Startup Act Tunisia: Legislation and support for young startups to promote entrepreneurship (2018-ongoing)

In 2018, Tunisia implemented the Startup Tunisia policy through the online portal “Startup Tunisia,” which provides access to finance, business advice, and networking opportunities to support economic diversification and inclusive growth, and to address rising youth and female unemployment. Startup Tunisia is regulated by the Startup Act, which was developed through a consultative process between the government and the private sector to facilitate startup creation, funding and growth.

In 2011, the unemployment rate in Tunisia hit 18 percent.¹ A total of 27 percent of women and 42 percent of young people unemployed. High unemployment was one of the catalysts for the Tunisian revolution (2010-11) and was a key focus of the democratic government’s agenda to restore social justice. The post-2014 government saw entrepreneurship and the creation of small- and medium-enterprises (SMEs) as a route for creating jobs, alleviating high unemployment, diversifying the economy, and boosting economic growth. However, access to business licenses and startup funding was largely monopolized by those who had connections to the government. As such, many young people faced barriers in starting up their own companies.²

The Startup Act was ratified in 2018. It defines startups as new businesses that are less than eight years old, have less than 100 employees, and more than two thirds of their shareholders are founders.

The Act encourages entrepreneurship by allowing private and public sector workers to take one year (extendable to two years) of unpaid leave to build a business, while ensuring that their current job is protected. Any individual can apply for a startup. The Act stipulates that, once recognized, new startups are provided with funds to cover the cost of patents and finance salaries of up to three founders [1,496 Tunisian dinar (TND) per month on average, 493 United States dollars (USD)) during the first year of operations. The Act also stipulates that startups are exempt from capital, import and customs taxes, and allows preferential access to foreign currency (which is normally limited) so that new businesses may access international markets.

Startup Tunisia provides recognized startups with two main services: Startup Ecosystem and Startup Invest. Startup Ecosystem is a support framework which focuses on connection and promotion.³ It provides funds (ranging between TND 30,000 and TND 200,000, or USD 9,855 and USD 65,703),⁴ training and international exposure to Tunisian startups,⁵ and supports startups at different stages from conception, incubation and acceleration to growth. Startup Invest is an investment framework which aims to create an ecosystem of venture capital⁶ (VC) funds with high added value for startups. It supports entrepreneurs’ access to finance by pooling investor funds and providing investment guarantees. The increased access to finance is also supported by financial advice through education and training programs delivered by national and international experts.

Startup Tunisia has three broad goals to be achieved by 2024: to identify and support 1,000 start-ups; to create 10,000 new jobs; and to support startups with a cumulative turnover of TND 1 billion.

Implementation

To overcome some of the recognized barriers and facilitate the entrepreneurial environment, a startup task force was established in 2016 by 70 investors, entrepreneurs, bankers and the Minister of Communications. The startup task force was responsible for reforming the entrepreneurial environment, with a particular focus on young people, women, and the technology sector. The Startup Act was one of the first outputs of the task force, and was advocated through social media to increase traction, particularly among young people.

A parliamentary academy was also created for parliamentarians to increase awareness of the Startup Act and of the need to reform the entrepreneurial environment. ⁷

The Startup Act is implemented through Startup Tunisia,⁸ an online platform created by the Ministry of Communication Technologies in 2018.⁹ The platform allows entrepreneurs to apply for the startup label. Once labeled, they become eligible for the benefits provided by the law, in addition to the Startup Ecosystem and Startup Invest services.

In 2020, the SAVE initiative was rapidly rolled out through Startup Tunisia to protect entrepreneurs during the COVID-19 pandemic. SAVE protected 60 startups by providing emergency loans between TND 10,000 (USD 3,285) and TND 50,000 (USD 16,425).¹⁰

Cost

There are many initiatives under Startup Ecosystem and Startup Invest, which mobilize funds from a range of sources. Financing is provided through the state-owned enterprise “Caisse des Dépôts et Consignations” as well as many donors. In 2019, the World Bank provided a USD 75 million loan to support the Startup Tunisia Project.¹¹ Expertise France provided EUR 583,000 (USD 643,000) for the emergency SAVE initiative during COVID-19.¹²

Assessment

By the end of 2021, Startup Tunisia had supported 650 startups (65 percent of the 2024 goal). It had contributed to the creation of 4,500 new jobs (45 percent of the goal) and had a cumulative turnover worth TND 240 million or USD 77 million (24 percent of the goal).¹³ In addition, Startup Tunisia had supported thirteen Tunisian startups to enter international markets.¹⁴

The initiative has contributed towards greater economic inclusion of women and young persons.  In 2020, the average age of a startup founder was thirty-four. Women co-founded 34 percent of startups, and 45 percent of the jobs created were filled by women.¹⁵

While there has been a lot of positive progress, Startup Tunisia recognizes that more work still needs to be done to empower women and rural areas. Although 45 percent of start-ups were co-founded by women, only five percent were exclusively founded by women.¹⁶ Women continue to be hindered by social and cultural norms that limit their access to capital.¹⁷ Meanwhile, 70 percent of startups were located in the capital Tunis in 2021.¹⁸

The Startup Act legal framework inspired countries like Rwanda, Senegal, and Cote d’Ivoire to ratify similar legislation to promote entrepreneurship in their countries.¹⁹

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Tags

• Children & Youth
• Gender
• Income & Wealth
• Labor
• Middle East & North Africa
• Middle-Income Country
• Tunisia