INTEGRATED SAFEGUARDS DATA SHEET APPRAISAL STAGE

Transcription

1 Date prepared/updated: l 6~November-2016 ISDSA13271 I. Basic Information INTEGRATED SAFEGUARDS DATA SHEET APPRAISAL STAGE Report No.: 1 B as1c. P ro.1ec ' td a t a Country: South Africa Project ID: P Additional Project ID (if any): Project Name: Land Bank Financial Intermediation Loan Task Team Leader: Gunhild Berg, Uzma Khalil Estimated Aooraisal Date: 21-0ctober-2016 Estimated Board Date: 23-January-2017 Managing Unit: GFMDR Lending Instrument: Financial Intermediation Loan Sector: General finance sector (30%), General agriculture, fishing and forestry sector (20%), SME Finance (50%) Theme: Rural markets (50%), Other Financial Sector Development (50%) IBRD Amount (US$m.): 95 IDA Amount (US$m.): GEF Amount (US$m.): PCF Amount (US$m.): Other financing amounts by source: Environmental Category: FI-2 Financial Intermediarr Assessment Is this a transferred project Yes r l No r1 Simplified Processing Simpler l Repeater r l Is this project processed under OP 8.00 (Rapid Response to Crises and Yes [] Emergencies) 2. Project Objectives: The project's development objective (PDO) is to sustainably scale up Land Bank's financing, specifically to benefit emerging farmers. The PDO will be achieved by providing long-term financing for Land Bank. This will facilitate a broader and deeper financial intermediation by Land Bank and diversify its funding sources away from government. 3. Project Description: The Project is a financial intermediary loan (FIL) ofus$95 million to Land Bank as the borrower and implementing agency with a guarantee from the government of South Africa. It will consist of a Line of Credit (LOC) for agricultural financing with the objectives of: {i) Supporting Land Bank in refocusing its operations on wholesale lending. Land Bank uses both wholesale and direct lending under the Corporate Banking (CB) and Commercial Development Banking (CDB) business lines. Given Land Bank's limited branch network and based on international best practices for Development Finance Institutions (DFis), wholesale lending is more sustainable because it helps Land Bank leverage a network of financial intermediaries without incurring significant operating costs. In addition, wholesale lending allows Land Bank to play a market enabling role because it permits agricultural borrowers to build credit history with financial intermediaries and improve their financial records for commercial loans, thus improving their I No [X]

2 ability to gain access to credit. The LOC will help Land Bank in epanding wholesale lending to both commercial and emerging farmers Wlder the CB and COB business lines respectively. Through supporting the CB business line, the LOC will support employment generation for poor farm workers employed on the commercial farms supported. The CB business line also contains a large and growing developmental portfolio in line with BBBEE, therefore making an important contribution to the NOP and Land Bank's development goals. (ii) Supporting Land Bank's new approach to help integrate emerging farmers into established value chains. Based on the outcomes of its organizational review, Land Bank decided to scale up financing support to emerging farmers in a sustainable and commercially viable manner through partnerships with large agriculture corporates that emphasize integrating emerging farmers in established value chains. The approach is anchored in identifying high-potential value chain projects in a given geographic region and securing buy-in from large agriculture corporates or technical partners to assist in supporting emerging farmers' integration into the chain. The agriculture corporates will provide technical support (directly or indirectly) to the emerging farmers, building up their capacity to be sustainable suppliers to the chain. Land Bank has identified potential value chain projects and agriculture corporates to partner with in the grains, winery, horticulture and livestock sectors for this type of financing. The success of these initiatives is epected to have a demonstrative effect in the medium term helping to bring in commercial banks' financing for such initiatives and agriculture in general which is currently very limited. To achieve the above objectives, Land Bank will provide both wholesale finance to participating financial intermediaries (PFis) for on-lending to commercial and emerging farmers and direct financing, in partnership with large agriculture corporates, to emerging farmers to support their integration in established value chains. It will do so through two main financing windows: 1) Window 1: Wholesale finance to commercial and emerging farmers. This window will provide a wholesale line of credit to Land Bank. Land Bank will on-lend the funds to PFis which comply with eligibility criteria agreed with the World Bank. The PFis will on-lend funds to eligible agriculture enterprises, commercial and emerging farmers, communal property associations and other eligible borrowers supported under the Land Bank's CB and COB business lines. 2) Window 2: Financing to integrate emerging farmers into established value chains. This window will provide a line of credit to Land Bank to finance direct lending to emerging farmers for integrated value chain finance. For direct lending to value chain finance/development projects, Land Bank will finance eligible emerging farmers and agriculture enterprises in collaboration with large agriculture corporates and/or technical partners in a targeted value chain. It is epected that 70 percent of LOC funds will be used to support wholesale lending and 30 percent will be used for direct lending to emerging farmers for their integration in established value chains. However, this ratio will be kept fleible in both directions to allow for adjustments based on market and portfolio developments in the bank's CB and COB business lines. 4. For Category C projects, project location and rationale for finding of little or no environmental or social risk or impact: NIA 5. For Category FI projects types of activities or sectors likely to be supported by the FI with Bank financing or other financial support, and rationale for classification as Category FI-1, FI-2, or FI-3:

3 The Project involves a financial intermediary loan (FIL) of US$95 million to support the Land Bank in refocusing its operations on wholesale lending and on improving access to credit for emerging farmers participating in the agriculture and agri-business sectors. The Project has been categorized as a Financial Intermediary Loan (Fl-2) according to the World Bank's Performance Standards for the Private Sector Projects (OP/BP 4.03). Project activities to be supported by the FIL will focus on agriculture and agri-business mainly involving cultivation of sugarcane, citrusfruits, grain and processing of food products which are likely to generate minimal environmental and social risks and impacts that are site-specific, largely reversible and can be readily addressed through mitigation measures. The specific nature, scope and location of the agriculture and agribusiness activities will be known during implementation when the Participating Financial Intermediaries (PFis) receive loan applications from the beneficiaries. The Land Bank will be required to manage the environmental and social risks of the FIL-supported activities consistent with the requirements of the OP/BP 4.03, applicable national environmental and social laws and regulations, while the PFis will have the responsibility of screening loan applications to identify environmental and social risks and impacts and manage the risks and impacts in a manner consistent with the procedures stipulated in the Environmental and Social Operations Manual. The following World Bank Performance Standards have been found to be applicable: PS 1: PS2: PS3: PS4: PSS: Assessment and Management of Environmental and Social Risks and Impacts Labor and Working Conditions Resource Efficiency and Pollution Prevention Community Health, Safety and Security Land Acquisition and Involuntary Resettlement PSI, PS3 and PS4 are triggered because of the inherent nature of environmental and social impacts associated with agriculture and agri-business operations which will likely generate point and nonpoint source pollution from run off emanating from the use of pesticides/herbicides in controlling weed infestation on farms and potential increased use of fertilizer lo increase crop productivity, effluent discharges and solid waste generated from agro-processing activities, noise and air emissions from agro-processing facilities, occupational health and safety of workers due to lack of or in-use of Personal Protective Equipment (PPE), soil erosion from poor or lack of proper site drainage, and contamination of water (both surface and ground water) from oil spills. PSI is triggered to prevent and manage the potential environmental risks and impacts. Beneficiaries of the sub-loans will be required to carry out environmental and social assessments equivalent to the level of risk assessed by the PFis and prepare appropriate safeguard instruments to mitigate the impacts in compliance with the WB 's PSs and national environmental laws and regulations. PS2 is triggered as beneficiaries to the loan will engage in agriculture and agro-processing activities which should comply with national laws and PS 2 on worker health and safety. PS3 is triggered to ensure proper management and appropriate application of fertilizers as well as availability of well-established pest mitigation measures through Pest Management Plans. PS4 is triggered to ensure that effective protection is ensured against risks emanating from agro-processes, gas releases from agroprocessing facilities, chemical hazards, fire and eplosions, and that community relations are maintained. PSS is triggered because although Land Bank will not finance the acquisition of land under the project, intensification of agriculture on eisting holdings could result in land tenants' relocation within a specific property. Based on feedback during field visits, the likelihood of such on-farm relocations is low. 6. Environmental and Social Safeguards Specialists on the Team: Kisa Mfalila, Senior Environmental Specialist (GENDR)

4 Paula F. Lytle, Senior Social Development Specialist (GSURR) 7. Performance Standards Applicable PS 1: Assessment and Management of Environmental and Social Risks and Impacts PS 2: Labor and Workin2 Conditions PS 3: Rt>souret' Effiri.-nry 11ml Poll11fion 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 Resources PS 7: Indigenous Peoples PS 8: Cultural Herita2e 8. If PS 1 and PS 2 are NOT applicable, provide a brief eplanation why: NIA Yes No II. Key Safeguard Policy Issues and Their Management A. Summary of Key Safeguard Issues I. Describe key environmental and social risks and impacts likely to be associated with the proposed project, if Category C, or the Bank-supported portfolio, if Category FI: The main environmental and social risks and impacts relate to the ability of Land Bank to identify and manage environmental and social risks associated with its lending activities. Risks and impacts inherent to the agriculture and agribusiness industry are largely related to effluent discharges from use of pesticides/herbicides in controlling weed infestation, use of fertilizer to increase crop productivity, pollution of soil and water resources from agriculture runoff, occupational health and safety of workers, efficient use of water and energy resources, solid waste disposal, and noise and air emission from industrial facilities. The World Bank's due diligence assessed the capacity of Land Bank to implement the Environmental and Social Management System {environmental screening, assessment, mitigation, review, monitoring and reporting) across the PFis, and the effectiveness in implementing, monitoring and reporting of its corporate Environmental and Social Management System. The World Bank assessment also identified some eisting gaps between Land Bank's Environmental and Social Management System anchored in the national laws and regulations and the World Bank's safeguard requirements which have been addressed in the Environmental and Social Operations Manual. As part of its due diligence, the Land Bank will ensure that the PFis screen all investments funded by the project against the applicable World Bank Performance Standards, the Eclusion List and ensure compliance with applicable national environmental laws and regulations. 2. Describe the key features of the client's Social and Environmental Management System and the capacity to implement it in a responsible manner: The Land Bank has an Environmental and Social Management System in place which was approved by the Land Bank Board. The system has been designed to meet the national environmental and social laws and regulations. Screening for environmental and social risks and impacts is carried out by the Bank during the credit application and approval process. Mitigation measures to address the risks and impacts are also identified through this process. Compliance

5 monitoring and enforcement is carried out by the national Department of Environmental Affairs, Department of Water Affairs and the Department of Agriculture following their respective mandates in accordance with the national EIA regulations, Water Licenses and Soil Conservation Act. The Land Bank has staff in the field who report on other aspects of compliance with loans, including provision of detailed information on the limiting factors on agricultural productivity, and on livelihoods. The main impediment to effective and meaningful implementation and enforcement of the environmental and social related laws are due to the fragmentation among regulatory institutions and licensing agencies to the effect that no single institution can take enforcement actions effectively. So as to ensure that the FIL is in compliance with the WB's PSs, an Environmental and Social Operational Manual has been prepared to guide the Land Bank and the PFis on screening, assessing, managing, monitoring and reporting on the environmental and social risks and impacts of the sub-loans. 3. Describe the key instruments used by the client to identify and assess risks and impacts, and measures taken by the client to address environmental and social risks and impacts of the project. Provide an assessment of client's capacity to implement the measures described: Land Bank has a commitment to environmental and social management through the Environmental and Social Management System which was approved by the Land Bank's Board in 2015, and through the credit application review and monitoring processes. The Environmental and Social Management System is anchored in the national environmental and social laws and regulations, particularly the National Environmental Management Act (Act 107of1998). The World Bank's due diligence assessed the capacity and knowledge of Land Bank to implement the Environmental and Social Management System (environmental screening, assessment, mitigation, review, monitoring and reporting) across the PFis, and the effectiveness in implementing, monitoring and reporting of its Environmental and Social Management System (ESMS). The Land Bank screens environmental and social risks and impacts as part of the loan application process and includes issues related to the land status and various social indicators. The assessment also identified any eisting gaps between Land Bank's ESMS and the WB's PSs. The Land Bank has an environmental and social coordinator who oversees the implementation of the sub-projects. The overall capacity and knowledge related to the application of WB Performance Standards is generally good. Technical assistance has been provided through a separate loan from the African Development Bank to strengthen the capacity and knowledge of Land Bank on environmental and social management systems. The Bank has prepared an Environmental and Social Operational Manual to further guide both the Land Bank and the PFis on screening, appraising, monitoring and reporting on environmental and social risks and impacts of sub-loans, and to ensure that beneficiaries are informed of environmental and social requirements for sub-loan appraisal, so that the subprojects can be implemented in an environmentally and social sustainable manner. The procedures have incorporated both the national environmental and social regulatory requirements and the World Bank's Performance Standards for Private Sector Projects. The procedures primarily comprise of procedures for Environmental and Social screening, for carrying out Environmental Impact Assessments, and for developing environmental mitigation and monitoring measures, where necessary. The Environmental and Social Screening will be carried out by the PFis at an early stage in their sub-loan review procedures to determine the appropriate risk category for the sub-loan, and may require the contracting of eternal epertise to carry out the appropriate Environmental and Social assessment depending on the level of risk and impact of the sub-loan. Following the screening, an Environmental Impact Assessment (EIA) in line with the environmental classification of the sub-project may be recommended or other mitigating measures may be developed.

6 The beneficiaries will be responsible for carrying out site-specific environmental and social analysis and for confirming that the proposed sub-projects comply with the relevant national laws and regulations, particularly on environment, water use and land rights, and the World Banks's Performance Standards for Private Sector Project. The beneficiaries will be responsible for obtaining the necessary pennits from appropriate licensing authorities. Once the analysis is performed and recommendations incorporated into the sub-projects, the PFI will appraise the proposed sub-loan package which would include, where appropriate, an environmental and/or social management plan. The implementation of the mitigation plan contained in the mitigation plans will be monitored by the PFI. The overall process of oversight, monitoring, and reporting on compliance will be monitored by the Land Bank and reported to the Bank through quarterly progress reports. B. Disclosure Requirements Date I For Cate2orv Fl -- Fl's Policy Statement and Procedures for Screenine and Assessine Risks: Dates of"in-country" disclosure I March 1, 2015 Date of submission to InfoShop I January 31, 2017 If in-country disclosure of any of the above documents is not epected, please eplain why:. C. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) Client's Environmental and Social Mana2ement System Has the client developed an appropriately detailed ESMS, and Yes [X] No [ ] NIA [] does the client have the technical and organizational capacity to implement it? Labor and Workine Conditions Does the client have a written human resources policy Yes [X] No [ ] NIA [ ] available to all employees that describes labor and working conditions? Monitoring: and Reporting: Has the client agreed to submit an annual Environmental and Yes [X] No [ ] NIA [] Social Performance Report to the Bank to report progress on implementation of its ESMS, and does the Legal Agreement contain this provision?

7 D. Approvals Si ned and submitted b : Task Team Leader: Additional Environmental and/or Social Develo ment S ecialist(s): Gunhild Ber Kisa Mfalila Paula F. Lytle Name zma Khalil Date Comments: Practice Mana er: Comments: Nathalie S. Munzber