The project will involve a loan to Westfalia Mozambique to establish a 200 hectare avocado orchard and associated pack house near the city of Chimoio in the Gondola district of Manica Province, in the Beira Corridor of Mozambique. Additional capacity will also be established within the same packhouse to serve an estimated 200 local litchi fruit farmers, providing them with access to export markets and other third parties fruit.

Risk Assessment: CATEGORIZATION

The IFC states that this is a category B project "because the limited number of specific environmental and social impacts which it may result in can be avoided or mitigated by adhering to generally recognized performance standards, environmental, health and safety (EHS) general or design criteria." IFC notes that key environmental and social risks associated with this investment are: (i) land acquisition and involuntary resettlement (ii) labor and working conditions including child labor across litchi suppliers, (iii) irrigation and water use and efficiency, (iv) soil erosion and conservation, (iv) environmental, occupational health and safety, food safety and social (including labor) management systems and related procedures for the farm operations and processing unit, including environmental health and safety organizational structure and internal technical capacity for effective implementation, monitoring and reporting of the Company's environmental health and safety management system; and (v) adherence to Mozambique labor law, working conditions, standards and risk prevention and management, including employees (permanent and casual), contractors and nearby communities.

APPLICABLE SOCIAL AND ENVIRONMENTAL STANDARDS

The following analysis is based on the initial E&S risk assessment conducted by Westfalia in order to determine if the project site was appropriate. The scope of review included a preliminary assessment of soil fertility, availability of water resources, basic infrastructure, land rights, land title and land disputes, labor aspects, site history and basic impacts of proposed enterprises on adjacent stock/crops and environment.

IFC documentation states that Westfalia "will conduct a more detailed environmental and social impact assessment covering all potential impacts from its activities, which will include a project description and exploration plan, site location and impacts to local biodiversity, more comprehensive water use plan including water extraction, storage, and efficiency (through implementation of drip irrigation technology), supply chain, land tenure risk assessment and associated social compensation in case of physical/economic displacement."

The Project triggers the following IFC Performance Standards:

PS 1 - Assessment and Management of Environmental and Social Risks and Impacts
PS 2 - Labor and working conditions
PS 3 - Resource Efficiency and Pollution Prevention
PS 4 - Community Health, Safety and Security
PS 5 - Land Acquisition and Involuntary Resettlement
PS 6 - Biodiversity Conservation and Sustainable Management of Living Natural
Resource

Source: IFC documentation

ENVIRONMENTAL AND HUMAN RIGHTS RISK ASSESSMENT

Labor Rights

The farm will employ 40 permanent workers to manage the farm, while during the harvest period (2 months), and will require 400 additional temporary workers for seasonal and harvesting operations. The IFC recognizes that "child labor remains a problem in Mozambique. Although the law prohibits forced and bonded labor by children, it is a common problem, especially in rural areas. Children, including those under age 15, commonly work on family farms in seasonal harvests and on commercial plantations harvesting cotton, tobacco, or tea and are paid on a piecework basis rather than for an hourly minimum wage. Trade unions indicated that in the northern provinces of Zambezia, Nampula, and Cabo Delgado, adults hired to work in tobacco, cotton, cashew, and coconut plantations routinely had their children work also to increase their income. These children worked long hours and were prevented from attending school." While litchi and avocado production are not explicitly mentioned in formal child labor reports, the IFC notes, this is in part because of the small size of this business in Mozambique, and "it does not mean they are not exposed to the same risks as other commercial crops are facing, especially considering it is a labor intensive activity."

The IFC further notes that, according to the Human Rights Country Report from US State Department, of child labor provisions "is very limited, especially outside the capital where a majority of the abuses occurs, and there are no mechanisms in place for submitting complaints about hazardous and forced child labor." IFC pledges that Westfalia will conduct harvesting operations at its litchi suppliers, using its own staff, thereby minimizing the risk of use of child labor across supply chain. Going forward, Westfalia has also agreed to develop a specific operational procedure for its supply chain that requires suppliers to commit in not using child/forced labor and in not converting natural habitats into fruit production.

IFC documentation states that Hans Merensky Holdings has a formal internal grievance procedure, as a part of its general human resources policy and includes periodical communication with workers' committees, a grievance form and an external phone line to raise complaints regarding the code of ethics. The Westfalia project will be part of this system.

The following questions may be relevant in determining whether you or your community has suffered a violation of labor rights due to the construction or operation of Westfalia's agribusiness:

• Are children under the age of 15 working in this industry?
• Do you have reasons to believe that children could be recruited and employed in the context of the planned Westfalia project?
• Is forced labor a problem in this industry?
• Do you have options (legal or otherwise) if children under the age of 15 have been recruited and employed in the project?
• Do you have options (legal or otherwise) if children under the age of 18 have been recruited and employed to work in dangerous jobs or at night?

Sources: IFC documentation; 2011 Findings on the Worst Forms of Child Labor

Right to Property and Adequate Housing

IFC documentation states: "According to Mozambique legislation, land is owned by the State and cannot be sold, otherwise disposed of or encumbered. Nevertheless, the law provides land use rights known as 'the use and enjoyment of land right' known as a DUAT. Foreigners may be a DUAT holder provided they have an approved investment project. Acquisition of a DUAT is proven through a title deed. DUAT for economic activities are conditional to a business plan approved by local authorities. A buyer of a rural property can only secure the land by an application to the authorities, for their approval of the transfer. However, if a land use rights are acquired by a company, the effective right of the company and the land can be transferred simply by transferring the majority of the shares of the company."

The IFC recognizes that "land disputes are relatively common in rural areas where concessions have been granted within or near community's traditional territory. As the Land Law does not require communities to register their rights, local governments and investors often fail to recognize the extent of community land and the nature of community land use. Community consultations are often ineffective."

Westfalia will acquire a single-block farm consisting of 318 hectares, in Gondola District of Manica Province to expand its avocado orchards in Mozambique. The existing DUAT holder is one individual who transferred his land-use rights to a newly-formed company. Westfalia will acquire the shares in this company, thereby obtaining the rights to use the land for the remaining DUAT period. The IFC states that this is a market transaction conducted on a willing buyer, willing seller basis.

Currently, IFC documentation states that "approximately six families are living and farming on the land. These families were resettled from the farm in 2005 when the land was converted to a tobacco farm. At that time the DUAT had been issued to its current owner and their agreement to move, following the negotiations and payment of at compensation package, was documented in the DUAT.

Due to the failure of the tobacco farming project these families have reentered the area and are currently using some of the land for small scale farming." The IFC states that "the current land owner has agreed to resettle the families who have already received compensation (documented in the DUAT under consideration) and will conduct this under supervision of local land authorities and WM [W].
IFC states that "in terms of the sale of share agreement, the responsibility remains with the seller to ensure that the resettlement is done correctly and at his own costs. Families will be allowed to harvest their crops before they leave the area and family members that show interest in working for Westfalia enterprise in Mozambique will have priority in hiring."

On August 8, 2012, Mozambique adopted the Regulation for Resettlement Resulting from Economic Activities, which seeks to provide safeguards for persons that have been relocated due to development projects. Although the Regulation provides important protections, it also contains many gaps. According to Human Rights Watch, the decree provides detailed requirements on some elements such as housing, but overlooks vital protections related to land and livelihoods, access to health care, grievance mechanisms, and meaningful consultation and participation of affected communities. Therefore, it is vitally important to closely monitor resettlement.

Additionally, Mozambique has a long history of flaws regarding the resettlement process with development projects. Human Rights Watch 2013 paper: "What is a House Without Food" details shortcoming in government policy and private corporate resettlement plans for communities who were displaced due to mining projects. The NGO noted instances of inadequate planning; lack of communication regarding timing and information about the impending move that resulted in crop loss and disruptions in food production; misrepresentations regarding resettlement land, and a lack of accessible and coherent grievance mechanisms.
The IFC states that "[i]n order to ensure that the families have been relocated appropriately and have had their livelihood restored in accordance to IFC PS5 requirements the company will complete an Audit of the resettlement and livelihood restoration process. The Audit will identify any further corrective action needed to ensure compliance with PS5 requirements including land for resettlement, proper monitoring program, additional compensation if necessary, moving assistance and proper livelihood restoration for both group of people, those who joined Westfalia's workforce, as well as for those who kept living from subsistence agriculture."

The following questions may be relevant in determining whether you or your community has suffered a violation of the right to property or housing due to the construction or operation of Westfalia's agribusiness:

• Do you have reasons to believe that your access to adequate housing could change as a result of the planned investment project?
• Do you have reasons to believe that the planned investment project could result in people being forcibly evicted from their homes?
• If you have been resettled, have you obtained adequate compensation for your land or property?
• What opportunities (legal or other) are available if you feel that your right to adequate housing has been affected?

Sources: IFC documentation, http://www.hrw.org/news/2012/09/17/human-rights-watch-recommendations-mozambique-s-resettlement-decree; http://www.hrw.org/sites/default/files/reports/mozambique0513_Upload_0.pdf

Right to a Healthy Environment

Environmental sustainability issues connected with agriculture and food production include pesticides, soil erosion, water use, energy, carbon emissions, biodiversity, and loss of habitat. IFC documentation specifically states that Westfalia uses chemical products to control fruit pests, disease and weeds. IFC documentation further states that "sanitary wastewater from pack house and office are discharged to septic digesters and seepage lines, and pit latrines are available for field workers." If not properly managed, the use of pesticides and any accumulation of toxic waste could result in environmental degradation of the area.

The following questions may be relevant in determining whether you or your community has suffered a violation of the right to a healthy environment due to the construction or operation of Westfalia's agribusiness:

• Has the company provided information to you regarding the disposal of solid waste, hazardous waste, and other waste products, and what impact is this likely to have on the local environment?
• Has the company informed you of environmental action plan in place for mitigating adverse ecological effects on local communities?
• What means do you have to seek redress if the environmental impacts of the proposed operations become a problem for local communities and/or the local ecosystem?

Sources: How Big is the Fruit-Growing Footprint; IFC documentation

Although the total Project cost is estimated at US$10.5 million, IFC's proposed investment comprises a senior A Loan to the company of up to EUR 3.1 million (approximately US$ 4.1 million). A portion of the A Loan may be mobilized through the Global Agriculture and Food Security Program. That portion would finance the construction of the packhouse with capacity sufficient to handle fruit from the neighboring smallholder farmers.

Westfalia Fruto Mocambique Ltda will be majority-owned (75%) by Hans Merensky Holdings (“HMH”), a South African fruit producer, exporter, trader and distributor known under its Westfalia trademark, also involved in timber production and processing under the Merensky brand. HMH is South Africa’s largest avocado producer and exporter, and Europe’s largest avocado importer. HMH is an IFC investee company since December 2012.

AgDevco will be a minority shareholder (25%) in WM. AgDevCo is a social impact investor and agribusiness project developer with a strong presence in Central Mozambique, across 17 ongoing projects. AgDevCo will provide debt and equity funding and use its experience in small agribusiness development in Mozambique to support the Company in engaging with local farmers.

Zac Bard, Managing Director
Westfalia Limited - Hans Merensky Holdings
PO Box 52288
Saxonwold 2132
South Africa
Phone: +27 (0) 11 381 5753
Email: zacb@westfalia.co.za

CONSULTATION PROCESS

The IFC states that, at a corporate level, Hans Merensky Holdings has a community liaison officer that manages a team of social workers tasked with actively engaging and communicating with local communities mainly through monthly based meetings with community committees. As part of the new recruited Corporate Sustainability Manager role Hans Merensky Holdings has developed a stakeholder engagement policy/program to disseminate existing best practices across all business units and consistent with IFC requirements. IFC states that Westfalia will further develop a site specific stakeholder engagement policy/program to address specific issues encountered during the risk assessment phase of the proposed Mozambique operations.

ACCOUNTABILITY MECHANISM OF IFC

The Compliance Advisor Ombudsman (CAO) is the independent complaint mechanism and fact-finding body for people who believe they are likely to be, or have been, adversely affected by an IFC or MIGA- financed project. If you submit a complaint to the CAO, they may assist you in resolving a dispute with the company and/or investigate to assess whether the IFC is following its own policies and procedures for preventing harm to people or the environment. If you want to submit a complaint electronically, you can email the CAO at CAO@worldbankgroup.org. You can learn more about the CAO and how to file a complaint at http://www.cao-ombudsman.org/