A Global Village
Issue 5 » Resources

Conflict Minerals in the DRC

Gordon Hewitt, Imperial College London

Global consumer demand for mobile phones, laptop computers and other electronic equipment is increasing rapidly. The manufacture of these devices relies on minerals such as tin, tantalum, tungsten, and gold. A significant deposit of these ores is found in the Great Lakes region of Africa, with the Democratic Republic of Congo (DRC) alone holding an estimated 64% of world coltan reserves1, the mineral from which tantalum is refined.

Mining and quarrying are key industries to the DRC, representing 8.6% of GDP in 20062. At the same time, the sector suffers from many problems; including corruption, the presence of child and forced labor and very low safety standards. Armed groups control mining operations in eastern DRC and funds raised from mining are fueling the ongoing civil war in the region.

With clear analogies to the blood diamonds of Sierra Leone and Angola, the US has taken steps to force importers to disclose whether any of these conflict minerals have been included in their products. Yet will this measure have the desired effect or instead result in plummeting prices and increased poverty for vulnerable Congolese miners?

The DRC is the site of the largest conflict in modern African history. In the decade 1998 – 2008, the war and its aftermath had claimed the lives of an estimated 5.8 million people, and violence still persists in the region today.

The eastern region of DRC, specifically the provinces of North and South Kivu, is home to a wealth of natural resources. Armed groups involved in the conflict control many of these mines, and revenues from mining activities represent a significant source of finance to these groups, fueling the ongoing conflict. In 2009, military forces – either the Democratic Forces for the Liberation of Rwanda (FDLR) or the Congolese army – controlled 12 of the 13 major tin, tantalite and tungsten mines in the eastern DRC3.

By forcing companies
to disclose their use
of conflict minerals,
it is expected that
they will clean up
their supply chains
in an effort to avoid
negative public
attention and consumer
boycott

Whilst being rich in mineral resources, this part of DRC has one of the poorest human rights records in the world and is plagued by violence. The NGO Human Rights Watch reported that the total number of sexual violence cases registered at health centers in North and South Kivu exceeded 7,500 by September 20094.

In response to the problem of conflict minerals, the US has passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Included in the act is a clause that requires US companies to disclose whether any conflict minerals, sourced from the DRC or its neighbouring countries, have been included in their products.

Whilst the act has good intentions, it may result in smelters and producers withdrawing from the DRC, which would jeopardize the ability of an estimated 750,000 to 2,000,00 artisanal miners to earn a living and support their dependents.

Miners, Négociants and Comptoirs
Mining in eastern DRC is small scale – in 2008, there were no industrial mines in the region5. Minerals are quarried by hand in open cast mines, and moved by artisanal miners from the mines to small villages. Local militia groups stop miners at checkpoints along the way, and demand payment in minerals or cash for safe passage. Due to the lack of infrastructure in this part of the Congo, miners travel on foot, carrying heavy loads for long distances.

Once at the village, local dealers or négociants purchase the minerals. Miners themselves are poorly paid, receiving around $10 per kilogram of mineral ore – a fraction of its market value6. In the regional capitals of Bakuvu (South Kivu) or Goma (North Kivu), négociants sell the minerals on to traders or comptoirs. These comptoirs collect ore from a large number of négociants, mixing it to perform some basic processing. The processing centers are located in DRC and in neighboring countries like Rwanda.

Comptoirs have links to international trading companies, who transport the ore to smelting sites in the Middle East, South and East Asia. Once the ore has reached smelting sites, it is mixed with ore from Australia, Canada and Brazil. The ore is refined to extract metals that are then are sold onto the world market.

The above supply chain lacks transparency, presenting many opportunities for diversion and corruption. In 2007, it was estimated that 14,000 tons of cassiterite arrived into Goma from the Walikale region. This ore had a market value of $88.7m, but only $800,000 was estimated to have remained in the area where it was mined. The lion’s share of the wealth generated from the mining activities was accrued to military, business and political leaders7.

Dodd-Frank
On 21 July 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Act) into law. Section 1502 of the Act specifically focuses on additional disclosure requirements for companies who source conflict minerals from the DRC and its neighboring countries.

The inclusion of section 1502 was due to an understanding within US Congress that the exploitation and trade of conflict minerals is fueling the war in DRC. By forcing companies to disclose their use of conflict minerals, it is expected that they will clean up their supply chains in an effort to avoid negative public attention and consumer boycott.

The ruling applies to companies that file reports with the Securities and Exchange Commission under the Exchange Act and use conflict minerals in the manufacture of their products. The definition of a qualifying company is broad, but at a high level it would include companies operating in the electronics, communications, aerospace, automotive, consumer goods, jewellery, toy, industrial machinery and apparel industries.

Whilst the Act has been signed into law, specific rules relating to section 1502 have not been released at present. These are expected towards the end of 2011. As a result, it is not possible to determine specific implications of the Act, but it is possible to consider some potential impacts.

Disclosing publically that your products contain minerals that have potentially funded militia groups in eastern DRC will be deeply unpopular with companies for fear of consumer boycott and reputational damage.

As demonstrated by the description of mining operations in eastern DRC, the supply chain for conflict-prone minerals lacks transparency. Companies may feel that the only way to ensure that the minerals they use are conflict free is to stop sourcing from the DRC and its neighboring countries entirely.

It is the demand for 
consumer electronics 
that is driving the 
extraction of minerals 
from the DRC

If a company does decide to continue sourcing from the DRC, it will have to issue a Conflict Minerals report. Issuing such a report not only exposes a company to the risk of reputational damage, but it also represents a significant expense. This will further push companies to withdraw from DRC and its neighboring countries.

Withdrawal from DRC would have a significant impact on the estimated 750,000 to 2,000,000 artisanal miners working in DRC. It would not lead to the cessation of mining activities, but it would result in the prices for minerals from the DRC to drop as demand plummets. Considering that DRC is ranked 168th out of 169 in the 2010 Human Development Index8, any loss of income will hit the country hard.

Transparency
Withdrawing from the DRC will allow companies to clean their supply chains, but it does not address the root cause of the problem. As a result, a boycott does not provide a sustainable solution to the issues associated with conflict minerals.

All stakeholders in the DRC mineral trade need to work together to develop long-term solutions. Stakeholders include governments of countries that produce, process and transit conflict prone minerals, the UN, comptoirs and négociants in DRC, metal smelters, companies purchasing refined minerals, investors of those companies, civil society in DRC and its neighboring countries, and the international civil society.

The obvious first step would be to work towards lasting peace in eastern DRC, and de-militarize the region – yet, as with all African conflicts, to say this is complex is an understatement. One of the main drivers of the extortion is the large military presence in the region. Soldiers loyal to both FDLR and the DRC government often go months without pay, and therefore support themselves through the mines.

The second step would be to create more transparent supply chains for conflict-prone minerals. To ensure that the funds used to purchase minerals do not end up the in hands of armed groups, it is essential to create a system to track minerals from mines where they are extracted through to the smelters where the ores are refined, and on to the companies that use the metals in their products.

Such an approach was largely effective in stemming the flow of blood diamonds under the Kimberley Process Certification Scheme (KPCS). Under this scheme only rough diamonds that are transported in sealed packages with accompanying certification may cross international borders. 75 countries worldwide are signed up to this scheme.

An analogous system, currently being piloted by the International Conference on the Great Lakes Region (ICGLR), involves identifying mines that are not controlled by armed groups and certifying minerals that have been mined at these sites. The certified minerals are placed in tamper proof containers and tracked throughout the supply chain. The regional certificates serve as a guarantee that the minerals were mined under acceptable conditions, in areas free from conflict, and have exited their country of origin legally, with all dues and taxes paid.

The proposed system is highly complex, involving significant investment from many of the stakeholders in the mineral trade, but it does offer an opportunity to create a more transparent and just supply chain for conflict-prone minerals.

If companies decide to withdraw from the DRC in response to their obligations under the Dodd Frank Act, a system such as this would be harder to implement as a major stakeholder in the mineral trade has effectively chosen to bury the issue of conflict minerals.

Blackberry or iPhone?
It is the demand for consumer electronics that is driving the extraction of minerals from the DRC. Sales of mobile phones worldwide reached 1.6 billion units in 2010, up 32% from the previous year9. In the same year, 352 million computers were sold globally, a 14% increase on 200910.

The supply chain for conflict minerals is long and opaque, which means that consumers are often unaware of the issues associated with their purchases. Educating consumers about the issues described in this article will result in greater pressure on companies like Apple and Nokia to address the problems associated with conflict minerals.

Yet there are no quick fixes, all stakeholders in the DRC mineral trade need to work together to develop long-term solutions. It is a combination of action by government, enterprise and the consumer that will reject conflict-prone minerals and refuse to fund terrorism and torture.

Do you have blood on your hands?

Gorden Hewitt is a postgraduate student at the MSc Environmental Technology, Imperial College London. He also was a 2011 summer intern at the UNited Nations-backed princicples for Responsible Investiment Initiative

Comments

  • Posted by Ampeire Ian on Jul 30, 2013 1:12 AM

    Mineral conflict in Congo should be stopped. Everyday ,children ,mothers have suffered much in Congo due to the fact that big companies still have got heavy demand of minerals from there. People have always washed blood from their hands daily to everyday that it has become a life to life activity

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[1] United States Government Accountability Office (2008)
[2] OECD (2008) African Economic Outlook: DRC.
[3] Blore S. & Smillie I. (2011) Taming the Resource Curse: Implementing the ICGLR Certification Mechanism for Conflict-prone Minerals.
[4] US Department of State (2009) Human Rights Report on DRC.
ITRI (2008) Factsheet on Cassiterite production and trade in DRC.
[6] Blood Coltan (Documentary film) (2008).
[7] The Extractive Industries Transparency Initiative (EITI) & Artisanal and Small-Scale Mining (ASM) (2007).
[8] UNDP Human Development Index (2010).
[9] Gartner, Inc. (2011) Competitive Landscape: Mobile Devices.
[10] International Telecommunication Union (2011).