NORFUND AND ETHOS MEZZANINE PARTNERS SUPPORT JOB CREATION THROUGH INVESTING IN KENYAN APPAREL PRODUCTION

Norfund and Ethos Mezzanine Partners support job creation through investing in Kenyan apparel production

By Donald Kogai

Norfund (the Norwegian development

finance institution) and Ethos

Mezzanine Partners 3 (a closed-ended

specialist credit fund), aim to support

the creation of 6,000 new direct jobs

and 6,000 indirect jobs, through

investing in the Balaji Group, one of

the leading textile manufacturers in

Sub-Saharan Africa.

Norfund and Ethos Mezzanine Partners

have executed a USD 25 million

mezzanine debt investment in the Balaji

Group (USD 12.5m 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.

“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 in Norfund.

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.

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.

“Ethos Mezzanine Partners provides

growth and replacement capital to mid-

market businesses across East Africa,

the Horn, and Southern Africa. We are

excited to partner with the Balaji

Group and Norfund to fund the next

phase in its growth trajectory that

spans 21-years since it was founded by

Pankaj and Amit Bedi. This funding

commitment also promotes the UN’s

Sustainable Developments Goals 5

(gender equality), 6 (clean water &

sanitation), 8 (decent work & economic

growth) and 12 (responsible consumption

and production)”, says Phillip

Myburgh, Managing Partner of Ethos

Mezzanine Partners.

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.

“Our story is one of resilience and

commitment to our vision to create a

legacy institution in the sector. We

are grateful for the opportunity to

have worked with Norfund and Ethos

Mezzanine Partners, whose core values

are development and improving people’s

lives, which is directly aligned with

what Balaji’s endeavour is too”, says

Pankaj Bedi, chairman of the Balaji

Group.

“Balaji Group has always been at the

forefront of adding value to the entire

community around our business

including not only our team but their

extended families & community at large,

we are now more than ever committed to

support the development of the local

supply chain ecosystem around our

sector by supporting & hand holding

MSMEs to be part of the supply chain,”

says Amit Bedi, Managing Director 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.