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Kenya Garment Production Lands $14M Investment

The Norwegian government has invested millions into apparel manufacturing operations in East Africa.

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

The funding agreement, facilitated by NDB Investment Bank Limited, will support Hela’s seven-year-old Kenyan manufacturing facility. The operation is the firm’s largest, employing more than 4,000 workers, 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 cut lead times and costs.

The Sri Lankan apparel manufacturer was one of the first global players to establish a presence in Kenya, and has since expanded across the African continent with operations in Ethiopia and Egypt. It wants to automate parts of the Kenya facility to optimize productivity.

Hela Apparel Holdings chairman A.R. Rasiah said the company continues to see “many opportunities within the region for further development.”

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

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Rasiah said the funding will help the company support the livelihood of “thousands of people” in Africa. “The intended investment in our Kenyan manufacturing facility, which will be supported by this lending from Norfund, is a key part of the Group’s strategy to remain globally competitive,” he added.

Norfund is also one of the largest shareholders of NDB Bank, which facilitated the transaction. “The wealth of knowledge gained by our prior dealings with Norfund and other development finance institutions (DFIs) enabled us to successfully execute this transaction, which is Hela’s first fundraising via a DFI,” NDB Investment Bank CEO Darshan Perera said. “We are extremely pleased to have advised Hela in our debut transaction in the African Region and look forward to working with them in realizing their plans in Africa.”

Norfund regional director for East Africa William Nyaoke added that the Norwegian government investment fund sees “great opportunities in contributing to large-scale job creation in East Africa by investing in the apparel and textile industry” as a part of its goal to create sustainable businesses and combat poverty. Norfund followed Hela’s progress in the region, and Nyaoke said it hopes the new partnership will increase job opportunities, particularly for underserved women.

The investments will benefit the creation of jobs for underserved women, Norfund said.

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 credit fund Ethos Mezzanine Partners 3 each invested about $12.5 million in the producer, which develops garments for brands and retailers focused on the U.S. The money will go toward purchasing state-of-the-art washing machines that will triple production capacity, along with reducing electricity use by up to 30 percent, water consumption by up to 70 percent and chemical use by 60 percent, Norfund said. Balaji Group already has East Africa’s largest rooftop solar plant, which generates 1.8 megawatts and supports much of its energy needs.

The investment fund aims to strengthen private sector investment in renewable energy, financial institutions, scalable businesses and green infrastructure in developing countries. Norfund’s portfolio includes $3.1 billion in investments in business across these sectors, across Sub-Saharan Africa, South-East Asia, and Central America.

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