Eldoret-based textile manufacturer Rivatex East Africa Limited is looking for a strategic investor to lease, operate and maintain its mill and other assets for 21 years in a bid to wean it from State support.
The search comes after the Cabinet gave a nod to the move as part of a strategy to rejuvenate cotton production in the country. Rivatex will require the strategic partner to lease the facility, inject working and operating capital and render all relevant technical support services to enable it to operate at full capacity.
“This non-equity arrangement is envisioned to support Rivatex by eliminating its reliance on budgetary allocations, enabling it to utilise the facility fully, attract capital investments and private sector expertise, further modernise the plant, and secure working capital,” said the firm in a tender document published last week.
Ritatex owns a textile factory that transforms cotton lint into finished fabric. The factory comprises four key production divisions, including preparation, spinning, weaving, and processing.
In addition, it owns an apparel and garments unit equipped with machinery to produce a wide range of outfits using cotton and cotton-blend fibres.
The State modernised Rivatex’s operations, substantially increasing production capacity across its divisions but this has left it with an idle capacity of over 90 percent given the prevailing working capital constraints.
In the spinning division, the firm says daily yarn production has risen from an average of 2,000 kilogrammes to 12,000 kilogrammes while the weaving division now produces 25,000 meters of fabric per day, up from 10,000 metres. Its processing division has quadrupled daily fabric production from 10,000 metres to 40,000 metres.
However, the firm said despite the recent investment by the government to modernise the factory, it is operating below the installed capacity, with spinning, weaving and wet processing units at a capacity utilisation of below five percent, eight percent and seven percent, respectively.
“There is still a need for additional investment through working capital and capital expenditure to enable Rivatex to meet its operational capacity,” said the firm.
The investor is expected to progressively establish a textile ecosystem around Rivatex through, for example, utilising the available space to create a farm-to-ginning ecosystem and the design, development and implementation of an industrial park.
The investor will among other things operate and maintain all assets, pay staff salaries, undertake active sale of Rivatex products, operationalisation of the ginning facility and facilitating supply of seed cotton —all with the view of mitigating financial losses with view of returning Rivatex to profitability.
“The tenderer shall be responsible for all activities necessary to return Rivatex East Africa Limited to profitability and to modernize its operations, ensuring that it meets industry standards for efficiency, quality, and sustainability,” reads the tender.
Rivatex, which currently employs 732 employees, is in the final stage of acquiring Special Economic Zone (SEZ) status following the Cabinet approval. The investor will be obligated to retain all employees for an initial three-year period and thereafter develop a human resource optimisation plan.
Once Rivatex hits break-even point, the investor will agree with the State on a revenue sharing model which will be reviewed annually based on changes in market conditions, operational costs, and profitability.
The Auditor General report shows Rivatex posted a Sh347.6 million loss in the financial year ended June 2023, pushing its cumulative losses to Sh3 billion.
