By Okuttah Mark
Palm Health Care International, a condom manufacturer in the process of setting up a plant in Nairobi, has received an Sh80 million ($1 million) equity injection from America-based venture capital firm Savanna East Africa.
The deal, which promises to create 100 new jobs, will see Kenya start producing male condoms from the first quarter of next year, making the country one of few African nations with a condom making plant according to promoters of the deal.
Kenya imports condoms mainly from Asia, with the government being the main agency shipping in 180 million pieces annually.
Sanjeev Gadhia, an executive director of the company, said Savanna East Africa will also bring in technical expertise to the start-up company as part of the transaction.
“The money will be used in getting the plant fully operational and the purchase of raw-materials and working capital,” said Mr Gadhia. “The plant is already in Nairobi and will commence production in the first quarter of 2011.”
Palm Healthcare will manufacture a variety of condoms including plain, ribbed, dotted, contoured, flavoured and luminous, according to Mr Gadhia.
The firm has installed a plant with a manufacturing capacity of 120 million condoms per year.
Palm Healthcare has shareholders from USA, Kenya, Malaysia and South Africa. Savanna East Africa is a venture capital firm with interests in Kenya’s information technology start-ups, affordable housing construction, and health products manufacturing firms.
Its asset base, according to Mr Gadhia, is in excess of Sh160 million ($2 million) and is projected to generate sales in excess of Sh200 million per annum.
As part of the deal, Savanna East Africa will bring in a new executive management team comprising of a chief executive, as well as a quality and production manager.
The partnership comes at a time when demand for condoms in the country has doubled from seven million to 15 million in the past year.
Other than the government, which is the main supplier of condoms in Kenya, other players in the market include Population Services International, which deals with the Trust brand of condoms. It supplies about 30 million pieces annually.
Philip Verges, the chairman of Savanna East Africa, said condoms used in Africa are manufactured outside the continent.
The deal gives Kenya an opportunity to make and export the condoms to other parts of Africa.
“We are investing Sh80 million ($ 1 million) as equity, but we will also be investing in commercial loans into the company,” said Mr Verges.
Savanna East Africa said it had also sealed deals with two other IT companies, a “systems integrator” firm and a mobile cash provider.
Mr Verges did not name the companies, citing confidentiality agreements between the partners. Savanna is also in talks with two other IT companies.
The company is one of the many equity firms that have shown keen interest in Kenya, especially in the IT sector and are mainly in search of start ups.
This week alone, 20 equity firms from the US jetted into the country to scout for IT start ups.
Venture capitalists’ keen interest in Kenya is seen as a boost to the sector, which has in the past been stifled by lack of capital for translating ideas into products.
Last Monday, Kenyan start-ups Paysure, Pewahewa Music, Digital Networks, Brighter Monday, Web Simba and Interpid made presentations to Fanisi Venture Capital Fund, Africa Media Venture Capital, eVA Fund, Open Capital, and Grofin in the hope of winning financial support from the funds.
During the session, two Kenyan IT start-ups are said to have caught the eye of the venture capitalists.
Pim De Wit of Fanisi Capital said the financiers were attracted to Kenyan innovations because they could be replicated in other African markets such as Ghana and Nigeria.
“We are looking at a number of things, but the key thing is the scalability of the project and the exit plan that has been put in place by the entrepreneurs,” said De wit. “We are also keen on the consumer market the application is addressing and its sustainability.”
Six other local IT starts — Verviant, Pesapal, Jumuika, Ratio Magazine, Paystream, and TKM Maestro have benefited from venture capital, with TKM Maestro bagging Sh80 million for business expansion from TBL Mirror Fund through Fanisi. Late last month, about 20 Indian companies came in the country to scout for buyout opportunities in software and business process outsourcing (BPO).