CAO Cases

Arne Hoel, The World Bank

Sub-Saharan Africa

Kenya / Pan African Paper-01/Webuye

Complainant
RECONCILE and Center for Environmental and Development Education Programs
Date Filed
February 01, 2008
Case Status
Closed
 

Synopsis

Complaint

The Pan African Paper Mills (East Africa) Ltd. is a project based in Webuye, Kenya in which the IFC first invested in 1974 and since then has supported the company in nine loans and equity investments. PPM produces more than 80% of the country’s paper and is one of the largest employers in Kenya. In February 2008, two Kenyan based NGOs – Resource Conflict Institute (RECONCILE) and Center for Environmental and Development Education Programs (CEDEP) – lodged a complaint with CAO on behalf of residents of Webuye town, Western Kenya. The complaint raised a number of concerns about the environmental and social impacts of the paper mill, and questions about the disclosure of information about the company’s activities.

 

CAO Action

Following an Ombudsman assessment and subsequent negotiations between stakeholders, the parties reached agreement to undertake a Stakeholders' Forum to discuss the specific complaints regarding social and environmental impacts of the project, as well as broader issues of community and economic development. Shortly after this agreement was reached, however, the company’s power was cut due to its inability to pay wages and utility bills, and PPM temporarily ceased operations. In light of this closure, the complainants postponed initiation of the Stakeholders’ Forum until the PPM’s future was more certain.

 

After six months of negotiations, PPM and the government were unable to agree on a plan to re-structure the company, and PPM closed permanently. Senior management representatives, who previously agreed to work together with the complainants in the facilitated Stakeholders Forum, left Webuye.

 

Following the company’s closure, in April 2009, the IFC notified PPM that it formally relinquished its $36 million debt claim in PPM. According to the IFC, after several failed attempts at turning around and restructuring PPM over the past five years, IFC considered its debt to be both irrecoverable and an unsustainable burden for any turn-around plan. Along with relinquishment of its debt, IFC committed to fund a general environmental audit, regardless of whether PPM remains closed or re-opens under new ownership. If it re-opens, the IFC audit would ensure a safe and proper start-up; if it closes permanently, the audit would ensure a safe and proper de-commissioning of the facility.

 

The audit was completed in August 2009, and following a series of negotiations between the IFC and the complainants, the IFC agreed to send a representative from the Nairobi office to present the audit findings at a CAO-facilitated workshop in Webuye.

 

The complainants and CAO organized the two-day workshop, which took place in November 2009 and comprised the following agenda:


• Presentation of the IFC-funded environmental audit of PPM;
• A presentation about IFC’s other small and medium enterprise projects in Kenya, and the types of projects IFC and its partners support throughout the country and region;
• A half-day training in community-based participatory research and monitoring;
• A half-day training in mediation and environmental conflict resolution.

 

The workshop was attended by the CEDEP membership and other community members and, as agreed by the complainants, constituted final closure of CEDEP’s complaint to CAO.

 

Status

The complaint was closed in December 2009. 

Project information

Institution
IFC
Project Name & Number
Pan African Paper Mills Ltd. 7206
Department
Global Manufacturing & Services
Company
Panafrican Paper Mills (E.A.) Limited
Sector
Pulp & Paper
Region
Sub-Saharan Africa
Country
Kenya
Environmental Category
B
Commitment
$15 million

Case Tracker

Ombudsman

  • Eligible: Completed
  • Assessment Period: Completed
  • Facilitating Settlement: Completed
  • Monitoring/Close-out: Closed

Compliance