Deal Summary
Norsad Capital (Norsad), a Southern Africa-based impact investor and private credit provider, has successfully exited its investment in Protea Hotels Zambia, a subsidiary of Union Gold Zambia, the franchise holder for Protea Hotels by Marriott in Zambia. Established in 2000, Union Gold expanded Protea Hotels Zambia from a single lodge to a network of 11 properties, making it one of the country’s largest hotel chains and a key contributor to local economic growth and job creation, especially for women. In 2015, Norsad provided $5 million in debt financing to Protea Hotels Zambia, primarily to support the development of the flagship Protea Hotel Ndola. The initial investment aligned with Norsad’s goals to support job creation, youth employment, and gender diversity in Southern African economies. By 2023, Norsad managed a portfolio of over 170 investments which supported 15,000 jobs across Africa. This exit represents the successful repayment of the debt financing and
Deal Rationale
Norsad’s exit marks the successful completion of its strategic objective: supporting mid-market companies to deliver strong financial returns and developmental impact. Protea Hotels Zambia emerged as a standout investment due to its potential in Zambia’s growing hospitality sector, which contributes 7% to the country’s GDP and employs over 300,000 people. The timing coincided with the government’s strategy to diversify the mining-dependent economy through tourism. Despite the setbacks of COVID-19, which caused a 70% drop in international arrivals in 2020, the tourism industry rebounded, with arrivals increasing by 16% in 2023, surpassing pre-pandemic levels. Protea’s affiliation with Marriott International gave it a competitive edge, ensuring high-quality standards that attracted local and international travellers. After nearly a decade of support, including critical follow-on financing during the pandemic, Norsad’s exit highlights its success in stabilising and enhancing Protea Hotels Zambia as a leader in the nation’s hospitality industry.
- Initial Investment: The Protea Hotel Ndola, located in Zambia’s third-largest city, was earmarked as a flagship project as early as 2013. Norsad’s $5 million debt investment in 2015 was critical to launching this project, culminating in the hotel's commissioning in August 2016. At its opening, the Protea Hotel Ndola was the second-largest in the city, providing much-needed capacity and establishing a strong foothold in a growing hospitality market.
- Value Creation: Norsad has been a crucial financial and technical partner to Protea Hotels Zambia over the last decade. Most notably, during the COVID-19 pandemic, the Zambian hospitality sector faced severe challenges, with international tourist arrivals dropping by 70%. Norsad’s support during this crisis was crucial for Protea Hotels Zambia’s survival. In 2021, Norsad received €60,000 ($67,956) from its shareholder, Swedfund (Sweden’s Development Finance Institution), specifically to support its hospitality portfolio in Malawi and Zambia, which had been significantly affected by the pandemic. Complementing this, Norsad helped Protea secure a $9 million loan from IFC in 2019, which provided further stability. These combined efforts allowed Protea to sustain operations, safeguard jobs, and prepare for recovery as travel restrictions eased.
Beyond financial support, Norsad provided strategic insights based on its broader hospitality portfolio in Malawi. This expertise enabled Protea to scale operations effectively and adapt to regional challenges. Additionally, Protea prioritised local sourcing and sustainability, aligning with Norsad’s impact goals. By working with local SMEs and adhering to green building standards, Protea demonstrated its commitment to environmental responsibility and community engagement. - Exit assessment: Considering how much the hospitality industry was affected by the COVID-19 pandemic, this successful exit highlights Protea Hotels Zambia’s remarkable recovery and underscores the value of a thoughtful, adaptable investment approach. For private debt investors in Africa, providing more than just capital—through tailored, hands-on support—can make a significant difference. Norsad’s partnership with Protea demonstrates how this approach protects investments and drives strong financial and developmental outcomes, showing the potential of resilience and adaptability in navigating Africa's dynamic markets. Norsad’s exit also aligns with the positive outlook for the Zambian hospitality sector, with international arrivals up 16% in 2023 from pre-pandemic levels and a projected 21.7% increase in 2024. The government’s plan to position Zambia as a top tourism destination further supports this. Protea Hotels Zambia, with 11 properties and a strong Marriott brand, is well-positioned for growth.
About the Fund Manager
Norsad Capital, established in 1990 through a collaboration between Nordic and Southern African Development Community (SADC) governments, has grown into a leading impact investor specialising in tailored debt solutions of $5 million to $15 million for mid-market growth companies. Its shareholders include Norfund, Swedfund, IFU, Finnfund, and the Development Bank of Zambia. Rebranding from Norsad Finance to Norsad Capital in 2022, the organisation focuses on sectors that drive sustainable development, including renewable energy, hospitality, and agriculture. Over its 32-year history, it has invested more than $550 million in over 170 companies, promoting the United Nations Sustainable Development Goals (SDGs). This commitment earned Norsad the Reuters’ ESG Investment – Social Leadership of the Year Award in 2022. In February 2024, Norsad secured a ZAR 680 million ($35.6 million) 6-year sustainability-linked term loan from Standard Bank, one of the first of its kind in the region. It intends to use this financing to invest in niche high-impact sectors that unlock financial growth and catalyse sustainable development. These include soft and social infrastructure, renewable energy, healthcare, and the food value chain.
