US-Congo Minerals Law: Overdue Reform or Fuel on the Fire?
13 Dec 2010
By Jon Rosen for ISN
When US President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act in July, the aim was to clean up American finance. Yet an obscure passage, buried deep inside the 2,300-page legislation, seeks to reform an industry thousands of miles from Washington - one that activists say is fueling rape and other acts of violence against civilians in the eastern Democratic Republic of Congo.
The "Miscellaneous Provision," external pageintroduced into the bill by Senator Sam Brownback, a Kansas Republican, requires US companies that use tin, tantalum, tungsten (the so-called "3Ts") and gold to disclose whether minerals used in their products originated in the Congo or any adjoining country. When the law takes effect in April 2011, companies sourcing minerals from Congo or its nine neighbors must submit an annual report to the Securities and Exchange Commission (SEC) detailing measures taken to exercise due diligence in their supply chain. They must also declare whether their products are "DRC Conflict Free;" that is, whether their mobile phones, laptops, MP3 players or other devices contain materials that have directly or indirectly benefited armed groups in the region. While there are no penalties for non-compliance, the disclosures must be made public on companies' websites, and firms continuing to source in "conflict minerals" face significant reputational damage.
By targeting the end-users of Congo's minerals, proponents of the bill believe it will force a degree of transparency on a shadowy, extortion-laden supply chain - similar to the crackdown on so-called blood diamonds - and eventually cut a vital stream of revenue to the region's many bad actors. Critics, however, charge that it is a hastily constructed measure that could create a de facto embargo on minerals from the region and potentially exacerbate the crisis.
"This legislation will have unforeseen consequences," said Harrison Mitchell, a director at Resource Consulting Services, a London-based consultancy specializing in extractive and agricultural sectors. "Companies must now decide whether they can put a due-diligence program in place or whether they will source their minerals from elsewhere. No one wants a de facto ban, but if it happens it could put tens of thousands of people out of work and increase poverty on the ground."
Fueling the conflict
Often dubbed "Africa's World War," the Congo crisis did not begin because of mining, and remains a complex tragedy, driven by tensions over land rights, regional and ethnic power struggles, and a vacuum of governance created by years of state decay under the notoriously corrupt dictator Mobutu Sese Seko. Still, most analysts contend that the minerals trade, a key source of financing for numerous armed groups, has long been a driver of the region's atrocities, including external pagerampant sexual violence that often goes hand in hand with the scramble to control valuable mining areas. According to the Enough Project - a Washington-based advocacy campaign and a prominent voice on the Congo crisis - armed groups generated an external pageestimated $185 million in 2008 from stakes in the four minerals targeted by the US legislation.
Though gold, high in value and easily smuggled, is potentially the greatest racket, the metal most vulnerable to the US law is the tin ore, cassiterite - eastern Congo's largest mineral export by volume and a key component of solders used in most electronic devices. Thought to contain up to external pageone third of the world's reserves of the ore, the region accounts for external pageapproximately six-to-eight percent of global tin production.
Though once extracted on an industrial scale, all is now mined artisanally: dug from open pits by individual men, and sometimes boys, laboring with pick axes and shovels. Most of the mines are subject to a constantly shifting maze of extortion involving scores of militias and individual actors, including units of the FARDC, the weak, chronically underpaid and often renegade Congolese army. Army commanders, militia leaders and regional warlords secure critical funds that help keep eastern Congo mired in conflict by levying taxes on the minerals as they change hands from miners to traders based in Goma, the capital of North Kivu Province.
Transparency - at what cost?
While the US legislation has forced new urgency into the due diligence process, pressure on "conflict mineral" users is not new. In 2009, two leading minerals players, the Belgian exporter Traxys and Thaisarco, a Thai-based smelting and refining company, external pagesuspended operations in the Congo, citing pressure from advocacy groups in the wake of a 2008 UN Security Council resolution that called upon countries to "ensure that importers, processing industries, and consumers of Congolese mineral products" exercise due diligence on the origin of the minerals they purchase.
Firms that continue to source from the region, including traders, smelters, and end users of the "3T" minerals, have been engaged in various transparency efforts that pre-date the new US law. Most prominent is a supply chain initiative launched last year by the International Tin Research Institute (ITRI), a membership-based organization representing major tin producers and smelters, which has begun tagging minerals at a pilot site in South Kivu Province and plans to commence in North Kivu shortly. The aim, says ITRI manager for sustainability, Kay Nimmo, is to develop a system of traceability from mine to exporter that will ensure tin is not being sourced from mines controlled by militias - essentially what the US Congress is now demanding.
Though they admit it is no silver bullet, supporters of the US law say that forcing transparency in the supply chain is the best way to disrupt the lucrative war economy that fuels the armed groups' culture of violence.
"I would never say that instilling good governance in the minerals supply chain will bring an end to the conflict," said Jason Stearns, former Coordinator of the United Nations Group of Experts on the Congo and doctoral student at Yale University. "But it will diminish the stakes over which the various parties are fighting, and it may make demobilization more attractive for some combatants when they can no longer occupy lucrative mines."
Though most armed groups have stakes in other rackets, including charcoal, timber, and fuel, even those inside the mining business admit their trade is a key lifeline for the region's numerous militias and renegade commanders. Most, including ITRI's Nimmo and David Bensusan, CEO of the Rwanda-based trading house Minerals Supply Africa, accept the need for reform and say they support the basic principle of the US legislation. The problem, they say, is the timing. Despite its progress, says Nimmo, ITRI's traceability scheme - a massive undertaking in a country the size of western Europe - will not be put in place by the legislation's April deadline.
"We are not just talking about implementing a system in areas where conflict funding is known to exist, but in other provinces of the DRC, and other adjoining countries, an area covering practically a third of Africa," she said in an 8 external pageNovember press release. "Realistically, with the resources available to us, it is unlikely that all cassiterite from the region can be covered by the system in time and many current production areas will unfortunately as a result be subject to an effective embargo by next April."
If Nimmo's warning is correct, insiders worry, the trade could be driven underground, as smugglers evade due diligence schemes that are funded by existing stakeholders and export to buyers in India and China, where companies are less vulnerable to bad publicity.
"The legislation has interfered with a transparency initiative that was happening anyway," said Bensusan, who's firm is the largest exporter of tin originating from Congo. "It is forcing an embargo. There will be an increase in smuggling, and more people will join militias. Miners put out of work have to eat somehow. I just don't think the US Congress thought this through."
A sneak preview?
To the bill's many critics, evidence of its likely consequences can be found in a current minerals export ban - in force since September in three of Congo's eastern provinces. The ban, announced after President Joseph Kabila visited North Kivu's Walikale territory - home to the region's largest cassiterite mine as well as a grisly July incident in which external pagerebels raped at least 179 women - was supposed to be lifted by 15 October. Though it remains in force, despiteexternal pagecosting thousands of jobs, mining controlled by armed groups has resumed. external pageAccording to Enough, the ban has "accomplished little more than creating increased tension in the east," as militias use "exploitative measures, including forced labor, to pressure local communities to continue extraction."
Though the motivation behind the ban remains a mystery, some believe it is linked to the government's aim to external pageintroduce large-scale mining in the region - a move that would provide a steadier flow of tax revenue. The prospect, however, of outside firms investing in such an environment is unlikely - due to security risks as well as Congo's abysmal record of corruption.
Barring the entry of such industrial scale operations, and assuming the current export ban is lifted, the end users of Congo's minerals must respond to the US legislation by continuing attempts to prove due diligence within the existing, artisinal supply chain structure. While many companies are working hard to do this, the fate of the region's mining hangs in the balance.
"Right now, I don't think anyone can certify one way or another if their minerals are conflict free," said Chuck Mulloy, a spokesman for Intel, a firm engaged in multiple transparency efforts, including the ITRI initiative.
"We believe we can find a way to verify our supply chain," he told ISN Insights. "But I don't want to forecast what will happen if we cannot."