navigate its turbulent political landscape.

Governance in Crisis
Saïed's consolidation of power has transformed Tunisia into a de facto one-party state. The 2024 presidential election, in which he claimed 90.7% of the vote with a 28.8% turnout, was a farce by global standards. Opposition candidates were disqualified, and independent observers were barred. The judiciary, once a bulwark of democracy, now rubber-stamps executive decrees. Decree 2022-54, which criminalizes “fake news,” has been weaponized to silence critics, while security forces routinely arrest activists and labor leaders.

The political climate has deepened public discontent. Youth unemployment, now over 30%, fuels frustration, and the government's rejection of IMF reform packages—aimed at cutting subsidies and restructuring public enterprises—has left the economy in limbo. Public debt hit $42.5 billion in 2023, and inflation, though easing slightly to 6.7% in September 2024, remains a drag on household incomes.

Economic Glimmers in the Shadows
Despite these challenges, Tunisia's economy is not without potential. Tourism, a vital sector contributing 20% of GDP, is rebounding, with over 11 million visitors expected in 2025. The country's strategic location near Europe and its relatively stable security environment compared to neighbors like Libya and Algeria make it a unique asset.

More promising is the push for renewable energy. In March 2025, the government awarded licenses to four international firms—including French firm Qair International and Norwegian-Japanese consortium Scatec-Aeolus—to build 500 megawatts of solar capacity at a cost of $386 million. These projects, expected to generate 1.1 terawatt-hours of clean energy annually by 2027, align with Tunisia's ambition to produce 8.3 million tonnes of green hydrogen by 2050. The African Development Bank has also committed $87 million to modernize road infrastructure, signaling international confidence in Tunisia's long-term potential.

Investment Risks and Rewards
The paradox for investors is clear: Tunisia's political instability raises red flags, yet its renewable energy and infrastructure projects offer tantalizing returns. The risks are multifaceted. Legal delays, bureaucratic inertia, and the government's refusal to adhere to international governance standards create a minefield for foreign investors. The 2025 Finance Law, which raised corporate tax rates to 20% (40% for banks), has spooked the business community, with the Tunisian Union of Industry warning of a “tax instability” that could deter growth.

Yet, for those with a long-term horizon and risk tolerance, opportunities exist. The solar projects, backed by international partners, are shielded by long-term power purchase agreements, reducing exposure to domestic volatility. Infrastructure upgrades, particularly in transport and water management, could unlock economic activity in underserved regions like Sousse and Sfax.

Strategic Entry Points
1. Green Energy Partnerships: Solar and green hydrogen projects are Tunisia's most promising avenues. The government's alignment with global climate goals and its access to EU markets (via the EU-Tunisia Association Agreement) make these sectors attractive, despite the need for careful due diligence on political risks.
2. Tourism and Agribusiness: While tourism is cyclical, Tunisia's olive oil and date exports remain resilient. Investors could target agribusiness ventures linked to EU-certified organic markets.
3. Infrastructure PPPs: Public-private partnerships in road and water infrastructure, though politically sensitive, offer stable returns if tied to international financing.

The Bottom Line
Tunisia is a study in contradictions—a country where authoritarianism stifles democracy but where solar panels could power a green future. For investors, the key lies in balancing patience with caution. The political risks are undeniable, but so are the rewards in sectors insulated from governance turmoil. As one Tunisian entrepreneur put it: “We're building in the shadow of the storm. If you want to profit, you must first survive the wind.”

In conclusion, Tunisia demands a nuanced approach. It is not a market for the faint-hearted, but for those who can navigate its complexities, the rewards—particularly in renewable energy—could justify the risks.