PRIVATIZATION AND PRIVATE SECTORCOMPETITIVENESS PROJECT

(PPSCP)

E-407

ENVIRONMENTAL PRE-AUDIT OF ENTREPRISESSELECTION OF ENTREPRISES FOR AUDITS)

SUBMITTED TO:

THE TECHNICAL SECRETARIAT FOR PRIVATISATIONMINISTRY FOR PRIVTISATION ANTANANARIVO - MADAGASCAR

THE WORLDBANK PRIVATE SECTOR DEVELOPMENT1818H STREET, N.W.

WASHINGTON, D.C. 20433, USA

SUBMITTED BY:

KOBINA ATOBRAH, Ph.D.10875 MAIN STREET, SUITE 205FAIRFAX, VIRGINIA 22030, USA

MALICK A.K.JOHNBANJUL, GAMBIA

November 2000

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

TABLE OF CONTENTS

1. INTRODUCTION 41.1 LISTINGS

2. PROJECT OBJECTIVES 5

3.ENVIRONMENTAL SETTINGS

3.1 INITIAL CONDITIONS:3.2 ENVIRONMENTAL CONCERNS:

4. RANKING 6

4.1 ENVIRONMENTAL PRE AUDITS EVALUATION CRITERIA:4.1.1 Rating Components4.1.2 Weighting Components

5. RESULTS OF RANKING:85.1 CONSULTATIONS

6. SECTOR ANALYSIS 10

7. DESCRIPTION OF KEY PRE AUDIT FINDINGS: 13

1. SIRAMA (Sugar Enterprise)2. JIRAMA (Electricity & Water enterprise)3. ADEMA (Airport enterprise)4. HASYMA (Cotton enterprise)5. TELMA (Telecom Madagascar)

DECOMMISSIONING PLANS: 26

9.STATUTORY FRAMEWROK: 26

9.1 LEGAL FRAMEWORK ON LIABILITIES9.2 MONITORING PROTOCOLS9.3 ENVIRONMENTAL GUIDELINES AND REQUIREMENT:9.4 TRAINING AND CAPACITY BUILDING:

10. COST ESTIMATES FOR AUDITS

11. RECOMMANDATIONS 31

12. LIST OF PUBLICATIONS USED FOR THE REPORT.

13. PERSONS CONTACTED

1. INTRODUCTION

This report is an environmental pre-audit of four (4) Public Enterprises (PEs) in Madagascarthat are being privatized under the Privatization and Private Sector Competitiveness Project

(PPSCP) by the Government of Madagascar (GOM) and funded by the IDA, World Bank,

Private Sector Development (Marie-Ange Saraka-Yao, Task Team Leader).

Private Sector Development is crucial to poverty alleviation and economic growth. A survey

of this sector in Madagascar identified deteriorating infrastructure as one of the main

constraints to private sector development.

Public Enterprises (PEs) have be found to be inefficient if not completely dormant and unable

to support employment and poverty alleviation programs

The Government of Madagascar embarked on a privatization program and has set up

- the privatization committee- the technical secretarial for privatization

It also proceeded to find in a first phase the privatization of SOLIMA, the national Petroleum

Company.

In addition, it has proceeded with reforms of various sectors of the economy including

privatization of a certain number of enterprises.

The assignment was carried out in two places as follows

Phase I: Field mission by Malick A.K. John, Engineer/Environmental Assessment Specialistwith back-up from Washington by Dr. Kobina Atobra as Team Leader. This phase entailed:

a) A preliminary meeting with the PU of GOM headed by Norbert RAZANAKOTO,Secretaire Technique. In attendance were

Erick RAJAONARY, Expert FinancierPaul TOMBOZAFY, Responsible for Operations STPRAJAONSON Bienvenu, World Bank- Environmental Adviseras well as the TTL.

b) Review of existing documentation and historical information and visual inspection of sites.

Phase II entailed

- assessment of risks, prioritization of environmental concerns and ranking of sites according

to the need for comprehensive, partial and no audit at divestiture for the four (4) PEs listed

below.

- on request from the PU to carry out preliminary ranking of twenty two (22) others based on

their activities

1.1. Listings

The priority list of PEs for pre-audit was as follows:. The sugar enterprises (SIRAMA). THE Water and Electricity enterprise (JIRAMA). The cotton industry (HASYMA). Madagascar airport (ADEMA). Telecommunications (TELMA)

Of the original list of PEs for preliminary ranking fourteen were subsequently retained (seeCh.5)

2. PROJECT OBJECTIVES

The primary objective of the project is to carry out an environment pre audit of the publicenterprises listed for divestiture and develop an ranking to determine which will needcomprehensive or full audit, partial audit or no audit at all before divestiture.

Furthermnore, the objectives include measuring the enterprises environmental conditionsagainst the risk of being held responsible for contingent damages after privatization. Inaddition, assist the Borrower to prepare guidelines that will ensure that the privatizationcandidates will undertake the necessary audits according to the ranking study and that theguidelines should be able to help with the determination of the environmental liabilities andaudit requirements for future privatization candidates.

The objectives also include the review of the national legislative framework to ascertain therole of PEs and the new investors on clean-up responsibilities after privatization.

3. ENVIRONMENTAL SETTING

3.1. Initial conditionsThe country, with a total surface area of 590,000 sq kw has a population of 14 millions with aper capita income of $US.

Madagascar is an island on the Indian Ocean bounded byLatitudes 12°- 25 0 South of equatorLongitudes 420 - 500 East

The Mozambique channel separates from the African continent:The country covers an areaThe physical environment is governed by its

- geological formations- topography and morphology- climate

The geology of Madagascar is a result of early volcanic activity with formation of graniticmountain ranges in the central part of the island running from the North East to the South. Theranges are bisected by valleys forming drainage systems to the lowlands bordering the islandon the eastern and western sea-boards. The marble and granite industry of Madagascar isderived from these formations.

The topography is also an emanation of this past activity and characterized by the centralhighlands giving way to rolling hills, sloping to the lowlands of the coastal regions.The topography led to the creation of the valleys, gorges which form the drainage system ofthe island as shown by the large number of streams and rivers.The climate is tropical to sub-tropical with average annual rainfall of 2000 mm in twoseasons. Temperatures range from a maximum of about 320 C to minima of 16°C.The soils range from sandy to sandy loams and mud in the lowlands.

3.2. Environmental concerns

The topography and morphology has led to widespread erosion in the whole country.

The indiscriminate burning and felling of trees as well as cropping on the riverbanks hasaccelerated this process of erosion.

The rivers and lakes are silting up at an alarming rate and the physical environment isbecoming desertic.

4. RANKING

In order to determine which of the PEs require a full and comprehensive audit to beundertaken, ranking have been carried out of the facilities based on risk characterization. Therisk characterization is a process of estimating the probable incidence of adverse impacts topotential receptors under various exposure conditions, including an elaboration ofuncertainties associated with such estimates. The ranking process applied in this assessmentinvolves the qualitative estimation of the potential risks and/or hazards due to activities at thePEs, since quantitative data were not required at the moment for such assessment.

An adequate characterization of risks and hazards at a potentially contaminated site allows fora comprehensive (full) enviromnent audit to be performed during which the site remediationprocess can be better focused, and cleanup criteria can be developed based on the 'acceptable'level of risks to potential receptors. Furthermore, during the comprehensive audits the greatestrisk can be identified and the site mitigation measure selected to address those issues.

The ranking procedure was similar to the scoring the DRASTIC Index (Aller and Others,1987; Atobrah, 1990; Atobrah and Others, 1989), and was based on risk characterization ofhazardous wastes (Asante-Duah, 1993; Asante-Duah and Others, 1996). The ranking approachprovided indication on whether the site was located in a generally sensitive or vulnerable areaand has a significant pollution potential to the environment.

4.1 The Environment Pre-Audits Evaluation Criteria:

The enterprises were assigned scores on the basis of the Audit Index Factors (AIF) developedfor the facilities at the various sites. The AIF is a degree of pollution potential for anenterprise by which assessment for comprehensive audits can be determined. The criteriaconsidered to have little impact on the environment were ranked by assigning the lowest scoreof one (1), and the criteria with significant impact on the environment were assigned the

highest score of the ten (10). The scores for each enterprise were then summed and the sitewith the highest score assigned the most likely site to have full audit to be undertaken.

4.1.1 Rating components:

The rating components for evaluating and characterizing the audit potential of a site were asfollows:* Type of Enterprise (i.e. activities at facilities and sites)* Emissions and Air Quality* Wastewater (i.e. impact on surface water and groundwater receptors)* Waste Oil and Spill Control Measures* Solid Waste* Noise* Occupational Health and Safety Issues* Environmental Management and Regulatory Framework* Capacity Building, Training and Awareness

The audit evaluation factors were assigned rating components ranging from one (1) to ten(10); with the least significant rated as 1 and the very significant rated as 10. The AuditFactors were incorporated into a relative ranking scheme that used a combination of weightsand ratings to produce a numerical value called Audit Index.

4.2 Weighting Components:

The weighting was assessed on the overall affects on pollution potential for the sites andfacilities by considering the weighting components as follows:

* Depth to water;* Soil and aquifer media;* Topography;* Impact on land_use and planning;* Impact on wetlands and water bodies; and* Impact on workers

Each audit factor was assigned a relative weight ranging from one (1) to five (5); the leastsignificant with a weight of 1 and the very significant with a weight of 5. For example, afactor such as 'Air emission' was assigned a weight of 5 if the impact to the environment wasvery significant and a weight of 1 if the impact to the environment was of least significance.

To obtain the number for each Audit Index Factor (AIF) which determined the degree of thepollution potential, the weight was multiplied by the rating. The total of the numbers forindividual Audit Factor gave the Audit Index. Evaluation of the Audit Index for the PEsprovided the relative significance of each facility or site with respect to the pollution potential.

Based on the cumulative Audit Index Factors derived for the facilities and sites, the PEs havebeen ranked into categories of those that required comprehensive (full) audits, those thatrequired partial audits and those that did not need any audits to be undertaken at this moment.

The rankings sere categorized as follows:

- PEs with Audit Index Factor of cumulative scores above 140 were considered highrisk and would require comprehensive (full) audits;

- PEs with Audit Index Factors of cumulative scores ranging from 100 - b 140 wereconsidered medium risk and would require partial audits;

- PEs with Audit Index Factors of cumulative scores less than 100 were consideredlow risk and would require no audits.

5. RESULTS OF RANKING

5.1. Based on the visual inspections in the field and using the audit criteria and index factors,the first four (4) PEs have been ranked as follows:

A. PEs requiring full audits

Sugar enterprise (SIRAMA) (259)Water and Electricity enterprise (JIRAMA)

B. PEs requiring partial audit

Airport of Madagascar (ADEMA) (134)Cotton Enterprise (HASYMA) (130)Telecommunications (TELMA) (114)

5.2. For the fourteen (14) enterprises for which a preliminary assessment of their ranking wasrequested the consultants, based on the nature and scope of their activities propose thefollowing rankings

A - Full audits

- Societe d'Etudes, de Constructions et de Reparation Navales (SECREN)- Societe d'Exploitation de la Viande a Madagascar (SEVIMA)- Societe d'Andapa Mamokatra (SOAMA)- Ferme d'Etat de la Sakay (FESA)- Societe Rizicole de Marovoay (SORIMA)- Fikambanana Fampandrosoana ny Lemak'i Betsiboka (FIFABE)

B - Partial audits

- Societe d'Interet National des Produits Agricoles (SINPA)- Kafe Malagasy (KAFEMA)- Societe Malgache de Transports Maritimes (SMTM)

C - No audits

- Antok'Asa Ambanivohitra (AAA)

- Societe Industrielle et Commerciale de l'Emyrne (SICE)- Maxime Darrieux (DARRIEUX)

- Groupe Comptoir de Commerce et de Representation pour l'Ocean Indien (COROI)- Cabinet RINDRA

6. SECTOR ANALYSIS

6.1. Agriculture

In general, in most African countries there are major concerns related to operation of plantsand the operations of the related nucleas/outgrower farms.Major impacts are usually encountered on- the atmosphere- terrestrial and- aquatic ecologies- health and safetyAdequate recycling or clean-up operations and equipment are not put in place for

- air emissions- liquid and solidwaste and their disposal

The condition of the plants in several cases have a lot to be desired.

The farms also generate impacts due to unplanned settlements resulting in- poor water and sanitation facilities not being available- promiscuity of the communities- banditism

These issues are addressed under the findings on the PE's in questionIn the case of Madagascar and as a general remark, the sugar in industry exhibited high auditindex marks of (259) because of pollution potentials. The cotton industry however showedlittle or no pollution except for the use of pesticides and fertilizer on the farms.

6.2. Transport and Telecommunications

As regards Madagascar airport the main concerns related to- noise levels- emissions- solid and liquid waste- airport utilities (waste/sanitation)- airport estatesAs regards telecommunications the major concerns relate to the- location of present and future equipment e.g. commutators, lines etc. in relation to

protected areas /sites- the decommissioning , replacement and disposal of its obsolete systems

Because most of these impacts can be mitigated the audit index factors have been put at ( 134)for the airport and (114) for TELMA i.e. only partial audits are required

7. DESCRIPTION OF KEY AUDIT FINDINGS

7.1. SIRAMA SUGAR INDUSTRY

The industry is composed of four (4) sugar and alcohol production facilities surrounded by

nucleus and outgrower farms at- AMBILOBE- NAMAKIA- NOSY BE- BRICKAVILLE

The management comprises a Director General and Secretary General with four (4) Directors

(Administration, Technical, Finance, Supplies) supported by two (2) Regional Directions andDelegations at the factory levels

KEY PRE-AUDIT FINDINGS

As a general remark, the most dramatic negative impacts were found on the island of NOSYBE.The practices of the enterprise are affecting the environment on the entire island.The consultants felt it necessary to emphasize the case of Nosy Be because of- the fragility of its eco-system- the impacts on its tourism trade

Waste disposal

It was found thati. Untreated liquid waste in all cases was discharged directly to rivers/streams, lakes in

their raw state from the factoriesii. Most of the solid waste (filter cake)

iii. Though most of the bagasse is burnt for full, a lot is found froating around the coasttime.

Although time was had to visit only Ambilobe, SIRAMA executives recognized the seriousnegative impacts of their disposal practices on

i. the rivers and lakesii. land surrounding their facilities

iii. groundwateriv. the oceanThe wastes with high sugar residues, COD, BOD, solid particles including bagasse which areactually visible have raised protests from- the communities- the tourist industry- environmentalists

Emissions

The emissions of Carbon Dioxide (CO2 ) Nitrogen Oxide (NO,) Sulfur Dioxide (SO,) VolatileOrgane Compounds (VOC5 ) fly ash and particulate are also visible. This is particularlydisturbing to the Hotel industry at Nosy Be.The burning of came before cutting is also causing an outcry because of noxious firmspervading the atmosphere.

Siltation

i. The rivers and streams are actually siting up from

a) the dumping practices of the enterpriseb) the agricultural practices of the communities on the river banks

ii. Some rivers are actually diverting their courses and threatening roads and bridges some ofwhich have simply disappeared.

Resettlement

While the enterprises real estates have been found to be adequate, shanty towns have sprungup around the factories without

- water or sanitation facilities- health facilities

The potential for- proliferation of diseases- sexual promiscuity and hence HIV/AIDS- banditism

is all too evident

Decommissioning

The facilities require a major renewal program. Large amounts of obsolete equipment arepresent in all the facilities.

The audit should delve into this in detail and proposed decommissioning plan.

RECOMMENDATION

i. SIRAMA should be subjected to a full and comprehensive audit.ii. Special attention should be given to the island of Nosy Be

iii. The audit should identify- the quality and quantity of the emissions from the factories- the quality (content) and quantity of sugar residue, chemicals and solids fromeffluents from the factories.

- the amount of fertilizer and pesticide residue from the farms entering the drainagesystems and discharged into the rivers/lakes and the ocean

iv. Assess the impacts ona. fisheriesb. the physical environmentc. the groundwater with particular emphasis on Nosy Bed. the tourism trade

v. Evaluate the economic and financial implications of converting the present practice ofburning the cane before cutting to green cutting in relation to the environmental impactof the burning practice.

vi. Propose a detailed- clean up exercise- waste treatment system- effluent discharge standards in collaboration with ONE

vii. The audit should identify equipment due for decommissioning and prepare a plan withcost estimates.

viii. The auditor in collaboration with ONE should formulate an appropriatea. An Environmental Management Plan (EMP)b. A monitoring programc. Capacity building and training program

These should be accompanied where relevant by the cost estimates.

Although it is best to leave time frames to bidders based on the terms of reference which areusually not limitative. It is the considered opinion of the consultants that the SIRAMA auditshould take no more than 12 weeks including reporting

COST ESTIMATE

Based on three (3) experts (one Environmentalist, one Environmental Engineer, one FinancialAnalyst)

Fees + Living Expenses $1 ,000/day 252,000 $USLeasing of equipment, local transportation or Lab analysesReporting etc 10% 25,200 $US

TOTAL 277,000 $US

7.2 JIRAMA (Electricity and Water enterprise)

This enterprise was a last minute inclusion to that of the four (4) enterprises for auditing.The Consultant was therefore obliged to visit the production sites, treatment where appropriate and transmissionor transportation The Consultant was able to visit only:

(i) the dam site at MANDRAKA

(ii) the reservoirs at AMPASAPITO and MANTASOA

(iii) the powerhouse at MANDRAKA

(iv) the estate at MANDRAKA

(v) the water treatment plant in TANA

PRE-AUDIT FINDING

7.2.1 Electricity

This is generated either fromHydro-electric power stations orThermal oil-fired stations

7.2.1.1 For hydropower at the dam sites the Consultant found that

(a) The spillways were in concrete with boulder stones acting as buffers to reduce flow speeds soas to prevent erosion downstream.

(b) Cooling water for the turbines go through aspersion chambers before being emptied into thechannels at stream temperatures.

There were therefore no environmental impacts of major concern at MANDRAKA power house.The main concerns were at the reservoirs sites at AMPASIPOTSY and MANTASOA with particular referenceto health of the populations i.e:

- Bilharzia- Malaria- Cholera- Typhoid- Dysentery

Because the reservoirs are used for drinking water as well as washing by the communities. There were noelements available to assess these potential impacts of the reservoirs around and downstream of them.All the other reservoirs present essentially the same concerns. Unfortunately JIRAMA could not produce anydocument as to the locations of these.

RESETTLEMENT

The Consultant could not assess the extent of resettlement attributable to the Dams and reservoirs as the landtenure system is complex. The downstream ricefields are essentially rainfed in the area visited.

7.2.1.2 Thermal Power StationsAgain JIRAMA did not furnish any documentation on their distribution in the country and none was withinvisiting range.

It suffices therefore to note that the main concerns are:

(i) Atmospheric pollution from emissions of carbon dioxide (C02), Nitrogen oxide (N02), Volatileorganie compounds (VOC5), Hydrocarbons (HC) Sulfur (HSO2) soot and other particulates.

(ii) Noise

(iii) Oil and lubrifiant spills

(iv) Health and safety measures in the plants.

RECOMMENDATIONS (Electricity)

The audit recommended should:

(i) carry out, in collaboration with the Medical Services of Madagascar and Institut Pasteur a Clinicalevaluation of the prevalence of water borne a water related diseases in the communities around thedams and reservoirs created by JIRAMA.

(ii) Assess the nature, scope and quality of water and sanitation facilities provided for the most vulnerableof these communities.

(iii) Carry out sampling and analyses of water in the lakes, rivers, reservoirs used by JIRAMA for physico-chemical and microbial parameters.

(iv) Formulate a management plan centered around- Settlements around the reservoirs

- Water and sanitation facilities for communities around the reservoirs- An awareness program or health practices

(v) For the thermal power stations to evaluate the level of atmospheric pollution from emissions and theircontribution to

- Acidification

- Eutrophication

- Depletion of the ozone layer or the green house effect

(vi) Assess the efficiency of the health and safety measures in place in a representative sample of theElectricity Generating facilities, transformers and transmission facilities.

7.2.2 Water

JIRAMA operates a total of 66 water extraction facilities throughout Madagascar. Extraction is either fromboreloles, rivers and lakes.

In all cases, the water is treated and subjected to physico-chemical and micro-biological analyses by both theenterprise and Institut Pasteur. Standards responding to WIO nomer are maintained.

The Consultant found that(i) Certain chemical standards could not be met as for example from boreholes and in particular iron and

calcium contents.(ii) Daily sampling is carried out but the analyses lag behind due to transfers to the laboratory in TANA.(iii) Only two(2) portable test kits are available for the seven regional centers outside TANA

RECOMMENDATION (Water)

(i) All the regional centers should be supplied with portable physico-chemical and microbial test kits

(ii) A training program for middle-level personnel on water quality analysis should be carried out using alocal Consultant TOTAL COST FOR BOTH £US35,000

ENVIRONMENTAL MANAGEMENT

Whist the water sector of JIRAMA is following a fairly rigorous water quality monitoring program, the healthrelated impacts of the dams and reservoirs have not been evaluated.

As regards capacity, JIRAMA has the capacity, in liaison with Institut Pasteur to monitor all potential impactsarising from its operations.

OVERALL RECOMMENDATION

The Audit Index factor assigned to JIRAMA is 214 and therefore a full audit is required.

The terms of reference for this audit will de derived from the recommendations specified for each of the sub-sectors.

COST OF AUDIT

The team for the audit should comprise:

- One (I) environmentalist for two (2) months $US 60,000

- One (1) clinical physician for two(2)months SUS 60,000- One (1) microbiologist for six(6) weeks $US 45,000

- Transportation $US 5,000

- TOTAL FULL AUDIT SUS 170,000

7.3 THE AIRPORT OF MADAGASCAR (ADEMA)

Background information

It need be borne in mind that ADEMA operates only 12 out of 51 airports in Madagascar, of which themain airport is at Antananarivo.

The airport of TANA, like any international airport is composed of:

- The runways

- Aircraft parking bays

- Aircraft maintenance bays (restricted

- Passengers and freight terminals

- Airport service areas such as taxi and cars parks

- Pre-audit findings

(i) Noise:

(a) it was found that the noise levels tolerated for the Air Madagascar Boeing 737 fleetwere not acceptable in European airports.

(b) noise level tests are in effect carried out on the basis of destinations to conform to thestandards imposed.

(c) for Madagascar, the noise level did not seem to matter or was acceptable probably foreconomic reasons.

(d) Ground crews were provided with ear sound mufflers.(ii) Emission:

(a) emission levels were determnined for different types of aircraft and in relation to theirdestinations again to conform to standards set.

(b) for in coming flights no standards have been set so far.

(iii) Solid waste disposal:

All solid waste is collected by the airport cleansing services from waste bins for disposal at a privatelyowned waste dump

(iv) Liquid waste:

Sewage, used water and storm water are all collected in a treatment plant before being pumped to thesurrounding rice fields. The sludge is used as fertiliser in the same fields.

The team could not access the aircraft maintenance workshop to assess issues related to oil andlubrifiant spills.

For the 12 secondary airports the major problem was resettlement of the riparian population orencroachment into the airports designated precincts.

The Consultants were informed that the airports are now being enclosed to halt the trend.

The noise and emission levels are less intense. Solid waste is incinerated in bins.

A- Recommendations

(i) Noise and emission levels

The partial audit recommended should review the levels with the airports authority and ONE anddetermine the economic and financial impacts of imposing specific standards of noise and emissionlevels.

(ii) the partial audit should review the efficiency of the solid and liquid waste disposal techniquesalready in place.

(iii) a cursory visit to the aircraft maintenance workshop to access waste oil/fuel / lubrifiantmanagement practices will be required.

(iv) a visit to one or two representative secondary airports will be required

(v) An assessment of stornwater drainage from the runways should be carried out for therepresentative airports visited

(vi) An evaluation of the sewage and used water disposal systems must be carried out.

D- Decommissioning

The partial audit should identify the necessity for decommissioning of any plant andequipment belonging to ADEMA

E- Cost of partial audit

(i) (ONE) National environmentalist or environmental engineer for two (2) weeks (includingtransportation and reporting at $ 200/day , $ 2800).

F- Environmental Management - Capacity Building

For the environmental issues to be addressed the partial audit should assess whether:

In house management and capacity building is necessary as opposed to- Sub-contracting the monitoring of the noise / emission levels, waste disposal especially where

ONE specifies standards.

7.3 COTTON INDUSTRY (HASYMA)

A- Background information

HASYMA operates five (5) ginneries at the moment with three (3) in the north of the country (Port-Berger, Mahajanga and Ambilobe) and two in the south (Ambahikily and Tulear). Two others(Morondava and Belobaka) were closed for lack of cotton.

The Technical Directorate in Tana manages the operations of HASYMA with the assistance of thefactory managers.

The production stands at 35,000 tons per annum.

B- Ginneries

The flow chart shown below typifies the processes from entry of the cotton to the outputs.

FIGI - FLOW - CHART FOR GINNERY

cotton grain input

X; | Cotton grain (100%)

1. telescope aspiration

2. Rock Catcher Po rocks + heavy solid waste

Dust + Volatiles

3. Separaty -* air ventilation Dustaspiration chamber Dust +

Waste

4. Cleaner lo Waste

5. Distribution conveyor

6. Feeder} Waste}7. Ginner} Waste I Waist conveyor 1 Dust Ventilator

Fibre

8. Super jet (Air)

4 Graine9. Line flue Grain conveyor

10. Condenser press

11. Lint slide Hydraulic press Grain bagging

12. Pounder presse

Fibre bales

C- Pre-audit findings

The Consultants found that

(i) the cotton ginnery produced

(a) Solid non toxic waste in the form of rocks or stones collected during harvesting ofthe cotton and were used in landscaping.

(b) Dust containing thin cotton fibres which were volatile or solid. These were allcontainerised and condensed and subsequently sold or incinerated.

The consultants concluded that for the ginneries, there were no discernible negative impacts on theenvironment.

(ii) the main source of concern was the use of fertilisers and pesticides whose residues foundthemselves in run-off water from the cotton fields into the natural drainage systems in thevicinity of the ginneries the consultants recognised the predicament of HASYMA on the needto

(a) conserve the fertility of the soils to maintain their production or to expand it(b) protect the cotton crop form virulent parasites endemic to cotton production

D- Recommendations

The consultants therefore found that only a partial Audit of a short duration was required forHASYMA. The partial Audit should:

(i) confirm the waste (dust, volatiles) disposal techniques presently in use i.e. condensation, saleand incineration of the materials

(ii) undertake sampling of the run-off water from the cotton fields for chemical content especiallypesticides(a) in the soils on the farms and the catchment area as well as in the groundwater and(b) to test for pesticide pollution of surface waters where run-off discharges are to rivers,

streams or lakes.

(iii) Environmental management plan

Due to the scope of the potential impacts of the farms especially their possible expansion. It isincumbent not only on HASYMA but also on ONE to:

(a) monitor the land use patterns for cotton cultivation

(b) monitor fertiliser and pesticide use for the effects of residues in run-off wateron land and the acquifers. The need for HASYMA to build up capacity forthis is not evident. The committees set up by ONE should be provided withthe tools to carry out these exercises. The partial audit should thereforeformulate the mechanism for implementing this approach.

E- Cost estimates

Based on one Consultant (National) an Environmentalist for 30 days at $US250 (includingtransportation chemical analysis, etc) $US 7500

N.B: This must be carried out before the end of or during this coming rainy reason.

7.4 TELMA (TELECOM MALAGASY)

A- Background information

TELMA took over the network from the government of Madagascar in 1995 with a managementcontract

The contract called for increasing numerisation of the network from the analogue system then existingand this over a three-year period to 1998.

The numeric system is centred around a unique national transit point in Antananarivo equipped withan ALCATEL OCB system. This system, apart from its functions as a local commutator also assumesthe role of a national and international transit link.

Table I shows the status of the network as of august 2000 with analogue systems largely in the north-east and southern parts of the country.

TELMA has ceased to execute any more development or up grading of the network on the

premise that any such development / expansion should be undertaken by the acquirers ofTELMA.

B- Pre-audit findings

(i) There were no environmental impacts discernible by the Consultants

The analogue equipment were essentially all cannibalised some stations with their relatedelectromagnetic equipment are however still in place as for example at Di6go where the analoguesystem is at the top of the hill in remote surroundings with the numeric station at button of the hill.

The only concern therefore is that these stations are in their rural setting simply.

EYESORES

Environmental Management Plan

It is not relevant for this enterprise, as the ONE Charter now requires any expansion program to bescrutinised by them prior to approval.

(ii) Capacity Building and training

Again, the Consultants found it unnecessary to build any in-house capacity for environmentalmanagement.

It is more cost-effective to call on Consultants to undertake the requisite environmental analyses /assessment for future expansion programs.

RECOMMENDATIONS

(i) A small scale short duration partial audit purely

(a) To identify the locations of obsolete equipment not in use

(b) To determine the where about of cannibalised analogue equipment and to specify thenature of the remnants and propose disposal techniques for these.

(c) In the case of (a) above, determine the need for decommissioning bearing in mind thefinancial costs.

(ii) Prepare a decommissioning plan where necessary

D- Cost of audit

Based on one (1) local Consultant for 30 days $US 250/day include of travel, $US 7500.

8. DECOMMISSIONING PLANS:

During the assessment it was observed that all the enterprises that needed comprehensiveaudits to be undertaken also needed decommissioning plans to dismantle, remove, andtransport to safe disposal sites obsolete plants and equipment. The decommissioning must beconducted separately from the environmental audits, and must adhere to the World Bankregulations that demand a decommissioning plan (DP) with a full environmental assessmentand properly carried out cost estimates.

9. STATUTORY FRAMEWORK:

The Charter for the management and control of the environment was enacted in 1990.

Enabling legislation in the form of decrees were promulgated for the application of the provisions ofthe charter.

The Office National de l'Environment (ONE) was charged with the responsibility of enforcement.

Broadly the charter and the enabling legislation confers on the ONE the powers and obligationto recommend to their titular Minister not to grant approval for execution of any project that isirreversibly detrimental to the environment.In effect, every project in Madagascar must now be submitted to the ONE for approval.

The Consultants found that the procedures used by the ONE are exactly as those stipulated in theworld bank operational policy document OP.401 of September 1998.

Every project submitted is subjected to:

(a) Screening to determine the extent and type of EA required or not. The project is classified orcategorised based on type, location, sensitivity and scale and the nature and magnitude ofpotential environmental impacts identified.

(b) An environmental impact analysis or assessment is then carried out either by the project promoteror ONE.

(c) Where necessary, public consultations of interested or affected groups and other stakeholders are

carried out.

(d) Where the project is approved or licensed, management/monitoring protocols are entered into toensure compliance by the project sponsor of guidelines and standards specified by ONE.

The Consultants also found that the ONE has extended environmental management practices to theprovinces by setting up committees composed of community representatives, NGOS and appropriateagents of decentralised services. The Consultants were impressed by the statutory framework in place.They noted however that

(i) the ONE lacks the capacity to fulfil all its obligations.

(ii) it does not possess the logistics and equipment for a sustained monitoring and enforcementprogram.

(iii) a vigorous awareness program is still at its infancy.

(iv) it needs to decentralise its inspectorate services as soon as possible and to formulateguidelines and standards for all sectors of the economy.

RECOMMENDATIONS

Capacity Building and Training

(i) Human Resources Training and awareness programsIt was agreed that ONE will furnish the Consultant the planned capacity building program and trainingneeds envisaged. This was however not done. This should be done during one of the audit exercises.

However, from past experiences of the Consultant, the Bank and the PU may be required to assist inthe Capacity Building exercise over at least the first three years. Given the need to ensure propersequencing of the environmental audits and the closure of the privatization transaction, it is proposedthat an international environmental expert be placed at the PU to supervise environmental auditscarried out by consulting firms. The international environmental expert will provide quality controland ensure the delivery of these audits in due time prior to the closure of the privatization transaction.He will be responsible for coaching and training in the field one local expert at the PU. A liaison agentwill be trained at the ONE to monitor compliance to environmental guidelines. Tentative proposals aretherefore as follows

(a) International Expert for 2 years @$US 120,000/yr $US 240,000

(b) Liaison agent at the ONE: $US 48,000

(c) Training $US 100,000

(d) Awareness Programs (all levels), $US 84,000

(ii) Logistics and monitoring equipment $US 150,000.(iii) Formulation of guidelines and standards $US 50,000

(iv) Grand total $US 672,000

9.1 Legal Framework on Liabilities

The privatization Unit must work closely with the National Environment Office (ONE) toascertain who assumes the responsibilities for the environment liabilities at the PEs. Forinstance, do the liabilities fall on the new owners or on the formner owners? It appears the lawsof Madagascar are silent on these issues, and hence ONE is required to determine theappropriate law(s) covering environmental liabilities with respect to: privatization policy, duediligence, and indemnification, so that there would be a clear understanding of who is liablefor contamination, both past, current and in the future, i.e. during and after divestiture.

9.2 Monitoring Protocols

There were lack of standards for monitoring environmental parameter, for instance, formeasuring water quality and air quality for Madagascar. Therefore, the individual PEs havebeen conducting self monitoring using standards that were not consistent. The National

Environment Secretariat (ONE) must be responsible for determining and preparing guidelinesand environmental performance indicators that are measurable for monitoring sites andfacilities of the PEs. The performance indicators can serve as the instrument for responding toany potential environmental hazard that may occur as a result of activities by the enterprises.

Furthermore. ONE must set up a monitoring and accountability protocol that would requireeither monthly, quarterly or yearly reporting from the PEs with respect to addressingsignificant mitigation measures and meeting the environmental management challenges of theenterprises.

9.3 Environmental Guidelines and Requirement:

The privatization Unit was not in a position to prepare guidelines for determiningenvironmental requirements for the future privatization candidates. The exercise should becarried out by the National Environment Office, working closely with the privatization Unitand local consultants. At best, the terms of reference (TORs) could be prepared by theprivatization Unit for the procurement of services requiring environmental demands within theprivatization.

9.4 Training and capacity Building:

A «

financing of key remedial and mitigation measures will be determined separately in each auditas appropriate.

During the conduct of the full audits, the cost evaluations would include estimates of capitaland operating expenses associated with remedial actions along with an implementationschedule. If at all possible the cost data on operation and maintenance (O&M) and otherrecurrent costs should be made available during the full audits. It may be difficult to separateoperating and recurrent costs from capital costs during the audits. However, it is important toobtain the information to make meaningful cost comparisons between simplified systems andother alternatives.

11. RECOMMENDATION

1.Based on the environmental pre-audit conducted in Madagascar, it is recommended thatcomprehensive (full) audits be undertaken for the eight enterprises. The prioritized list beingindicated in a reducing order as follows:

* SIRAMA* JIRAMA

Partial audit must be carried out for ADEMA; HASYMA and TELMA.

2. Decommissioning Plans: During the pre-audit it was observed some of the enterpriseswould require some form of decommissioning of old equipment and materials. Someof the equipment comprises:cranes, old plants, clarifiers, control panels, and batteries.It is recommended that undertaking actual decommissioning plans for each site mustbe evaluated and the costs be determined during the comprehensive audits.

3. Legal Framework and Contingent Liabilities: The Ministry of Environment,through the National Environment Office must be strengthened to ascertain whoassumes the responsibilities for environmental liabilities at the enterprises. The ONE,working closely with the privatization Unit and other appropriate and relevantgovernment agencies, must determine whether the liabilities fall on the new owners oron former owners at the time of divestiture.

4. Guidelines and Environment Performance Indicators: The National EnvironmentSecretariat ONE must be responsible for determining and preparing guidelines andenvironmental performance indicators which are measurable for monitoring sites andfacilities of the enterprises being privatized, or have already been privatized. Theguidelines, prepared in collaboration with the Privatization Unit, should enable the PUto determine the environmental requirements of future privatization candidates.

The cost for developing the guidelines and monitoring protocols has been estimated at fiftythousand dollars (US$50,000.00). It is recommended that the allocated amount must be givento ONE who may retain local environmental consultants to provide the technical assistance.

Furthermore, it is recommended that the ONE must set up a monitoring and accountabilityprotocol that would require either monthly, quarterly or annual reports with respect toaddressing significant mitigation measures and meeting the environmental managementdemands due to the activities and operations of the enterprises. The monitoring protocolwould require working in partnership with the leading agencies, such as the National WaterBoards, non-governmental organizations, and government institutions.

5. Training: It is recommended that the National Environment Office (ONE), workingclosely with the Privatization Unit, should participate effectively in providing training for thesenior management of all the enterprises by providing programs inenvironment. The training could consist of workshops or seminars, with the initial trainingprovided by a qualified local environmental management firm supported by internationalconsultants. The training should be part of the environmental audits for the privatizationprocesses. The cost for providing the training has been estimated at eighty four thousandsdollars (US$84,000.00).

5. Environmental Management Systems/Plans: Some enterprise must have on itspremise a senior Official responsible for environmental management activities, andliaise with the ONE on environmental laws and regulations pertaining to the activitiesof the enterprise and participate in training and be part of the capacity building forenviromnental management. The senior official must coordinate and support thedevelopment of contingency plans that link city/urban contingency plans with that ofthe enterprise.

Furthermore, it is recommended that some of the enterprises develop and incorporateenvironmental management systems plans (EMS/P) into its management structure. TheEMS/P must include elements such as:

* Execution of environmental monitoring programs for the enterprises;* Knowledge and compliance with applicable environmental laws and regulations;* Conduct occasional drills to alert the staff and workers on how to react and operate

in cases of emergencies;* Conduct training and awareness programs as part of good management practices

while promoting capacity building within the enterprises;* Develop the capacity to execute coherent sampling and monitoring programs as

part of remedition plans; and* Carry out medical monitoring, while including HIV/AIDS awareness programs.

6. Consultations

Consultations were carried out using:(i) Radio/Television announcements(ii) Public discussions as far as environmental impacts are concerned.The outcome of these discussions were positive clearly stating the need:

(a) To clean up area where pollution is evident, in particular solid waste such asbagasse.

(b) To ensure that liquid waste is treated to acceptable standards/normes.(c) With particular reference to NOSY-BE, to determine impacts on groaned

waters.

LIST OF ACRONYMS USED

ONE Office National pour l'Environment

PU Privatization Unit

HASYMA Cotton Madagascar

TELMA Telecom Madagascar

ADEMA Airports of Madagascar

SIRAMA Sugar of Madagascar

PE Public Enterprises

SCT Technical Secretariate for Privatization

JIRAMA Water and Electricity of Madagascar

LIST OF PEOPLE ENCOUNTERED

1. TECHNICAL SECRETARIAT FOR PRIVATISATION

- Mr. Norbert RAZANAKOTO, Technical Secretary

- Mr. Erick RAJAONARY, Financial Expert

- Mr. Paul TOMBOZAFY, responsible for Operations

2. WORLD BANK

- Ms Marie-Ange SARAKA-YAO, Task Team Leader

- Mr. RAJAOSON Bienvenue, Environmental advise

3. NATIONAL OFFICE FOR THE ENVIRONMENT

- Mr. Henri RAKOTOBE, Director - Department for Environment Policy

- Mr. Paul ANDRIANAVOMAHEFA, Chief cellule MECIE

4. HASYMA (COTTON INDUSTRY)

- Mr. Henri RAKOTOFIRINGA, Director of Production

- Mr. Dimbiarinaivo RALIJAONA, Financial Director

5. TELMA (TELECOM MALAGASY)

- Mr. Jean Andriamaro RAKOTOMALALA, Deputy Chief Executive

6. ADEMA (AEROPORTS DE MADAGASCAR)

- Mr. Herison ANDRIAMIHAFY, Director General

7. SIRAMA (SUGAR INDUSTRY)

- Mr. Fran,ois Xavier SOAVELO, Adviser to the Director General

- Mr. Maurice NDIAMANANA, Director Technical Department

- Mr. Andre RAZAFIMAMONJY, Former Director - Nosy Be

- Mr. Simon RANDRIANANTOANDRO, Agronomy Co-ordinator