World Bank watchdog to probe social, labour complaint against Lonmin

Johannesburg – Lonmin [JSE: LON] is to be investigated by the World Bank’s Compliance Advisor Ombudsman (CAO) following a complaint by women in the Marikana community that the platinum miner has failed to comply with social and labour plans.

This is according to a statement issued on Thursday by the Centre for Applied Legal Studies (CALS), which helped bring forward the complaints of the local community based organisation Sikhala Sonke to the World Bank watchdog.

Most of the complaints, made in June 2015, are from women who live in a settlement, Enkaneng, in Marikana, according to a compliance appraisal by the ombud.

The complaint relates to $50m investment Lonmin received in 2007 from the International Finance Corporation (IFC), a member of the World Bank, for Lonmin’s local economic development programme.

The programme involved development, expansion and mechanisation of Lonmin’s South African mines, $15m was specifically allocated to the development of a comprehensive, large-scale community and local economic development programme. The IFC later sold its equity holding in the investment. 

“The funding was granted to ensure Lonmin contributed to the development of nearby affected communities by providing infrastructure, basic services and poverty eradication programmes in line with its social and labour plan commitments,” the legal centre explained.

“Ten years after receiving this funding, the living conditions of the communities near Lonmin’s Marikana mine remain dire. Lonmin has failed to comply with its commitments and the IFC’s performance standards and the purpose for which the funding was granted,” it said.

Concerns by the community members relate to the lack of broad community support for the project, Lonmin’s non-compliance with its social and labour plan and adverse environmental and health impacts from the air or dust pollution and groundwater pollution, the appraisal read.

IFC drops the ball

Given the complaints, the World Bank ombud conducted the appraisal to determine if an investigation was warranted and in its concluding remarks stated that the IFC be investigated for failing to ensure Lonmin complied with its performance standards.

“It is unclear to CAO whether IFC provided support to the client in terms of meeting its requirements, and managing community expectations, as the client’s financial situation became more constrained,” the appraisal read.

The ombud was concerned about this as Lonmin’s failure to meet its housing requirements under the Social Labour Plan (SLP) created an environment conducive to “tension, labour unrest, and disunity” among employees.

The bank's ombud also called into question the IFC’s supervision of Lonmin’s water and sanitation projects, which appeared to be limited.

Among other concerns was whether the IFC provided necessary advice to Lonmin for its target on women employment, or if it considered and provided guidance on environmental and health risks.

“CAO notes that IFC identified several times the slow progress in the implementation of various mitigation measures.

“However, it is unclear to CAO whether IFC reviewed with the client any performance improvement opportunities that would be commensurate to the risks identified,” the appraisal read.

Significant complaint

No other complaint from South Africa has ever reached this far in holding the IFC accountable for its investments, CALS noted.

“This investigation could have a huge impact on development projects in South Africa and beyond,” said Nomonde Nyembe, an attorney at CALS.

“The IFC has a great deal of immunity, but this could result in the entity changing its methods of operation in other contracts and ensuring the companies they invest in, such as Net1, comply with their safeguards and human rights standards.”

Wendy Tlou, group head of communications at Lonmin said that Lonmin is “committed” to providing clarity to the World Bank's ombud throughout the investigation.

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