While all Performance Standards (PS) are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards: PS1: Social and Environmental Assessment and Management Systems PS2: Labor and Working Conditions PS3: Pollution Prevention and Abatement PS4: Community Health, Safety and Security PS5: Land Acquisition and Resettlement PS8: Cultural Heritage The KIBP is 894ha in extent, although some 190 ha comprise undevelopable swamps and natural drainage lines. The land was an artificial forest created in early 1920’s and declared as a forest reserve in 1968 for the growing of trees for firewood. In late 1996, the Government de-gazetted the land and re-zoned the area for industrial use. In 2000 the UIA undertook an EIA for the KIBP and received environmental authorization from the National Environmental Management Agency (NEMA). While it was determined that no individuals were residing in the area, portions of land were being used by surrounding communities for various uses including the cultivation of crops, cattle grazing and sand winning. In addition, the community is sourcing water from natural springs located in the area. The Government has taken responsibility for compensation of affected communities, although ongoing use of the area has been permitted until such time as the area is developed. Roofings assisted the UIA to relocate a natural spring as located on their site, to outside the site boundary. This spring was being used by the local community as a source of potable water. Although limited, as identified in the Roofings EIA, the local community were cultivating crops on the land as currently occupied by Roofings. Although the UIA compensated the community for the loss of access to the area, there is a need to confirm if this process was compliant with PS: 5: Land Acquisition and Resettlement. The Environmental and Social Action Plan (ESAP) defines specific actions to address this issue. The EIA for the KIBP identified areas requiring conservation and the UIA is responsible for management of these areas. This EIA determined that the natural vegetation in the broader area where Roofings is located was largely transformed due the establishment of plantations, cultivation and sand winning. However, one threatened and one endangered floral species were identified. The Roofings EIA did not identify these species as being present on-site and none of the faunal or floral was determined to be of conservation significance. As such, PS 6: Biodiversity Conservation and Sustainable Natural Resources Management is not relevant to this project. There are no Indigenous Peoples and thus PS: 7 Indigenous Peoples is not applicable.

Due to the nature of the Company’s existing operations in Lubowa, there are limited potential social and environmental impacts. Such issues will be further controlled through implementation of certified environmental and occupational health and safety management systems being developed by the Company. These systems, along with the existing ISO 9001 quality management system, will be replicated for all 3 phases of the Project. The expansion is located within a newly established industrial park and impacts on surrounding communities are limited and can be readily managed. Potential environmental issues have been identified that could result in impacts. However, mitigation measures have been defined by the Company and these will be supported through application of the ESAP. No resettlement was required for the Project, although limited economic displacement occurred. As defined in the ESAP, this issue will be assessed by Roofings to ensure compliance with IFC’s requirements. Thus this is a Category B project according to IFC’s Environmental and Social Review Procedure because the specific impacts identified can be avoided or mitigated by adhering to generally recognized performance standards, procedures, guidelines or design criteria.

Roofings has presented plans to address the environmental and social impacts to ensure that the project will, upon implementation of the specific agreed mitigation measures, comply with applicable national laws and regulations, IFC’s Performance Standards on Social and Environmental Sustainability and IFC’s applicable Environmental, Health and Safety (EHS) Guidelines. The information about how these potential impacts will be addressed by the project is summarized in the paragraphs that follow, and in the ESAP which is disclosed with this document.

PS 1: Social and Environmental Assessment and Management Systems
Under the terms of the National Environmental Management Act, Roofings was required to undertake an EIA for the Project. Roofings commissioned a local environmental consultancy, Enviro and Industrial Consult (U) Ltd., to undertake the EIA. Environmental authorization for the Project was provided by NEMA in April 2009. In addition, Standard Bank Ltd. commissioned Golder Associates (Pty) Ltd. to review Roofings’s environmental and social policies, procedures and the EIA. The basis for the review was to determine the extent of compliance with IFC’s Performance Standards and the Equator Principles, and was used to inform Standard Bank’s decision on whether to invest in the Project. Although the review identified gaps in the EIA relative to that required for compliance with the IFC’s Performance Standards, recommendations to address these were defined. As applicable, these recommendations have been incorporated into the ESAP.

In 1999 Roofings obtained ISO 9000 certification of its quality management system (QMS) for their Lubowa operations. In 2002 this was upgraded to ISO 9001: 2000 and as of November 2009 the Company obtained certification for ISO 9001:2008. The Company is currently seeking certification for ISO 14001:2004, an environmental management system, with final certification anticipated in October 2010. In addition, the Company also intends obtaining certification for OHSAS 18001, an occupational health and safety (OHS) management system, and SA 8000, a standard that applies to socially responsible employment practices. Implementation of the latter two systems is to commence in May 2010, with certification expected to be obtained by October 2011.

The quality, environmental and OHS management systems as defined above, along with SA 8000, are also to be applied to the Project. Certification of these systems for Phase 1 is scheduled for July 2011. The phase 2 operations will be certified against all the standards by December 2011 i.e., one year following commencement of operations. This time constraint will equally apply to the phase 3 operations.

The schedules defined for certification are considered realistic and achievable and have been agreed to with the consultant assisting the Company with implementing the standards. The relevant tasks in the ESAP mirror the schedules as defined above.

Roofings have a Health, Safety and Environment Policy that is applied to the existing operations, including phase 1. The Company has individual Quality, Environmental and Safety Managers, all of whom report to the Technical Director. Given the recent initiative to implement certified management systems across all the operations, the Company has recognized the need for additional resources. Thus an experienced QSHE Manager is in the process of being employed whom will oversee the individual managers responsible for these separate functions, and report to the Technical Director. This requirement is confirmed in the ESAP.

All staff is subject to induction and job specific training. Until recently the Company’s approach to health and safety had been fragmented and ad hoc. However, Roofings have now centralized the approach to the OHS management; this is also assisting with a more focused approach to OHS training. This will be further supported by implementation of OHSAS 18001. Emergency response training is focused on fire fighting drills. The Company currently does not have an emergency response plan for the existing operations, including phase 1. Although this is a requirement of ISO 14001, the ESAP defines the need for development and implementation of plans in the short term.

Monitoring of environmental performance is currently limited. Given the nature and location of the operations at the existing facility in Lubowa, this is not considered material at this location. However, the Project has the potential for more significant risks and impacts and a detailed management plan for these operations is required. Further, there is no monitoring of OHS related issues e.g., noise, heat, lighting, and OHS statistics have only recently been regularly recorded on an ongoing basis. Implementation of OHSAS 18001 will address this.

Roofings have recognized the importance of engaging with the local communities in which they operate and management representatives, including the Managing Director, have participated in meetings with communities in the vicinity of the industrial park. To strengthen engagement with the communities in which they operate, the Company will develop and implement a grievance mechanism compliant with IFC requirements. This is defined in the ESAP.

Roofings personnel are acting as overall project managers for construction of phases 1 and 2. However, the Company has engaged experienced sub-contractors for various components of the development. Roofings Safety Department is responsible for managing OHS on-site. The EIA includes an Environmental Management Plan (EMP) defining how environmental issues will managed on site. This requires upgrading to provide more detailed mitigation and monitoring measures. Thereafter, an independent consultant will undertake monitoring of environmental issues, including OHS, during construction of both phases 2 and 3.

PS 2: Labor and Working Conditions
Roofings currently employ 820 workers at their facility in Lubowa. The majority of these are permanent employees with 145 on temporary contracts, and 20 casual laborers. Phase 1 of the Project currently employs 54 workers and this expected to marginally increase once the new wire line is installed. Phase 2 is anticipated to employ 174 workers, while the number of employees for phase 3 is still to be confirmed. Of the current staff compliment, a total of 50 i.e., 6% are women.

The Company has a Human Resources Policy and supporting employment guidelines that are consistent with Performance Standard 2. The Policy and guidelines extend to all employees, regardless of their contractual basis of employment, and will apply to all future employees. The guidelines define the requirement for non-discrimination, the recruitment process, working hours, over-time work, annual leave, salary remuneration and benefits. Disciplinary regulations are also included in the guidelines, along with a grievance mechanism. The Company does not employ individuals below the age of 18 years and this is verified with personal documentation. Roofings have no retrenchment policy and the Company has not undertaken retrenchment since commencement of initial operations. Further, this is unlikely in the immediate future given the expansion Project. Aside from the casual labor who are employed on a daily basis to assist with the loading and offloading of materials and product, all employees are provided with a written contract which defines their salary and references the human resource guidelines.

In accordance with national law, employees are free to join unions. Currently 306 workers are unionized and belong to the Uganda Building Construction, Civil Engineering Cement and Allied Workers Union. Roofings has a signed collective bargaining agreement with this union.

The approach to human resources as defined above will apply to all new employees at the Project. The management of human resources so as to ensure ongoing compliance with this Performance Standard will be further supported through implementation of SA 8000 at all operations.

The Roofing Safety Department is responsible for OHS at the existing operations, including phase 1. The Safety Manager co-ordinates OHS at the respective operations and a committee has recently been established at which all the differing departments are represented to support co-ordination.

During the site visit it was evident that the Company places a strong emphasis on the use of Personal Protective Equipment (PPE) and this is readily available to all personnel. There is however limited OHS data and recording of information such as incidents is a recent initiative. Since commencement of operations, Roofings have had no fatalities or disabling injuries. Between October 2009 and February 2010 the Company experienced 29 incidents. The majority of these were associated with finger and hand injuries. Aside from casual labor, all employees are provided with medical insurance. There is an on-site clinic that is staffed by a clinic officer and nurse 6 days a week, 12 hours a day. The clinic officer is on call after hours and there is a doctor on call 24 hours a day who visits the clinic twice a week. Emergency situations are referred to a hospital in Kampala. Similar facilities / services will be made available at the Project once phase 2 operations commence. This is defined in the ESAP. The Company has a HIV/AIDS policy that is applied to all operations and ongoing training of all personnel is provided which will be extended to the Project.

To enhance and provide momentum to implementation of OHS management across all the Company operations, Roofings will undertake a baseline OHS audit. The objective thereof is to define compliance relative to national legislation, the requirements of OHSAS 18001 and IFC’s EHS Guidelines. This audit will also include a review of hazardous material storage practices to ensure appropriate management. For the existing operations, including phase 1, this is a condition of disbursement. For phases 2 and 3, this is to occur within 3 months of the operations commencing. Based on the audit findings, a corrective action plan is to be agreed with IFC to address key findings. This audit will provide the Company with a basis to commence certification of the OHS management systems.

The number of workers associated with construction of phase 2 approximates 300 and varies depending on the type of work being undertaken. OHS is managed by the Roofings Safely Manager. This will be reviewed as part of the EMP compliance monitoring. Roofings are also required to review the human resources documentation for sub-contractors undertaking construction activities for phase 2 to ensure compliance with this Performance Standard. This applies equally to phase 3 activities.

PS 3: Pollution Prevention and Abatement
Roofings’ existing operations in Lubowa are situated within a well established area with direct access to municipal services. The facility utilizes approximately 55m3 of water per day as supplied by the municipality for purposes of ablutions, cleaning, the canteen and cooling. (Note: The Company provides employees with unlimited access to bottled water and there are water dispensing points located throughout the facility. This similarly applies to the phase 1 operations, and will be extended to all new operations. Oil is used for cooling and lubricating equipment. Used oil is collected in drums on-site and sold. Stormwater is discharged into the municipal stormwater systems and sewerage via septic tanks. Roofings are required to monitor discharges from the septic tanks to confirm compliance with national standards and IFC’s requirements. Based on this information, if necessary the Company will implement remedial measures to ensure the final water discharge is compliant with IFC’s EHS Guidelines.

Solid waste generated includes sedimentation from the cooling process which comprises steel particles, along with metal dust generated from cleaning raw material and products. This is collected by a waste management company i.e., C&J Cleaning company, and disposed of at the Kampala waste disposal site. General domestic waste such as that from the canteen and offices is collected by the municipality and also disposed of at the municipal waste disposal site. All scrap metal from the various production processes is baled and stored on-site for use in phase 2 operations.

Total water consumption for the phase 1 will be 35m2 per day of which the majority is used for make-up cooling water and in the pickling line. Approximately 10% of this water is provided by the Kamapla Water and Sewerage Corporation, with the remaining supplied via an on-site borehole.

Sewerage is currently disposed of via septic tank. Generally the KIBP has a high ground water table and the area forms part of the catchment that discharges into Lake Victoria. As the Lake is the source of Kampala’s drinking water, potential ground and surface water contamination has been identified as a key potential impact from operations at the KIBP. The KIBP EIA defined the pretreatment of waste water from individual operations within the park as one of the primary mitigation measures for this impact. Thus Roofings will install a waste water treatment plant to treat all sewerage as generated from the Project’s three phases. Thus the current method of sewerage disposal i.e., septic tanks, will be discontinued.

Process waste water is generated from the pickling line and equates to 18m3 per day. This waste water is neutralized with addition of lime and then discharged off-site into the adjacent vacant land within the industrial park. Although there is pretreatment of waste water prior to discharge, it should be disposed of via the waste water treatment plant to be constructed by UIA. No time-frame has been defined as to when this plant will be operational. As noted above, any contamination of ground or surface water is a concern. Thus Roofings will implement a water quality monitoring program in compliance with IFC EHS Guidelines to determine the water quality being discharged from the pickling line. Based on this information, the Company will then agree with IFC on a safe disposal method. This could involve discharge of the waste water via the sewerage treatment plant, however this will need to be verified to confirm it is an acceptable practice. This is defined in the ESAP as a condition of disbursement.

Solid waste includes general domestic waste and sediment collected from the waste water neutralization tank; the latter equates to approximately 1 ton per month. This waste is collected by the municipality and disposed of at the municipal waste disposal site. Although limited, any scrap metal is collected and stored for use in the phase 2 operations.

The phase 2 operations will use approximately 3m3 of water per day and is primarily associated with domestic use e.g., ablutions and cleaning and make-up cooling water. Sewerage will be disposed of via waste water treatment plant referred to above. Domestic solid waste will be collected and disposed of by the municipality and any scrap metal will be used in the furnace. The primary solid waste from these operations include slag from the furnace (900 tons per annum), mill scale which forms on the surface of the furnace’s crucible (600 tons per annum), ladle washings (450 tons per annum), baghouse dust and used refractory bricks from the furnace. There are opportunities for the reuse and recycling for some of these wastes e.g., slag can be used in the cement or road construction industry and part of the mill scale and ladle washing may be re-smelted in the furnace. To ensure all waste are appropriately reused, recycled or disposed of, Roofings will develop a waste management strategy for all solid waste associated with their existing operations and phase 2, in agreement with IFC.

The induction furnace will be equipped with a primary hood to capture emissions which will then be discharged to atmosphere via a bag filter. No data are available on the baghouse efficiency or expected emissions. To some extent the latter will be dependent on the quality of the scrap received. Typically this will be mild steel and unsuitable scrap will be screened out in scrap steel separation plant. Roofings will provide IFC with design details on the anticipated emissions and baghouse efficiency showing that emissions will meet IFC guideline requirements prior to commencement of operations. Thereafter, the Company will undertake stack emission monitoring within three months of operations to determine compliance with IFC EHS Guidelines for Integrated Steel Mills (April, 2007). Annual monitoring will also be required to confirm ongoing compliance. The reheating furnace will be fired with oil with an approximate annual consumption of 2000 tons of oil per annum. The capacity of the oil storage tanks is still to be confirmed, however it will be stored in above ground bunded storage tanks. This requirement is defined in the ESAP.

Limited information is available on phase 3 operations as Roofings have not finalized the project / process design. Once the Roofings have confirmed the latter, the Company will submit solid, liquid and gaseous waste management plans to IFC for review and confirmation.

Stormwater from phase 1 operations is collected in on-site drains for discharge off-site. This will similarly apply to phases 1 and 2. However, the UIA have no specific plans to construct infrastructure in the park to manage stormwater. Roofings therefore need to develop stormwater management plans for the Project. These are to define methods for separating clean and potentially contaminated stormwater, treatment options for the latter if necessary, and off-site disposal requirements to limit potential impacts e.g., erosion.

Given potential impacts as result of ground water to contamination, Roofings will establish a ground water monitoring program. Whilst such a program will identify potential impacts from the Roofings operations, it will also serve to ensure the Company is not liable for contamination from other operations in the KIBP. This program will be reviewed by IFC prior to implementation.

Phase 1 and 3 of the project require the use of LPG for heating. Currently there are two 38m3 tanks underground tanks situated adjacent to the phase 1 building. Phase 1 will use 320m3 of LPG per month, while the quantity required for phase 3 is still to be defined. However, an additional 530m3 of LPG storage capacity is proposed, bringing the total on-site capacity to about 600m3. Roofings transport the LPG by road from Mombassa, Kenya in isotainers to the site. Phase 1 also incorporates a nitrogen plant with a 5m3 storage tank, and phase 2 will include an oxygen plant with 10m3 storage tank. The potential risks and mitigation thereof are discussed in the following section.

Roofings current operations in Lubowa utilize 3.3 megawatts (MW) of electricity, while phases 1, 2 and 3 will use 1.5, 8.3 and 11.5 MW of electricity respectively. This equates to 24.6 MW which, when combined with the oil consumption for the reheating furnace in phase 2, will result in a total of 10,500 tons of CO2 emissions per annum.

PS 4: Community Health, Safety and Security 
The Roofings facility in Lubowa is bounded to the south and east by residential properties, to the west there is the busy Entebe – Kampala road; further in this direction are residential developments, while to the north there is vacant land. Given the nature of operations at this facility, potential off-site impacts are considered limited. Road access is provided directly off the adjacent main road and there is sufficient space on and off-site to accommodate vehicles. Given the 24 hour nature of operations, there is the potential for noise impacts on the residences located to the south and east. Thus Roofings will undertake a noise assessment to determine potential impacts on these adjacent residences and implement mitigation measures if required. This is defined in the ESAP.

The expansion Project is located on the KIBP’s northern boundary. There are no communities located in proximity to the Project, although the entire park is bordered by communities. Equally, given Roofings is the first development in the area, there are no other businesses in the park. Potential operational impacts on air quality will be identified via the point source air quality monitoring on the induction furnace.

The greatest risk posed by the operations relates to the LPG storage tanks. While the current usage of LPG is relatively low, this will increase significantly once phase 3 operations commence. In accordance with international best practice, Roofings will undertake a risk assessment by a qualified risk assessor to define the risks posed by the transport, storage and use of LPG, and implement appropriate mitigation measures. This assessment will also take into consideration the nitrogen and oxygen plants. Further, the assessment will review the existing and proposed life, fire and safety procedures and response mechanisms to confirm compliance with IFC’s EHS Guidelines.

Access to the KIBP and the Project is off the adjacent A109 which is a primary road in Kampala. On-site there is sufficient parking space to accommodate vehicles as may be generated by the operations. However, the access road from the A109 to the site travels through a small community. In addition, it is likely that this community may increase in size once the business park becomes more established. Roofings have recognized potential risks posed by traffic to the community and the Company has agreed to fence their primary school. In addition, Roofings have agreed with IFC to assess further opportunities to limit potential impacts on the community as a result of traffic e.g., installation of speed control measures on the road, and the erection of warning signs. Thus the Company will present to IFC plans which have been discussed with the affected community to manage potential traffic risks, and an agreed time-frame for implementation.

Security is provided at all the facilities by armed and unarmed guards who are employed by the Company and provided by sub-contractors. Thus Roofing will define a protocol for the use of armed force by security personnel, and ensure ongoing training of such personnel.

PS5: Land Acquisition and Resettlement
No resettlement was required for establishment of the KIBP and, as a result, the Project. However, limited economic displacement did occur due to Roofings’s occupation of land in the park. The compensation process for the affected community members was managed by the UIA. Thus Roofings will undertake an audit to confirm if this process was in compliance with this Performance Standard. If required, the Company will then implement actions to comply with IFC’s requirements.

PS8: Cultural Heritage
Six graves required relocation which was undertaken in consultation and agreement with the local community. No other cultural issues were identified in the review.

An EIA was undertaken for establishment of the KIBP and Roofings also undertook an EIA for the Project. Both these assessments required consultation with stakeholders. Roofings has engaged with the community located adjacent to road providing access to the Project to discuss potential concerns. Further, consultation will be undertaken with the community to determine appropriate measures to limit the potential risks associated with vehicular traffic. The Company will also develop and implement a grievance mechanism for all their operations that is compliant with IFC’s requirements.

The ESRS, companion ESAP, Roofings EIA and independent review as undertaken by Golder Associates (Pty) Ltd., along with any further information required about the new operations, may be obtained from NEMA and Roofings, contact details below. Mr. Sheikh Arif Director (Finance) Roofings Group P.B. 7169, Lubowa Esate, Entebbe Road, Kampala, Uganda Tel: +256 312-340100, +256 414 200952 Fax: +256 0414-20008 Email: sarif@roofings.co.ug Mr. Sunil Asawa Director (Finance) Roofings Group P.B. 7169, Lubowa Esate, Entebbe Road, Kampala, Uganda Tel: +256 312-340100 Fax: +256 0414-20008 Email: sunil@roofings.co.ug Mr. Waiswa Arnold Director, Policy and Compliance Affairs NEMA P.O. Box 22255 Kampala, Uganda Tel: +256 414 251064/65 Email: wayazika@nemaug.org