Mozambique: Mozal-01/Matola and Maputo
Justiça Ambiental, Livaningo, Liga Moçambicana dos Direitos Humanos, Centro Terra Viva, Kulima, and Centro de Integridade Pública
Air emissions, community health & safety, consultation, information disclosure, environmental management plans.
Up to $135 million in quasi-equity and loans
In October 2010, a coalition of local and national NGOs representing themselves and other locally affected people filed a complaint to the CAO regarding the Mozal project in Mozambique. Mozal, located 20km west of Maputo, is an aluminum smelter with a production capacity of 250,000 tons per year. IFC has two active investments in the project: the first, approved in 1997, supported the construction and operation of the smelter, and the second, approved in 2001, supported doubling its production capacity. BHP Billiton, a publicly traded international mining and metals group, is the primary sponsor of Mozal.
The complaint to CAO relates to the public health impacts of increased emissions that resulted from the bypass and rebuild of fume treatment centers (FTCs) in Mozal’s anode bake furnaces during the period November 2010 to March 2011. The bypass and rebuild was necessary due to corrosion in the FTCs which had been a problem since 2001. The complaint also raises questions about the environmental and social due diligence undertaken by IFC in approving the bypass operation, and the adequacy of access to and disclosure of information around the process.
The CAO deemed the complaint eligible for assessment in October 2010 and an ombudsman team traveled to the field in December 2010 to meet with the complainants, company representatives, and IFC team working on the project. The ombudsman assessment aimed to understand the perspectives of all the parties and explore options for resolution of the issues raised. In January 2011, the CAO conducted a second trip to discuss the draft assessment report with the parties and next steps. The company and complainants agreed to pursue a CAO dispute resolution process to attempt to resolve the issues raised and jointly agreed to ground rules outlining the suggested topics for discussion during the dialogue meetings.
As part of the dispute resolution process, the parties met on several occasions between February and June 2011. The ground rules paved the way for an initially successful negotiation that resulted in the drafting of several proposals. The process did bring the parties closer to an understanding of one another’s concerns and potential solutions and Mozal agreed to disclose information with the coalition about the bypass program.
Although the parties worked toward a final agreement on all the issues, an agreement was not reached in the end and the NGO coalition requested that the complaint be referred to CAO's compliance function.
The case was formally transferred to CAO Compliance in December 2011. CAO's Operational Guidelines provide for a compliance appraisal in order to decide whether an audit of IFC's role in the project is warranted.
The appraisal concluded that once the risk of structural failure of the fume treatment centers (FTCs) was reported in 2010, IFC responded to assure itself that reasonable and practical steps were being taken by Mozal to identify, assess, and rectify the plant failure. Similarly, though advance measures to engage with communities around the bypass were lacking, the appraisal finds that IFC took appropriate action once this issue was identified. While ambient air quality remained mostly within relevant limits during the rebuild, the appraisal finds that studies conducted provide sufficient evidence that, from a public health perspective, polyaromatic hydrocarbon emissions from the plant should be minimized both in concentration and duration. However, the appraisal process did not allow CAO to reach a conclusion as to whether IFC was sufficiently proactive in monitoring the corrosion risk in the FTCs, particularly given that it was aware of a previous need for repairs to the FTCs due to corrosion. As such the complaint was referred for audit.
A CAO audit was released together with a response from IFC on April 12, 2013.
In a context where the FTCs were known to be subject to corrosion and had previously been shut down for repairs on this basis, the audit finds shortcomings in the way in which IFC worked with its client to address the changing risk profile of the project. In particular CAO finds that it would have been reasonable for IFC, after it became aware of the earlier corrosion incident, to have requested that Mozal assess, monitor and report regularly on its approach to the management of risks associated with the possible future failure of the FTCs. Had this been done, CAO finds that appropriate advance consultation with affected communities could have been conducted.
While asserting that IFC staff took reasonable action timely action consistent with its policies and procedures, IFC acknowledges the importance of the issue raised by the audit; specifically the reporting of incidents relevant to a client's environmental and social performance (particularly in mature investments).
IFC has expressed its disagreement with the central finding of CAO’s audit of its investment in Mozal and maintained that it relied appropriately on its client’s expertise in relation to engineering issues that are outside the scope of IFC's environment and social supervision duties. Nonetheless, IFC made an addition to the ESRP stipulating that IFC may request supplemental project information if specific aspects of a project raise significant E&S concerns. This provision did not however address the issues raised by the CAO audit of IFC’s investment in Mozal either in terms of: (a) IFC’s approach to supervision of changes in project E&S risk or, (b) client reporting requirements in relation to such changes. Subsequently, CAO discussed with IFC about additional measures which might address the audit findings but IFC did not take these up. In conclusion, as IFC’s investment in Mozal is no longer active and the CAO audit did not identify project level compliance issues which require remedy, CAO has decided to close this compliance process.
The case was officially closed on June 25, 2014. All documentation relating to this case, including the Compliance Monitoring and Closure Report, is available under "View Documents" below.
Updated: June 30, 2014