East African garment manufacturing attracts $14 million in investment – Sourcing Journal

The Norwegian government has invested millions in clothing manufacturing in East Africa.

Norfund, the sovereign investment fund, this week announced a $14 million financing agreement with Hela Apparel Holdings PLC, a Sri Lanka-based sustainability-focused manufacturer. The activewear, lingerie and children’s clothing manufacturer operates 10 factories in four countries.

The financing arrangement, brokered by NDB Investment Bank Limited, will support Hela’s seven year old Kenyan manufacturing facility. The plant is the company’s largest, employs more than 4,000 people and is responsible for 20 percent of Kenya’s total apparel export volume. Hela wants to strengthen its supply chain partnerships in East Africa and enable regional sourcing from countries like Kenya and Tanzania to reduce lead times and costs.

The Sri Lankan garment manufacturer was one of the first global players to have a presence in Kenya and has since expanded across the African continent with offices in Ethiopia and Egypt. It wants to automate parts of the plant in Kenya to optimize productivity.

Hela Apparel Holdings Chairman AR Rasiah said the company continues to see “many opportunities for further development in the region.”

“In the increasingly unpredictable global environment, establishing long-term funding relationships with strategic partners who share our vision for Africa as the global apparel sourcing hub plays a critical role in ensuring envisaged growth plans are realized,” he added.

Rasiah said the funding will help the company support the livelihoods of “thousands of people” in Africa. “The proposed investment in our Kenyan manufacturing facility, supported by this loan from Norfund, is a key element of the group’s strategy to remain globally competitive,” he added.

Norfund is also one of NDB Bank’s largest shareholders, which has facilitated the transaction. “The wealth of experience gained through our previous dealings with Norfund and other development finance institutions (DFIs) enabled us to successfully complete this transaction, which is Hela’s first fundraising through a DFI,” said Darshan Perera, CEO of NDB Investment Bank. “We are very pleased to have advised Hela on our first transaction in the African region and look forward to working together on the implementation of her plans in Africa.”

Norfund’s regional director for East Africa, William Nyaoke, added that the Norwegian Government Investment Fund “sees great opportunities to contribute to large-scale job creation in East Africa through investments in the garment and textile industries” as part of its goal of sustainable businesses create and fight poverty. Norfund has been following Hela’s progress in the region and Nyaoke said it hopes the new partnership will improve employment opportunities, particularly for underserved women.

The fund also announced plans to support the creation of up to 12,000 jobs through an investment in the Balaji Group, a leading textile manufacturer based in Nairobi. Norfund and specialist debt fund Ethos Mezzanine Partners 3 each invested about $12.5 million in the manufacturer, which develops garments for brands and retailers focused on the United States. The money will go towards buying state-of-the-art washing machines that will triple production capacity. along with reducing electricity use by up to 30 percent, water use by up to 70 percent and chemical use by 60 percent, Norfund said. The Balaji Group already has East Africa’s largest rooftop solar system generating 1.8 megawatts and covering much of their energy needs.

The investment fund aims to strengthen private sector investments in renewable energy, financial institutions, scalable companies and green infrastructure in developing countries. Norfund’s portfolio includes investments of US$3.1 billion in companies in these sectors in sub-Saharan Africa, Southeast Asia and Central America.

Earlier this year, the Kenyan government announced its own plans to build the country’s burgeoning textile industry through strategic investments in local manufacturing operations. A State Department industrialization official said $1.6 million would go toward reopening closed factories, and the country also plans to invest in new cotton ginning factories to boost GDP and provide more sources of raw materials in the country.