South Africa: Lonmin-01/CAO Vice President Request

Date Filed
21 Aug 2012
Status
Closed
Phase
Compliance
Country
South Africa

Case Tracker

Eligibility
Status as of April 20, 2021
Eligibility
Assessment
Status as of April 20, 2021
Assessment
Dispute Resolution
Compliance
Appraisal
Closed
CURRENT Status
Appraisal (COMPLIANCE)
Closed

Complaint Overview

Complainant

CAO Vice President Request

Concerns

Labor dispute, project due diligence and supervision

Cross-Cutting Issues
Labor Community Health and Safety Social Order / Conflict Violence / Abuse Loss of Life

Project Information

Region
Sub-Saharan Africa
Institution
IFC
Name & Number
Lonmin 24803
Company
Lonmin plc
Sector
Mining, Oil, Gas and Chemicals
Department
Other
Category
A
Commitment

10 year A loan of $100 million, $50 million equity

Synopsis

Project Overview

In light of the reports of serious violence which resulted in the deaths of Lonmin workers and members of the South African police August 2012, the CAO Vice President triggered a compliance appraisal of IFC’s investment in Lonmin plc. In particular how IFC reviewed, interacted and advised its client on matters related to work force, labor conflicts, labor unions, broader social impacts of unattended labor unrest/ latent conflict, and how IFC has assured itself of implementation of relevant IFC policy provisions.
A CAO compliance appraisal is a preliminary investigation to determine whether the CAO should proceed to a full compliance investigation of IFC. Through such appraisals, CAO ensures that investigations of IFC/MIGA are initiated only for those cases that may raise substantial concerns regarding environmental and social outcomes.

In December 2006 IFC approved an investment and advisory service project to support Lonmin’s multi-year expansion program at its platinum operations. The project consists of i) the development, expansion, and mechanization of Lonmin’s South African mines; ii) the financing of planned transactions regarding broader and more equitable ownership of South African businesses through Black Economic Empowerment (BEE) participation in Lonmin’s development programs; and (iii) through an IFC Advisory Service project, a comprehensive, large-scale community and Local Economic Development Program (LEDP) for the community of about 350,000 people living on and around Lonmin’s main operations.

Complaint

In December 2006 IFC approved an investment and advisory service project to support Lonmin’s multi-year expansion program at its platinum operations. The project consists of i) the development, expansion, and mechanization of Lonmin’s South African mines; ii) the financing of planned transactions regarding broader and more equitable ownership of South African businesses through Black Economic Empowerment (BEE) participation in Lonmin’s development programs; and (iii) through an IFC Advisory Service project, a comprehensive, large-scale community and Local Economic Development Program (LEDP) for the community of about 350,000 people living on and around Lonmin’s main operations.

CAO Action

CAO’s appraisal report considered the adequacy of IFC’s appraisal and supervision of its Lonmin investment. In particular it considered how IFC reviewed, interacted with and advised its client on matters related to labor conflict, and how IFC assured itself of implementation of relevant IFC policy provisions.

Based on a review of documentation and interviews with IFC staff, the appraisal report raises concerns as to the adequacy of IFC’s E&S performance in relation to this investment. It also identifies potentially more systemic issues regarding the way in which the Sustainability Framework was applied to an equity investment in a publically listed company.

Status

Absent a complaint from affected workers, however, CAO finds that the nexus between the E&S performance issues outlined in this appraisal and the tragic outcomes of the August 2012 dispute is insufficiently established. Therefore, CAO decides that an investigation is not warranted and closed the case.

Updated: September 6, 2013

Case Documents

  • Compliance

    Appraisal Report(s)
    CAO Appraisal Report
    Aug 30, 2013
    English
    CAO Appraisal Report