Norfund has partnered with Ethos Mezzanine Partners 3 to invest in Balaji Group, a Kenyan textile manufacturer
- Norfund said it has partnered with Ethos Mezzanine Partners 3, a closed-ended specialist credit fund to invest US$25 million into Balaji, which is one of Sub-Saharan Africa’s leading textile companies
- The two partners said they have executed a USD 25 million mezzanine debt investment in the Balaji Group, with both contributing US$12.5 million each
The government of Norway, through the Norwegian development finance institution Norfund, has signed a new partner to invest in Balaji Group, a Kenyan-based textile manufacturer.
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On February 24, 2023, Norfund said it has partnered with Ethos Mezzanine Partners 3, a closed-ended specialist credit fund to invest US$25 million into Balaji, which is one of Sub-Saharan Africa’s leading textile companies.
Job creation in Kenya
The investment is also expected to aid the creation of 6,000 new direct jobs and another 6,000 indirect jobs.
The two partners said they have executed a USD 25 million mezzanine debt investment in the Balaji Group, with both contributing US$12.5 million each.
Balaji Group is based in an Export Processing Zone in Nairobi, Kenya where it operates the largest apparel manufacturing business in Sub-Saharan Africa, producing garments for many global brands and retailers which are exported predominantly to the USA.
The textile and apparel sector is a key driver of economic growth in Kenya. The country is a net importer, and export-oriented industries like textile and apparel manufacturing play a critical and central role in improving its trade balance.
Commenting on the funding, William Nyaoke, Regional Director for East Africa in Norfund said that by contributing to the growth and development of the textile and apparel sector, the fund is assisting in facilitating job creation at scale in order to combat poverty.
The textile 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. There are already more than 50,000 workers, the majority of whom are women, that are employed in the sector, and there remains considerable potential for further growth.
Balaji Group already employs over 12,000 people, and with the capital support of Norfund and Ethos Mezzanine Partners, it aims to hire 6,000 new direct workers and create opportunities for another 6,000 indirect jobs across the value chain.
Phillip Myburgh, Managing Partner of Ethos Mezzanine Partners said Ethos Mezzanine Partners provides growth and replacement capital to mid-market businesses across East Africa, the Horn, and Southern Africa.
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He said that they are excited to partner with the Balaji Group and Norfund to fund the next phase in its growth trajectory that spans 21 years.
“This funding commitment also promotes the UN’s Sustainable Development Goals 5 (gender equality), 6 (clean water & sanitation), 8 (decent work & economic growth) and 12 (responsible consumption and production),” he said.
The investors bring much-needed capital to fund the company’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.
“We are grateful for the opportunity to have worked with Norfund and Ethos Mezzanine Partners, whose core values are developing and improving people’s lives, which is directly aligned with what Balaji’s endeavour is too,” said Pankaj Bedi, chairman of the Balaji Group.
In addition to the capital injected, the funders aim to support further improvements in the company’s management of environmental, social and governance standards.
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Norfund investments in Kenya
In a related story, Norfund recently revealed that it had invested US$32 million in Kenya in 2022 and plans to further increase financing to local enterprises seeking growth support in 2023.
On February 9, 2023, Norfund said it would continue to invest in the region, focusing on profitable enterprises with the potential to contribute to economic and social development.