A joint statement from CDC Group, BIO, DEG and FMO on the long-term role of Development Finance Institutions in poverty-stricken regions of the world

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Photo: HRW
CDC, BIO, DEG and FMO | 25 November 2019

A joint statement from CDC Group, BIO, DEG and FMO on the long-term role of Development Finance Institutions in poverty-stricken regions of the world
 
As Development Finance Institutions (DFIs), our principle purpose is to deploy long-term investment in some of the poorest and most challenged regions to bring about positive social, environmental and economic change. In many instances we are challenged to do “the hardest things in the hardest places".
 
Today’s Human Rights Watch report concerning our shared investment in PHC/Feronia, a palm oil producer for the domestic DRC market, highlights the need for further investment to improve environmental and working conditions at the company. Realising improvements to working conditions and community infrastructure is central to DFIs’ engagement with Feronia. We therefore welcome HRW’s research and will continue to work with Feronia on how to best address these urgent challenges. We take very seriously our role and commitment as long-term socially responsible DFI investors to manage salient impacts and help to achieve positive change in challenging and imperfect contexts.
 
Feronia operates in very remote and poverty-stricken areas of the Democratic Republic of the Congo, by many measures the poorest country in the world. The surrounding populations of around 100,000 people rely on the 100-year-old company as the sole source of employment, healthcare and education in the region.
 
Over the last six years, we (CDC as an equity investor and BIO, DEG and FMO  as debt-lenders) have invested over $100m into rescuing Feronia after it was effectively abandoned by its previous owner. At that point the company’s assets, social infrastructure and palm oil trees were severely neglected; 8,000 jobs were at risk, people were working barefooted, wage and benefit payments were significantly and systematically delayed; housing was in severe disrepair and medical facilities derelict. Wages were significantly lower than today. Since 2013 all revenues have been reinvested into rehabilitating the company.
 
Investments like Feronia are never quick fixes. They take a great deal of investment, expertise and – most importantly – time and commitment to put right. That is why the DFI model involving the deployment of long-term investment and support is so critically important. 
 
Today, worker wages at Feronia have more than doubled, and protective clothing is mandatory. Housing is constantly being renewed and restored, 72 wells have been drilled or renovated to provide clean water, and restored medical facilities are helping thousands of workers and non-workers every year.
 
When we invested, we knew it would take a good many years to put the company back on a sound footing. We are proud that Feronia has increased palm oil production, and begun addressing the most urgent social improvements, but the enormity of the task means it will take many more years of hard work.
 
Throughout our engagement with HRW, we have been transparent about the company’s challenges. Complete access has been provided to the company’s operations - as can be seen by the detail in their report - and we had provided detailed answers and context to their questions.
 
To be clear, the issues raised by HRW in its report are important and the company, owners and lenders are committed to tackling them. Actions we are taking are detailed below. When DFIs invest in the hardest things in the hardest places, it is vital not to only judge us on what is left to be done, but also on the progress that has already been made. The alternative may instead lead DFIs to only invest in companies that can comply with all standards when we invest. This would make it more difficult to invest in particularly poor regions.
 
We choose to work with companies like Feronia because that’s where we have the potential to make the greatest impact in some of the poorest and most in-need countries in the world.
 
Our  ambitions for the company will not be achieved until it is financially self-sufficient and operating to international standards concerning working conditions and environmental best practice.
 
To that end, our motivation and goals are the same as HRW.
 
Progress since the initial DFI investment by CDC
Wages and Labour Relations
 
Since 2013, minimum wages for Feronia staff have more than doubled and are now substantially above the minimum wage in DRC.
The workforce is now unionised and benefits from free healthcare provision, sick leave and holiday pay for employees and their families.
Feronia is committed to increase the number of contract workers and reduce the number of casual workers and is currently working with the government’s Labour Inspectorate on this. 
Pay levels have been agreed with Unions with the average worker earning $3.30 per day – higher than a nurse or teacher would earn locally.
Even the lowest paid workers earn one and half times the applicable national minimum wage in DRC.
Palm Oil Mill Effluent (POME) Disposal
 
Palm Oil Mill Effluent (POME) is an organic mix of natural waste oils and fats and has been discharged into rivers since the plantation came into being in 1911. The discharge does not threaten human health and therefore the decision was taken to allow the status quo to continue for a limited time to prioritise other improvements such as medical, educational and new housing provision.
In the absence of government provided drinking water, Feronia has 72 new and refurbished water wells have been drilled for local communities with further wells planned.
Health and safety
 
In 2013 workers had no personal protective equipment (PPE) and often worked the fields while barefoot. Today PPE use is mandatory. 
From the start of the DFI investment in Feronia, the company has had a significant budget for PPE and Feronia has spent well over $300,000 on protective equipment since 2016 and all workers have received training on its use. 
Long-standing supply issues that have hindered the company’s ability to source appropriate protective equipment, detailed in the report, have largely been resolved since HRW’s visit.
Further actions in response to HRW Report
 
As a group we welcome the HRW Report and are committed to tackling the important issues raised by the HRW report. We recognise many of the issues through our own due diligence and monitoring and have, over the course of our investment, sought to resolve them in a timely and efficient way, recognising the challenges that the company is facing. As an initial response to the Report, we will continue to engage with Feronia on the aspects below and will incorporate these commitments into an updated Environmental and Social Action Plan, that will guide and govern our requirements for Feronia.
 
The actions for Feronia below are in response to the report.
Wages and Labour Relations
 
Strengthen the role and independence of trade unions to support the representation of worker rights to management. 
Ensure that pay slips for casual workers are consistently provided with their monthly payment. Ensure the Company’s human resources department provides clarification and confirmation of questions from workers, and that these interactions are aggregated and reported to Feronia’s ESG committee. 
Confirm wage parity between the work undertaken by men and women. If this is not the case, DFIs will require a plan of action to be presented to the ESG committee to achieve this in the near term 
Ensure that all workers have copies of contracts, clearly outlining the terms of employment, including any benefits the worker and their family members are entitled to, in line with Congolese labour law 
Continue to actively work with Congolese Authorities (i.e. Labour Inspectorate) to convert casual workers to contract workers.
Palm Oil Mill Effluent (POME) Disposal
 
To resolve the issue at the Yaligimba settlement, we will require Feronia to undertake a review of POME disposal at the specific site and to present recommendations to address community concerns at the next ESG Committee meeting. 
Improve the monitoring of POME disposal through an appropriate water quality monitoring programme, which is supported by appropriate laboratory equipment and analysis. 
Undertake a review of effluent disposal at each site to ensure that leaks in infrastructure are repaired, and that effluent discharge points are configured to avoid impacting local communities.
Health and safety
 
Additional training and training materials (including in Lingala) to be provided for workers in relation to agrochemicals
Ensure that medical checks are conducted on all agrochemical operators every six month and that results are communicated to them.
Company medical staff will provide feedback and guidance to workers on their health checks and advise on indications of agrochemical exposure. 
Company health care professionals to provide training to workers on agrochemical application, and safety. 
Ensure the construction of appropriate washing facilities for workers, their clothes and PPE to be cleaned after the use of agrochemicals. 
Require Feronia to undertake a review on the appropriateness, availability and actual use of PPE used.
Original source: CDC et al.
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