The International Finance Corporation (IFC), the private sector arm of the World Bank Group, invested 80 million euros in the Titan Group subsidiary Alexandria Portland Cement Company (APCC) in 2010. The investment provided the IFC with a 15.2 percent equity stake in Alexandria Portland Cement Company, through Titan’s holding company Alexandria Development Limited (ADL). Alexandria Portland Cement Company is one of two Titan Group entities which received IFC investment totaling 180 million Euros in a bid to expand the Group’s cement manufacturing operations in Egypt and thereby facilitate the growth of the country’s construction and infrastructure sectors.
Alexandria Portland Cement Company’s cement plant is located in the Wadi al-Qamar area of Alexandria, Egypt. The plant dates back to 1949 when it was owned by the Egyptian government. It was subsequently privatized in 2000, and then incorporated into Alexandria Portland Cement Company in 2007. The IFC identified a number of potentially beneficial development impacts to the local economy arising from its investment at the project approval stage including employment generation and retention; additional capacity support to the low-income housing market and major construction projects in the surrounding areas (New Cairo communities, Smart city, AUC campus); and higher environmental and social standards at the plant.
As a client of the IFC, APCC is obliged to uphold the IFC’s Environmental and Social Performance Standards. Far from upholding “higher environmental and social standards” and serving the development needs of the local community, APCC has been accused of violating these standards by damaging the health and livelihoods of the local community through exposure to harmful emissions and dust; violating labor and worker’s rights; and polluting the environment. A complaint by Egyptian rights groups, community members, and laborers was filed against APCC with the Compliance Advisor Ombudsman (CAO) on April 8, 2015. The CAO, the IFC’s independent grievance mechanism, has since deemed the complaint eligible to move through the grievance process.
Labor leaders allege that Alexandria Portland Cement Company has reduced its permanent labor force to one-eighth of its size at the time of purchase without regard for the plant’s labor requirements. APCC has chosen to supplement its labor needs by contracting temporary workers, who often perform the same task as formal employees, and in some cases have been working for the company for upwards of twelve years. This is ostensibly a cost savings exercise as formal employees earn five times as much as subcontracted workers. Additionally temporary workers are not entitled to profit sharing benefits and do not receive company’s medical treatment plan.
The company’s actions are an affront to the IFC’s financing objective of promoting beneficial development impacts for the local community, specifically job retention and generation, but are also illegal under Egyptian national law which the performance standards mandate compliance with. Egyptian labor law proscribes the hiring of labor through labor contractors or suppliers (Paragraph 2/ Article 16 of Egyptian Labor Law). Furthermore the law is clear that workers commissioned to perform tasks in the same work area as original employees must be equal in all rights (Article 79 of Law 12/2003).
Workers maintain that APCC management have refused to share profits with employees in accordance with Egyptian law, which states that at least ten percent of net profits are to be distributed to employees, provided that the amount does not exceed the total value of the employee’s annual salaries. Despite a number of sit-ins and peaceful strike actions the company continues to delay full payment of profit shares, such that in November 2014 workers had only received thirty percent of what was legally owed to them since February of that year. APCC is also accused of non-disbursement of outstanding severance pay to workers who have taken early retirement since 2003.
APCC is accused of orchestrating a campaign of violence and intimidation against the workforce to prevent its organizing activities. Having found the company’s grievance procedures unsatisfactory, workers staged strikes and peaceful sit-ins to address APCC’s discriminatory treatment of subcontracted workers and its refusal to disburse profit sharing. At the behest of company management, these activities were violently disrupted by police and resulted in the arrests of numerous workers. In one incident hundreds of Central Security Forces armed with weapons and police dogs raided a peaceful sit in. According to the complaint submitted to the CAO “The police forces set the dogs on the workers, beat and dragged them, and threw chairs at them, injuring some workers seriously.” Subsequently, eighty workers were arrested by the police; twenty eight of them were brought before the prosecution on false charges and the remainder released. The company proceeded to dismiss four-hundred and twenty-five workers, ninety-two of whom were later reinstated.
Environmental pollution from the cement plant and its associated harm on residents and workers’ health is a major concern for the residents. The plant’s location ten meters from a residential area has resulted in the local community’s exposure to harmful emissions and dust produced from the cement manufacturing process. As a consequence increased rates of severe, chronic respiratory ailments have been reported in the adult and child populations.
A report by the Ministry of Justice found the plant produces on average 120 mg/cu m of dust emissions. This is more than twice the limit allowed under the IFC standards, which can only be exceeded in extreme circumstances and through the provision of additional justifications. In another report by a committee of environmental and health experts tasked by the Alexandria Governorate, emissions from the company were described as posing a “severe danger to the citizen’s health”. It further noted that the company was negligent in using its emissions filter by not regularly changing the filter, and at times using no filter entirely.
In failing to address the problem of harmful emissions on the local community surrounding the plant, APCC is violating Performance Standard 3 which seeks to avoid or minimize the negative impacts on human health by avoiding or minimizing pollution resulting from a project’s activities.
The pollution caused by the plant’s dust emissions has also negatively impacted upon local business. Meks Saltworks, the largest saltworks in the Middle East, filed a suit against the company when it became evident that the salt it extracted from seawater in large open air tanks close to the plant’s main smokestack was being covered with grey cement dust. The court ruled in favor of Meks Saltworks taking into account the increased production costs associated with the company having to wash the salt of the cement and thereby losing an estimated five percent of the salt produced. Notably, the potential harm to consumers from ingesting the contaminated salt was not featured in the legal report.
APCC is currently resolved to using coal to replace natural gas as an energy source for the cement plant. The shift in energy source will increase the production of greenhouse gases and contribute to global warming, which is in flagrant contradiction to the IFC’s environmental performance standards that promote sustainable environmental behaviors and a low carbon economy. Local residents are also extremely worried by this development in view of the expected increase in toxic emissions from the plant including nitrogen and sulfur gases, metal emissions such as mercury and lead, and dioxin and furan.
Residents seeking the annulment of APCC’s temporary licensing activities brought the case to court. However the case has been pending since February 2010 and as the State Commissioners Agency’s report is not binding on Egyptian judges there has been no legal judgment for an annulment. The issue of licensing has also been brought to the IFC CAO panel’s attention because this is yet another example of the company failing to comply with Egyptian national law, which the IFC’s performance standards mandate compliance with.
BIC Senior Program Associate, Middle East and North Africa Program
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