* Three IPOs so far this year vs two in all of 2012
* Official says 15 in the pipeline
* Contrasts with moribund IPO outlook in Egypt
* Market regulation still a problem
* Outlook unclear for listings of big state firms
By Tarek Amara
TUNIS, May 8 Tunisia is struggling with rising
inflation, a big external deficit and an uncertain political
outlook. These obstacles did not deter local businessman Mohamed
Frikha from launching an initial public offer of shares in his
fledgling carrier Syphax Airlines last week.
Syphax, founded in 2011, operates three planes, competing
with state-owned flag carrier Tunisair. The IPO, which will run
until May 20, aims to raise 25 million dinars ($15.5 million).
Frikha said he was encouraged to list the airline on the
local stock market by his success in 2011 in listing Telnet
, a software and technology consulting firm.
"The Tunisian stock exchange has become a real alternative
for the mobilisation of financial resources," he said, adding
that Syphax's listing would help the airline buy more planes and
develop routes to the United States and Asia.
Over two years after Tunisia's revolution ushered in an era
of political and economic instability, the Syphax IPO points to
an encouraging trend for the economy: the gradual revival of the
stock market as a place for companies to raise money.
Three companies have conducted IPOs so far this year - a
technology consulting firm, a cheese maker and a garment
producer - compared to two in all of last year.
Mohamed Bichiou, general director of the Tunis Stock
Exchange, says 15 more firms have applied to conduct IPOs, which
should bring the number of listed companies up to 75 by the end
"I am optimistic...Tunis's bourse will achieve a real
take-off this year," Bichiou said in an interview at the
exchange's modern new headquarters, opened last month in an
upscale neighbourhood of Tunis.
If this expectation is borne out, the listings could in the
long term help to boost growth of the economy. Moez Joudi, a
financial analyst and economics professor in Tunis, estimates
banks still provide nearly 85 percent of funding for Tunisian
companies - a dependence which constrains the companies and
poses risks for the banks.
In addition, a string of IPOs would send a powerful signal
of returning confidence in Tunisia, by showing that businessmen
were willing to entrust their firms to the stock market and
investors were ready to stump up their money.
Though still in its early stages, the revival of IPOs in
Tunisia contrasts with neighbouring Egypt, another economy hit
by instability after a 2011 revolution. There, equity issuance
has largely ground to a halt since the revolution, and some
businessmen have been taking steps to delist their firms from
the stock market, potentially to move their wealth abroad.
The last two years have not been kind to Tunisia's economy.
The official inflation rate hit a five-year high of 6.5 percent
in March, while the International Monetary Fund estimates
Tunisia will post a big deficit in trade of goods and services
of 7.3 percent of gross domestic product this year; it predicts
GDP growth in 2013 of 4.0 percent, not enough to make much dent
in poverty and unemployment.
The stock market was hit in February by the assassination of
opposition politician Chokri Belaid, which ignited the worst
street violence since the revolution. Elections expected towards
the end of this year will involve fresh uncertainty.
The main Tunisian stock market index has
reflected these reverses; it sank 7.6 percent in 2011 and a
further 3.0 percent last year, and is up just 1.4 percent this
year even as some other Middle Eastern markets have surged.
Foreign investment inflows totalled 394 million dinars ($244
million) in the first quarter of this year, down 10.6 percent
from a year earlier and down 17.2 percent from the first quarter
of 2010, before the revolution, according to the government's
investment promotion agency. The vast majority of inflows in
this year's first quarter were direct investment in companies;
only 20 million dinars were portfolio investment in securities.
Nevertheless, there have been positive signs for the long
term. Tunisia's new, democratic political system reacted with
some flexibility to the February unrest, forming a new
Islamist-led government that included independents. If this
year's elections go smoothly, they may be seen by investors as
setting the seal on the country's democratic transition.
The government has moved more actively than Egypt to
introduce economic reforms such as cuts in subsidies, and last
month the International Monetary Fund agreed to extend it a
$1.75 billion loan, easing though not removing the pressure on
Tunisia's external finances.
Joudi said a major problem still overhanging the stock
market - and deterring any major influx of foreign money - was a
lack of transparency. Some listed companies do not disclose
their earnings regularly and regulators do not have the courage
to punish offenders, he said.
Bichiou denied there was any lack of transparency, insisting
that the law compelled all firms to provide quarterly results,
though he acknowledged that sometimes there were delays.
Both he and Joudi agreed that to attract major foreign
investment to the market, which has a capitalisation of only
about $9 billion, Tunisia would need to list big state-owned
companies such as steel producer Foulahdh and Tunisie Telecom.
The government has been looking at such a possibility but
preparing the companies for listings could involve cutting
staff, and that may be politically impossible, at least before
In February 2011, a month after the overthrow of president
Zine al-Abidine Ben Ali, Tunisie Telecom said it had cancelled
plans for a joint IPO on the Tunis and Paris stock exchanges
after consultations with trade unions. Workers at the company
had been threatening industrial action if there were job losses.