25700 - Omar Effendi

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Environmental & Social Review Summary

Project Number

25700

Company Name

OMAR EFFENDI

Date ESRS Disclosed

Apr 17, 2007

Country

Egypt, Arab Republic of

Region

Africa

Last Updated Date

Sep 30, 2022

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Jun 18, 2007
Signed : Jun 20, 2007
Invested : Nov 1, 2007

Sector

Retail (Including Supermarkets, Grocery Stores, etc.)

Industry

Tourism, Retail and Property

Department

Regional Industry - MAS Africa

Project Description

Omar Effendi (Omar Effendi or the company) was established in 1856 and is Egypt’s largest department store with 82 branches and 68 warehouses. The government of Egypt (GOE) has decided to privatize the company and divest 90% of the ownership.

Anwal United Trading Company Limited of Saudi Arabia (Anwal), which is owned by the Qnebeit family; and Jameel, Riad and Ibrahim Qnebeit (the joint sponsors) of Saudi Arabia were successful in their bid through an international bidding process to purchase the company. The purchase and transfer of 90% of the company were completed in February 2007 for $102.5 million. The GOE maintains a 10% minority ownership.

The sponsors have approached IFC to assist with the financing of the refurbishment program for the Omar Effendi stores. This store refurbishment and turnaround program constitutes the project.

Overview of IFC's Scope of Review

IFC''s review included meetings with key senior management staff of Omar Effendi, and managers of Omar Effendi''s safety and security department, discussions on an environmental and social questionnaire presented by IFC and site visit inspections to stores at Adli, Mourat, Orabi, Giza and Nasser City, and to the warehouse complex serving the Cairo area.

E & S Project Categorization and Applicable Standard

While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment may have impacts which must be managed in a manner consistent with the following Performance Standards:

- PS1: Social and Environmental Assessment and Management System
- PS2: Labor and Working Conditions
- PS3: Pollution Prevention and Abatement
- PS4: Community Health Safety and Security

The key social and environmental issues in this project are the company’s capacity to manage social and environmental issues, and human resources management in light of anticipated personnel changes required in the future development of Omar Effendi, and fire safety provision in the anticipated store upgrade program. Other issues of concern are safety during refurbishment, disposal of wastes arising from refurbishment, air conditioning system refrigerant selection and energy efficiency of the stores.

The potential adverse effects of the project are limited, site specific and reversible and can be readily mitigated. It is therefore concluded that this is an Environmental Category B project according to IFC’s Environmental and Social Review Procedure.

Environmental and Social Mitigation Measures

The sponsor has presented plans to address these impacts to ensure that the proposed project will upon implementation of the specific agreed measures, comply with the environmental and social requirements - the host country laws and regulations and the IFC Performance Standards on Social and Environment Sustainability and relevant IFC/World Bank environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow. Actions are summarized in the attached Environmental Action Plan.

- Social and Environmental Management:

All store developments and refurbishments have complied with Egyptian regulation which requires approval of an environmental impact assessment before construction can start. Physical changes to the stores anticipated during the upgrade program will amount to refurbishment of buildings within their existing envelope. Potential environmental impacts during this process will be managed through contractual arrangements with contractors and suppliers as described below.

Omar Effendi manages safety and environmental matters through its Safety and Security department of 270 persons, the manager of which reports directly to the company chairman. Elaborate fire safety precautions have been developed and are implemented, and are described within the Community Health and Safety section of this review.

Omar Effendi was not able to demonstrate active management of environmental impacts. A consultant will be retained to identify the most significant ongoing environmental impacts, and assist Omar Effendi in the development of an environmental management system covering all retail, warehousing and distribution operations and shall obtain certification of this system to ISO 14001 or equivalent within three years.

There is a more advanced safety management system which will be described below. Omar Effendi shall similarly obtain ISO 18001 or equivalent certification of its safety management system within the same timescale.

- Labor and Human Resource Management:

- Conditions of Employment

Omar Effendi has recently recruited a highly experience human resources professional who is overseeing a complete revision of the company’s human resources policy, management and employment relationship with staff. This revised system is not yet in place, but the key objectives of this revised human resources structure are that it is non-discriminatory, fair and enables Omar Effendi to attract and retain high caliber staff.

These changes, which will include a new human resources policy, new employment contracts and a retrenchment program are being made in consultation with the trade union which represents employees through its thirteen member representatives.

The new employment relationship will be based upon written contracts with staff, defining the rights and responsibilities of the company and its employees, and cash and non-cash remuneration will be fully compliant with Egyptian Labor Law 12 of 2003 and IFC’s Performance Standards. Salaries will be determined by collective bargaining or individual agreement depending upon the post.

- Retrenchment Program

Omar Effendi currently has around 6,000 staff, paid around 1,000 LE monthly. Staffing needs of the new Omar Effendi are currently under review and will be determined after a bottom-up analysis of the needs of each store. However, it is expected that around 2,000 posts will be made redundant over a 2-3 year period. As part of the culture change program, it will be necessary to retrain the retained staff such that the future Omar Effendi is able to offer the high quality customer service required for a modern retailing company to be successful.

Each member of staff will be individually interviewed to determine each person’s employment objectives within the new Omar Effendi, and also to judge the likelihood that each individual can be retrained to meet the company’s future needs. This determination will be based on criteria yet to be defined which will include an assessment of existing skills and performance, and flexibility and adaptability of individuals, as well as each individual’s wishes. The company management will review the employment conditions of the staff members meeting these criteria to gradually ensure that these match conditions of newly hired peers.

Omar Effendi expects the complete staff retrenchment process to be accomplished through a voluntary redundancy process. While the expectation is that 2,000 posts will be lost, the number of staff retrenched may exceed this figure: however net loss of employment will be in the region of 2,000 posts. A number of staff will reach retirement age during the 2-3 year period in question, and other staff members are expected to volunteer for early retirement or to accept retrenchment, though the company’s management will retain the right to accept or reject redundancy requests. Any staff member accepting redundancy will receive a cash lump sum of up to 45,000 LE depending upon years of service, and those taking early retirement will receive a monthly pension.

- Supply Chain

Omar Effendi is in the process of completely revising its supplier base, according to the new ownership group’s determination of markets needs served by the stores. The company’s procurement policy will require that its suppliers do not benefit from harmful child labor or forced labor.

- Occupational Health and Safety

Occupational Health and Safety is managed through the Safety and Security Department which liaises closely with the company’s engineering / projects and legal departments and whose chief reports directly to the company chairman. The company is compliance with the safety in the workplace requirements of the Egyptian Labor Law 12 of 2003.

Each store has a Health, Safety and Environmental (HSE) committee, which reports to a central HSE committee at headquarters. At each store two managers on a part-time basis review risk (essentially risk arising from electrical equipment, air conditioning systems and other machinery) and the fire emergency plan, and report through the committee to HQ which should implement corrective actions. The regular reporting to the chairman strengthens the Safety Department’s ability to rectify faults at they are identified. All stores have first aiders, and the larger stores employ a qualified nurse. Members of the Safety Department’s core team provide regular staff training in fire fighting, first aid and industrial safety.

Contracts for store refurbishment will require contractors to provide active OHS management, and this will be supervised by Omar Effendi’s Projects Department.

- Pollution Prevention and Abatement:

There is no known use of asbestos within any Omar Effendi stores. If any should be identified during renovation it will be encapsulated, removed and disposed of by specialist licensed contractor.

Solid wastes arising from store refurbishment will comprise display counters, lighting and false ceilings which will be removed during refurbishment. There may also be some renewal of mechanical services. All wastes will be removed from the work sites by an authorized contractor and disposed of in a licensed disposal site.

Omar Effendi’s more modern air conditioning systems use HFC refrigerants while the older systems retain HCFC 22. It is highly likely that all HCFC 22 systems will require to be replaced before the complete phase out of this refrigerant in Egypt: all replacements will use none ozone-depleting refrigerants.

Energy efficiency opportunities were identified during the site visits, particularly in store ventilation and air conditioning systems. Energy audits will be undertaken of stores not scheduled for immediate refurbishment, and energy efficiency will be considered in refurbishment.

- Community Health, Safety and Security:

- Fire Safety

Fire safety provision in Omar Effendi’s stores follows Egyptian requirements. Fire protection in stores is typically provided through portable extinguishers and fire hose reels. Some stores have break-glass type manual fire alarms, and some have smoke detectors. Limited areas of some stores have sprinklers. Fire risks are assessed in each store, and one person is assigned responsibility to manage these risks. Another has responsibility to manage evacuation. Each store has weekly training in use of fire fighting systems, and store staff certainly appeared familiar with these systems, and there are bi-weekly evacuation drills.

In the stores which were visited, IFC staff identified deficiencies in escape routes, where stairs were not separated from the main sales floor, access and coverage of fire hoses, compartmentation and emergency lighting. It is not clear that the number of emergency exits meets internationally recognized fire safety codes.

Omar Effendi will commission a qualified fire protection engineer to prepare a Life and Fire Safety Master Plan for each store refurbishment, such that when implemented the store is compliant with all local and an internationally recognized fire safety code. Furthermore, the engineer will inspect each store after refurbishment to confirm that the refurbishment was undertaken in compliance with this Master Plan.

Fire safety audits will be undertaken by a qualified fire protection engineer acceptable to IFC in stores not scheduled for immediate refurbishment, to determine deficiencies if any when compared with international fire safety codes. These audits will define corrective actions to be undertaken to achieve code compliance, and these will be undertaken by Omar Effendi.

All stores will either have been refurbished or will have implemented corrective actions arising from fire safety audits within three years.

Stakeholder Engagement

The privatization of Omar Effendi, which was once considered a national treasure, has attracted considerable attention in the Egyptian media. Any Egyptian stakeholder with even a passing interest in Omar Effendi is most unlikely to be unaware of the ownership and operational changes at the stores which are in place. Omar Effendi has and continues to make periodic announcements of developments in its renovation project, and these will continue.

Omar Effendi, as a retailing company, is dependent on maintaining good relationships with its neighbors. It will welcome any constructive comments or complaints, which may be made to the company at the address shown below.

This ESRS may be viewed in Egypt at the following location:

Omar Effendi Store
25, Adli Street
Downtown
Cairo, Egypt

Client Documentation

File Name	Actions
EAP_Omar_Effendi.pdf

**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability

IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

Complaints can be submitted by any of the following methods:

Online form: available at https://www.cao-ombudsman.org/
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Voice mail: +1 202 458 1973
Email: cao@worldbankgroup.org
SMS, WhatsApp, Telegram, and Signal: +1 202 650 2627

CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Environmental and Social Review Summary (ESRS) is prepared by IFC to disclose its findings and recommendations related to environmental and social considerations regarding potential investments. Its purpose is to enhance the transparency of IFC's activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this ESRS is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein.
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Projects

Environmental & Social Review Summary

Project Description

Overview of IFC's Scope of Review

E & S Project Categorization and Applicable Standard

Identified Applicable Performance Standards

Environmental and Social Categorization and Rationale

Environmental and Social Mitigation Measures

Environmental and Social Mitigation Measures

Stakeholder Engagement

Stakeholder Engagement

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