Norfund, the Norwegian Investment Fund for Developing Countries, is foraying into the African textiles industry with big-ticket investments in two manufacturers in Kenya.
- Norfund and Ethos Mezzanine Partners 3, one of Africa’s most renowned investment companies, together invest $25 million ($12.5 million each) in the Balaji Group. The goal is to create at least 6,000 new direct jobs and a further 6,000 indirect jobs in the company.
- Norfund’s investment of $14 million in Hela Apparel Holdings will support additional investment in the Kenyan manufacturing facility which will enhance productivity and create new employment opportunities. The company will also use the capital to build a sustainable local supply chain in East Africa.
The Backdrop: The COVID-19 pandemic and increased perception of political risk have increased the pressure on differentiation and developing alternatives to Asian textile production.
The Investments: The textiles and apparel sector is a key driver of economic growth in Kenya. The country is a net importer, and export-oriented industries like textiles and apparel manufacturing play a critical and central role in improving its trade balance.
- The textiles and apparel sector is relatively underdeveloped in Kenya compared to many Asian economies where it has played a key role in underpinning economic growth and creating new jobs on a large scale.
- In Kenya there are already more than 50,000 workers (majority of whom are women) that are employed in the sector, and there remains considerable potential for further growth.
- The investors bring much needed capital to fund the Balaji Group’s further growth. By financing the replacement of Balaji’s old washing facility with new modern washing machines, its manufacturing capacity will increase by 300%, while reducing electricity use by 20-30%, water consumption by 70% and chemical use by 60%. The company has also already installed a 1.8MW captive solar plant to advance its ambitions of running a more environmentally sustainable operation. The new funding will also enable further investments in sewing machines that will expand production capacity and contribute to increasing the number of garments produced per hour.
- The proceeds from Norfund’s investment will also be utilised to strengthen Hela's strategic supply chain partnerships in East Africa. This will enable Hela to leverage regional sourcing from Kenya and Tanzania to a larger extent, providing significant cost and lead time advantages for manufacturing in the region. A potential supply chain investment is also being considered by Hela for the proceeds. Proposed Capex investments within the Kenyan manufacturing facility on process automation will enhance productivity and place the facility in a more competitive position within the region. NDBIB, Sri Lanka, was the Financial Advisor for the transaction.
