IFC’s appraisal considered the environmental and social management planning process and documentation for the Project and gaps, if any, between these and IFC’s requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through implementation of these measures, the Project is expected to be designed and operated in accordance with Performance Standards objectives.
PS1: Assessment and Management of Environmental and Social Risks and Impacts
Environmental and Social Assessment and Management System:
AGI has an EHS Policy, which includes the commitment of the group to ensure all its business activities are governed by stringent EHS principles to provide a safe and healthy work environment to its employees and stakeholders. The AGI’s EHS policy includes the requirement for contractors to abide by national legislation and the group’s EHS policy. The policy applies to all the entities and shall apply to the proposed project. In addition to the EHS policy, the company has also developed a corporate environmental and social management system (ESMS) and associated management procedures for EHS aspects that comply with ISO 14000 (Environmental Management) and ISO 45000 (Occupational Health and Safety Management) standards and requirements of IFC Performance Standards (PSs). Following the corporate ESMS and EHS procedures, the company will develop and implement facility-level ESMS and ESMPs for all production plants covered under the project per national law, requirements of IFC PSs, WBG General EHS Guidelines (2007) and WBG EHS Guidelines for Integrated Steel Mills (2007). (ESAP #1).
Identification of Risk and Impacts:
AGI has a Hazardous Identification and Risk Assessment Procedure as part of its corporate ESMS. As part of the project, the company will ensure that ESIAs compliant with IFC PSs requirements and national laws are undertaken for the expansion of capacity in AGI plant in Bishoftu, Ethiopia, the construction of the WHR in Jinja, Uganda, and the installation of the solar plant in Kenya (ESAP #2) and that necessary ESIA permits are obtained. The ESIAs will cover all aspects, including the construction and operational phases of the sub-projects funded by the proposed project. The ESIAs shall include detailed cumulative impact assessment and the Construction Environmental and Social Management plans (CESMPs). The CESMPs will serve as the guiding framework for E&S risk management during the construction, which the company will contractually require the construction contractor to implement. The existing E&S auditing and monitoring standard operating procedure should be implemented for the operational phase.
Organizational Capacity and Competency:
At the group level, the E&S function is within the HR manager's responsibilities. The group will recruit a dedicated E&S manager who will report directly to the group's chief operating officer (ESAP #3). The Group EHS manager will oversee the implementation of the Corporate ESMS and EHS plans, systems and procedures across the company facilities and supervise the development and implementation of site-specific ESMS for each site.
Currently, each of the existing plants has an EHS officer, who reports to the plant HR officer and reports to the group-level HR Manager. Going forward, Abyssinia will review its plant EHS organization structure to ensure regular EHS reporting to the group-level EHS Manager. In compliance with national legislation in each country, the company has established EHS committees for workers that discuss EHS issues and improvements quarterly.
All workers and contractors are trained and sensitized to plant safety and PPE usage through toolbox training and government-approved safety training. Workers report any identified EHS risks or hazards to the EHS committee for action.
Emergency Preparedness and Response:
A group -level Emergency Preparedness and Response Plan (EPRP) has been developed in line with IFC PSs requirements, which establishes minimum requirements and standardized risk identification and response procedure, emergency communication; emergency response equipment including firefighting arrangement, training and drills; inspection and equipment maintenance; KPIs; standard templates/reports. During the construction phase, the company will require the construction contractors to develop and implement site- specific Emergency Preparedness and Response Plan (EPRP) through its contractor management plan.
PS 2: Labor and Working Conditions
AGI employs approximately 3,640 workers across their Kenyan, Ethiopian, and Ugandan operations, with a female representation of approximately 6%. Most workers (approx. 80%) are recruited locally through local labor brokers and provided with three-month term contracts that are renewed as required. Labor brokers employ these workers directly with AGI’s HR department overseeing their performance and adherence to relevant policies and procedures. There is a limited expat contingent across the operations.
AGI has a group-level human resources (HR) head, supported by country-level HR managers, and respective plant-level HR teams. At an operational level, further support is provided by respective departments, including procurement, supply chain, and transport and logistics.
Human Resources Policies and Procedures:
The company has prepared a group-level HR manual detailing the application of the various policies and defining various aspects of labor and working conditions, as detailed below. The group-level HR manual is adopted and refined as necessary at an operational level and is available to all employees at the time of induction. AGI policies and procedures apply to direct workers, and where relevant, labor brokers are contractually obliged to comply with these requirements and local legislation.
The HR policies and procedures cover labor and working conditions, including a Code of Conduct, Bullying and Harassment Policy, Alcohol and Drug Abuse Policy, Equal Opportunity Policy, Diversity Policy, and a Recruitment Policy and Procedure, among others. HR policies and procedures are aligned with the requirements of PS2 and local legislation and regulations. The implementation of these policies at a site level will be assessed through a labor audit. As per ESAP #4, AGI will commission an independent labor audit across all its operations to assess compliance and alignment of current labor practices and working conditions with local statutory and IFC PS2 requirements. The labor and working conditions of casual workers, employed through labor brokers, will also be assessed against national legislative requirements and IFC PS2. Gaps identified during the audit and mitigation measures will be reflected in a timebound corrective action plan.
Working Conditions and Terms of Employment:
Labor and working conditions within AGI’s operations are managed as per the requirements of the respective country's labor legislation and regulations. The respective HR manuals detail labor and working conditions, including recruitment procedures, performance management, training and development, disciplinary procedures, grievance management, leave and absence, termination, and transfers. Conditions of employment are also defined in written contracts provided to all workers, including contract workers. Direct workers are generally provided with open ended contracts, while contract workers sourced through labor brokers are given 3-month term contracts.
AGI generally implements a policy of 8 hours per day, 6 days a week, across their operations, with overtime paid as per national legal requirements. In some instances, as per industry norms, critical positions such as within the rolling mill, workers operate on twelve hour shifts due to the nature of the manufacturing process. As per ESAP #5, where relevant, working hours will be aligned with legal requirements such as limits of normal working hours and overtime. When 12-hour shifts are required for operational reasons, shift workers will be remunerated and have rest periods as per national legislation or current collective bargaining agreements (CBA) where applicable.
AGI provides all direct workers with in-house training opportunities to enhance their job-related skills and abilities and promote successful career progression and development. Training opportunities are assessed and identified through ongoing performance appraisals and recorded in individual training records. Performance appraisals are conducted at the end of the required 3-month probation period and then every 6-12 months.
Workers’ Organizations:
AGI’s approach to freedom of association and collective bargaining is defined by local legislative requirements, which are currently supported in all three countries of operation. Currently, only workers at the company’s Ethiopian and Kisumu operation in Kenya are unionized. The collective bargaining process at each of these operations was ongoing at the time of IFC’s appraisal. As per ESAP #6, AGI will finalize the (CBA at both their Ethiopian operation and relevant Kenyan operation and implement agreed labor and working conditions.
Non-Discrimination and Equal Opportunity:
As detailed in the HR Manual, and reiterated through the Diversity Policy and Recruitment Policy, AGI is committed to fostering, cultivating, and preserving a culture of diversity and inclusion. AGI is an equal opportunity employer committed to principles of non-discrimination during the recruitment process, which is carried out in a fair, equitable and consistent manner.
Retrenchment:
As per the AGI HR Manual, should an employment contract be terminated due to redundancy, the process will be managed as per the workers’ statutory entitlements. During this appraisal, the company initiated a retrenchment process at their Eldoret operation in Kenya, due to operational and productivity requirements, that will result in either the dismissal or transfer of approximately 150 workers. As per ESAP #7, prior to implementing the retrenchment or transfer, the company will develop a retrenchment and relocation plan defining the approach and alignment with local statutory requirements and PS 2. As a component of the plan, AGI will provide IFC with all relevant documentation related to the retrenchment and relocation process, including but not limited to, the skills gap analysis, notice letters, meeting minutes, payment schedules etc. AGI will also complete a memo confirming completion of the retrenchment / relocation process, and alignment with statutory and PS2 requirements.
Grievance Mechanism:
AGI has an existing employee grievance procedure that is detailed in their HR Manual. The procedure allows for formal and informal grievance management and is available to all direct workers and contracted workers. Should resolution not be achieved through an informal process and mediation, a three-stage formal procedure is available, including assessment by a Grievance Panel as necessary. The grievance mechanism also makes provision for anonymous complaints via a dedicated phone line, or dedicated drop boxes. As per ESAP #8, AGI will (i) develop and maintain site-specific grievance registers, and (ii) ensure dissemination and training on the policy application and accessibility to both staff and contractors. The efficacy and implementation of the grievance mechanism will also be assessed through the labor audit as per ESAP #4.
Protecting the Workforce:
AGI does not have an explicit policy relating to child and / or forced labor. However, all recruitment and employment, including casual labor, is governed by respective labor laws and regulations. As per their HR Manual, the Company prohibits the employment of workers under the age of 22, and respective documentation is collected and confidentially stored at the time of recruitment.
Occupational Health and Safety:
AGI has developed a robust occupational health and safety (OHS) management system supported by several policies and standard operating procedures (SOPs), including an overarching OHS Policy, Fire Safety Policy, and Transport Policy. SOPs include those relating to use and allocation of personal protective equipment (PPE), motor vehicle inspection, and hazardous material management among others. AGI’s QHSE department maintains an overarching hazard identification and risk impact process and associated register where primary OHS hazards are identified, and control measures defined. Key operational risks relate to plant equipment, adequate allocation and use of PPE, vehicle use and transport, electrical, and fire safety. The results of air emission monitoring for AGI’s facilities in Jinja, Awasi and Mariakani relate to indoor air quality measurements which are generally found to be compliant with national indoor air quality standards. These group level policies and procedures are adopted and refined as necessary based on the risk profile of each operation.
At an operational level, OHS is ultimately the responsibility of the plant manager, who is supported by an EHS officer. The EHS officer also leads the Health and Safety Committee, which is responsible for the assessment and implementation of ongoing recommendations and improvements. AGI has implemented an SOP for work-related incident and accident reporting, investigation, and analysis, and OHS incidents are reported monthly. As per ESAP#4, as a component of the independent labor audit, AGI will assess their current OHS management policies and procedures, roles and responsibilities, hazard identification processes, control measures and training among other areas and define and implement corrective actions where necessary.
Workers Engaged by Third Parties
AGI currently utilizes several contractors to support operations, including labor brokers providing term contract workers, transport providers, and security. The company has defined a Contractor Management SOP detailing its approach to evaluating, communicating, and monitoring contractor and labor broker performance. All contractors and labor brokers are contractually required to abide by both AGI policies and procedures and local legal requirements relating to labor and working conditions and OHS. Labor brokers are contractually required to provide monthly reports to AGI detailing any OHS incidents, grievances, legal case, dismissals etc.
As per the Contractor Management SOP, AGI monitors and audits its third-party service providers on an ongoing basis. At the end of the contract period, evaluation of the contractor’s E&S performance helps determine whether to retain them or consider them for further opportunities. As per ESAP #4, the management and monitoring of contractors and labor brokers, including their compliance with statutory and PS2 requirements, will be assessed, and where necessary, timebound corrective actions defined.
PS3: Resource Efficiency and Pollution Prevention
Resource Efficiency:
The primary source of energy is the national power grid. This is supplemented by roof-mounted solar PV installations at various sites. The group’s average monthly electricity consumption in 2023 was 6,405,715 kWh, and the average monthly consumption of furnace oil was estimated at 400,000 liters per month. Manufacturing of the sponge iron is energy intensive. The company will use power from the national grid for the induction furnaces. AGI will also install an 11MW waste heat recovery power plant with sponge iron production. The company has developed a resource efficiency and water management procedure, which will be implemented at each facility. The ESMS procedure will include monitoring resources and setting targets to improve efficiency.
GHG emissions:
The total GHG emissions are 2,790 tCO2e/year. Net emissions - 9,041 tCO2/year. As at appraisal a number of efficiency programs were under implementation such as (i) procurement of a hydraulic grab with vibro feeders for scrap/sponge iron charging to furnace to optimize the heat timings from 3 hours to 2 hrs 30 mins thus increasing the throughput of the melt shop; and (ii) upgrade of wire annealing and galvanizing facility from 16 wires to 22 wires to increase the productivity from 1500 kg/hour to 2050 kg/hour.
Air Emissions:
Furnace emissions are the primary source of air emissions. AGI commissioned a third-party specialized and licensed laboratory to regularly monitor ambient air quality and air emission levels at the plants in Kenya and Ethiopia, and such monitoring is yet to be performed for the Uganda-based plant. The results of ambient air quality monitoring for AGI’s facilities in Ethiopia and Kenya indicate compliance with the national ambient air quality standards.
AGI’s environmental monitoring procedure complies with respective national laws and standards and needs to be augmented per environmental monitoring guidelines of WBG General EHS guidelines (2007) and WBG EHS Guidelines for Integrated Steel Mills (2007) (Table 1. Air Emissions Levels). Hence, as per ESAP #9, AGI will i) augment corporate – levels ESMS environmental monitoring procedure for air emission monitoring per WBG EHS Guidelines for Integrated Steel Mills (2007) (Table 1. Air Emissions Levels) and cascade down such procedure across all facility level ESMSs, ii) perform stack air emission monitoring for all facilities covered under the project, and iii) if needed, implement technical improvements of air emissions abatement measures to achieve compliance with national air emission standards and WBG EHS Guidelines for Integrated Steel Mills (2007) (Table 1. Air Emissions Levels). Fugitive air emissions such as dust from non-paved areas around the sites contribute to poor air quality around some facilities. Dust suppression measures through water sprinkling were implemented at some of the sites, though AGI indicated plans to pave the company sites to reduce fugitive dust emissions.
Water and Wastewater:
Water consumed in the production facilities is obtained from the underground wells located at the factory sites. Water is mainly for cooling purposes and recycled in the closed cooling cycle is treated by sedimentation and filtration., the company will monitor its water consumption as part of augmented ESMS (monitoring and reporting procedure).
Wastewater generated on site is directed to on-site treatment facilities. At Mariakani plant for example, the company has installed an effluent treatment plant (ETP). The effluent quality monitoring results from 2022 results indicated general compliance with national effluent quality levels with a slight exceedance in total dissolved solids. To address the exceedance the company indicated that the output of ETP is processed through the RO plant to remove dissolved solids prior to discharge into soakaway pit. As part of ESAP #10, the company will i) develop a corporate wastewater monitoring and management procedure per national law and standards, WBG General EHS guidelines (2007) and WBG EHS Guidelines for Integrated Steel Mills (2007) (Table 2. Effluent levels for integrated steel mills sector, ii) perform an assessment of the efficiency of all on-site ETPs against the requirements of new wastewater monitoring and management procedure, and iii) implement corrective actions required to achieve compliance of effluent levels with the WBG EHS Guidelines for Integrated Steel Mills (2007) (Table 2. Effluent levels for integrated steel mills sector).
Solid and Hazardous Waste Management:
Solid waste generated from the plants includes slag10% of steel production, ash 15% of rolled products; dolochar1.2% of sponge iron produced, fly ash 0.3% of sponge iron produced, and mill scale 2% of rolled products. Slag, ash, dolochar and flyash are used as base material for paving internal roads. Millscale is used in melting. Some of the by products are sold to other industries. Slag is used for backfilling and for road pavements projects.
Hazardous waste generated from the plant includes used filters, spent oil, and used florescent lamps and empty containers of hazardous chemical substances. Spent oil is collected by specialized licensed waste management company. Other hazardous wastes are collected and disposed by Hazardous Waste Management Facility. Non-hazardous solid waste is collected by solid waste contractor.
PS4: Community Health, Safety and Security
AGI sites are located in peri-urban and rural locations in areas designated as industrial development zones. There are sparse rural communities and villages around the facilities.
The company has a Transport Policy and maintains a fleet of 83 trucks that are mainly used for product distribution to clients. AGI employs a Group Logistics Manager who implements the company’s transport policy and transport management system, procedures for cargo handling, transport safety policies as well as tracking and maintenance of company owned fleet. The logistics team monitors the movement of all trucks in real time. No major road accidents have been reported. The company’s distribution is supported by third party transporters. In addition, the company outsources several trucks from third party transport companies to manage their raw material imports.
Life and fire Safety audits are conducted annually at AGI plants in compliance with host country building and fire safety regulations. The audits reveal that significant progress has been made in establishing and rolling out positive fire safety practices at most plants, such as installing firefighting equipment, servicing fire equipment, and conducting annual audits. However, for the same plants, the fire safety reports indicate the need for short-term improvements. The gaps have been identified, including The Fire safety reports indicate a low level of L&FS risk management at AGI facilities, and gaps have been identified, including the provision of independent fire water tanks for emergency purposes, installation of safety signage, and staff training. As per ESAP #11 the company will close out the identified gaps in the statutory audit before the first disbursement.
The company has contracted an external security company to guard various company assets. Security personnel are unarmed, and contracts are in place with the security service providers. The company will develop a Corporate Security Management Plan (ESAP #12) in line with IFC performance standard 4.
