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.

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’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.