International Finance Corporation (IFC) is set to invest Sh2 billion in Bidco Oil Refinery, half the amount one of Kenya’s largest manufacturers plans to sink into its Sh4 billion expansion.
The expansion will raise its direct employment by 15 per cent.
The World Bank’s private lending arm is proposing to lend Bidco the cash the company requires to expand its Thika-based plant and construct a new factory on the same land in Kiambu County.
IFC will also syndicate another Sh1.17 billion, bringing the total IFC-linked investment to Sh3.71 billion.
“The proposed investment will consist of a corporate A loan investment of up to $23 million (Sh2 billion) on IFC’s account and a syndicated B loan investment of up to $13.5 million (Sh1.17 billion),” said disclosure notes released by the multilateral lender.
The IFC did not indicate the financiers of the syndicated loan or where Bidco will get the balance $9.5 million or Sh826 million.
The disclosure says Bidco will expand capacity at the Thika plant for the existing product lines while the new plant is to be constructed for new products.
Bidco currently manufactures edible oils, cooking fats, soaps, baking powder, animal feeds and detergents in 30 brands that control over 60 per cent of the cooking fat and 54 per cent of the cooking oil market in Kenya, according to Consumer Insight.
Its main competitors include Nairobi’s Kapa Oil, coast-based Pwani Oil and Nakuru-based Menengai Oil.
“The expansion of Bidco’s capacity into new products will be constructed on a greenfield site in Thika, Kenya,” says the note.
Construction of the new plant, which will include a waste-water treatment plant, is expected to be completed by June 2015.
Expansion will also result in the manufacturer increasing its labour force to 2,596 employees from 2,256 over the next two years.
IFC said that Bidco’s expansion project will also benefit about 20,000 farmers who will be added to the company’s supply chain.
Currently the company sources raw materials from an estimated 5,000 farmers. Another source of raw material is the 20,000-acre palm oil plantation in Kalangala Island, located on the Ugandan side of Lake Victoria.
In an earlier interview Bidco chief executive Vimal Shah said its target was to increase cultivation to 30,000 acres. At the time Mr Shah said that Bidco had invested $150 million (Sh12.9 billion) in the Kalangala plantation.
On Monday, Mr Shah could not be reached for comment.
The family-owned business has evolved from a garment factory founded in 1970 to one of the region’s largest fast-moving consumer goods companies. IFC has made heavy investment in the financial sector in Kenya over the past few years.
This is the second investment it is making in the manufacturing sector after the investing Sh6.4 billion in National Cement, which is part of the Devki Group.
The company is expanding capacity at its Athi River-based plant and constructing a clinker plant in Kajiado County. Data from the Economic Survey 2014 shows that the manufacturing sector accounted for 12.4 per cent of employment and 8.9 per cent of GDP.
Loans advanced to the manufacturing sector increased by eight per cent to Sh183.7 billion from Sh170 billion between 2012 and 2013, while projects approved by financiers more than doubled to 268 from 119 over the same period.
Bidco is one of several manufacturers based in Thika which include vehicle assemblers, security printers, bakeries, leather firms and tobacco processors.