Norwegian State-owned investment company Norfund will participate in the debt financing of Balaji Group, a textile manufacturer based at the Export Processing Zone (EPZ) in Nairobi.
Norfund and Ethos Mezzanine Partners 3, a closed-ended specialist credit fund, will inject a total of $25 million (Sh3.15 billion) into the Athi-River-based manufacturer with money being used to replace Balaji’s old washing facility with new modern washing machines.
Each of the two financiers will give $12.5 million (Sh1.58 billion) in debt, in what is aimed to support the creation of 6,000 new direct jobs and 6,000 indirect jobs by one of the leading textile manufacturers in Sub-Saharan Africa.
Balaji Group, based at the EPZ where firms enjoy preferential physical and fiscal terms, produces garments for a number of global brands and retailers which are exported predominantly to the United States of America.
“We believe that by contributing to the growth and development of the textile and apparel sector in Kenya, we can make a significant impact by delivering on our mandate of facilitating job creation at scale in order to combat poverty,” says William Nyaoke, Regional Director for East Africa at Norfund. Norfund has financed several projects in Kenya, spanning SMEs to financial inclusion and renewable energy.
Successive Kenyan governments have identified the textile and apparel sector as a low-lying fruit in their bid for increased value-addition.
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.
In Kenya, 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.
One of the ways Kenya has tried to encourage the growth of the textile industry is by giving firms in EPZ preferential tax terms, water and electricity on the condition that what they produce is exported earning the country critical foreign exchange.
Balaji Group already employs over 12,000 people, a figure that is expected to rise by 6,000 with the new financing.
It is one of the most important EPZ firms in terms of jobs created, exports and use of local materials, according to the Export Processing Zones Authority (EPZA).
By financing the replacement of Balaji’s old washing facility with new modern washing machines, the firm’s manufacturing capacity is expected to increase by 300 per cent, while reducing electricity use by between 20 and 30 per cent.
Water consumption is expected to drop by 70 per cent and chemical use by 60 per cent. The financing of Balaji marks the latest investment in Kenya by Norfund which is among a group of development finance institutions involved in various sectors of the economy.
