SRWB Water Supply and Sanitation Programme

In March 2022, the EIB Complaints Mechanism (EIB-CM) received two complaints regarding the Southern Region Water Board Water Supply and Sanitation Programme in Balaka, Liwonde and Mangochi provinces in Malawi (the project). The complaints concern the Mangochi component that is co-financed in parallel by the Kuwait Fund for Arab Economic Development (KF) and, in particular, the facilities located within Lake Malawi National Park, a UNESCO World Heritage Site for its outstanding biodiversity and landscape value. In August 2022, the EIB-CM issued an Initial Assessment report IAR SG/E/2022/05.

The complaints include multiple allegations of non-compliance with the EIB environmental and social (E&S) standards, which the EIB-CM grouped as follows: gaps in the analysis of alternatives, gaps in stakeholder engagement, gaps in the environmental and social impact assessment (ESIA), gaps in the biodiversity studies, non-compliance with UNESCO conventions and guidelines and a lack of E&S management and monitoring.

After visiting the project area, meeting stakeholders, reviewing and analysing the available information, the EIB-CM compliance review finds non-compliance with the relevant E&S standards regarding most of the allegations raised by the complainants. The Mangochi component, financed by the KF, was integrated into the EIB financed Project. However, the EIB is financing only the two other components of the Project. Therefore, the EIB and the KF are considered parallel co-lenders. Under parallel co-financing, lenders generally administer their own part of a project although joint supervision or agreements are possible, on a best effort basis. In this case, the KF had signed its financing agreement before the EIB started its appraisal. As per its procedures, the Bank should assess the differences between the co-lenders’ standards and duly take into account any gaps. Additionally, the Bank has a duty to appraise E&S risks associated with any component financed by the co-lender (in this case, the Mangochi component), define the appropriate mitigation measures and monitor their implementation. However, since it does not supervise the procurement process nor the disbursement for the works of a component that it does not finance, the EIB has limited control on the implementation of the Mangochi component (i.e. during monitoring).

This report concludes that the Bank’s E&S appraisal of the Project did not assess gaps between the Standards and those of the KF (the co-lender). The EIB appraisal did nevertheless cover the Mangochi component. The EIB-CM’s compliance review finds that there were shortcomings in the appraisal of that component since the EIB did not review in substance the assessment of alternatives, the ESIA, the consultations undertaken and the biodiversity risks. The EIB-CM considers that the Bank’s E&S risk categorisation was also insufficient. According to the EIB E&S Procedures (the “Procedures”), an assessment of potential biodiversity impacts of projects located in protected areas or with high biodiversity value should be undertaken. The EIB-CM concludes, that had these risks been identified, the Bank could have taken more appropriate mitigation measures at appraisal and provided better tailored support to help and guide the promoter (the Southern Region Water Board, or the “Promoter") in the implementation of that component in line with the Standards.

The EIB did nevertheless ensure, through its finance contract, that the Promoter committed to implementing the Project in compliance with the Standards. The EIB also provided technical assistance aiming at having the Mangochi component implemented in line with the Standards. The initial objectives of the technical assistance were however not achieved. The EIB-CM finds that the Bank adequately followed up on the Mangochi component on a best effort basis despite its limited leverage on the implementation of this particular component. The EIB had no direct leverage in the selection of the contractor and disbursement of the works. Hence, the EIB-CM concludes that there is no maladministration by the Bank with regard to the allegations that construction works started before the public consultations, the upgrade of the ESIA and before the environmental permit was granted.  

In view of the shortcomings identified at appraisal, the EIB-CM recommends that the Bank:

·       Clarifies through its ongoing revision of the E&S procedures, as committed when adopting the EIB Environmental and Social Sustainability Framework in 2022, the approach for E&S risk categorisation and associated minimum appraisal required.

·       Ensures that a biodiversity assessment is undertaken of the Mangochi component to the satisfaction of the Bank in order to confirm whether the site is a critical habitat or not and accordingly determine if residual impacts (taking into account the implementation of existing mitigations) need to be further mitigated or offset. This is also in line with the UNESCO main recommendation.

The EIB-CM finds that the Bank did follow up on the Mangochi component on a best effort basis acknowledging that it does have limited direct oversight of the implementation of that component. Therefore, the EIB-CM issues a suggestion for improvement for the Bank to verify that the Promoter’s E&S expertise in support of the Project implementation unit is reinforced and satisfactory to the Bank (both at its headquarters and on-site) to support all components of the Project to comply with the Standards. An improvement in this area is particularly important for the two components financed by the EIB.

To allow public access to environmental information on allegations investigated in this report, the EIB-CM suggests that the Bank requests the promoter to publish the biodiversity study complementary to the ESIA once available and considers publishing the document through a link to the promoter’s website.