Paper originally presented to the Norwegian Church Aid Roundtable "Towards best practice of supply chain mapping of conflict minerals", Oslo, 27 November 2009

Political Context

The East of the Democractic Republic of Congo has been in a state of conflict since 1993, with the spillover of the Rwandan genocide and subsequent regional conflicts, violent struggle around control of the Congolese state and local ethnic and land grievances between the communities of Eastern Congo each playing prominent roles at various times. Currently the situation in the provinces of North and South Kivu can be described as one of generalised low-intensity insecurity with pockets of violent armed confrontation. According to the UN Office of Humanitarian affairs, at the end of September 2009 North Kivu had around 1m internally displaced and South Kivu around 700.000 with the humanitarian situation deteriorating in both provinces.

War in Kivu has a tendency to directly affect the balance of power in the DRC as a whole. The Kabila rebellion which toppled the Mobutu dictatorship in 1996-97 originated in local rebellions in the Kivu provinces. After Kabila's alliance fell apart in 1998, Kivu was under control of the rebel movement RCD (Rassemblement Congolais pour la Démocratie) until 2003 when the RCD together with the other rebel armies entered a transitional government in Kinshasa which prepared historic free and fair elections in 2006. Sections of the RCD army refused to join the peace process and formed a separate army under the RCD general Laurent Nkunda who founded the CNDP (Congrès National pour la Défense du Peuple) in 2006. From 2006 to January 2009 the CNDP strengthened its hold on parts of North Kivu and grew into a nascent national rebellion. Other armed groups in the Kivu provinces, mainly constituted along ethnic lines, flourished in response. Finally, the remnants of the army and militia which carried out the Rwandan genocide 1994 and later formed part of Kabila's armed forces reassembled in Kivu after the formal end of the Congo war 2003 under the name FDLR (Forces Démocratiques pour la Liberation du Rwanda), growing stronger in recent years and gaining direct or indirect control of up to 40% of the Kivus.

The growing strength of both CNDP and FDLR in the two years following the Congolese elections of 2006, in turn legitimising the establishment of an increasingly unaccountable military elite on the government side, has made meaningful political and economic reform and reconstruction impossible. The provincial governments of North and South Kivu have been plagued by lack of finance, lack of control over security forces and public services, widespread corruption and weak capacity. Everyone knows that real power resides not with the elected institutions but with those who have access to guns. The commanders of the military regions are more powerful than the provincial governments, the commanders of armed groups are more important than the heads of local government.

The widespread view that instability in Eastern Congo is due to Rwandan meddling and a wish in Rwandan to weaken the DRC is not borne out by the facts on the ground. For years the DRC suspected Rwanda of building up the CNDP as a tool to exert influence in the Kivus. Then, a rapprochement between the governments of DRC and Rwanda occurred at the end of 2008 which led to the arrest of CNDP leader Nkunda in January 2009 during a military intervention by Rwandan forces - an intervention officially directed against the FDLR. Even this has not brought peace. CNDP forces and the other local militias have been integrated into the Congolese army FARDC but continue to follow their own agenda, with one foot inside the official structures and one foot outside. Human rights abuses have become more widespread, leading to more displacement. The military campaign "Kimia II" against the FDLR has slightly weakened the FDLR but not dismantled it, and the human cost in the DRC is very high.

In recent weeks, some disturbing new trends have emerged on the ground which point towards worsening instability in a pattern disturbingly similar to that of the years preceding the fall of Mobutu 1996-97 :

- land conflicts and conflicts about who has a right to live where are growing. In North Kivu, the fear that Congolese Tutsi who were driven into Rwanda in the mid-90s might return and claim their lands has led to a resurgence of ethnic militia activity amongst the Hutu, Hunde and Nyanga groups, partly allied with the FDLR against the government army which is seen as CNDP-infiltrated. A propaganda campaign to secure land against a "Tutsi invasion" led to the spontaneous emptying of IDP camps with tens of thousands of Hutu and Hunde inhabitants around Goma in September and October. Since then, around 12.000 Congolese Tutsi refugee households are said to have returned from Rwanda, mostly those not living in UNHCR camps but settled for example in the protected Gishwati forest or other areas where they are no longer welcome. There is a real danger of violent land conflict which could serve as a trigger for renewed ethnic war.

- The various armed groups are all in different ways disenchanted with their integration into the rag-tag government army FARDC and the perceived lack of payback by the government side in return for their willigness to lay down their weapons. Already in September, a number of leaders of armed groups previously fighting CNDP warned that they would return to war if prisoners were not released, troops were not paid and militia commanders' ranks were not respected politically and financially. This was followed by similar threats from CNDP itself. It appears that whenever one faction is thought to have integrated itself successfully, its enemies distance themselves from the process and pull out. A "coalition of the frustrated", each with their own and mutually exclusive agenda but united by common disregard for the state, is emerging, accelerating territorial and social fragmentation.

- The FDLR has lost territorial control in some areas and a large number of fighters following military operations against it, but it is becoming increasingly mobile and adept at finding new allies among local armed groups, including even some Congolese Tutsi, and friends in high places in Burundi and Tanzania and even within the Congolese army, as the new UN Group of Experts report has revealed. It is turning from a local militia operating a "state within a state" to the nucleus of an informal regional alliance for everybody who wants to fight the Rwandan and Congolese governments. For this it is drawing on the same informal friendship networks and trading patterns as those which originally gave rise to Kabila's rebellion against Mobutu in 1996 before this was taken over by Rwandan and Ugandan military.

Economic Context

The Kivu economy is usually discussed in the context of mineral exports and conflict finance. However, historically the economy in the Kivu provinces is based on agriculture and long-distance trade, not mineral exploitation.

Minerals only gained prominence when commercial agriculture was destroyed by conflict. Mining is not something desirable which people aspire to; it is a default activity which people turn to out of desperation when their usual activities are no longer possible due to insecurity. Mining has two crucial advantages in a time of prolonged crisis: it generates instant revenue on a daily basis; and its products are a non-depreciable and mobile store of value. This makes artisanal mining an attractive activity for rural populations for whom agriculture, with its longer time frames, becomes too risky in times of war, and for young generations who grow up in a time of instability and social dislocation and need to earn a living quickly. In a mine, you can earn money on the same day and your workplace will be tightly controlled and protected if necessary; on a farm, you have to wait for market day or even a harvest and your fields and gardens are isolated and vulnerable to attacks with looting and raping. And in times where any kind of visible wealth is likely to be attacked, stolen or looted, minerals are an attractive alternative for traders and businessmen who can invest surplus cash in gold instead of houses or land, and who can use minerals as an alternative to stocks of perishable goods or large amounts of cash.

This convergence of interests between Kivu's historically dominant caste of powerful traders and its majority population of subsistence farmers is an important reason for the special place occupied by the mineral trade in Eastern DRC today. It is a symptom of unprecedented economic decay and possibly also a precursor of new socio-economic relationships. If excessive dependence on the mineral trade is seen as a conflict-exacerbating factor, then peace-building will depend on the reemergence of other forms of economic activity which are less dependent on short-term gain and mobil physical assets.

Kivu is import-dependent, a hub of cross-border trade towards and from East Africa and Asia. Butembo in North Kivu is one of the biggest commercial centres in the Great Lakes region and the Kasindi border post linking this part of North Kivu to Uganda is the second most lucrative after the Atlantic seaport Matadi. Petroleum products and construction materials are the main import goods and taxation of imported goods is the biggest and most reliable source of revenue, whether for the government or for an armed group, far outstripping any export earnings.

Historically, import goods were traded for the products of commercial agriculture such as coffee or foodstuffs. Most commercial agricultural enterprises in the Kivus were either looted or abandoned during the wars beginning in 1993 and agricultural production today is mostly small-scale or subsistence, with many inhabitants of rural areas turning to mining instead.

What has not changed is the dependence of the region on cross-border trade and therefore the centrality of the control of trade routes and outlets to control of the Kivus. Whoever controls the border posts of Kasindi, Ishasha, Bunagana and Goma has a stranglehold on North Kivu, which is why control of these four main border posts of the province is usually divided between different factions. For years, Goma was controlled by the provincial government and parts of the security apparatus, Bunagana by CNDP, Ishasha by FDLR and Kasindi by local traders operating a separate customs regime. Today officially the state controls everything and moves to formalise trade have intensified. A similar situation can be observed for South Kivu.

The perception that minerals fuel the war in Eastern Congo has come to dominate international debate in recent years. Successive UN panels and groups of experts since 2000 demonstrated that some dynamics of the Congo war could indeed be explained by violent competition around the control of mineral resources. This reasoning subsequently prevalent, as though there were no others reasons for violent conflict in DRC and as though competition around Congolese minerals could not be carried out in other ways. The fact is, however, that Eastern Congo was at war long before minerals became an issue and that the most important mining areas of DRC are at peace.

This does not mean that there is no important work to be done regarding the role of the Congolese mineral trade in violent conflict. It means that this work cannot be a substitute for peace-building. It is at best an accompanying measure and it can, if not properly carried out, itself fuel conflict.

Current trends in cassiterite trading

North Kivu's cassiterite mainly originates from the mines in the Bisie area of Walikale district in the undeveloped west of the province. The mining rights in Bisie have always been contested and currently there is no legal concession holder actually exercising any activity, which however does not prevent mining from being carried out by locals under military control. The area is not accessible by vehicle and trading goods are brought in and out by air, making it very easy for specific traders or military strongmen to exercise monopoly control and extract maximum profits. The airstrip Kilambo is a former piece of road.

For several years until the beginning of 2009, the entire area was under control of the 85th FARDC brigade led by the former Mai-Mai Col. Samy, who was suspected of profiting from cassiterite production through his privileged links to the Kinshasa government. During this time, control of the area was shared between the 85th brigade which controlled the main urban centres and mines and the FDLR which controlled much of the rest; it is unclear to what extent the two forces colluded and to what extent FDLR control of mines was an issue. The Kinshasa government occasionally proounced the Bisie mines closed, but at the same time it repeatedly resisted international calls to remove the 85th brigade and submit it to an integration process into the government army FARDC. Instead, Walikale was used as a springboards for reinforcements sent to fight the CNDP rebellion further east closer to Goma. When the CNDP was integrated into FARDC in the first few months of 2009, the 85th brigade was moved to South Kivu and ex-CNDP units took their place. At present it remains unclear to what extent production is still under military control. A firefight between ex-CNDP troops in FARDC and a local trader turned militia leader with presumed FDLR connections left dozens dead in August 2009. There are reports that some ex-CNDP officers are now profiting from cassiterite mining.

Cassiterite from South Kivu and from Manono district in Katanga province, where tin mining has a long history, is also partly exported through Goma when the Bukavu export route becomes difficult. Manono cassiterite is reputed to have a higher tin content than that of Bisie.

The revenues generated from the Kivu cassiterite mines have long been recognised as strengthening specific armed actors in Eastern DRC, both inside and outside government forces, especially the FARDC 85th brigade in North Kivu until the begnning of this year and the FDLR in South Kivu. It is perfectly possible for an "illegal armed group" to export these minerals completely legally through registered and licenced traders and yet use the revenues to sustain violent activities. The issue of legal versus illegal trade is thus of limited relevance. Legal trade can finance warlords, illegal exploitation can generate income for large numbers of otherwise completely destitute people.

As coltan and cassiterite mining in North Kivu emerged during the war as a crisis symptom, it took some time for it to be recognised as an economic activity in its own right. Registered exports were very low for a long time and only began to approximate the capacity of the province's mines, estimated at around 10.000 tons/year, in the years since the elections 2006 :

Source: Division des Mines et Géologie, Goma

Moving from unregistered towards registered exports does not by itself improve the mineral trade, but it is a precondition for improvement. It increases the visibility of the trading chain and its individual actors and therefore in theory makes it possible to check whether rules and regulations are being upheld, who benefits from the trade and where revenues end up.

A series of important developments has helped to make the cassiterite trade more visible and at the same time highlighted the remaining political obstacles remain to full transparency.

Tax simplification, but not followed through

One disincentive to formalised exports was the DRC's long-held insistence on taxing exports which creates an incentive for tax avoidance and also for smuggling when neighbouring countries do not levy export tax. The move away from unregistered exports has been accompanied by revisions in taxation and customs regulations in order to remove disincentives for legal trade, and by attempts to enforce existing laws limiting the number of competing state services at the border which sometimes extort money to four instead of over 20 as otherwise the case.

Until 2008, export duty rates for cassiterite as well as other minerals were set at 5% of FOB value. The baseline - the theoretical 100% - for such taxes is set by the government customs service OFIDA according to prevailing market prices, but in practice it often remains unadjusted for long periods of time. Thus in July 2008 OFIDA raised the baseline for cassiterite from $4/kg to more than $14/kg, more than tripling effective tax rates. This led to an export strike by North Kivu's mineral trading companies on 19 July 2008, and the provincial government was forced to find a compromise: the new higher baseline remained but the tax rate was reduced to 3% on 22 August and further to 1% on 2 December 2008, the latter measure intervening at the height of the Nkunda war when most trading had stopped anyway and world market prices had dropped sharply due to the global financial crisis.

Additionally, all taxes and charges payable at export were straemlined into a single payment: rather than the trading firm having to pay each state service separately, one single payment is made into a government account at the Central Bank and this is then distributed within government. This includes payments due to the provincial level. The number of separate services present at the border posts, mostly with no legal basis and raising illegal payments, dropped following this measure.

However, on 25 May 2009 a new provincial export tax of 3% on artisanal mining products was introduced in North Kivu, outside the existing regime. This was not immediately applied and trading firms continued to pay the legal 1% tax. It further emerged that the amalgamation of the various taxes into one single payment was not fully implemented: 12 separate payments were still due, according to the traders' association in September 2009. On 17 September 2009, the North Kivu Mineral Traders Association ANEMNKI wrote to the provincial government that "we are unable to exercise our functions due to the multiple taxes we are due to pay and which never remain stable, variations occurring on a daily basis without motive or cause". Several state bodies had unilaterally raised their taxes, leading to confusion. Negotiations on this were supposd to take place within the North Kivu provincial assembly but stalled when the assembly instead tried to impeach the provincial governor for corruption in October 2009.

The reason for all this appears to be that the new streamlined payment regime disadvantages the provincial government, as all payments flow straight into central government coffers and the amount due to the provinces is not properly retroceded. This has forced the North Kivu provincial government to levy its own taxes outside the new structure. A similar development has been recently observed in Katanga, where on 19 October the provincial government unilaterally ímposed an export duty of $5/kg cassiterite for minerals leaving Katanga for other DRC provinces. Given the prevailing world market price, this effectively means a 100% tax in Katanga on interprovincial cassiterite movements. The transfer of Manono cassiterite to the trading houses of Bukavu and Goma has now all but ceased.

In the latest development, the North Kivu provincial government has now decreed that all exporters have to apply for new licences from 2010. These will only be granted for cassiterite with at least 70% tin content (the corresponding figures for tantalum oxide in coltan and niobium in pyrochlore are 20 and 40%). Given that the average in 2008 was 62% and no firm got above 67%, this will require extensive investments in processing capacity - which in turn require public infrastructure investments such as a functioning electricity supply.

Trading chain transparency, but not in practice

Parallel to the moves to formalise exports, the DRC authorities have tried to centralise the mineral trade so as to make it easier to exclude rogue elements and to engage in a general revision of the often anarchic licencing procedures for mining and trading. Thus at a mining conference for Eastern Congo in Goma on 1-2 July 2009, the DRC mining minister proposed the following measures :
- the rapid conversion of the 120 existing exploration permits in North Kivu into mining permits, which are subject to more stringent conditions and can be revoked more easily if no activity is actually forthcoming; many exploration permits are not used for their stated purposed but serve rather to lay a claim on land ownership;
- the restriction of mineral trading licences to 30 per province, which theoretically means applying more stringent conditions for licences.

It has also been agreed to try and centralise mineral trading within Eastern Congo at the point where "négociants" who buy artisanal mining products in the mines sell on to the "comptoirs" based in Goma or Bukavu who then engage in export, in two sites each in North Kivu and South Kivu. For North Kivu, Rubaya (Masisi district) and somewhere in Walikale district have been retained; for South Kivu, Hombo and Kamituga. The idea is that at these four sites, all relevant state services have offices, taxes can be paid directly, there is a harmonised system of packaging, labelling and control, and each mineral load is issued with a certificate stating its origin, route and destination. This latter information should be centralised at the provincial mining ministries.

If properly applied, this system would be a major step forward: it would lay the ground for a certified trading chain and also for the applicability of due diligence rules whereby minerals originating in areas clearly under control of eg FDLR militia can be excluded from legitimate trade. However, all this has hitherto remained a declaration of intent.

Local and international action, but not synchronised

Faced with the prospect that the export of Eastern Congolese minerals might be excluded from world markets either through UN sanctions or through reticence by purchasers anxious about their reputation, the local stakeholders have sought to work together. In all the major cities of Eastern Congo - Bukavu, Goma, Butembo, Beni and Bunia - "National Trade and Transit Facilitation Committees" (CNFCT) were set up in mid-2008, uniting state services, including security services, and the private sector represented by the employers' association FEC in a structure with regular meetings. Officially this is part of the DRC integrating the international agreements with Rwanda, Uganda and Kenya on the "Northen Corridor", East Africa's main trade route starting in Mombasa on the Indian Ocean. But it also serves to discuss other subjects of common interest.

In South Kivu, the "Observatoire Gouvernance et Paix", a sister organisation of Pole Institute in North Kivu, has set up a "cadre de concertation" involving not only state services and private sector but also civil society and representatives of mining communities, especially artisanal mining which is otherwise unrepresented in formal structures. This structure also mets regularly and has managed to work out points of common interest and concern, especially regarding the licencing and taxation regime for artisanal mining.

One issue which all these structures feel strongly about is any kind of boycott of Eastern Congolese minerals on the world market. At the beginning of May 2009, the Belgian trading firm Traxys, one of the main buyers for Eastern Congolese cassiterite, said it was pulling out of Eastern DRC in response to the recently published interim report of the UN Group of Experts - this report had said that in 2007 Traxys had bought 1631 tonnes of cassiterite and 226 tonnes of coltan from trading houses whith buy fom FDLR-controlled mines. "In an industry that relies heavily on trust and integrity, it is important that Traxys preserve its reputation against even the false appearance of wrong-doing", the firm said. In September, the Thai-based tin smelter Thaisarco, owned by AMC in London, similarly suspended its purchases from Eastern DRC, citing "the threat of misleading and bad publicity".

These moves have been unanimously condemned in the DRC as counterproductive. The Observatoire Gouvernance et Paix, in a press release dated 8 October, warned of "dramatic consequences" for the South Kivu economy: "Given the number of people involved in artisanal mining and the size of their revenues, boycotting the sector is simply dangerous. It also risks massively increasing fraud and mineral smuggling towards neighbouring countries as these countries are not subject to the same due diligence requirements as the DR Congo." The day after, the DRC mining ministry confirmed it had requested AMC and Traxys to resume purchases, saying that the government was working on traceability in tin, coltan and wolframite and would certify sites free from armed groups which it was safe to buy from.

At that time, the final report of the UN Group of Experts, which was examined in the UN Security Council on 25 November 2009, had already been completed. It gave rise to UN Security Council resolution 1896, passed on 30 November, which renewed the mandate of the Group of Experts and expanded it to "recommendations for guidelines for the exercise of due diligence by the importers, processing industries and consumers of mineral products regarding the purchase, sourcing (including steps to be taken to ascertain the origin of mineral products), acquisition and processing of mineral products from the Democratic Republic of Congo". It also called on UN member states "to take measures to ensure that importers, processing industries and consumers of Congolese mineral products under their jurisdiction exercise due diligence on their suppliers and on the origin of the minerals they purchase".

It remains to be seen whether the various efforts on the international level to implement due diligence programmes - ranging from the work of the International Conference on the Great Lakes Region to the programmes of the German GTZ to establish a Certified Trading Regime - are taken forward in cooperation with the existing efforts and structures on the ground in Eastern Congo.

Dominic Johnson, Pole Institute, Goma, DR Congo

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