In 2013, IFC’s Board approved a project for the construction of a 280-room 5-star hotel in Conakry, Guinea. The project was implemented by Palma Guinée S.A., which is fully owned by the Topaz Group of companies. Palma Guinée S.A was incorporated specifically to develop and own the hotel, to be operated under the Sheraton brand. At the time of approval, Guinea’s capital had no 5-star hotels and the proposed hotel was expected to become an important part of Conakry’s business infrastructure. The total project cost is estimated at US$61 million. IFC’s investment was a secured senior loan package of up to $26 million to Palma Guinée S.A comprising an A loan for IFC’s own account of up to $15 million and a syndicated B loan of $11 million. Palma Guinée S.A prepaid the entire outstanding loan balance on September 15, 2022.

A complaint was filed to CAO on January 19, 2023 by the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco, and Allied Workers’ Associations (IUF) and Global Labor Justice-International Labor Rights Forum (GLJ-ILRF) on behalf of the workers of the Sheraton Grand Conakry hotel. The complainants alleged labor-related issues, particularly unpaid wages, unsafe working conditions, lack of health benefits, and interference with their rights to participate in, and be represented by, a trade union including:  delaying the election of workers’ representatives; discouraging trade union activity through misinformation, intimidation, and retaliation; and unfair and unlawful termination practices with no alternatives to retrenchment or assurances of future employment provided, which resulted in financial consequences. The complainants also raised concerns about failure to properly inform workers of health impacts due to mold contamination found in December 2021 which resulted in the closure of the Sheraton Grand Conakry hotel. They also raised concerns about lack of due diligence by IFC to ensure that their client was compliant with IFC’s Performance Standards (PS).

In August 2023, CAO found the complaint eligible for assessment. When making the eligibility determination, CAO applied additional criteria (paragraph 49) from the CAO Policy, as the complaint was submitted within 15 months after project exit. In accordance with these criteria: a) CAO found that the complainants’ participation in good faith negotiations with IFC constituted a compelling reason why the complaint could not be made before exit; b) the complaint related to the IFC exited project with Palma Guinée S.A, raised environmental and social issues within CAO’s mandate, and was presented on behalf of current and former workers of the Sheraton Grand Conakry who are, or may be, affected by the issues raised; and c) after consultation with IFC, CAO found that accepting the complaint would be consistent with its mandate, as it could contribute to enhancing the environmental and social outcomes of projects and foster public accountability and learning regarding labor issues and the application of Performance Standard 2 in the tourism sector.

In January 2024, CAO completed its assessment, and transferred the complaint to CAO’s Compliance function for an appraisal of IFC’s environmental and social performance.

In June 2024, CAO concluded its compliance appraisal and decided not to pursue a compliance investigation. While the complaint met the criteria for a compliance investigation, since the IFC loan was prepaid in September 2022, the CAO Policy requires consideration of whether an investigation would provide “particular value in terms of accountability, learning, or remedial action despite an IFC/MIGA exit.” The decision was based on the following reasons:

• Accountability: Given IFC’s acknowledgment of its shortfalls in this investment, and CAO’s analysis of gaps in IFC’s performance noted in the compliance appraisal report, CAO concluded there is not particular additional accountability value in pursing an investigation.
• Learning: While IFC’s Management Response does not illustrate whether some of the possible learning from its investment in Palma Guinée has been incorporated by IFC, CAO concludes that an investigation of a single hotel investment is unlikely to produce systemic learning for IFC.
• Remedial action: Given the stated position of IFC’s former client, and the fact that IFC does not have any other ongoing investments with Palma Guinée, CAO concludes that the prospect for remedy through an investigative process is limited.

CAO’s Appraisal Report is available in English and a French translation of the report will be available in due course.