IFC Disclosure

FINAL DRAFT

Habesha, Ethiopia, #41561 Project description Habesha Breweries S.C. (‘the company’), includes a brewery located 3km south of the town of Debre Birhan, in the Amhara Regional State North Shoa Zone, Basona Warena woreda, Ethiopia, 120km north west of the capital, Addis Ababa. The company also has a head office in Addis Ababa.

The company is one of the larger brewers in Ethiopia and distributes its beer to just under half of the geographic area of the country. The brewery was constructed between 2012 and 2015, brewing and packaging the first brew in June 2015.

The proposed IFC investment is to provide a €70 million syndicated senior loan facility to Habesha Breweries S.C., to support their €165 million capacity expansion program, which will increase Habesha’s brewing capacity from an original (2015) 0.3 million hectoliters (capacity in 2018 is currently at 1.2M hectoliters) to 4.5 million hectoliters by 2025 (“the project”). Habesha is 60% owned by Bavaria Overseas Breweries B.V. (“Bavaria” or the “sponsor”), 10% by Linssen Investment (a Dutch rose grower based in Ethiopia) and the remaining 30% is owned by 8,000 Ethiopian shareholders. The expansion will increase the original 7ha footprint of the brewery by a small amount (some 200 meters in one direction beyond the current fence line) and will include the construction of a 3rd brew house, additional bottling lines, additional/reconfigured office space, new malt handling silos, additional cylindrical-conical fermentation tanks (CCTs) and bright beer tanks (BBTs), a new waste water treatment plant (already under construction alongside the existing WWTP) and a new perimeter road and fence to ensure efficient and safe movement of increased truck traffic within the premises.

Overview of IFC’s Scope of Review IFC visited the company’s operations in August 2018. The visit included Habesha’s Addis Ababa headquarters where IFC met with the company’s chief executive officer, the finance director, the human resources director and the head of security. IFC received presentations on the expansion of the brewery, information on water and energy saving initiatives, discussed security and emergency preparedness arrangements, and reviewed the company’s answers to IFC’s environmental and social appraisal questionnaire and discussed the contents of the many documents and records that the company had posted in the project’s data room. A full day visit to the brewery was also undertaken. During that visit IFC met with those responsible for brewing and other aspects of production and toured the entire facility and the immediate surrounds. The tour included a visitor induction that highlighted the hazards found on site, areas for receiving malted barley, raw water treatment, boiler house, back-up generators, refrigeration unit, brew halls, areas under construction, quality control laboratory, bottling lines, storage areas, chemical management sit es, solid waste management areas, effluent treatment plant, fuel storage areas, the construction site of the new effluent treatment plant, and truck parking areas. The walk around the outside of the brewery allowed IFC to see the location of the handful of dwellings found in proximity to the operation, the site of the clean drinking water supply (stand pipe) that the company has installed for use by local communities, the fields that receive treated effluent from the waste water treatment plant for use as fertigation, and the nature of the long-cultivated landscape that the brewery was built upon starting back in 2012.

Identified Applicable Performance Standards Applicable PS are 1, 2, 3, 4, and 5. PS 6, 7 and 8 are not applicable as the land used to buil d the brewery had long been cultivated and the brewery is not involved in primary production of agricultural commodities (i.e. there are no impacts to biodiversity and it buys its barley from other growers) and likewise, there were no sites of cultural heritage on the land required for construction, nor will there be any on the small additional land that is required for the expansion. No indigenous peoples are found within the project’s area of influence. A lack of impacts related to matters contemplated under PS 6, 7 and 8 are confirmed by the findings of the first Environmental Impact Assessment developed prior to the construction of the brewery.

Environmental and Social Categorization and Rationale

FINAL DRAFT This is a category B project according to IFC’s Environmental and Social Sustainability Policy because the project is expected to generate limited and site-specific E&S impacts that can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria.

Material E&S risks and impacts include the following: those associated with the need for additional raw water to allow for the expansion in production and to ensure that by consuming that water the company does not adversely impact other water users; and, the need to ensure that either the physical or economical resettlement of the four households from the land required for the plant expansion is undertaken according to the requirements of the performance standards and that the livelihoods of those impacted are restored to at least the level they were before being impacted.

Environmental and Social Mitigation Measures IFC’s appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFC’s requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives PS1 Policy The company does not have an overarching policy defining the environmental and social (E&S) objectives and principles that guide the project. They have developed vision and mission statements and they also have a food safety policy; which references ISO 22000:2018, the requirements of which the company is currently working to certify against. The content of those documents can be included/referenced in the development of the overarching policy to provide a complete framework for assessment and management of E&S risks and impacts. The need to develop such a policy is addressed as ESAP item #1 Identification of Risks and Impacts The company undertook an Environmental Impact Assessment study (EIA) for the construction and operation of the brewery back in 2015 according to the requirements of the EIA proclamation (No. 299/2002), among others, of the Government of Ethiopia. It further undertook an EIA (dated November 2016) for the expansion of the brewery (from 400,000 hectoliters to 1.2M hectoliters).

These documents describe typical risks and impacts expected from the construction and operation of a brewery (construction worker safety, operational water consumption, effluent management, operational energy use, chemical management, matters of work OHS, community engagement, etc.) and how the company will work to avoid or minimize such risks and impacts.

Being that a brewery is a significant consumer of water, there was a need to more fully understand whether enough water could be provided to support the operation before it was constructed. As part of that effort, a study was undertaken, entitled, Water Resource Potential Assessment Feasibility Study for Habesha Beer Factory to be planted around Debrebirhan Town In North Shoa Administrative Zone of Amhara Region (December 2009) by the Amhara National Regional State Water Resource Development Bureau (WRDB of ANRS). The required water need for the brewery (and therefore the objective in terms of yields from wells) was stated in the report as being 8-10 liters/second for the start-up phase and 17-20 liters/second for the (first) expansion. The report concluded that the area could be recommended as a good ground water potential area and further provided technical requirements regarding drilling, testing (including that of water quality) and proposed locations and depths of the required wells.

More recently, and in response to plans to further expand the brewery, the company commissioned more detailed studies regarding water resources near the brewery. IFC reviewed a report provided by the company entitled Integrated hydrogeological, geological, geophysical and hydrochemical study in Debrebirhan-Chacha area for groundwater potential investigation (October 2017) The objective of this second study was to further understand the potential supply of groundwater and explore where additional wells for the expansion (that would be required to be sunk and at what depth) could be located. In addition, the 2017 study also conducted a risk assessment of current groundwater pollution. Again, results were favorable, and conclusions made that the water that

FINAL DRAFT would be required for expansion would be available. (Other matters related to consumptive use of water and water efficiency measures are summarized in the section on PS 3 below. ) The EIA for the expansion to 4.5 M HL has not yet been begun. In addition to that impact assessment process (which is required under Ethiopian law) IFC will require a supplemental assessment that further quantifies and qualifies the E&S risks of obtaining the necessary additional ground water to support the expansion in production envisaged because of the investment contemplated herein. That study will either conclude that the use of additional water, above the current 800,000 m 3 the brewery is currently permitted to use, would be expected to not adversely affect other water users that might be dependent on the same resource (i.e. the aquifer from which the brewery will draw additional water) or that there would be adverse impacts. If the study concludes there will be adverse impacts upon other users, then the company will subsequently need to create and submit to IFC a time-bound plan that commits them to designing and implementing additional measures at the brewery that will decrease the amount of ground water that is required to support an expansion in production to the desired, or anticipated, amounts.

These measures, once implemented will result in the brewery only obtaining and consuming that amount of ground water that will not adversely impact other users of that same ground water. This is addressed in the ESAP. Assessment of the social impacts related to the brewery operation did feature in the EIA reports (as required under the regulatory framework), however, in varying degrees of specificity and quality.

Specific impacts that were initially considered were related to the acquisition of agricultural land (for the construction of the brewery itself) that was being farmed at the time; for example, the first study references 10 households that would be impacted by losing the use of this land for both raising crops and grazing animals. The management of such economic displacement (and, for that matter physical displacement) in Ethiopia is under the purview of the local government (Woreda). See the section on PS 5 for further details regarding this impact and that related to the acquisition of a small strip of land adjacent to the existing site of the brewery (to accommodate the expansion of buildings, road and fences) that will impact an additional 4 households.

Stakeholder engagement (referred to as stakeholders’ analysis in the document) was covered only in generic terms in the first report, i.e. the report did not completely assess (or quantify or qualify) the impacts related to land acquisition. It did report, however, that those who would experience economic resettlement expressed a desire to stay where they were living (which they did) so they could take advantage of the new market that the workers of the brewery would provide for the products they grew and/or sold or would buy and/or trade with the resettlement compensation provided by the company and administered by the Woreda. The second EIA states (in the Executive Summary and Conclusion section) that the company ‘has made the necessary financial compensation for families’ (i.e. those affected by the initial land acquisition). See below for more details on current stakeholder engagement practices undertaken by the company.

In summary, whereas prior regulatory-driven identification and assessment of risk and impacts have reviewed many of the material risks associated with such a project, they have not fully placed the risk of consuming additional raw water from ground water sources in its full context. The need to double raw water supply to provide for a production rate of 4.5M HL p.a. therefore requires a more in-depth impact assessment to be undertaken, to demonstrate that such a supply will not adversely impact other groundwater users. As noted above, this is addressed in the ESAP. Supply chains The main inputs required by Habesha to brew beer are barley, hops and water. Additional needs are for packaging (including glass, plastic, paper and wood). Despite Ethiopia being one of the major producers of barley in sub-Saharan African, low yields ensure that there is not enough barely available to satisfy internal needs, nor malted barley for that of the brewing industry. Currently, Habesha requires approximately 14.5 KMT of malt; this will increase to 29 KMT by 2021. Of the current requirement, Habesha obtains approximately 14% from local sources. The remaining barely is imported from Europe. The company has a target to obtain 50% from local sources by 2021 and 80% by 2025.

Barley production in Ethiopia is not known to be associated with the types of social risks and impacts contemplated by the Performance Standards (child labor, forced labor) according to the current edition of the US Department of Labor List of Goods Produced by Child Labor or Forced Labor. An IFC Advisory project targeting increasing yields for small holder barley growers and

FINAL DRAFT professionalizing the supply chain is currently being contemplated. Supplying to the Habesha brewery is the main component of this project which will have many positive outcomes for both growers and the consumer of this input.

Management Programs The company has established management programs that describe mitigation and performance improvement measures and actions that address the above identified environmental and social risks and impacts of the project. Evidence of their efficacy can be found in compliance with host nations laws and regulations and in the many project boards located throughout the brewery. These boards listed key performance indicators (KPIs) for each production area; see the section on monitoring and reporting below for more details. Also, as presented to IFC, there are several initiatives and programs either underway, or being contemplated, that will target improvements in performance related to materials risks and impacts such as the use of fossil fuels; further details are presented below in the section on PS 3.

Organizational Capacity and Competency The company has established and maintains an organizational structure that defines roles, responsibilities, and authority to implement the management of environmental, OHS and social matters as identified above. Specific personnel have been so designated to fulfill those roles.

Matters of E&S management are overseen by those responsible for a technical discipline (such as the HR manager, or those involved in the production areas of the brewery) in collaboration with the EHS manager (known in Habesha as the Safety, Health and Environment or SHE Manager) and staff located at the brewery. During the appraisal, IFC held conversations with the above managers; such conversations provided IFC with assurance that the managers (and their reports) were very experienced in all aspects of brewing and were competent with respect to management of relevant E&S aspects of the project as contemplated by the Performance Standards. Observations made during an extensive tour of the brewery confirmed that opinion. The SHE manager will be responsible for ensuring all additional E&S actions described within this document (as ESAP items) are implemented going forward.

Emergency Preparedness and Response The brewery does involve specifically identified physical elements, aspects and facilities that have the potential to generate impacts resulting from emergency situations. For example, the brewery uses ammonia for its refrigeration purposes, requires chemicals to keep equipment clean, utilizes combustible substances, stores malt in silos and employs pressurized vessels. As such, emergency preparedness and response activities are required to ensure that workers are protected and understand what measures are to be taken in the event of an emergency. For example, there is a trained and certified on-site firefighting team (equipped with a fire engine/truck) along with a ring main for fighting fires. The area of the plant that contained the refrigeration equipment was supplied with leak detectors, alarms and was clearly sign posted, and entry restricted to only authorized personnel. (Note that IFC reviewed the cooling room safety inspection checklist that is used to ensure equipment is kept in working order, that alarms are tested, that they trigger extraction fans when activated, etc.; in short, that the company works to avoid emergencies from occurring in the first place.)

The brewery has clearly marked evacuation routes and lighting throughout; evidence of practice drills (firefighting and evacuations) were posted on the SHE bulletin boards. Emergency showers were found in areas that contained caustic chemicals. There is also a trained nurse on site at the brewery who can deal with minor injuries and accidents. Risks, summary actions, and those responsible for such, are fully described in an Emergency Action and Response Plan that was reviewed by IFC (document dated May 2018).

Monitoring and Review The company has established procedures to monitor and measure the effectiveness of the management programs, as well as compliance with related regulatory requirements. A daily operations meeting is held to review production rates, including brewing and packaging, but also that of SHE performance including the performance of the effluent treatment plant. A water and energy optimization board are used to record performance regarding water consumption, thermal energy consumption and that of electrical energy consumption against established targets. Other examples include a utilities operating parameters board and a cellar and filtration KPI board. Any

FINAL DRAFT issues that impact the ability to achieve targets are noted and the actions that need to be taken to get performance back on track listed. For example, works orders are generated and assigned to the relevant department to be completed.

Any incidents or accidents (including near misses) are reported on boards located in each production area. A description of the issue, when it occurred and when it is due to be addressed (along with the status) is required to be completed on the same boards.

Senior management within the company receive periodic performance reviews of the effectiveness of the management of material environmental. OHS and HR risks and impacts. Performance is summarized on a scorecard that reports on efficiencies in production, quality as well as environment and human resources. See the relevant sections below for results regarding the latter two areas.

As noted above, the Group commissions an annual E&S audit of the Habesha operations. The scope of the audit includes the following: fire safety; contractor safety; water management (including the locations of the well/boreholes); energy management; lost time accidents and safety behavior, use and storage of dangerous goods; control of the waste from the waste water treatment plant; and, matters of local involvement (community contacts, community projects being undertaken).

Based on results from such reviews and audits, it is evident that senior management takes the necessary and appropriate steps to ensure the operations are run in a way that supports the intent of the client’s policies with regards to E&S matters.

Stakeholder Engagement The company engages with the community that is found in proximity to the brewery in a variety of ways. For example, monthly meetings are held with the local community (an example of meeting minutes from March 2018 was reviewed by IFC; this meeting discussed the construction related to the expansion among other issues). Meetings are attended by a member of each household, the brewery general service manager and the operations director.

In addition, the families living in the area near the brewery are invited to the brewery on an annual basis (an event known as the Annual Community Conference). These events are used to discuss community improvement programs that the brewery is willing and able to support during the upcoming year. They are attended by the company CEO, marketing director, operations director and other department heads. Attendees from the community include men, women and elders.

Outcomes to date have included an irrigation system laid in adjacent fields (that uses treated effluent from the brewery as fertigation), installation of a clean drinking water tap that is used by locals (thereby avoiding the need for them to extract water from a contaminated pond as they had been doing) and an extension of the brewery’s electrical network to provide power to local houses.

In addition, spent grains (a residual brewing product) have been provided to locals to feed their cattle. (These grains are rich in protein and highly suitable as cattle feed.) Further, the company has refurbished a small clinic, equipped an orphanage and a geriatric care center and purchased a large tent for locals to use for weddings and funerals. Because of these projects, relations with local communities are reported as being very positive. The company provided IFC with details on budgets of the above programs; in 2017, the company spent 1,740,000 Birr (approximately USD $62K); amounts either already spent or budgeted for 2018 amount to 1,215,000 Birr (approximately USD $43K) and include projects to support women farmers, provide support to Debre University, construct public toilets and build a community policing house near the brewery.

The company has provided for ongoing communication with local communities; the first point of contact for any issues, including grievances, is the general service manager who is responsible for addressing any issues brought to their attention.

Whereas the above interactions and measures have, to date, led to positive relations with the communities, IFC heard that expectations are growing with respect to what the company can do for local communities. This will only increase as the expansion gets underway and the brewery is seen to increase its outputs. As such, the company should move to formalize its engagement practices with interested stakeholders, especially those communities in proximity to brewery operations and

FINAL DRAFT those possibly further afield that would have an interest in the increased consumptive use of groundwater. This is addressed as an ESAP item.

PS2 Working Conditions and Management of Worker Relationship Human Resources Policies and Procedures The company has put in place an HR policy and procedures manual and a code of conduct. The contents are shared with new employees during their induction process. The manual and code contain information on employment, recruitment, probation period, transfers, promotion, termination, the grievance mechanism and includes references and procedures that will be taken in the event of inappropriate workplace behavior, including that of sexual harassment . It provides details on work schedule, remuneration including overtime pay, public holidays and leave, health insurance, pension fund, training and development, staff relations and communications (including a grievance mechanism or GM), occupational health and safety, workplace rules, code of conduct and disciplinary actions that could be taken.

At the time of the appraisal, the company employed 531 permanent (i.e. open-ended contract) staff (436 male and 95 female). Most of female staff (61 of the 95) are employed in the finance and sales and distribution function. A total of 447 positions are outsourced; security 218, casual laborers in the factory 82 (undertaking jobs such as unloading malt), 37 cleaners (under renewable term contracts), and 110 bottle sorters (likewise, under renewable term contracts). The company provided IFC with copies of the daily laborers agreements and the agreements regarding security workers. See additional details under PS 4 regarding third party security workers.

As part of the expansion, the company expects to hire more workers, e.g. for the new bottling line some 20 people will be required. New hires (that will be employed as operators) will receive 6 months of on-the-job training; those hired for management will undergo one year’s worth of training/on-boarding.

Work ing Conditions and Terms of Employment Office staff work 44 hours per week in accordance with labor law. There are three shifts per day in the brewery. Overtime is paid as is extra compensation for irregular working hours. There is no minimum wage stipulated for this sector of employment in Ethiopia. However, the company pays above the median wage for workers employed in this type of work. A salary scale was provided to IFC for review and the lower scale is equivalent to US$250 per month; however, the majority of the Habesha workforce holds a bachelor’s degree and is paid between the range of 500 and 3000 USD per month. The salary scale has recently been updated and aligned with accepted/recognized professional position descriptions to allow the company to compare its practices with a broader set of companies to ensure it competitively positions itself with regards to remuneration and therefore enables it to attract new talent.

Work ers’ Organizations No labor unions are present within the organization. Discussions with company management revealed that the company has provided the opportunity for people to establish labor unions (and even motivated its personnel to form a labor union), but there was reported to be no interest from workers to do so.

Grievance Mechanism As noted above, the company has put in place a grievance mechanism. The policy as it currently stands does not allow for the processing of anonymous grievances. The company will amend the policy to allow for the receipt and appropriate processing (and response) of anonymous grievance as required by Performance Standard 2. This is addressed in the ESAP. Protecting the Work Force Neither child labor or forced labor is utilized by the company. Minimum age is 18 and age of potential employees is confirmed before any offer of employment is made.

FINAL DRAFT Third party workers Of relevance to companies in this sector is the use of women as “beer girls� to promote the product.

Several companies in the region have been seen to have inappropriate practices (or a lack of control of the working environment) with regards to these women, resulting in sexual harassment or assault.

IFC explored this issue in detail with Habesha management who stated that any use of women to promote their product is limited to well-managed company events (such as the annual shareholder meeting) and is under the control of the Head of Security. They do not employ women to promote the product in bars or clubs or any such venues where oversight of the working environment is difficult, and its absence could lead to problems. Any employment of women in roles to promote the product is described in the code of conduct and training and awareness sessions are provided to such employees (that are invariably casual workers) by the company’s legal department.

OHS The company has put in place practices to ensure a safe working environment. Those jobs that have inherent hazards and risks (such as working at height, in confined spaces, with energized equipment, or with hazardous materials) have been assessed and safe working measures developed and implemented. For example, a lock-out-tag (LOTO) practice ensures that workers engaged with energized equipment are protected from exposure to electricity, pressurized liquids, etc. while they complete their tasks. IFC observed hot work being undertaken during the site visit; proper practices were seen to be occurring and PPE was being worn.

Some construction work was being undertaken during the site visit. This was being undertaken by local contractors (building a gate to the entrance of the brewery). The standard of the health and safety of these workers could stand to be improved; as such t he company will ensure it expands the scope of its OHS oversight and implementation to all jobs being undertaken within the brewery, including that being completed by third party contractors. This is addressed in the ESAP. There is a life and fire safety system (LFS) for the brewery. Teams of fire fighters are certified by the local authorities and the company recently purchased a fully equipped state-of-the-art fire truck.

There is also a LFS committee responsible for life and fire safety. Each shift has five members who are accountable for LFS. The parent company, Bavaria, has a Safety and Health team which visits and audits Habesha; in addition, other companies specializing in risk assessment (and based in the Netherlands and the UK) also regularly visit and assess LFS systems. All findings from the most recent audits have been addressed by the brewery. Lastly, as part of the LFS management program, the company conducts emergency fire drills in various locations within the breweries twice a day.

The company decided not to create a safety committee; instead, they have a dedicated SHE Manager. The role of the SHE manager is cross-cutting; they stated that they deliberately avoided working through a committee since they felt this would make other employees complacent. Instead, this responsibility for OHS is included in the job descriptions of each employee to help create a sense of accountability and ownership of OHS. Also, see requirement above for the need to increase the scope of this function to include contractors working at the brewery.

The current Lost time incident frequency rate (LTIFR) for permanent employees is 3.56. Such a rate compares well with expected rates for companies engaged in brewing. No information was available for temporary/casual workers or those employed by third parties. As such, the company will calculate the LTIFR for temporary/casual laborers and contractors and report performance of such in the Annual Monitoring Report (AMR) alongside that of their own employees.

Safety KPIs are posted in each production area (e.g., administration, warehouse and material control, quality assurance, packaging, brewing and engineering). Near miss reports, the need for first aid, lost time accidents and fatalities are all recorded in this way.

Based on the above summary, the company can be said to comply with the requirements of this performance standard, with the exception of the need to enhance the grievance mechanism and ensure that OHS management is extended to include third party workers where relevant (i.e. construction workers) undertaking work for or on behalf of the company .

FINAL DRAFT

PS3 Resource Efficiency and Pollution Prevention Resource Efficiency The client has implemented technically and financially feasible and cost-effective measures for improving efficiency in its consumption of energy, water, as well as other resources and material inputs for core business activities. Details are provided below.

Water Consumption Availability of groundwater in the areas of the brewery has been well studied in the past, as noted in the introduction to this document. The brewery is in the central plateau of Ethiopia, in an area described as humid, cool and tropical, characterized by high rainfall (1500mm or 60 inches per annum) and low evapotranspiration. As a result, the area experiences good infiltration of rainfall and the underlying geology provides for good storage of this water; hence, there is good recharge – and thus availability – of groundwater. Existing boreholes, found in the well fields that supply the town of Debre Birhan, provide evidence of good yields and sustainable supply. Groundwater quality is also good. However, please see the discussion under PS 1 above re the need to conduct an assessment that puts the need to extract more groundwater (to enable the expansion in production) into its full context regarding other users of groundwater.

Existing raw water is abstracted from four bore holes, drilled to depths of between 150 and 341 meters, located between 1.4 and 2 km from the brewery. All incoming water is metered. A current water use permit (granted in accordance with article 8 of the Ethiopian water resources management proclamation (No. 197/2009) for 800,000 m 3 (equivalent to 8,000,000 hectoliters and sufficient to produce approximately 2.3M HL of beer at the consumption rates shown below) was reviewed by IFC. Raw water is piped to a treatment plant within the brewery, where it is treated (degassed, sand filtered, precision filtered) prior to use in the brewing process. Consumption rates for 2017 were 3.85 HL (total water)/HL beer produced. (Total water is tap water plus brew water.) The target for 2017 was 3.5 HL/HL beer. Current consumption rates (figures for the first 6 months of CY 2018) show the brewery used 3.57 hectoliters of total water per hectoliter of beer produced (HL/HL); this compares with the target for the whole of 2018 of 3.47 HL/HL. Results to date for 2018 compares reasonably well against the value of 3.53 as reported by the Beverage Industry Environmental Roundtable (BIER) 9th benchmarking study.

Energy consumption With regards to energy efficiency, Habesha consumed an average of 7.33 Kwh of electricity per hectoliter of beer produced per month for the first 6 months of 2018 (equivalent to 26.4 megajoules per hectoliter of beer produced). The overall target for 2018 is 7.6 Kwh/HL (down from 8 Kwh/HL in 2017). Thermal energy consumption averaged 91.9 megajoules/HL; the 2018 target is 83.6 MJ/HL (down from 110 MJ/HL in 2017). Thus, combined electricity and thermal energy inputs per HL of beer produced is 117.61 MJ/HL; this compares to the BIER benchmark figure of 109 MJ/HL, i.e.

Habesha is currently about 8% above the benchmark value.

The company was subject to an energy audit of the brewery in May 2018, undertaken by the Ethiopian Energy Efficiency and Conservation Directorate. The objective was to target areas and equipment for potential (electrical) energy savings and to reduce the consumption of light fuel oil (LFO) currently used in the boilers. The audit reported 2017 average specific power consumption (SPC – a measure that takes into consideration electrical and thermal power used) as 0.34Khw/l of beer produced. Conclusions (and energy and cost savings) were estimated and reviewed with production management. Measures related to reduction of air in boilers, better insulating boilers and steam systems, replacement of halogen bulbs with LED bulbs for lighting were described; implementation of all measures included in the audit could result in 361k Kwh of electricity savings and 7812 liters of LFO annually (at current production rates). In addition, suggestions regarding the

FINAL DRAFT type of boilers to be used in the expansion were made; as a result, the design of the expansion will utilize electrical boilers which will eliminate the use of LFO. Effluent and waste Treated liquid effluent is not discharged to surface waters. It is pumped from the treatment plant to adjacent agricultural fields; as such, it is used for fertigation (given it still has organic content ) which can ameliorate soil quality and hence help farmers attain better crop yields (and two crops per year as opposed to the one that can be grown using rainfall alone). Effluent quality is monitored and is suitable for such as use. The farmers themselves manage the distribution of this effluent; currently some 57 families benefit from the practice and the expectation is to reach 114 families after the full expansion is complete. The current discharge is 1094 m3/day. This amount of water is applied to 217,500 square meters of farm land. It is projected that when the brewery reaches a capacity of 4.5 million hl of beer, the effluent available for use as fertigation will be 4376 m3/day resulting in 870,000 square meters of farm land being improved.

Solid wastes (such as broken bottles, waste labels) are sorted and sent for recycling. Pallets are reused. Construction debris is sent to the landfill. Amounts of solid waste are recorded monthly. For example, for the first 6 months of 2018, the company produced 65,718 kg of waste glass that was provided to a glass factory for use in making new glass bottles. The limited amounts of plastic waste include used jerry cans (which are sold and subsequently re-used); other waste is taken by the municipality to the common waste disposal facility.

Hazardous materials, including LFO, are properly stored and marked with appropriate warning signs. The above-ground LFO tanks (along with the diesel tank) are properly bunded with adequate secondary containment provided.

The company is not involved in primary production; as such pesticides are not used. Minor rodent and roach control is undertaken by a licensed company.

As noted above, the company is currently exploring (or already implementing) initiatives aimed at promoting more efficient production, i.e. by reducing the inputs or changing production practices to brew more beer with less consumption of natural resource. The company presented their sustainability ambitions to IFC during the visit to the company’s HQ. The presentation considered the following possible applications of different practices: those related to fossil fuels and energy, brewery process by-products, and waste materials. Highlights included consideration of measures to drive zero waste (of spent grains, kiezelguhr, waste yeast, surplus CO2 and sludge from WWTP), use of solar, wind, heat exchanging systems, decompression-technology, biogas optimization, other energy saving processes and new boiling technologies, and sustainable packaging design. Concepts, being led by a team in the Netherlands, are due to be completed in October 2018 and will then be considered by management.

Greenhouse gas emissions The company calculates greenhouse gas equivalent emissions each year. The total for 2017 was 15,300 tons.

PS4 Community Health and Safety The client has evaluated the risks and impacts to the health and safety of members of the public that may be impacted by company operations. The main risks are those associated with security and the types of inputs, equipment and processes found within the brewery.

Issues associated with inputs, equipment and processes at the brewery are assessed through a variety of means. For example, the company undertakes electrical safety audits, fire audits, and assessments with respect to explosions (that looks at the types of equipment, materials used in the brewery and propensity for explosion risk due to their use) and measures to be taken to avoid explosions and leaks. For example, barely and hops present a risk of explosion due to the dust that they can generate when being moved; also, when stored in silos. Measures are in place to ensure particulate concentrations do not pose a risk. The risk of ammonia leaks, that could also present a

FINAL DRAFT risk, are also assessed, and the equipment used for refrigeration regularly tested and, as noted above, an alarm system is in place to warn of any irregularity. Whereas there are a few houses beyond the perimeter of the brewery, they are not judged to be at risk to any such leaks.

Possible impacts due to the transport of the product are currently relatively minimal; for example, delivery of the product to regional storage is undertaken by the company using its handful of refrigerated trucks. These are new and well-maintained trucks, driven by trained drivers whose location and speed is tracked using GPS technologies. Agents, who sell the beer to bars, etc., collect their product using their own smaller trucks (collection can be either from the brewery or from the company warehouses, depending on the location of the vendor’s sales territory); their movements are generally within small geographic areas and not over large distances. As such, problems arising from excessive speed, driver fatigue, etc. are not currently experienced. Following the expansion, the overall number of trucks will increase, especially those of the independently owned and operated distributors. Whereas it is not expected to encounter any additional risks, t he company will ensure that the drivers of those trucks have access to appropriate sanitary facilities while they are on-site at the brewery collecting beer for distribution. This will avoid any possible impacts upon the local communities; this is addressed in the ESAP. Food/Product Safety

Security Personnel The company has developed a Security Management Plan. The scope of the plan is the protection of people, product and property and is based on risk assessments, current legislation and extends to the supply chain. The plan is developed by the company’s Head of Security. The plan includes descriptions of security duties (including checking visitors, patrolling buildings and the greater facility, etc.), the roles of the various actors involved in security, including company management, the security service provider and company employees. It describes the requirement to conduct an annual security audit feeds into subsequent risks assessments and the need to develop mitigation plans as needed.

Firearms are sanctioned for use by security providers. Use is governed by a written firearms policy.

The policy describes how firearms are stored, issued, handled, and if needed, when and how they should be discharged. To date, no use of firearms has been reported by the company.

IFC reviewed the contract agreement for the provision of security services. The contract details the number of security personnel to be deployed in the various locations (brewery, warehouses, boreholes, etc.), the need for the security provider to have appropriate licenses to provide security as required by law, that the security company provide skilled and experienced security guards, the need to provide a team leader to manager the security guards, etc. As such, the security arrangements as currently in place are in accordance with the objectives and requirements of this PS. PS 5 As noted above, the EIA conducted for the construction of the brewery referenced 10 households that were to be impacted by losing access to agricultural land. This land was used for both raising crops and grazing animals. Matters regarding the loss of use of land (i.e. economic resettlement) fall under the purview of the local authorities in Ethiopia. After receiving a request for the land from the brewery, the local government selected the households who were to be impacted and an estimate of the value of the activity on that land was made. In t his event, that amount was set at approximately Birr 3.4 M (equivalent to USD $122K) which was subsequently paid in full by the brewery to the authorities on behalf of those to be impacted. Again, as referenced above, the second EIA states (in the Executive Summary and Conclusion section) that the company ‘has made the necessary financial compensation for families’ (i.e. those affected by the initial land acquisition).

Those affected by the construction of the brewery still live in proximity to the brewery. They are among those that attend the community meetings and the annual community conference, referenced in PS 1 above; the company reports that no issues have been raised by those initially impacted.

Also, as noted above, the expansion of the brewery will require the acquisition of a small strip of land adjacent to (and at the back of) the current facility. This land is required to accommodate the expansion of buildings, construction of a perimeter road to better manage truck traffic and

FINAL DRAFT associated fences. This strip of land is currently used for farming, akin to the land that was required to construct the brewery several years ago. The acquisition of this land will impact 4 households.

Whereas this process will again be managed by the local authorities, given IFC’s involvement in financing this project the company will ensure that it collaborates with the responsible government agency (to the extent permitted by law and/or the agency) to meet the objectives of this Performance Standard. Specifically, and in addition to such allowable collaboration, the company will first conduct an assessment of the livelihoods of those to be impacted. It will later use that baseline information to ensure that, post-impact, their livelihoods are at least restored, and will take supplemental measures accordingly if legally mandated compensation does not result in that occurring. A post impact audit will be conducted to demonstrate, at a minimum, the restoration of livelihoods. These actions are addressed in the ESAP.