PS1: Social and Environmental Assessment and Management System
PS2: Labor and Working Conditions
PS3: Pollution Prevention and Abatement
PS4: Community Health, Safety and Security
PS5: Land Acquisition and Involuntary Resettlement
PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources

PS 7 “Indigenous Peoples”, and PS 8 “Cultural Heritage” are not expected to be encountered during the course of this project.

This is category B project according to IFC’s Policy on Social and Environmental Sustainability because a limited number of specific environmental and social impacts may result that can be avoided or mitigated by adhering to generally recognized performance standards, EHS general and sector-specific guidelines or design criteria as is described in the following sections.

Risks discussed in this ESRS consist of those associated with the operations of existing forests plantations, timber processing and lumber importing and distribution in South Africa; Avocado Orchards operations, avocado processing in South Africa and Latin America, and distribution in EU. Key issues include land tenure and land acquisition, Imports of tropical hardwood from Malaysia, sustainable use of water for irrigation, labor issues in supply chain and working conditions in sawmills in South Africa. HMH commits to meet IFC’s Policy and Performance Standards on Environmental and Social Sustainability as defined in ESAP (Environmental and Social Action Plan) to be agreed with the company.
Key Mitigation Measures are:
Implement an Environmental and Social Management System at sawmill operations.
Develop an internal wood purchasing procedure for imported lumber, requiring FSC, PEFC or other relevant certification (MTCC) endorsed by PEFC for all imported tropical natural hardwood lumber.
Use the state of the art in terms of water efficiency in irrigation systems.
Develop a specific operational procedure for supply chain, requiring suppliers to commit in not using child/forced labor and not converting natural habitats into fruit production areas.

PS1: Social and Environmental Assessment and Management System
Merensky Forests plantations in South Africa (SA) are FSC certified and managed to achieve compliance with SA laws and FSC requirements. Avocado orchards and processing facilities in SA and Peru are certified under a mix of Global GAP, BRC Food Safety, HACCP, Nature’s Choice and Fair Trade Standards, according to specific market demands. However, Global GAP is a basic requirement of all fruit products/operations. Westfalia have comprehensive management systems in place for its forest plantations that includes a Policy Statement, Organizational Capacity, Environmental and Social Assessment, Management Programs, Training, Monitoring and Stakeholder engagement, consistent with IFC PS1 requirements. However, as set forth in the ESAP, wood mill operations will enhance its existing E&S management practices, in order to incorporate all elements of an Integrated Environmental and Social Management System, consistent with PS1. Environmental and Social Assessment: Following FSC requirements, Merensky’s forests plantations undergo environmental impact assessments appropriate to the scale and intensity of forest management operations and the uniqueness of the affected resources. The scope of the assessments includes landscape level considerations as well as the impacts of on-site processing facilities. Environmental impacts are assessed prior to construction and/or operations phase. Since Merensky’s forest plantations were originally managed by the public sector, no ESIAs were conducted during its first development. However, Merensky’s Forest Management Plans includes landscape level environmental baseline assessment and operational procedures/practices following FSA (Forestry South Africa) Environmental Guidelines for Commercial Forest Plantations. In addition, Merensky has a post harvest impact assessment checklist that includes an evaluation of possible negative impacts, such as soil erosion and compaction; changes to soil productivity; changes to invasive exotic, native or naturalised flora or fauna species abundance, diversity or distribution, habitat fragmentation, pesticide, lubricant, nutrient or fertiliser pollution (by runoff, spray drift or spillage). As part of the implementation of an E&S management system, Merensky’ wood mills will conduct a formal process of identification of key environmental aspects/impacts and OHS hazards/risks of every step of its operations, as well as a gap analysis according to legal requirements and World Bank Group general and sector-specific (sawmilling and wood-based products) EHS guidelines.
A similar management approach is taken by Westfalia on avocado orchards that also includes an initial risk assessment to determine if the site is appropriate. The risk assessment has to be reviewed annually and take into account risks that have changed, site history and impacts of proposed enterprises on adjacent stock/crops and environment.
Organizational Capacity: Merensky and Westfalia mainly rely on operational staff to handle EHS aspects of its operations. On the forestry side, organizational capacity includes a plantation manager and a technical service manager, one community relations liaison supported by 4 site based staff. As set forth in the ESAP, HMH will enhance its E&S organizational capacity at a corporate level hiring a Sustainability Manager that will be responsible to consolidate, design and manage E&S programs at a corporate level. Merensky’s timber and Westfalia will hire one EHS professional each, to respectively support the design, implementation and management of specific EHS programs at processing/milling operations and plantations.
Management Programs: Merensky have Forest Management Plans appropriate to the scale and intensity of operations that includes management objectives, description of the forest resources to be managed, environmental limitations (a.e. Soil, Climate, slope, buffer zones along riparian areas) land use plans; provisions for monitoring of forest growth and dynamics; environmental management measures based on the environmental impact assessments; plans for the identification and protection of rare, threatened and endangered species; maps describing the forest resource base including, protected areas, and planned management activities. All potential environmental impacts identified during the assessments are considered during the planning and physical operations phases ensuring that adverse impacts are preferably avoided or mitigated. Forest plantations follow a framework of Business Operational Procedures (BOPs) defining acceptable E&S practices for forest management to meet or exceed national or regional best international practices. Timely corrective actions are considered and implemented to address both past and potential non-conformances. Corrective action requests (CARs) are recorded and closed out. Forest plantations also have specific E&S management programs, such as waste management, fauna and flora management, rehabilitation of riparian areas and degraded lands, mandatory OHS risk prevention and occupational health and safety monitoring programs. As part of the implementation of its E&S management system, Merensky wood mills will develop specific EHS management programs appropriate to the scale of the impact and risks identified during the assessment phase. Merensky mills will develop specific Operational Procedures incorporating prevention measures to avoid, minimize or mitigate identified risks during assessment phase. Merensky will also develop specific management programs and procedures covering machinery protection of rotating and moving equipments with specific provisions of turning off, disconnecting, isolating, and de-energizing (Locked Out and Tagged Out) machinery; fall prevention; safety work with cranes and bridge cranes; and ergonomic, repetitive motion and manual handling management program.
Westfalia adopts a similar approach, which includes site management plans that establish strategies to minimize the E&S risks identified during the risk assessment. Westfalia has formal written Operational Procedures to conduct the work that includes EHS provisions. Farms have specific waste, wildlife, OHS and energy efficiency management plans and programs.
Training: Forest workers receive adequate training and supervision to ensure proper implementation of the management plan and operational procedures. Merensky has a comprehensive training program ensuring that forest workers at all levels of skill and responsibility are appropriately educated and trained in the tasks they are assigned to as well as on Company policy and procedures, in accordance with FSC requirements.
Westfalia has a well developed and structured training program that includes an Induction workshop covering basic conditions of employment, disciplinary code, and environmental , OHS, and HIV/AIDS policies and procedures. Westfalia also provide specific trainings according to workers need that includes OHS, first aid, safe handling and application of chemicals, insect scout, tractor and chainsaw operators, among others.
As part of the implementation of its E&S management system, and as set forth in the ESAP, Merensky wood mills will develop and implement a specific training program including an induction for new staff and EHS briefing for contractors, general EHS management system (policy, risk assessment, management programs, monitoring, reporting and analysis), and OHS trainings covering machinery protection of rotating and moving equipments; fall prevention; safety work with cranes and bridge cranes; and, ergonomic, repetitive motion and manual handling.
Monitoring: Merensky has an E&S monitoring program, under its Forest Management Plan, to assess the condition of the forest, yields of forest products, management activities and social and environmental impacts. Forests inventories data are input into a GIS database and the E&S monitoring framework follows Forestry South Africa - FSA Environmental Guidelines for Commercial Forest Plantations. Field inspections are conducted during harvesting and silvicultural practices. As a FSC certified unit, Merensky follows a system of internal and external audits to ensure consistency with FSC standards requirements.
Westfalia adopts a similar approach as monitoring and recording is a critical component of global GAP framework. Westfalia monitors inputs consumption and efficiency such as water, fertilizers, agro-chemicals as well as work demand and work efficiency. Westfalia conducts periodic self assessment and external due diligences, according to Global GAP standard requirements.
Forests plantations and avocado orchards have a specific monitoring system of labor and OHS legal requirements based on review of legal documentation and field inspections. As part of the implementation of its E&S management system, Merensky wood mills will identify key EHS performance indicators according to the identified risks of its operations and legal monitoring requirements and develop a specific EHS monitoring plan for every site. This plan shall also include an OHS job observation program with periodic field inspections, internal auditing system as well as external verification.
Reporting: Key E&S indicators are gathered in managerial reports and internally disclosed, as needed. Hans Merensky Holding (HMH) discloses some E&S indicators to investors under its annual report. HMH will also prepare and disclose (annually) a sustainability report, with relevant E&S information and indicators, to all stakeholders using the international reporting standard format (GRI - Global Reporting Initiative), which shall be available at their website.


PS2: Labor and Working Conditions
Human Resource Policy and Management: Hans Merensky Holding has adopted a formal General HR policy and a Code of ethics, covering the terms of employment, such as wages and benefits, hours of work, overtime arrangements and overtime compensation, annual and sick leave, maternity, vacation or holiday, non-discrimination, sexual/moral harassment, work/life balance and conflict of interest. Workers are provided with a copy of the terms of employment, in which all relevant information are described, including hiring period, compensation, leave, promotions, salary increase and termination of contract.
HMH relies on a formal internal grievance procedure, which is part of its general HR policy and includes periodical communication with workers committees (OHS, accommodations, industrial), a grievance form and an external phone line to raise complains regarding the code of ethics.
Worker’s Organizations: As defined by law, workers have the right to form and join workers organizations by their choosing in both Peru and South Africa. Unions are very active in SA and annual salary increase, sector specific minimum wage, profit sharing and some benefits are bargained directly with the unions under collective bargaining agreements, but respecting the minimum standards defined by the Federal Administration. 81% of Merenky work forces are unionized and 40% of Westfalia as well. Union’s representatives work for both Merensky and Westfalia and there is no evidence that the Company restrict freedom of worker’s association. In Peru, agropecuaria Ayacucho employs a small number of workers (70) and there are no local active union representing the workers.
Non-Discrimination and Equal Opportunity: The company informed that the employment relationship is based on the principle of equal opportunity and fair treatment. HMH currently employees 4,558 permanent workers (2/3 are male and 1/3 female), which is consistent with the nature of the work and sector benchmarking. During the field visit, no evidence of discrimination based on workers personal characteristics unrelated to the job requirements, such as race, gender, religion or region of birth was identified.
Retrenchment: Merensky has a saw mill upgrading and expansion program that includes the discontinuing of Singisi mill operations and expansion of Langeni and Weza. The Singisi mill has currently 570 workers, and Merensky will negotiate with workers’ unions a retrenchment plan and associated benefits package. Currently, Merensky offers a lump sum payment to workers who agree to voluntary separation. The Company also buys back shares of the Company from workers at separation. Going forward,, Merensky will develop a retrenchment plan in accordance with PS2, IFC’s Retrenchment Good Practice Note recommendations and in consultation with relevant stakeholders. The retrenchment plan will include mitigation measures, such as training for employees to apply for job opportunities at Weza’s mill expansion, assignment to other Company''s operations, or building capacity to enhance local procurement program (as described in stakeholder section).
Protecting the Work Force. Merensky and Westfalia ensures that no forced or child labor is used at its operations by directly hiring all workers (no intermediaries) and following national laws, FSC and Global GAP requirements, and the minimum worker’s age is 18. Merensky hosts about 700 workers at its own accommodation camps following South African labor accommodation standards. The conditions of dormitories vary site to site but the basic standard includes two person shared room, pit latrines and water supply outside the rooms. In some camps, it is possible to find communal water closets arrangements and bath rooms with hot showers. Workers rely on wood based stoves inside the rooms to cook their meals, and some camps are supplied with electricity. Westfalia accommodations are better than Merensky and are provided with water supply, basic sanitation, showers, electricity and small electrical stoves. As set forth in the ESAP, the client will conduct a gap analysis of every accommodation camp, base on IFC Guidance Note on Worker’s Accommodation Standard, and provide a specific corrective action plan consistent with referred standard requirements.
Occupational Health and Safety: As described above, forest plantations and avocado orchards management practices includes comprehensive OHS risk assessment provisions, including operational procedures with clear OHS guidelines, management programs and means of protection consistent with local legal requirements, WBG’s EHS sector guidelines, FSC and Global GAP standards. However, some deficiencies were identified in the wood mills operations, such as partial machinery protection and provisions of turning off, disconnecting, isolating, and de-energizing (Locked Out and Tagged Out), insufficient fall prevention procedures and PPEs, limited safe operational procedures with bridge cranes, noise exposure protection and ergonomic conditions. Merensky will enhance its wood mills OHS performance by increasing management capacity, implementing an OHS management system and management programs (machinery protection of rotating and moving equipments; fall prevention; safety work with cranes and bridge cranes, ergonomic, repetitive motion and manual handling) as well as enhancing EHS training, monitoring and reporting.
Westfalia will review its safety procedures/practices of storing, using and handling chemicals (caustic soda) at avocado oil extraction plants, including better PPE provisions, safer handling and procedure for soda solubilisation tank filling, secondary containment and deployment of emergency showers and eye washers.
Supply chain: Avocado production is a labor intensive activity and relies heavily on local work force. Westfalia works with a small number of independent suppliers in South Africa and has a JV with Ayacocho Agricola in Peru. As part of this investment, Westfalia expects to increase the supply of avocado from other regions of Latin America, including from Chile, Colombia and Mexico. Avocado orchards and processing facilities are certified under Global GAP, BRC Food Safety, HACCP, Nature’s Choice and Fair Trade Standards, according to specific market demands. Global GAP is a basic requirement of all products/operations. Although Global GAP does not have specific control points covering terms of employment or child/forced labor issues, Global GAP certification process is characterized by a high level of formalization of business activities and work relationship, which are difficult to reconcile with small/family based production. Labor relations in SA are regulated and fairly enforced. In addition, as all the South Africa suppliers are certified under Global GAP, this significantly minimizes the risk of low labor cost factor (child labor) in its supply chain.

PS3: Pollution Prevention and Abatement

Resource Efficiency: Merensky wood mills use small boilers (less than 50 MWth) to burn wood chips and generate steam for kiln driers. Energy is purchased from the distribution grid and water extracted from rivers and wells. As part of this investment, Merensky will conduct feasibility studies to replace existing boilers to new and more efficient ones to generate steam and energy for self consumption or to be sold to the national grid. Avocado processing plants uses small boilers (less than 50 MWth) that burn coal and generate steam for the processing facility.
Currently, the average conversion efficiency from round-wood to sawn lumber is about 45%. Merensky uses harvesters machines in the plantation fields to cut and classify the logs according to pre-defined grid patterns. Some mills have automatic log scanners to determine the optimum sawmilling patterns. Some mills use finger-jointing technology to combine scrap or into lumber products. As part of this investment, Merensky will implement a mill’s modernization program to disseminate best technologies and increase average wood conversion to 50%.
While forest plantations rely on rainfall, avocado orchards needs supplemental water supply from irrigation systems. Westfalia deploys state-of-the-art technology to optimize water efficiency in irrigation systems, including micro-jets and dripping systems and tensiometers.
Greenhouse Gases: Main sources of GHG are the energy consumption from the grid, diesel/gasoline consumption by tractors/machines and trucks/vehicles, and fertilizers use in forests plantations and orchards. Emissions from boilers can be considered neutral due to the fact that they use renewable source of energy (wood chips/dust). Fertilizers use is based on plantations needs and agronomical recommendations and consumption is strictly monitored. As described above, Merensky will conduct feasibility studies to replace its existing boilers to new and more efficient ones to generate steam and energy for self consumption, and a reduction of GHG emissions is an expected outcome of this investment.
Wastes: Solid wastes in the forest plantations are managed following FSC requirements and, as such, forest management should minimise waste associated with harvesting and on-site processing operations. Operational solid wastes from forests plantations are managed according to chemicals, containers, liquid and solid non-organic wastes. Used lubricant oil and empty containers of chemicals are delivered for recycling. Bins are available at the villages and work areas for the collection of all waste. Waste produced at field operations is brought back to the work areas where it is placed into bins for recycling by licensed contractors.
Solid wastes from wood mills are wood bark that is incinerated, wood chips that are sold to plywood production and milling dust that is burned in the boilers. Empty containers of chemical products are segregated and collected by licensed providers for recycling. Sanitary wastes and littering from administrative area are delivered to the local public waste disposal system.
Solid wastes from Westfalia operations follow Global GAP and BRC Food Safety standard requirements and are managed according to a waste and pollution protocol. Production of organic waste is collected and delivered to composting and used in orchards as a fertilizer. Solid waste is segregated and empty chemical/pesticides containers are returned to suppliers for proper disposal/recycling, used oil is delivered to recycling, used tires returned to suppliers for recycling. Non-recyclable domestic waste is dumped and burned.
Wastewater: Liquid effluents from sawmills are generated from runoff from irrigated log yards, as well as from chemical coating of wood. Logs coming from the field are temporary stored at large log yards and irrigated with water to maintain minimum wood moisture threshold during dry season. As set forth in the ESAP, Merensky will collect run off and reuse the wastewater for log yard irrigation. Merensky mills have small wood treatment facilities basically working by demand. Small amounts of treated lumber are stored in yards adjacent to the treatment facilities. As set forth in the ESAP, Merensky will contain, treat and reuse all wastewater generated from wood coating plant. Treated lumber will be stored indoor or, alternatively, yards will be lined up and storm water run-off contained and treated before discharge.
Air emissions: As described above, main sources of air emissions are from the boilers and wood barks incinerators. Under the proposed ESMS implementation outlined in the ESAP, wood mills will start monitoring air emissions and will deploy means of control to bring them into compliance with local legal requirements and WBG guidelines. In addition, whenever the client consider to replace a boiler, they will look for other fuel alternatives (preferably biomass from wood mills or natural gas) and also deploy air emissions control systems with an operational capacity consistent with WBG EHS guidelines requirements
Pesticide Use and Management: Merensky uses 17 types of authorized herbicides for weed control based on field assessment of weed infestation and on a qualified profenional prescription. Merensky also uses insecticides to control (Taumasticoris, Leptocybe, Sirex, Nudaurilia, Diplodea, Gall wasp, Baboons and Fusarium) that is monitored and chemical control decisions are based on the economical level of control, consistent with IPM principles and IFC PS3 requirements. Merensky does not use pesticides that fall in WHO pesticides hazard classification system class I(a) or I(b).
Westfalia relies on a small number of chemical products to control fruits pests, disease and weeds. Everything is monitored and control decisions are based on field infestation, economical level of control and on a qualified Agronomist prescription. Westfalia does not use pesticides that fall in WHO pesticides hazard classification system class I(a) or I(b).


PS4: Community Health, Safety and Security

Forest operations can negatively affect communities’ health and safety in different ways: (i) impacts from wood transportation; (ii) forests accidental fires; (iii) nuisance to adjacent communities sawmill sites; (iv) impacts on freshwater ecosystem services due to extraction of water for irrigation for the avocado orchards and/or run offs. Merensky informed that, due to the historical process of forests development by governmental entities, there are no human settlements inside or adjacent to forest plantations and access roads that could be negatively affected by wood transportation. Merensky currently have a well structured forestry fire prevention plan that includes observation towers, radio communication, meteorological monitoring, permanent terrestrial monitoring, fire load/risk mapping, fire breaks, training, aerial and terrestrial fire fighting means, a network of points for water supply and community engagement. During site visits, it was identified some vulnerable, disadvantaged groups (small settlements and/or isolated hoses adjacent to mills operations). As set forth in the ESAP, Merensky will deploy proper fences/walls to isolate mill operations from adjacent communities for security/safety purposes. Merensky will also identify and assess possible sources of nuisance/impacts to these communities and will implement appropriate/feasible mitigation measures. Merensky will also develop specific community development programs for these communities to improve living conditions and employment/job opportunities.
The avocado orchards in SA relies in rain fed (1200mm/y) with supplemental irrigation during dry season. Water use is strictly regulated and water use permits are based on hydrological studies and multiple users approach. Currently no more water use rights for irrigation are granted by water authority and avocado orchards are limited in size based on existing water availability and efficiency. Water source is based on a mix of surface extraction and rainfall/run-off collection reservoirs. Westfalia uses state-of-the-art irrigation systems for water use efficiency, based on micro-jets and tensiometers.
In Peru, Ayacucho Agricola is located within an irrigation district of the Cachi River Project. The "Proyecto Integral Rio Cachi" is an official development of GoP implemented during the 80''s. The project was based on hydrological studies and considered two irrigation districts (13,745ha in total) and two hydropower dams. However, the national’s institutional framework for water resources management is characterized by deficient policy coordination and overlapping responsibilities. Although water permits are required, there is poor control of water use against sustainable water extraction based on hydrological studies. Although Ayacucho Agricola has obtained all required water permits, there is no control and/or monitoring of the amount of water extracted from the irrigation canal. Considering that Ayacucho Agricola is within a larger irrigation project, and comparing the different scales of client’s operations versus larger overall irrigation scheme context (190ha vs. 13,700ha), it is assumed that the 190ha of existing avocado orchards cannot alone pose significant impacts to local water ecosystem services of relevance to surrounding communities. Ayacucho Agricola also deploys state-of–the-art irrigation technologies, based on dripping systems and tensiometers to manage the water use/efficiency. As set forth in the ESAP, Ayacucho Agricola will deploy water meters at water extraction points on the canal to further monitor and ensure compliance with water use allowances.
In respect to long term cumulative impacts of regional water use for irrigation, the World Bank Group has two active projects in Peru designed to enhance water resource management and governance (Peru/Water Resources Management Modernization Project) as well as to enhance the management of irrigation infrastructure and practices (Peru/Sierra Irrigation Project).
Hazardous materials management and safety: chemical stores are available at all forest plantation units and they are consistent with WBG guidelines requirements. Facilities are available for dealing with spillages and the appropriate PPE is available when chemicals are used in field. Merensky uses fuel/diesel transport trucks to supply machines in the field and the business operational procedures (BOPs) have specific EHS requirements and control points to avoid spills, fires and workers exposure. Chemicals containers, liquid and solid non-organic wastes, including fuel and oil are disposed in an environmentally appropriate manner at off-site locations as described under PS3 section. Merensky adopts similar approach following Global GAP requirements.
Diesel tanks have secondary containment to avoid spills at both Westfalia and Merensky sawmills, but the later will review all chemical storage arrangements as part of the E&S management system implementation as described in PS1 section and in the attached ESAP, including the fuel storage area and refuelling procedures for the helicopters.
Emergency preparedness and response: As described before, Merensky has specific fire management program for the forests plantations and, in addition to that, both Merensky and Westfalia sites have emergency plans, covering different possible scenarios such as fires, chemical spills, medical emergency as well as emergency contact numbers and communication procedure, emergency equipment and execution of emergency response procedure. As set forth in the ESAP, and within the scope of the E&S implementation, Merensky sawmills will deploy all required L&FS equipments and procedures to achieve compliance with local legal requirements and get all required Life and Fire safety permits/licenses from authorities.
Security Personnel: Both Merensky and Westfalia rely on own non-armed security personnel in SA to watch its properties/assets and to prevent wood/fruits robbery in the fields. The security strategy is based on monitoring (cameras) and communication technology to contact public security forces, when response is needed. Both Merensky and Westfalia conducts periodical meetings with communities representatives as well as with workers where grievances can be raised. As a set forth in the ESAP the client will post in from of all processing facilities the contact phone numbers where complaints can be raised.
Ayacucho Agricola uses armed security forces in Peru to protect workers and company’s assets and, as a set forth in ESAP, Westfalia will develop a rule of conduct for security personnel including provisions on how to respond to threats guided by the principle of proportionally. Westafalia will manage security forces in accordance with IFC PS4 requirements as described in paragraph 12 and 13.

PS5: Land Acquisition and Involuntary Resettlement
Context of land tenure issues in South Africa: After 1994, the new democratic government in SA embarked on an ambitious program to redress the wrongs of the past, draw black people into the mainstream economy, and build a functioning democracy. Two primary mechanisms have been put in place for land transfer: the restitution of land lost through race-based laws and practices; and the redistribution of privately owned and public land. The government has pledged to transfer a total of 30 percent of white-owned land to black owners by 2015. An estimated 40 percent of privately owned plantations and 70 percent of State-owned plantations are subject to land claims by local communities. As a result, land claims have been gazetted against land owned and land leased by the Company, 17,538ha out of 30,824 owned land (57%) and 34,724ha out of 80,711ha leased land (43%).
The first forestry privatization deal to be concluded in South Africa was for the Eastern Cape North package. The bidder selected was Singisi Forest Products, a consortium led by Hans Merensky. The case is interesting because Merensky met and exceeded government targets in terms of black equity stakes, and also invested heavily in social and economic development in the area. Merensky plantations are protected by long term leasing agreements, irrespective of land ownership, and they pay an annual lease fee of R6 million (US$850,000) to the government, which holds this money in trust for the communities that have lodged claims to portions of the plantation. When the claims have been settled, accumulated and future rents will be paid to a community trust. The Company is supporting claimants’ settling of claims, which is a demanding and lengthy process for which communities often lack the necessary resources.
However, on the owned land side, the situation is different. Although the Company''s approach is to accept claims once it has been legally validated, they are still in negotiations with GoSA to define a fair price for compensation and long term leasing agreements of existing orchards to secure avocado supply. On the other hand, the Company expects that the cash obtained by possible compensation of land loss will allow them to obtain more area for plantations. HMH holds broad national recognition and respect, and its successful experience in the forests concessions may help, but it is still a work in progress. However, land claims are historical land issues in South Africa and cannot be considered as an E&S impacts from IFC investment. The process has been conducted without litigation while the Company is not opposing to complaints from communities and negotiations are being conducted based on good faith.
Land acquisition: Westfalia is also looking for land to acquire or lease to expand avocado orchards in SA and other countries in Latin America, and it includes (in SA) possible concessions of public land or leasing agreements from land restituted to traditional communities. In all cases, it will have to follow IFC PS5 requirements, and supported by agreements and arrangements with local communities. Currently HMH conducts a feasibility study before land acquisition/leasing and the Client will incorporate IFC PS5 aspects and requirements in this land assessment process.


PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources
Protection and Conservation of Biodiversity: Currently HMH manages 74,200ha of forests and 1,815ha of orchards in South Africa. At its owned land, HMH protects 8,427ha of indigenous vegetation composed by either forests or mixed bush fields (local denomination to transitions assemblies from savannah to forest). Merensky also manages (22,178ha) public areas of native vegetation for conservation under forests concessions agreements. Fruits orchards take place only on existing farming lands and forest plantations are FSC certified and no conversion of critical and/or natural areas is expected for this project.
Merensky and Westfalia closely monitors fauna and flora indicators of all natural areas within its properties or under its management following both FSC and Global GAP requirements respectively. Monitoring programs include a baseline assessment, endangered species identification, forests succession stages, maps and schedule of monitoring of High Value Conservation Forests.
Supply chain: Currently, most of planted wood supply comes from Hans Merensky own plantations (570,000 m3/year FSC certified). In 2012, 70,000m3/y of wood was being supplied from a local company that Merensky had a wood supply swap contract. Although this wood is not FSC certified, it is under Merensky Chain of Custody procedure (FSC) and is treated as a controlled source. It is expected that this amount will increase to 140,000m3/year by 2014.
Merensky also imports small amounts of native hardwood lumber from Malaysia (2380m3/year) and Gabon (45m3/year – equivalent to one container) from companies that holds a certificate of PEFC/MTCC Chain of Custody scheme (Program for Endorsement of Forest Certification/Malaysia Timber Certification Council), that ensures, as a minimum, the verification of legal origin of the wood. As set forth in the ESAP, Merensky will include imported hard wood lumber supply under its existing CoC procedure (FSC certified) to treat the imported wood as a controlled source.

Stakeholder Engagement: At Singisi forest operations, Merensky actively engage with stakeholder as it proven to be key for the success of the concession process and the business. Singisi case is interesting because they met and exceeded South African government policies in terms of black equity stakes. It also invested in social and economic development in the area. A local community trust, Singilanga Directorate Trust, has a 10 percent stake in the consortium, which could be increased to 25 percent by adding the 6 percent retained by the State-owned company that previously owned and managed a portion of the plantations, and the 9 percent owned by SAFCOL (South African Forestry Company) . The money accruing from this stake is paid into a community trust and used for community development initiatives. Stakeholders are the immediate community adjacent to the forests.
Support for the development of forestry-based enterprises was part of the Singisi bid, and it is included in the lease agreement with the government. Singisi has an active program to support black-owned forestry enterprises, including procurement policies that favor black-owned contractors and service providers, and a preferential procurement target of 25 percent. The leases include requirements to respect the existing use and access rights of resident and surrounding communities, especially the right to collect non wood forestry products for domestic consumption. Singisi has adopted a support program for small enterprises, including mushroom collecting and selling.
Merensky has a community liaison officer that manages a team of social workers dedicated to local communities that actively engage and communicate with them mainly on monthly based meetings with communities committees. As part of the new Corporate Sustainability Manager role, and as set forth in the ESAP, HMH will develop a stakeholder engagement policy/program to disseminate existing best practices across all business units and consistent with IFC PS1 requirements.