Trying to Fix Tunisia’s Economy with “Solidarity”

Tahar Etahri, President of the Association for the Safeguarding of the Jemna Oasis, plans to register their association under the new Social and Solidarity Economy legal framework. Photo by George Gale, October 3, 2019.

At the end of June, a years-long process reached a pivotal moment: Parliament passed a law instituting a new category of economic activity, the Social and Solidarity Economy [SSE]. It is one of the latest laws in recent years—among them a new investment law, a start-up act, and a self-entrepreneur decree—aimed at reshaping the economy. Proponents believe it will help the economy, but they’re sharply divided on what SSE means and who it serves.

For some, the new law promises to make their lives easier.

“Tax authorities, the fisc, is always up my ass,” Adnen Ben Hadj Yahia told Meshkal.

Ben Hadj Yahia cofounded El Space, a coworking space that presents itself as a “social innovation hub.” El Space is registered as an “association”—a legal category that encompasses all charities, non-profits, NGOs, and civil society organizations in general. But El Space makes some profits and reinvests them in expanding its operations, which state officials tell Ben Hadj Yahia looks like “borderline tax evasion.” The problem, Ben Hadj Yahia thinks, is that there hasn’t been a legal category between for-profit businesses and non-profit associations. Until now.

“With this law, with El Space registered as social [and solidarity] enterprise, a maximum of 25 percent of profits can go to dividends, can go to investors or shareholders,” Ben Hadj Yahia explained, referencing one of the stipulations in article 4 of the new law, which dives into the complex accounting rules that will apply to SSE-labeled organizations.

Many of the associations that have sprung up since the 2011 uprising have worked on a grants model, working on diverse public-interest topics with the help of financing from international development organizations. This model has provoked numerous criticisms: international actors having too much influence over Tunisia’s policies; the perpetuation of colonial patterns of labor; “taming” youth activism or turning activists into project managers, questions over the sustainability of this financing model, and the fickleness of funding priorities, among others.

On the question of financial sustainability, the SSE model opens new possibilities for civil society groups, or at least allows associations that already make profits in informal ways to formalize this in the eyes of the State and its authorities.

“The SSE economy will change some of the NGOs into businesses, which is great,” said Houssem Aoudi, an angel investor and entrepreneur who advocates for liberalizing the Tunisian economy.

“Our mistake as Tunisians is we never considered NGOs as being part of the economic tissue…Guess what? NGOs right now are the number one importer of foreign currency in the country,” Aoudi told Meshkal, adding that NGOs also hire high-skilled workers who might otherwise leave Tunisia as part of a continuing brain drain.

Ben Hadj Yahia believes the financial sustainability his association could achieve with an SSE designation would help El Space expand its operations and improve the impact of El Space’s social mission.

“Being a social enterprise means having a social mission. This [law] will give access to impact investors,” Ben Hadj Yahia said, referring to a term popular in the financial sector for investors who seek to invest in projects that could be seen as having positive social or environmental impacts.

According to Ben Hadj Yahia, having an SSE label is attractive to investors these days, but there have been so few for-profit projects marketed as having a social impact that there is only one such impact investor operating in Tunisia, a venture capital firm called “Impact Partner”. (Impact Partner appears to be managed by Fares Mabrouk of the wealthy and politically-connected Mabrouk family).

“They’re basically sponsoring agricultural stuff. Social impact is not very much demonstrated because there are no guidelines from the government and there were no clear guidelines of what social enterprise is,” Ben Hadj Yahia told Meshkal.

Is SSE for Tech Start-Ups or Farming Collectives?

Ben Hadj Yahia said he gave his input during the writing of the SSE law, but not all those who crafted the law imagine a tech-savvy, entrepreneurship hub when they think of an SSE enterprise.

“If today in Tunisia there is a law on Social and Solidarity Economy, it is thanks, among other things, to the Association for the Safeguarding of the Jemna Oasis,” Taher Etahri, the Jemna association’s president told Meshkal.

The Jemna association is very different from El Space. Since 2012, the association has been managing the date palm plantation which locals reclaimed after the 2011 uprising, using the profits to hire more locals and reinvesting into public infrastructure and services. The government in 2016 froze the association’s assets as part of a feud over the land’s ownership and management—and over the association’s legal status. While this was resolved following demonstrations in solidarity with Jemna, the dispute occurred around the time that the SSE law was first being drafted by the Tunisian General Labor Union (UGTT), together with the International Labor Organization (ILO).

The state has disputed the Jemna association’s registration classification, calling on it instead to register as one of a number of agricultural cooperatives and thereby ceding some ownership claims over the land to the State. Some see the SSE classification as a compromise that would allow the Jemna association to receive formal, legal recognition by the State.

According to Etahri, they are still negotiating with the government to resolve the dispute, but he asserts that they will “certainly…work now within the framework of the new [SSE] law and we will be a social enterprise.”

For Etahri, the advantages of the law are first that the concept of SSE is recognized formally, second that it would allow their association to be labeled as such—meaning their association would no longer be in legal limbo and vulnerable to State efforts to shut it down, and third that the law opens the door for the creation of a public bank that could lend to SSE enterprises.

“The interest rate would be very low. Maybe this law will also allow young people in the region to unite and work and no longer fear adventure. They will work and they will find a guarantee—

it’s the State itself that will be a guarantor—for times when they need credit from banks,” Etahri told Meshkal, clarifying that the Jemna association itself has not needed any loans thus far.

The kind of cooperative work that the Jemna association does appears to be what some UGTT actors had in mind when they first began drafting the law. For Lotfi Ben Aissa, a specialist on social economy within the UGTT and one of the people who worked on the SSE law, SSE will be the new legal grouping for several previous kinds of agricultural collectives and mutual associations.

Ben Aissa gave the example of the agricultural sector where he says there are “more than 3000 Groupements de Développement des Agricoles, GDAs [Water Users Associations], 315 SMSA Societés Mutuelles de Services Agricole [Agricultural Services Mutual Companies], 18 Cooperative Units, 48 mutual groups and several hundred associations specialized in social and environmental activity” which he believes will be consolidated under the SSE label to their benefit.

But while the new SSE law might give cooperatives, NGOs, and mutual groups more access to funding, the law also allows commercial, private-sector businesses to apply for the SSE designation.

Is SSE Socialist or Capitalist?

One reason the Social and Solidarity Economy law could apply to some commercial companies is that stipulations applying to them were introduced once leadership in the law-drafting process passed from the UGTT to the government in 2016. At that time, the Tunisian government received funding from the Netherlands and the ILO to set up a team that could coordinate the law-drafting in consultation with experts and stakeholders, according to Saida Ounissi, currently a Member of Parliament with the Ennahdha party who played a lead role in redrafting the law as Minister of Employment and Vocational Training from 2016 to 2019.

According to Ounissi, the external funding budget for the SSE law-drafting project could be used more flexibly than other State budget sources, but the external experts brought on were actually Tunisian civil servants on secondment to the ILO. So Ounissi told them to keep in mind that they would be returning as public servants eventually and keep that in mind when drafting.

“ILO was recruiting; most of their experts were former civil servants coming from my former ministry but who would take like a kind of leave to work for ILO for two, three, four years, being paid obviously triple, representing ILO in front of the ministry,” Ounissi said. “When I realized this, I went to the ILO guys and told them: ‘In some years you will be back to the public side, so do your best to deliver us with good quality expertise, because you will probably in five years or two years be the ones who will implement the tools or mechanisms from the Tunisian side.’”

The UGTT’s original version of the law included 53 articles, but this was eventually whittled down, and the current, final version has only 24 articles.

“We have in a way wiped out, destroyed little by little the law proposed by the unionists. But that doesn’t mean that everything is bleak, everything is black, no. We worked in negotiation with the state to fix the problems of the law,” Taher Etahri of the Jemna association told Meshkal.

“There are certainly deficiencies [in the law], but the deficiencies will be remedied with the [executive] decrees which will be adopted afterwards by the government, by the prime minister and we will try—as supporters of SSE—to fix the gaps in the law,” Etahri said.

Laws passed by parliament usually require executive decrees that offer more specific instructions for how to execute the law or detail the corresponding regulations for the law.

According to Ounissi, the UGTT had initially balked at the SSE law covering sectors like education or health—areas where some critics have suggested the SSE framework may be used to privatize existing State services or to transfer the burden of providing social services from the State to the private sector.

“In the beginning they [the UGTT] said: ‘This is a red line; we don’t include as economic sectors [such as] education, transport, and public health into areas of potential SSE projects,’” Ounissi recounted to Meshkal. “But then, I tell you, after probably six months of discussion about that, they were like ‘Ok. No problem.’”

Speaking of Noureddine Taboubi, Secretary General of the UGTT since 2017, Ounissi said “he understands in certain areas you need to review your primary conviction and ideas.”

Ounissi explained that one argument she used with the UGTT was to warn that full privatization is already underway in some sectors, so opening up the path for SSEs instead might actually be an alternative to that.

“I gave them an example which was Tataouine, where you have an explosion of private primary schools and actually in an area like that, if we leave the private sector taking over, taking everything, we actually will create more inequalities,” Ounissi told Meshkal. “But if we give the opportunity to people to set up Social and Solidarity Economy primary schools where—for example—the food or any service there would help tackle school drop outs but at the same time allow parents to pay a very, very small amount of money to bring their kids to school—you need to look for these kind of solutions.”

Trickier than getting the UGTT on board was to winning the support of the Tunisian Union of Industry, Commerce and Crafts [UTICA by its French acronym], the main national chamber of commerce, according to El Space cofounder Ben Hadj Yahia. Ben Hadj Yahia said UTICA was initially worried about new SSE enterprises presenting new competition to their members’ existing markets. In the end, UTICA dropped its objections because they believed that regulations restricting SSE enterprises would be adequate, according to Ben Hadj Yahia’s account.

Ben Aissa of the UGTT downplays the potential of the SSE law to be used as a tool for privatization, citing in particular the law’s stipulations under Article 4 for an SSE enterprise to maintain “democratic management” in its internal organizational structure. Unlike in many private businesses, no single member can hold a majority voting share within an SSE, although how the state will enforce this stipulation remains unclear. Ben Aissa called SSE a “third choice” between the public and private sector.

The Social and Solidarity Economy is an “essential and inevitable component of the economic model to be constructed, which we call at the UGTT the ‘Alternative Development Model’. Alternative to what, you might say? Alternative to the neoliberal model,” according to Ben Aissa.

But Akram Belhaj Rhouma, a law professor at Manouba University who was consulted by the government during the drafting of the SSE law and is satisfied with the law’s final version, concedes the law could open the door to privatization depending on how the law is implemented.

“The risk exists because certain enterprises use SSE as a tool to privatize and to carry out activities that fall under the public sector perhaps. But I think if we apply the principles laid down in the law…we could destroy or at least totally minimize that risk,” Rhouma told Meshkal, noting that a lot depends on the dozens of governmental and ministerial decrees still needed to sort out the execution of the law.

Asked whether the SSE ecosystem could be used to unload the state’s social responsibilities onto the SSE economy, Ounissi said she sees this as a potential risk.

“I don’t deny that there is a whole trend for Social and Solidarity Economy and…as entrepreneurship, it could be, if it’s not done in a good way, a kind of the de-responsibilization of the state,” Ounissi told Meshkal.

For the researchers Ester Sigillo and Damiano de Facci, the SSE concept in Tunisia has been a way to translate protest movements into associations that are “building an ‘alternative’ to the state development model which had led to economic and territorial fractures,” according to a paper they published on the topic.

Sigillo and De Facci see the concept of SSE as a kind of “grammar” which allows groups with different or even opposed “diagnoses of socio-economic exclusion” to speak to one another in common terms and come up with common solutions.

“SSE is configured as a crossroads of entrepreneurship, the subsistence economy and the solidarity economy,” the researchers wrote.

But this sort of compromise between—or mixing of—different economic philosophies and categories doesn’t make sense to everyone.

“At a certain point in time we have to decide, are we liberal or are we communist? To quote a friend of mine, Tunisia is a capitalistic North Korea. We are capitalistic but our borders are closed,” said investor Houssem Aoudi.

Aoudi said he likes the SSE law, and, like the Start-up Act he worked on drafting and several other recent legislative initiatives that claim to promote entrepreneurship, it represents a step towards opening up Tunisia’s economy. But Aoudi also sees a problem with the State’s overall approach to economic reform, using piecemeal legislation to create new categories.

Aoudi in particular sees problems with laws that allow certain categories of legal entities to receive selective benefits—especially access to foreign currency and tax incentives—rather than having a more uniform economic policy.

“Think of it as economic apartheid. Some people have all the benefits, the other doesn’t have the same benefits [even though] they are same born under the same roof,” Aoudi said. “Instead of working on the whole economy…you are just segregating and giving some people an advantage over others. This is the same thing that you can see with liquor license in the country for example, it’s the same thing with the banking license, it’s the same thing with privileges given to a few instead of giving them to the many. So the game is rigged.”

But treating everyone equally in the economy might ignore existing inequalities, which some officials believe need to be addressed through proactive measures by the state.

“I’m basically the one who came up with the national strategy of entrepreneurship and I’m a little bit…I’m a bit leftist on this stuff,” former Minister Ounissi said. “I think the State has a responsibility. People are not equal; I can’t expect a young person from Sidi Bouzid to have the same opportunities as someone living in Monastir in terms of running a project and being successful and creating employment.”

“You can’t say to people this is going to sort out all your problems,” Ounissi continued. “At the same time, it requires a big investment from the State to make the Social and Solidarity Economy work because you need institutions, people in the fiscal institution who know how to deal with it, you will need trainings, you will need a whole comprehensive administration.”

The Economic Effects of Solidarity

At least one executive decree is needed to lay out how the SSE law will work in practice. Some of the debates about the law that were set aside to pass it have reemerged in the political battle over drafting the first SSE-specific executive decree. According to Ounissi, such a decree was ready in early July 2020, but as of late September such a decree had not yet been issued.

Ben Aissa, who said he is contributing to shaping the executive decree, pointed to certain issues under discussion. One of the most important is how and which authority will be able to designate entities as SSE—the label needed to operate as an SSE with all the benefits that implies.

“What is the label? It’s a visa for entry into the ecosystem. These are the keys to the SSE house. If you leave these keys in the hands of a public entity, that’s it. Farewell to independence, farewell to the autonomy of the sector,” Ben Aissa said. “So it’s necessary to balance [things].”

Ben Aissa said that his goal for the final version of the decree is to make sure that there are two categories of entities, one that will receive the SSE label automatically and one that will require review. In the first group would be those that “are by nature integrated in the Social and Solidarity Economy” such as cooperatives, mutual societies, and development associations. The second category would include commercial companies and associations.

But it’s not clear yet how clear the decree will be or how effectively it might be implemented to prevent some businesses from opportunistically taking the SSE label.

“There’s a lot of companies that harm the environment but they claim they are social enterprises. This is where the labeling part of the law is important,” Ben Hadj Yahia, El Space’s co-founder told Meshkal.

How this label will actually be given is, according to Ben Hadj Yahia, “dangerously vague.”

Technically, “a hotel could be a social enterprise according to this law. It can be social enterprise but it’s going to be very difficult to do this. The hotel business is simply not adequate to be a social enterprise. They can be a responsible enterprise that respects environmental values, ISO norms, that’s good. But whoever is trying to get a hotel as a social enterprise, good luck with that.”

Nearly all of the people Meshkal spoke with were optimistic that the SSE law would improve Tunisia’s economy, but some had mixed feelings.

“I like where we are today celebrating this law, but at same time there are many things that need to be changed. It’s more about its implementation on the ground,” Ben Hadj Yahia said.

For Ben Aissa of UGTT, he gives definite economic predictions for how the law might increase Tunisia’s GDP growth and create jobs.

“The objective of this [SSE] law is to promote the creation of a new generation…hundreds of new entities. These hundreds will create a dynamic which will generate added value which could take [GDP] from one percent today to three, four and why not five percent within the frame of the five-year development plan,” Ben Aissa said.

But Ounissi, the former Minister, is more cautious. While Ennahdha had been a supporter of the law, she believes the law was set aside by her former boss, Prime Minister Youssef Chahed, before the 2019 elections in order to deprive Ennahdha from running on the successful passage of the law. Ounissi sees some actors as putting the political optics of SSE ahead of its real, if somewhat limited, capacity to reshape the economy.

“There is a whole pattern today at the ILO to go to Social and Solidarity Economy as a miracle tool for job creation, and I don’t think that’s the case,” Ounissi said, although she praised the ILO for its capacity to mobilize teams and expertise. “I don’t think entrepreneurship is kind of a magic wand for employment. It is the way government—even those I was part of and those I voted for—want to present it because it’s comfortable politically. But we need to be very careful on that.”

“This is not a miracle solution. That’s why I was a little bothered by all this celebration around SSE, because I was like, and especially in this time, you know Tunisia is going to go through worst recession ever like all countries basically,” Ounissi added, referring to the effects of the coronavirus pandemic.

Apart from the current economic challenges presented by the pandemic, another issue is that the Tunisian economy has been structured from the 1970s onwards upon an export-driven model dependent on European markets and international loans. It appears the SSE framework does not address this structural challenge, and none of the specialists interviewed by Meshkal commented on it.