If provided by the financial institution, the Early Warning System Team writes a short summary describing the purported development objective of the project and project components. Review the complete project documentation for a detailed description.
The project consists of an investment of up to an aggregate of ZAR1.5 billion (~$104 million) in an investment vehicle ("[NewCo]" or the "company") that has been set up to acquire and hold the ownership of Neotel Proprietary Limited ("Neotel"). Neotel was formed in 2006 to be the second national operator for fixed line telecommunication services in South Africa. Having operated for 10 years, Neotel has become South Africa's first converged communications network operator providing tailored innovative solutions based on voice, internet and data services to enable businesses, internet service providers and consumers.Neotel is seeking a strategic redirection, competitive repositioning and capital expenditure program to take advantage of broadband growth opportunities in South Africa, under the auspices of its new owners, Liquid Telecommunications Holdings Limited ("Liquid Telecom"). As part of the transaction, Neotel will become merged with Liquid Telecom's South African operations ("Liquid SA") and the merged entity will be able to expand the boundaries of both networks. The new, merged company will retain many of Neotel's existing management systems and structures including E&S management.The project will be implemented in two phases both of which will make use of the IFC investment. Phase 1 will comprise the acquisition of Neotel from its existing shareholders; and Phase 2 will involve the subsequent funding of the company's two year capital expenditure ("CapEx") program to support its network expansion in South Africa.Neotel has access to 27,280km of fiber-optic ("fiber") linking cities and towns across South Africa with 591 Points of Presence (PoPs) and 1400kms of own fibre currently under construction. Neotel has 295 base stations, all of which are leased and two data centres one of which is owned and the other leased. The company has four retail stores, all of which are leased and three offices of which one (the Neovate Head Office) is owned and the other two are leased.Liquid SA owns a fiber backbone network of 670km, a further 750km is currently being constructed and an additional 620km is planned for 2017. The company has a satellite hub situated in South Africa and a Network Operating Centre (NOC) and Service Operations Centre (SOC) in Johannesburg. Liquid SA is also planning to establish a backbone from Cape Town, via Port Elizabeth to Durban, some 1570km of new build.
OVERVIEW OF IFC'S SCOPE OF REVIEW
The review of this proposed investment in the company consisted of a visit by IFC staff to the Liquid SA and Neotel head offices in Johannesburg, South Africa in July 2016 to meet with and interview management. IFC staff also appraised environmental and social ("E&S") and technical information submitted by Liquid SA and Neotel including sustainability policies, various environmental approvals and supporting documentation and the overall structure of EHS management within the two companies.
IDENTIFIED APPLICABLE PERFORMANCE STANDARDS**
While all Performance Standards are applicable to this investment, IFC's environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards.PS 1 - Assessment and Management of Environmental and Social Risks and ImpactsPS 2 - Labor and working conditionsPS 3 - Resource Efficiency and Pollution PreventionIf IFC's investment proceeds, IFC will periodically review the the project's ongoing compliance with the Performance Standards
PS4 (Community Health, Safety and Security), PS5 (Land Acquisition and Involuntary Resettlement, PS7 (Indigenous Peoples) and PS8 (Cultural Heritage) are not considered applicable given that the company only employs unarmed security, that new sites will either be leased or purchased from a willing seller; no Indigenous Peoples are expected to be affected; and no important cultural heritage is expected to be impacted and Neotel has a chance find protocol. Based on the review of the company's existing assets and currently defined plans and due to the limited footprint of the company's assets and installation of fiber routing along existing infrastructure, PS6 (Biodiversity Conservation and Sustainable Management of Living Natural Resources) is not considered applicable, but the company will screen new assets and projects against PS requirements through the company's E&S management system, as discussed under PS1..
ENVIRONMENTAL AND SOCIAL CATEGORIZATION AND RATIONALE
The key E&S issues associated with the project are generally limited construction impacts associated with laying fiber; labor and working conditions (including employee and contractor occupational health and safety); and managing fuel for generators.As E&S risks and impacts are expected to be limited, site-specific, and relatively few in number, and any adverse impacts that might result can be avoided or readily addressed through mitigation, the proposed investment has been classified as a Category B project according to IFC's Policy on Environmental and Social Sustainability.
**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability
ENVIRONMENTAL AND SOCIAL MITIGATION MEASURES
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 the implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives.
PS 1: ASSESSMENT AND MANAGEMENT OF ENVIRONMENTAL AND SOCIAL RISKS AND IMPACTS
Environmental and Social Assessment and Management SystemNeotel has an overarching Sustainability Policy and well developed E&S management systems that include an Occupational Health and Safety (OHS) management system that is OHSAS18001 certified and an Environmental Management System that is ISO14001:2004 certified. The policy is available on a portal and accessible by all Neotel staff.Neotel implements the management system requirements through working committees that address various environmental requirements such as e-waste, green procurement, energy efficiency, carbon footprint and sustainability. Each working committee reports into an Environmental Management Steering Committee that is chaired by a senior executive.Higher risk activities are principally related to construction activities, which are all outsourced, as are maintenance requirements but with Neotel project management and supervision. Neotel has developed a 'contractor's pack' that provides procedures for E&S implementation on projects and these requirements are fixed in contract documentation. Neotel conducts risk assessment for all new work (including maintenance) and conducts regular audits on the contractors to ensure compliance with the contract requirements.New facilities and network installations require local environmental authorizations, which are issued on the back of Environmental Impact Assessments and Environmental Management Programs that prescribe environmental controls during both the construction and operations phases. Although the fiber network can traverse environmentally sensitive areas, the fiber is mostly laid in existing corridors such as roads or railway lines to minimize the risk of additional impacts. After the merger there are plans to develop two long distance fiber networks from Cape Town to Port Elizabeth and on to Durban (some 1579km of new build). The routing will pass through areas of high biodiversity value. Mitigation will principally be using existing corridors (roads particularly) but under the IFC investment the company will ensure that areas affected by the new fiber routing are assessed for natural and critical natural habitat. Where such habitat is identified the company will fully implement the associated PS 6 requirements as per ESAP item #1.Neotel is in the process of improving the management of its supply chain (green procurement). Under IFC's investment, the company will include E&S requirements in its agreements with suppliers, as per ESAP item #2. Neotel supervises, monitors, and reports on E&S risks and impacts of all operations for the duration of its involvement. The company will report to IFC on compliance with the Performance Standards.
PS 2: LABOR AND WORKING CONDITIONS
Human Resources Policies and ProceduresNeotel employs approximately 960 workers directly and a further 50 contract workers. Services such as cleaning, canteen and security are outsourced. No retrenchments are anticipated with the take-over as Neotel has a number of vacancies that need to be filled. The gender split is some 60% males and 40% females.Neotel has an overarching HR policy that includes all HR functions from recruitment through career development, conditions of employment, resolution of worker grievances and so forth. The HR policy is available to all staff through a portal and there is also a summary booklet that is made available to all staff. The policy complies with South African labor law, which is non-discriminatory and promotes fair treatment, freedom of association (right to unionize), equal opportunity for its employees and prohibits child and forced labor. The labor force is not unionized, however. Record reviewed by IFC includes no significant conflicts with workers, and no labor law violations have been raised by authorities.Occupational Health and SafetyNeotel has systematically identified worker health and safety hazards including working next to roads, working at heights, live circuits and employee driving amongst others. Neotel has procedures to reduce these hazards and maintains detailed records of incidents including vehicle accidents.Neotel has a very low lost time injury frequency ratio (LTIFR) of 0.47, which is indicative of the generally limited hazards and the good controls in place. Under IFC's investment, the company will include near miss reporting to further reduce safety risks, as per ESAP item #3. Neotel conducts medical surveillance of their technical staff and drivers, with medicals performed annually. Neotel also monitors vehicle driving characteristics such as harsh braking, speeding and so forth and disciplines drivers for poor driving.Neotel requires the deployment of appropriate measures for life and fire safety at its offices and operational sites. The local authority, which includes an assessment by the Fire Department, issue occupancy certificates and people may not assume occupancy until the certificates are issued.
PS 3: RESOURCE EFFICIENCY AND POLLUTION PREVENTION
Pollution PreventionNeotel's construction and maintenance activities generate waste materials, and for these purposes, the company has policies and procedures for waste management consistent with Section 1.1 of the World Bank Group EHS Guidelines for Telecommunications. Some 42% of the waste generated by Neotel is recycled and Neotel is actively pursuing, through its green procurement working group, the phasing out of non-recyclable materials by suppliers.Neotel has calculated its carbon footprint at 36,326 CO2eq per annum of which 80% is derived from electricity use. Although there have been no reductions in overall energy use because of the continued expansion of the network, Neotel has an active energy efficiency initiative that includes the use of LEDs and timing and motion sensor light switches. Under the IFC investment, the company will establish and populate energy efficiency indicators that can be used to determine net improvements over time (as per ESAP item #4).Neotel has a series of generators that are used to supply emergency power with both above and below ground fuel storage tanks. Below ground tanks are regularly pressure tested for integrity and above ground tanks have secondary containment to contain potential fuel spills. Drip trays are used on portable generators.Neotel has a dedicated e-waste program that serves to ensure the safe disposal of e-waste and is in the process of developing operational objectives and targets so that there can be effective performance reporting.