Congo Siasa

Thoughts about conflict minerals

Readers of this blog will probably have read David Aronson’s lucid Op-Ed in The New York Times a few days ago. David argues that the Dodd-Frank legislation – the “Obama law” as some Congolese refer to it – has produced a de facto embargo of minerals in the eastern Congo and has actually benefited abusive military commanders.

Efforts to render minerals supply chains more accountable have indeed had unintended adverse effects. As I have written here before, commanders such as Bosco Ntaganda have benefited from smuggling and thousands of people may have been put out of jobs. There is no doubt that the implementation of the law has been sorely wanting, and that there need to be more focus on governance and political developments in general and not just conflict minerals. Nonetheless, I still believe that the Dodd-Frank bill – in Section 1502 on the Congo – should be supported.

Why?

Here are some thoughts about David’s piece.

1.  The Dodd-Frank legislation in no way mandates or supports a real or de facto embargo on minerals exports from eastern Congo.  While in general the Dodd-Frank legislation has had some foreseeable negative side-effects in the region, it is important not to confuse the law itself and its perception. The SEC regulations will not enter into effect until January 2012 at the earliest, so it would be misleading to speak of the “impact of the Dodd-Frank legislation” before the regulations have even been promulgated.  Indeed, the “de facto embargo” that the Op-Ed speaks of actually consists of two parts: a Congolese-imposed export ban on minerals (September 2010-March 2011) and decision by the main electronics lobbying body in the U.S. (the Electronics Industry Citizenship Coalition) to stop buying minerals from the Congo that have not been tagged or traced (April 2011-now).

The Dodd-Frank legislation did not directly lead to these initiatives, nor does it require such bans or embargoes.  Instead, it requires companies to state publicly what they have done to implement due diligence with regard to Congolese minerals.  While it is true that the fears and interests of various parties could have been better managed by the U.S. and Congolese governments – the minerals industry in particular has been taking a hard-line position in defense of its interests – this does not undermine the validity of the law itself.  In fact, it demonstrates the potential power of the law to induce real reform, and the importance of engaging with companies now to ensure they do not misunderstand the intent and purpose of Dodd-Frank.  Many analysts in fact believe the EICC somewhat cynically is taking this extreme de facto embargo stance to try to water down Dodd-Frank and delay its due diligence measures as much as possible.

2.  David’s suggestion that the legislation is out-of-date, arguing that most Congolese rebel groups have been integrated into the Congolese army, does not accurately reflect the reality on the ground.  According to the United Nations’ most recent report (June 7, 2011) on these rebel groups, at least a dozen rebel groups remain active in the Kivus and many derive considerable profits from mining.  David is correct in suggesting that some Congolese army commanders have benefited through smuggling, but both the SEC and the U.N. specifically include the Congolese army in their initiatives and require due diligence to detail any involvement of Congolese officers in the supply chain.

In general, David seems to imply that doing nothing would have been better than pushing for greater transparency.  However, as various United Nations and NGO reports (including reports by Eric Kajemba and other Congolese activists) have explained in depth, the link between armed groups and mining remains strong – and delinking that nexus remains key to broader reform efforts in the region.

3.  The Op-Ed discounts the positive impacts of Dodd-Frank.  It places an emphasis on the short-term negative impact of how the Electronics Industry Citizenship Coalition and the Congolese government have immediately responded to the Dodd-Frank legislation.  However, there also have been positive developments due to the push for transparency.  The Congolese army has withdrawn from some of the largest mining areas, including the Bisie tin mine, the largest tin mine in the region which produces over 70% of all tin from North Kivu province.  In addition, some large multinational corporations (Malaysia Smelting Corp and Rajesh Industries) have expressed an interest in investing in large-scale industrial mining in the Kivus and have said they would cater to western markets and would invest in certification and traceability initiatives.  While these promises have not yet fully materialized, and industrial mining carries with it risks of its own, it is a step in the right direction. Furthermore, industry leaders such as Apple and Motorola have come up with detailed certification and supply chain due diligence plans that demonstrate their ongoing commitment to purchasing in the region.

4. The Op-Ed give the impression that all Congolese oppose the Dodd-Frank legislation. This is misleading.  As recently as May 2011, a group of over 50 Congolese NGOs, together with over a dozen US and European NGOs, expressed their support for Dodd-Frank and urged for its rapid and thorough implementation. Since the beginning of the war, Congolese groups have expressed their concern about the link between mining and conflict and have pressed for action, including transparency, due diligence, and certification initiatives.  Even the activists that Aronson quotes in his piece, Eric Kajemba and Didier de Failly, despite their complaints with regards to Dodd-Frank, recognize that the law is a reality and they are now talking to the U.S. government to find ways to better implement it.  I interviewed Kajemba only last week in this space, and Kajemba said he supported the spirit of the Dodd-Frank legislation but expressed deep concern regarding the way it has been perceived and implemented so far.

This sentiment is echoed not only by large advocacy groups such as the Enough Project and Global Witness, but also the Organization for Economic Cooperation and Development and the United Nations. In fact, the U.N. Group of Experts in their report of June 2011 said: “Since its development in 2010, this United States legislation has proved an important catalyst for traceability and certification initiatives and due diligence implementation in the minerals sector regionally and internationally.”  This sentiment has been echoed by many groups, both Congolese and others, who have officially submitted their opinions to the SEC for them to take into consideration while they draft the regulations.  The authors of Section 1502 of the legislation also consulted with a variety of Congolese groups and received their support in drafting the bill.

5.  Efforts are currently underway to see how Dodd-Frank and the OECG guidelines can be implemented, the financing of armed groups undermined, while boosting transparent investment in local mining communities and livelihoods.  In particular, the U.S. government is working with international partners and industry members to implement a dual-stamp system – one in the eventuality that companies can determine their products are “conflict-free,” but also one in the immediate term in which companies can state they are “due diligence compliant.”  This dual system would help ensure that companies working to fulfill the spirit of the Dodd-Frank legislation and to mitigate any possible use of conflict minerals in their supply chains are not penalized for not immediately becoming “conflict-free.”