Kenya’s biggest and most polluting pulp and paper mill, which is partly owned by the IFC, is set to expand.
By Chris Lang. Published in WRM Bulletin 123, October 2007.
Earlier this year, in an attempt to discourage the use of plastic bags, the Kenyan government slapped a 120 per cent tax on plastic. While the tax may look like an environmentally friendly decision, it could result in severe impacts on the environment. One of the beneficiaries of the decision will be the partly government-owned Pan African Paper Mills.
Pan Paper has reported huge losses in recent years and has debts estimated at US$100 million, according to The East African. Much of the debt will mature in the next two years. In April 2007, the company appointed a new management team after the company’s lenders hired consultants McKinsey to suggest ways of reviving the company’s fortunes. The plastic tax could provide a lifeline to Pan Paper.
Packaging company Tetra Pak is already expanding production in Kenya. “We would like to increase our sourcing of raw materials from Pan Paper. We are discussing with them to find if they can produce more of the raw materials that we need,” Anders Lindgren, Tetra Pak’s managing director told Business Daily in July 2007. Pan Paper recently announced plans to spend US$1.19 million planting six million trees over the next year.
Pan Paper currently has a production capacity of 120,000 tonnes of paper a year at its mill in Webuye. Established in 1974, the company is a joint venture between Orient Paper and Industries (part of India’s Birla Group) the Kenyan Government and the World Bank’s International Finance Corporation.
The involvement of the IFC means that, in theory at least, the pulp and paper mill should meet the IFC’s social and environmental guidelines. But IFC’s own staff admit that there is a conflict of interest between protecting the environment and the economic interests of company’s in which IFC is a shareholder.
In 1996, when IFC lent a further US$15 million to Pan Paper for an expansion of the pulp and paper mill, IFC did not demand a full environmental assessment. Instead IFC relied on information provided by the company. IFC noted that Pan Paper “has made commitment to fully comply with World Bank policies and guidelines”.
IFC promised to “monitor Panafrican Paper’s ongoing compliance with World Bank policies and guidelines during the life of the project.” In 2003, IFC promised more financial assistance for the restructuring of Pan African Paper Mills. Unfortunately, IFC’s monitoring of Pan Paper only involves reading reports submitted by the company and “periodic site reviews during project supervision”.
Pan Paper is, of course, keen to keep its problems hidden. For example, at a conference on “sustainable consumption and production” in 2004, Pan Paper’s John M. Khaoya talked about “maintaining a delicate balancing between environment and profits”. He talked about best available technologies, best environmental practices, pollution prevention and waste minimisation. He talked about employee training and awareness. He talked about corporate social responsibility and the community projects Pan Paper has funded. He talked about sustainable use of renewable resources. He talked about compliance with environmental regulations and of working “hand-in-hand” with the promoters of cleaner production. He talked about a “‘win-win’ situation for industry and environment”.
Michael Ochieng Odhiambo, of the Kenyan NGO RECONCILE, has a different view of Pan Paper’s operations. Writing earlier this year in the newsletter of the Western Kenya Environmental Law Centre he describes the “noxious stench” from the mill: “Many regular travellers on this route will close the windows of cars or buses as they approach the factory in order to avoid the stench. But for the residents of the town this is something they have to live with.”
Odhiambo lists the health problems that residents of Webuye complain of as a result of the pollution from Pan Paper’s operations: “irritation of the eyes and respiratory tracts, dry mouths and scratchy throats, gross accumulation of fluid in air spaces impairing the functioning of the lungs, cancer of the lung and throat, asthma, bronchitis, bronchial pneumonia, conjunctivitis, hepatitis, dermatitis, tuberculosis, impotence, babies born with stunted reproductive organs, retarded intelligence among children, and high levels of respiratory diseases.”
But pollution from the pulp and paper mill is not the only problem that Pan Paper creates. Further problems come from the supply of raw material to the mill. In 2001, the Ogiek people living in the Mau mountain forest accused Pan Paper of logging in their forest areas. For the last four years, the problems caused by Pan Paper’s mill, logging and plantations operations have been raised in the Kenyan Parliament.
Today, industrial tree plantations cover about 160,000 hectares in Kenya. Three-quarters are planted with cypress and pine trees but eucalyptus trees are increasingly planted in Kenya – using seedlings from South Africa. A recent article in The Nation (Nairobi) notes that “eucalyptus and other exotic species are fast replacing indigenous trees in many . . . parts of the country”. The result has been drying up springs and streams. The article suggests that eucalyptus plantations have made droughts in the country even more severe.
By promoting the polluting pulp and paper industry, the government’s plastic tax will end up having some very unpleasant environmental and social impacts.
 Korinna Horta (2001) “The IFC, Forests and the PanAfrican Paper Mill in Kenya, Environmental Defense, 14 May 2001.
 John M. Khaoya (2004) “Environmental Challenges: Industry perspective“, in “Mainstreaming Cleaner Production and Sustainable Consumption in Lake Victoria Basin Development Programs”, Proceedings of The 1st East African Round Table on Sustainable Consumption and Production, Imperial Hotel-Kisumu, Kenya, Organized by Kenyan National Cleaner Production Centre (KNCPC) in collaboration with The United Nations Environment Programme (UNEP) and The African Roundtable on Sustainable Consumption and Production (ARSCP), 6-7 December 2004.
 Michael Ochieng Odhiambo (2007) “Industrialization, environmental pollution and public health: Must communities bear the cost while the Nation reaps benefits?“, Mazingira Magharibi, Newsletter of the Western Kenya Environmental Law Centre (WK-ELC), Issue 1, 2007.
 See Question No. 337, “Destruction of environment by Pan African Paper Mills“, National Assembly Official Report, Wednesday, 19 July 2006.
 P. A. Diro, “Private sector participation in the government woodfuel and afforestation program“, World Bank, no date.
(P. A. Diro is the Forest Manager at Pan African Paper Mills).