Dominic Johnson
Pole Institute, 19 July 2010

Hidden away in an ambitious piece of financial sector reform legislation, the US Congress has passed a law aiming to cut the link between mineral trade and persistent conflict in Eastern DRC. It is a laudable goal, but the means employed risk causing considerable economic damage in Eastern Congo. The end effect would then be the opposite of that intended: pushing people towards conflict rather than leading them towards peace.
The "conflict minerals" legislation is contained in Chapter XV (Miscellaneous Provisions) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a monster of more than 2300 pages passed by the US Senate on 15 July after a similar vote of the House of Representatives on 30 June. It was signed into law by President Barack Obama on 21 July. Here are the main provision of the relevant Section 1502:

- "It is the sense of Congress that the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo, particularly sexual- and gender-based violence, and contributing to an emergency humanitarian situation therein"

- Within 270 days, any person or enterprise required to register with the Securities and Exchange Commission (SEC) will be obliged to "disclose annually" whether "conflict minerals" used by it "did originate in the Democratic Republic of the Congo or an adjoining country". If they did, a report is required including "a description of the measures taken by the person to exercise due diligence on the source and chain of custody of such minerals, which measures shall include an independent private sector audit of such report", "a description of the products manufactured or contracted to be manufactured that are not DRC conflict free", and "the facilities used to process the conflict minerals, the county of origin of the conflict minerals, and the effort to determine the mine or location of origin with the greates possible specificity"

- Within 180 days, the State Department and USAID must submit "a strategy to address the linkages between human rights abuses, armed groups, mining of conflict minerals, and commercial products". This strategy is to include measures to "monitor and stop commercial activities... that contribute to the activities of armed groups and human rights violations in the Democratic Republic of the Congo" and to "develop stronger governance and economic institutions that can facilitate and improve transparency in the cross-border trade involving the natural resources of the Democratic Republic of the Congo to reduce exploitation by armed groups and promote local and regional development"

- Also within 180 days "a map of mineral-rich zones, trade routes, and areas under the control of armed groups in the Democratic Republic of the Congo and adjoining countries" is to be produced, to be updated at least every 180 days

- A product can be certified as "DRC conflict free" "if the product does not contain conflict minerals that directly or indirectly finance or benefit armed groups in the Democratic Republic of the Congo or an adjoining country". An "armed Group" is "an armed group that is identified as perpetrators of serious human rights abuses in the annual Country Reports on Human Rights Practices". The term "Conflict Minerals" refers to "columbite-tantalite (coltan), cassiterite, gold, wolframite, gold, or their derivatices, or any other mineral or its derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country". "Under the control of armed groups" refers to areas in which armed groups "physically control mines or force labor of civilians to mine, transport, or seel conflict minerals; tay, extort, or control any part of trade routes for conflict minerals, including the entire trade route from a Conflict Zone Mine to the point of export... or... trading facilities, in whole or in part, including the point of export from the Democratic Republic of the Congo or an adjoining country".

Thie legislation is the fruit of intense lobbying by international and especially American NGOs aiming to suppress Congolese "blood minerals" whose trade supposedly makes war crimes in DRC possible - an analysis which, we contend, is an extreme simplification of the real motives and dynamics behind Congolese conflicts.
These NGOs were of course very pleased with their "victory" in Congress and made this sentiment public on 16 July. According to Glbal Witness, these "landmark reforms", which also include requirements of transparency and payments disclosure in all extractive industries, are "a huge victory for corporate accountability" which will promote "responsable trading practices". John Prendergast, founder of the "Enough" campaign, called the law a "huge victory" with which "the world moved a step closer to ensuring that the supply chains for our laptops and cell phones do not finance violence in eastern Congo".
Economic operators on the ground are more circumspect. John Kanyoni, an established mineral trader in Goma and president of the Association of Comptoirs in North Kivu, said in a letter to the Economic Section of the US embassy in Kinshasa on 16 July that he was "totally shocked". The measures passed by Congress, he continued, were "in fact an embargo on materials from the Great Lakes Region... and even the whole African continent... Asking all the manufacturers to track every piece of metal in every single item they make is a gentle way of just telling them: Don't buy from DRC and adjoining countries, which is an embargo de facto". With the "unilateral US action", Congress was making existing and quite advanced international initiatives for transparency and due diligence in the Congolese mineral trade "of no consequence". "The consequence of the US regulations will be that thousands of Congolese will be jobless and might most probably join the armed groups.. We keep busy thousands of people without a chance of getting jobs."
Industy scepticism is already apparent. The American Jewellers' Association said on 15 July that the new legislation was a "nightmare" and "impractical" because the means of verifying the exact source of every mineral did not exist - unless one only used products from specific mines, not mixed with any other produce from other sources. Other reports indicate that the electronic industry is already looking at alternative mineral supplies. It must be stressed that the new legislation does not just affect the DRC, but all "adjoining countries" too: Angola, Zambia, Tanzania, Burundi, Rwanda, Uganda, Sudan, the Central African Republic, the Republic of Congo (Brazzaville) - half the African continent, and a very mineral-rich region.
There is in our opinion a real danger that initiatives like this will, through trying to eradicate illegal trade which feeds armed actors in the DRC, kill the entire trade. The efforts and costs involved in tracing, disclosing and verifying the exact source of mineral components and submitting to an independent aufit will lead international enterprises to either ignore the law or to turn their backs on the Great Lakes Region in order to reduce risk. Even if business plays by the rules, the legislation will make Congolese resources more expensive without any benefit to the Congolese themselves. The only beneficiaries will be the international consultants who carry out verifications, audits and mappings.
It must be stressed that the economy of Kivu would collapse if mineral export revenues dried up. Following decades of conflict, almost everything is imported, and the foreign exchange needed for this comes either from mineral exports or from international aid or UN spending. As this second source is about to diiminish, following progressive reductions in humanitarian aid and MONUC activities, Kivu's economic dependence on the exploitation of its natural resources is due to increase in years to come. This situation may be deplorable, but Kivu's population will not find peace by losing its only own sources of revenue - in fact, quite the opposite is likely.
Pole Institute calls for a broad cross-border consultation involving public and private actors on the ground in order to find practical ways of promoting responsibility in the natural resource trade which develop the economy instead of killing it.

Dominic Johnson
Pole Institute, 19 July 2010

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