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.
IFC Performance Standard 1: Assessment and Management of Environmental and Social Risks
The Borrowers do not have an environmental and social management system (“ESMS”) in place to adequately identify and manage the risks. As per ESAP#1, the Borrowers will develop an ESMS for the Companies that is commensurate to the level of risk and impacts emanating from its operations including: (i) an overarching environmental and social (“E&S”) policy; (ii) procedures for identifying store level risks during pre-construction (site selection), construction and operational phases; (iii) management programs, including occupational, health and safety (“OHS”), (iv) designated roles and responsibilities; and (v) emergency response plans and procedures (“EPRP”). EPRPs will specifically include provisions for climate-related hazards e.g., heatwaves and flooding events. The ESMS will also include construction contractor monitoring procedures to ensure compliance with environmental, health and safety (“EHS”) Management Programs and E&S specifications for new store development.
An E&S risk assessment has not been conducted for the site in Nosy Be nor has environmental approval been obtained from the regulator. As per ESAP#2, the Borrowers will appoint a suitably qualified consultant to assess the E&S risks and impacts associated with the development of the site prior to commencement of construction. As the site is in a peri-urban area, the associated E&S risks are expected to be low to medium. The assessment must consider potential community impacts, OHS risks, water availability, pollution risks, and potential biodiversity impacts (see below). The findings of this assessment will inform the site’s design, construction, and operational planning.
The sites for the other three stores subject to IFC use of proceeds will be leased. The site at Ivato is already leased and for Bypass the lease is being finalized. For these sites’ responsibility for E&S risk assessments and the associated permitting falling on the property owner.
The proposed Nosy Be site lies within the Madagascar sub-humid forest ecoregion. The entire island of Nosy Be is located within the Nosy Tanihely National Park Key Biodiversity Area (KBA). Although the site is within the KBA, it is not situated within or close to any protected area. As noted above, the site is considered modified habitat. No priority biodiversity values, or critical habitat values were flagged for the site during project screening, which included consultation with the KBA secretariat.
As part of the E&S assessment for ESAP #2, the appointed consultant will identify mitigation measures in line with IFC PS6 commensurate to the predicted project impact on modified habitats. Since the project will not create a new footprint within the KBA, the implementation of additional programs is not required.
A local construction contractor will execute the works for the Nosy Be stores. The Group has an in-house structural engineering team that will oversee the construction process, including internal design and quality control.
As per ESAP#3, for the Nosy Be stores, the Borrowers will engage a suitably qualified professional to prepare a LFS Master Plan and provide a professional certification that the design of LFS systems for the stores comply with the requirements of the LFS Section of the WBG General EHS Guidelines. Upon completion of construction of the stores (at the time of the LFS systems testing and commissioning), a suitably qualified LFS professional will conduct a review and will certify that the construction of these systems has been carried out in accordance to the LFS Master Plan. In addition, the Borrowers will obtain all required environmental approvals and permits from the relevant regulatory authorities for the construction and operation of the Nosy Be stores, in accordance with applicable national legislation.
For the leased stores (Ivato and Bypass), the Borrower will appoint a suitably qualified LFS professional to conduct a gap analysis of the buildings’ LFS design and systems against the requirements of the WBG General EHS Guidelines (LFS section) and assess whether the store layout aligns with these guidelines. Where gaps are identified, the Borrowers will engage with the landlord to address issues under the landlord’s control. For aspects under the Borrowers’ responsibility, such as internal layout adjustments, the Borrowers will implement necessary corrective measures themselves.
No one is designated responsibility at the Companies for EHS risk management. The Borrowers will appoint a suitably qualified EHS Officer to oversee the development and implementation of the ESMS, the E&S risk assessment for the Nosy Be site and the EHS performance of the contractor (ESAP#4).
IFC Performance Standard 2: Labor and Working Conditions
SANIFER employs 299 staff members including 92 females. KIBO employs 94 staff members including 53 females.
Working Conditions and Management of Worker Relationship
Human Resources Policies and Procedures
Human resources (HR) management is centralized at the Group level. Although HR staff are not based at the Borrowers level, each store has a manager who is responsible for handling HR-related matters on site and for escalating issues to the Group HR team.
The Group has established HR regulations that cover the Borrowers. They define key aspects of labor management, including recruitment and hiring, working hours, protection of personal property, employee absences (including sick leave and other forms of leave), equipment use and maintenance, and basic OHS provisions. They also address disciplinary procedures, professional conduct, the prevention of sexual and psychological harassment, and breach of contract. These provisions are communicated to all employees during onboarding. The document further outlines how certain provisions may be adapted to reflect operational differences across the company’s subsidiaries.
Working Conditions and Terms of Employment
Labor and working conditions across both SANIFER and KIBO are managed as per the requirements of Malagasy labor laws and regulations, notably the Labor Code (Law No. 2024-014).
All employees are engaged under indefinite-term contracts (Contrat à Durée Indéterminée), and written contracts are in place in accordance with national labor law.
Employees work a total of up to 60 hours per week, comprising 40 regular hours and 20 hours of overtime. This exceeds the Malagasy Labor Code's overtime limit of 16 hours. The Borrowers comply with national minimum wage requirements, paying the statutory gross monthly wage of 265,700 MGA for laborers under category M2, prorated for partial periods. Overtime compensation practices are generally aligned with Madagascar’s Labor Code, including premiums of 130% for regular overtime and 150% for night work.
As set out in ESAP #5, the Borrowers will develop and implement a system to monitor working hours more closely and prepare a corrective plan to progressively align overtime practices with national legal requirements.
Workers’ Organizations
The Group’s HR regulations recognize the right of workers to form and join trade unions. It also includes provisions for staff representative elections in companies with more than 11 workers and defines rules for collective bargaining. Currently, employees are not unionized, and there are no collective bargaining agreements in place. However, there are no restrictions preventing employees from joining trade unions or engaging in collective bargaining, in accordance with national legislation.
Employee representatives are elected at Group level to a Comité d’Entreprise, with proportional representation for each company within the Group, in accordance with local legal requirements. Elections are conducted every two years. The functioning of the body was reported to be effective, with regular engagement between management and employee representatives.
Non-Discrimination and Equal Opportunity
The Group HR policy states that staff are recruited without discrimination based on race, color, sex, religion, political opinion, trade union membership, or social class. It prohibits any form of mistreatment, including sexual harassment, and protects employees from retaliation.
Retrenchment
In April 2023, 50 shop-floor employees at SANIFER were retrenched following an internal reorganization. The affected roles were deemed redundant due to the implementation of digital systems. Retrenchment packages provided were reported to be double the statutory requirement under local labor law.
As part of ESAP #6, the Borrowers will incorporate commitments into its HR policies to ensure that any future retrenchment processes are conducted in accordance with the requirements of IFC PS 2, including appropriate consultation, compensation, and transitional support.
Grievance Mechanism
A formal grievance mechanism is not currently in place. Employees may raise concerns through their line managers or elected staff representatives, who then escalate grievances to the corporate HR team. Grievances are logged and recorded; however, the process is informal and lacks standardization.
As part of ESAP #7, the Borrowers will develop and implement a formal grievance mechanism aligned with the requirements of IFC PS 2, ensuring accessibility, confidentiality, and timely resolution of employee concerns.
Protecting the Work Force
As per the Group’s HR policy, all workers must provide a copy of their ID and proof of address for age verification.
Occupational Health and Safety
The Group’s HR policy includes general provisions on OHS, such as accident prevention, hygiene practices (e.g. hand washing), appropriate clothing, and emergency response. However, these provisions are not tailored to the specific operational contexts of the Borrowers and lack sufficient procedural detail.
OHS risks associated with the Borrowers’ retail and warehouse operations include ergonomic hazards, slips, trips and falls, machinery-related risks (e.g. forklifts), fatigue, stress, and food hygiene.
As part of ESAP #1, the Borrowers will develop and implement a fit-for-purpose OHS management system as a component of its ESMS. The system will include an OHS policy, procedures for risk identification, a legal register, defined roles and responsibilities, training plans, operational controls and safe work procedures, personal protective equipment (PPE) requirements, and protocols for incident investigation and reporting.
Workers Engaged by Third Parties
The Borrowers engage third-party contractors for security, cleaning, cash handling, construction of new stores and goods delivery services. At present, there are no formal procedures in place to screen or monitor the EHS performance of these contractors.
As part of ESAP #1, the Borrowers will develop and implement contractor management procedures to assess and monitor the EHS performance of third-party service providers, consistent with the requirements of IFC Performance Standards.
Supply Chain
The Borrowers supply chain is predominantly import-driven, with approximately 85% of products sourced internationally—70% from Europe and 30% from China, India, Turkey, and South Africa. The remaining 15% are sourced locally, primarily essential goods such as cement, paint, rice, frozen chicken, eggs, bread, cheese, and vegetable oil. The company works with around 300 suppliers, including approximately 150 foreign suppliers. Key exporters such as Intermarché and Weldom Export supply products under contracts, with direct shipments from France to Madagascar.
The Borrowers maintain direct relationships with both international and local suppliers, conducting regular site visits for relationship management, product quality, and production continuity. Although there is an effort to increase local sourcing, particularly for food, concerns remain associated with the reliability of local suppliers. Sourcing decisions are primarily guided by price and security of supply. The Borrowers do not have a Procurement Policy or Supplier Code of Conduct and lack sufficient understanding of the associated labor and biodiversity risks. Supply chain risks are highest for wood products, due to potential deforestation and unsustainable sourcing, and for locally sourced food products, where there may be risks of child or forced labor, significant safety issues, and habitat conversion.
As per ESAP#8, the Borrowers will conduct a supply chain mapping exercise and risk assessment covering all suppliers of wood products (local and international) and locally sourced food products. For wood suppliers identified to be operating in high-risk areas that do not have third-party sustainable forest management certification (e.g., FSC), the client will identify and engage alternative certified sustainable suppliers within a reasonable timeframe. For local food product suppliers where there is a high risk of child or forced labor, significant safety concerns, or conversion of natural habitats, the client will engage with suppliers to implement corrective measures to address, or otherwise identify alternative suppliers if remediation is not feasible.
The Borrowers will also develop a supply chain management system that includes:
- A Procurement Policy and Supplier Code of Conduct that includes prohibitions on Child Labor, Forced Labor, and significant safety issues as per PS2, as well as prohibition of natural habitat conversion per PS6.
- An onboarding and screening procedure to assess new potential suppliers against the Supplier Code of Conduct.
- Clauses requiring compliance with the Supplier Code of Conduct in contracts with suppliers.
- A training plan for management and procurement teams on issues related to Child Labor and Forced Labor, significant safety issues and natural habitat conversion risks.
IFC PS3: Resource Efficiency
Power supply
Lack of reliable power from the national grid is a significant challenge across the Companies. All stores currently rely on diesel generators to supplement grid connectivity to ensure operational continuity. The Group is considering a solar installation for the Nosy Be stores, as part of EDGE certification for the stores.
Water supply
Water for stores is sourced from the municipal supply. However, intermittent water cuts are common and water storage tanks have been installed.
GHG emissions
Diesel generators and refrigerant gases are the main source of GHG emissions. Emissions are below 25 000 tons of CO2 equivalent (tCO2e) annually from direct emissions and indirect energy use and therefore no reporting by the Borrowers is required.
Waste management
The Borrowers do not have a formal waste management policy in place. Wooden pallets are sold locally for reuse, but most other waste is sent to landfill and expired products are incinerated by waste management contractors. As per ESAP#1, a waste management plan will be developed and implemented for key waste streams including packaging and expired food products.
IFC PS4: Community, Health, Safety and Security
Food Safety
No food safety or product recall incidents were reported by KIBO. KIBO does not have a formal food safety management system in place. Although no fresh produce is sold, the company does sell frozen goods, which potentially introduces food safety risks related to cold chain management and product expiry. As per ESAP#9, KIBO will develop and implement a food safety system aligned with the IFC EHS Guidelines for Food and Beverage Processing and based on HACCP principles (Hazard Analysis and Critical Control Points). The system should include procedures for cold chain and temperature control, expired and non-confirming products, personnel hygiene, cleaning procedures, product recall and monitoring. SANIFER does not sell any food products.
Transport Safety
The Borrowers operate their own transportation fleet, consisting of approximately 20 vehicles of various sizes operated by 33 drivers, primarily used to distribute goods from warehouses to retail stores. KIBO has electric bikes for last-mile customer delivery in Antananarivo. One incident was recorded involving a driver operating a vehicle under the influence of alcohol, resulting in a collision. The driver was subsequently dismissed for misconduct. No further such incidents have been reported. Third-party road freight providers are responsible for transporting goods from the port to the Group’s central warehouse. The Borrowers will develop a road safety management plan for their respective fleet of vehicles as part of the ESMS. It will detail vehicle and driver safety standards, driver training and behavior expectations, route planning and incident and near miss reporting. It will also include road safety requirements for road freight providers (ESAP#1).
Security Forces
Two private security firms provide unarmed security guards at stores. No vetting of security contractor track record, training or policies and procedures is conducted. The Borrowers will conduct a security risk assessment and develop a security management plan for the companies (ESAP#10). This assessment should be consistent with the requirements of IFC PS and relevant Malagasy legislation to ensure that security measures protect personnel and property while minimizing risks to workers and members of the public. The Borrowers will also include Security Management Plan requirements in security provider contracts to ensure consistent management of the security risks identified in the security risk assessment.
