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 proposed greenfield flour mill in Nacala will be constructed within an existing commercial development zoned for industrial use on a plot leased by the Company from a private owner. The proposed grain handling terminal will be constructed within the existing port premises. As such, neither of the two proposed facilities will have significant adverse impacts related to PS5: Land Acquisition and Involuntary Resettlement, PS 6: Biodiversity Conservation and Sustainable Natural Resource Management; PS7: Indigenous Peoples or PS8: Cultural Heritage.

This is a Category B project according to IFC’s Policy on Environmental and Social Sustainability. Grain milling and processing are typically low impact operations with few environmental and social issues. Milling waste that had previously been disposed is now processed as animal feed in a new feed mill commissioned on the grounds of the Company’s Machava plant in 2011. Process waste water is recycled into milled grain. Solid waste from operations consists predominantly of office and packaging paper waste and spent lubricants from vehicle maintenance, both of which are recycled.

The key environmental and social issues identified during IFC’s appraisal relate to worker occupational health and safety (OHS) in all operations and food safety management in the Company’s food processing operations.

PS1: Social and Environmental Assessment and Management System

IFC’s assessment considered: the Company’s management system of its environmental, occupational health and safety, and food safety performance in the establishment and operation of its facilities; and compliance with national and local permitting requirements.

All public or private entities proposing activities that may have a direct or indirect impact on the environment must prepare an EIA for those activities and obtain approval from the Mozambican national environmental authorities, Ministry for the Coordination of Environmental Affairs (MICOA), to proceed with construction and operations. As such, Merec has commissioned a consultant to undertake an EIA for the two proposed facilities and it will ensure that these EIAs are prepared in accordance with IFC’s Performance Standards and WBG’s EHS Guidelines.

Merec has no formal environmental, occupational health and safety management and food safety management system at present in any of its facilities. However, internal control systems used for sourcing raw materials and finished goods acquisition, transport and storage and to ensure quality production are well established. Merec purchases wheat and maize on the international market, importing the grain through the ports of Maputo and Beira and transporting it in bulk to its grinding mills by road and rail. (The Company is the majority share holder in a joint venture grain handling terminal at Beira port). From these mills, finished product is distributed nationally by Africom, another Charania Group company and regionally by Merec itself. Warehouses on the grounds of each Merec facility serve as collection and distribution points for other foodstuffs, e.g., rice, sugar and salt, traded by the Company.

The Company’s on-site Quality Assurance (QA) laboratories at each facility ensure compliance of raw materials with purchase specifications and continuously analyze collected samples to determine compliance with established quality standards. The QA laboratory at the Socimol mill also operates a small bakery to ensure that the milled flours yield baked goods of high and consistent quality.

Merec’s Human Resources (HR) manager has been responsible for operations compliance with applicable Mozambican laws and regulations, including workforce OHS and government guidelines for production and handling of foodstuffs. This function is well established to ensure compliance across all operations.

Merec has recently expanded its Quality Assurance/Quality Control (QA/QC) functions with the creation and staffing of a corporate department for Quality and New Products Development. The principal Quality Assurance function of this department is the effective application of Hazard Analysis and Critical Control Point (HAACP), food safety standards (ISO 22000) and more general international (ISO 9000, ISO 14001), regional (Southern African Development Cooperation) and national environmental, health and safety guidelines. In addition to having QA/QC champions dedicated to Company’s operations in Maputo, Beira and the one proposed in Nacala, this department includes a unit dedicated to environmental management across all operations.

PS2: Labor and Working Conditions

IFC’s review considered Merec’s operations with regard to fair, safe and healthy working conditions in its operations.

Human Resources Management: Merec employs a permanent staff of 650 employees (30% of whom are women) and another 250 workers under contract (cleaning, catering and security) country wide. The Company expects to employ an additional 100 workers to staff the proposed Nacala flower mill and Maputo grain handling terminal. Merec’s HR manager is responsible for ensuring the Company’s compliance with Mozambican laws and regulations affecting all permanent employees, including wages, benefits and occupational health and safety. The Company negotiates an annual collective bargaining agreement with the National Union for Workers in the Food Industry & Beverages (SINTIAB). The Company’s HR policy incorporates a grievance mechanism for resolving worker issues concerning employment and working conditions internally and with the participation of Union representatives. Grievances that cannot be resolved internally are submitted to external arbitration and ultimately to the national labor court. There are currently no such cases pending. Merec’s minimum age of employment is 18.

Occupational Health and Safety: The most significant health and safety risk in grain handling and flour milling is the risk of explosion from the accidental ignition (e.g., sparks from friction or faulty electrical connections) of suspended dust in work areas. Merec contracts fire prevention and response services from an established local contractor. The contractor provides fire and emergency response training to all employees at induction, as well as refresher courses annually. Fire and emergency response drills are carried out twice a year. Merec mills are designated non-smoking facilities and are clearly posted with no smoking signs. Merec has yet to adopt industry best practice of installing Lower Explosive Limit (LEL) monitors in high risk areas of potential dust accumulation within its mills but this precaution will be considered in the development of its Company-wide OHS Program mandated in the attached ESAP as described in the next paragraph.

Merec acquired its 1960s vintage Socimol mill in 2006 and has gradually been upgrading its machinery to achieve the mill’s full 250 tons/day capacity. Standards of housekeeping and control of both occupational and fire hazard in Socimol are inferior to the standards maintained at Merec’s Machava mill, which are inferior still to the standards maintained at Merec’s Beira plant commissioned in 2006. As a condition of IFC’s previous investment in the Company, as documented in the ESAP for that investment, Merec was to formalize a corporate occupational health and safety training program for milling, transport, warehousing and other activities across all operations. This training program was to include: job hazard analyses; orientation to chemical compounds and employee training using material safety data sheets (MSDS) or International Chemical Safety Cards (ICSCs) for chemicals employed in pest control; and collection of accident and near miss statistics and analysis of these statistics to modify work places and working conditions to reduce the number of lost time accidents experienced. The implementation of this program has not yet been completed but the remaining activities will be incorporated into the attached ESAP for this proposed investment. To qualify for new IFC investment, the Company has agreed to: 1) undertake an internal occupational health and safety audit of its Socimol and Machava mills against the conditions maintained at its Beira mill and to implement corrective actions as required; and 2) implement an externally verified occupational health and safety program across all its milling, food processing and warehousing operations nation-wide.

PS3: Pollution Prevention and Abatement

IFC’s review considered the Company’s management of resource use and waste disposal on the surrounding human and natural environment in its operations.

There is no process liquid effluent from Merec’s milling as all water used in operations is consumed in the mills for wheat conditioning. The Company sources potable water for all processing and sanitary purposes from municipal supplies or from on-site bore holes. Wastewater from employee changing rooms, bathrooms, laboratories and other operations is piped to a subsurface septic system No hazardous materials are utilized in milling or food storage and distribution operations with the exception of natural gas to fire pasta and biscuit factory ovens, diesel fuel for back-up generators and chemical compounds used by a subcontractor for pest management. Fuel and chemical storage for these operations are segregated from milling and warehousing operations. Pest control materials meet accepted standards for food preparation operations.

Merec milling operations are closed to reduce the release of dust and the risk of explosion. The Company has recently commissioned a 10 tons/hour animal feed mill on the grounds of its Machava mill. Dust, pollard and bran are collected from both mills and blended into feed.

Merec’s transport vehicle maintenance facility produces waste hydrocarbons and scrap that are collected and sold for recycling. Diesel fuel for vehicles and generators is stored in above ground containers with limited secondary containment. As set forth in the ESAP for this proposed investment, and to comply with the WBG Environmental, Health and Safety General Guidelines, such containment will be installed to prevent any surface leakage and soil contamination. Waste hydrocarbons in storm water from the property are collected in an oil water separator prior to discharge to the public sewerage.

Merec’s greenhouse gas emissions resulting from consumption of electric power and natural gas do not exceed IFC’s threshold of 100,000 tons/year of CO2 equivalents. Potentially significant savings may be realized through installation of individual electric motors on flour milling equipment in Socimol plant. At present, all milling machines are powered by a central drive which operates whether one or all milling machines are functioning.

Pest management is provided by third party contractor licensed by local government. In general, the service is not utilized unless an infestation is identified. Merec will obtain technical information on the chemicals in use and include information about these compounds and associated hazards in employee occupational health and safety training programs. Bird intrusion is a common problem and control measures include trapping and releasing.

PS4: Community Health, Safety and Security

IFC’s review considered the Company’s capacity with regard to the management of the impacts of the operation of its facilities on the health, safety and security of surrounding communities.

Food Safety: Merec operates a 1 ton/hour capacity biscuit factory and a 2 ton/hour pasta factory on the premises of its Socimol mill. A second pasta line is under construction at Socimol. As a condition of IFC’s previous investment in the Company, Merec was to obtain an internationally recognized food safety certification for its current and planned biscuit and pasta manufacturing operations. This certification has not yet been obtained but the Company has renewed its commitment to doing so through the mandate of its recently created Quality and New Products Development department. This commitment will be incorporated into the attached ESAP for this IFC’s proposed new investment.

Security: Merec contracts external security services and contract specifications for these services include guidance for the contractor based on good international industry practice in hiring, rules of conduct, training, equipping and monitoring these services. The Company has an emergency response plan and includes community representation and awareness building as part of local community engagement.

As part of MICOA’s statutory requirements for project approval, public meetings will be convened by Merec’s consultants to review the results of the EIAs for the Maputo grain terminal and Nacala pasta plant. In addition, Merec will post the EIAs Management Plans for both projects, as well as the conditions for MICOA approval, on the Charania Group website for public access. The Company will also post the attached ESAP on the Group website with periodic updates on the status of completion of time bound ESAP’s action items.

Mr. Mhamud Charania, Managing Director
Av. do Trabalho 1107, Maputo,
Mozambique

Tel.+258-21-401-850
Fax.+258-21-401-695
Website: http://www.charaniagroup.com/

Title	Anticipated completion Date
I. Environmental and Social Impact Assessment and Management Plan. Commission a qualified Consultancy to undertake the EIA of the proposed Maputo Grain terminal and Flour Mill at Nacala mandated by MICOA for new industrial installations in accordance with the applicable IFC Performance Standards and WBG Environmental , Health and Safety (EHS) General and Sector-Specific Guidelines. a) Ensure that the Consultant TOR includes reference to applicable IFC 's Performance Standards and WBG's EHS Guidelines requirements b) Provide a draft ESIA and Management Plan Satisfactory to IFC. c) Provide an action plan, inclusive of budget and staffing plan and, for the implementation of the ESIA Management Plan during construction and operations of the two facilities. d) Post a link to the MICOA approved ESIA and Management Plan, including conditions of MICOA 's approval on the Charania Group website.	05/30/2012
2. Upgrade Housekeeping and Occupational and Safety Health Standards at Machava and Socimol Operations. Using the operation s of the Beira Flour Mill as a benchmark , undertake an internal audit of workplace health and safety condition in the Machava and Socimol flour mills and develop a Corrective Action Plan for bringing those operations up to the standard s of Beira. Submit internal audit report and corrective action plan to lFC. Complete the corrective action plan.	09/30/2013
3. Occupational Health and Safety Program. Develop a Group wide occupational health and safety program for milling, transport, warehousing and other operations to address: health and safety training; job hazard analyses; evaluation and development of mitigation of dust explosion hazard in all operating mill s; orientation to chemical compounds and employee training using material safety data sheets (MSDS) or International Chemical Safety Cards (ICSC) for chemicals used in facilities for fumigation and pest control; collection of accident and near miss statistics and analysis of these statistics to reduce the number of lost time accidents recorded. Submit schedule for internal review and needs assessment. Provide a draft program, including budget, staffing and timetable for the implementation of an OHS program across all Merec operations. Engage a qualified independent party to audit the implementation of this Program against the reference documents cited as required.	09/30/2012
4. Obtain Internationally Recognized Food Safety Certification for Pasta and Biscuit Manufacturing Operations. Pasta manufacturing may be certified Hazard Analysis and Critical Control Point (HACCP) independently in accordance with the Codex Alimentarius or included in an ISO 22000 management system that combines quality and food safety.	09/30/2013