As legislation requiring large U.S. companies to disclose the origins of the minerals they use is meant to come into force this year, Crisis Group sent a mission to North Kivu to assess the different strategies used to fight conflict minerals and their impact in the field.
For many years, it has proved impossible to find a solution to the problem of the illegal exploitation of minerals in eastern Democratic Republic of Congo (DRC) by actors in the conflict. The Kassem Report[i] and others that followed showed that the belligerents partly finance their activities from the sale of gold, wolframite, coltan and cassiterite – minerals very much prized by the electronics industry and valued at around US$60 million per year. Adoption of the Dodd-Frank Act by the U,S, Congress in 2010 resulted in an upsurge of international initiatives to make trade in conflict minerals in the Great Lakes zone transparent and prevent it from financing the warmongers behind the troubles in eastern DRC.
These new regulatory initiatives have provoked lively reactions locally, embarrassed governments in the region and divided experts. But to what extent do they have the potential to change things? The strategies formulated to combat the illegal exploitation and trade of minerals in the DRC include two major approaches. First, they aim to re-establish legitimate control over the mines. Second, more long-term, they aim to regulate trade to prevent conflict minerals from reaching the international market. These two major approaches complement each other but their limitations show that they must be accompanied by a profound reform in governance.
I. The failure of attempts to police the trade in minerals
The first attempt to police the trade in minerals came from the United Nations and targeted traders and companies in commercial relationships with the armed groups. Since the beginning of the 2000s, the UN Security Council has passed a series of resolutions about the illegal exploitation of natural resources in the DRC. Referring to Resolution 1493 (2003)[ii], Resolution 1596 (2005) imposed sanctions (assets freeze and travel ban) against individuals violating the embargo on the sale of arms to rebel groups in the eastern DRC.[iii] UN Security Council Resolution 1533 in 2004 provided for the creation of a group of experts to support the work of the sanctions committee. Having documented the illicit relations between armed groups, local traders and foreign companies in many reports[iv], the Security Council passed Resolution 1856 in 2008 calling on all states to take the steps necessary to end the illegal trade of minerals in the DRC[v]. However, this system of international identification and sanctions against traders and companies dealing with armed groups has not proved very effective. First, the sanctions committee has a very restrictive policy and has only sanctioned 31 individuals and companies in five years[vi]; second, the lack of political will by states has meant that the sanctions imposed often remain a dead letter. Finally, the companies indicated by the group of experts quickly change their commercial identity.
In a second phase, the United Nations Mission in DRC (MONUSCO) became involved in the struggle against mineral smuggling and attempted a few policing operations in support of Congolese authorities, in accordance with article 3 of Security Council Resolution 1856 (2008). In addition to these policing operations, various military operations were undertaken by the Armed Forces of the Democratic Republic of Congo (FARDC) with MONUSCO’s support to dislodge the rebels and re-establish the Congolese authorities’ control over the mining regions. However, despite the Umoja Wetu (2009), Kimia II (2009) and Amani Leo (2010) operations, the rebels have maintained control over small production sites. The FARDC have undoubtedly taken control of the large mines in the territories of Walikale (North Kivu) and Kalehe (South Kivu), but often only to extract the profit for themselves.[vii]
The most recent attempt to police this type of activity came on 10 September 2010, when Joseph Kabila, President of the DRC, banned the production and trade of minerals in the Kivus and Maniema. Accompanied by an order to demilitarise the mining zones[viii], this ban ought to have signalled a return to government control of the east. Unfortunately, this presidential measure did not end mineral smuggling nor military involvement in this activity[ix] and the ban was therefore lifted on 10 March 2011 in tacit acceptance of its failure.
These different coercive initiatives did not halt or reduce illicit relations between armed groups and those involved in the trade of minerals. On the contrary, they promoted the over-militarisation of the mining zones and shifted the focus of the problem rather than resolving it. The UN’s desultory attempts to police this international trade have foundered on the lack of cooperation by the countries providing a base for the main economic operators and the absence of a legal corpus that is binding on the importing companies. Meanwhile, attempts to re-establish government control in eastern DRC have not succeeded because of corruption and the clientilistic system of governing. Ignoring this context leads to the promotion of coercive solutions without the existence of any means of coercion.
Given the inability to retake the terrain from the armed groups and impose international discipline on the economic operators, that is, to pre-emptively resolve the problem, attempts have been made to implement regulatory measures.
II. The challenges of normative regulation
Having failed to re-establish legal production of minerals in eastern Congo, some international actors focused on preventing the flow of “conflict minerals” onto the raw materials market. This involved identifying the mines under the control of armed groups, introducing a traceability and certification mechanism to cover transfer from the mines to the trading counters and encouraging importers to only buy certified minerals. A map of mining sites in eastern Congo has already been available for a few years thanks to the work carried out by the International Peace Information Service. This map serves as a basis for traceability and certification initiatives.[x]
Traceability and certification initiatives
The International Tin Research Institute (ITRI), the German Federal Geoscience and Natural Resources Bureau (BGR) and the United Nations (which has established trading centres in the Kivus) have all launched supply chain traceability and certification initiatives. Implementation depends on the Congolese authorities in this sector.[xi]
The ITRI initiative, launched in 2009 after some of its members were accused of indirectly buying minerals from areas controlled by the rebels[xii], aims to improve the traceability of the entire supply chain of minerals extracted from the DRC.[xiii] The objective of the first phase was to check the legality of exporters in the Kivus. The second phase, which began in June 2010, aims to test a certification scheme at two pilot sites in Bisie, North Kivu and Nyabibwe, South Kivu. This scheme involves weighing, packaging and labelling cargoes of minerals before they leave the mine and recording their passage at various points in order to trace the supply chain. Independent audits should also take place to ensure that the documentation issued at trading counters corresponds to the information recorded in a database.
The BGR has designed a more complete system than the ITRI. Its Certified Trading Chain includes ethical transparency, environmental and social criteria in its certification system as well as a geochemical method of tracing minerals.[xiv]On the basis of a census and certification of mining sites, the scheme also uses a cargo packaging and labelling system at the point of production. However, this initiative also provides for the identification of the geochemical footprints of minerals, in order to determine their geographical origin. This system adds to the administrative certification of the origin of minerals a scientific method for the traceability and social and environmental certification of minerals.
In addition to these two initiatives, four trading centres have been set up in North and South Kivu[xv], in accordance with the recommendations of Security Council Resolution 1906 of 2009.[xvi] These centres are designed to centralise production and thereby facilitate control and certification by the Congolese authorities. MONUSCO is training police officers to ensure security at these centres.
The duty of due diligence and control by the market
The principle of due diligence set out by the OECD was not legally binding for a long time – until the American Dodd-Frank Act passed on 21 July 2010. In the wake of discussions on corporate social responsibility and guidelines on engagement in zones of conflict[xvii], the OECD finalised a methodology for due diligence for business use[xviii], which encourages companies to establish measures to control and trace the supply chain of minerals they obtain, make public these measures and submit them to an external audit. However, the non-binding element of these due diligence measures limits their effectiveness, as it did with the guidelines. In 2010, OECD Watch[xix] concluded that the latter are not strong enough to clean up the trade in minerals because of a lack of political will and the fact that they are not legally binding.
Congress has taken the principle of due diligence from the realms of woolly “soft law” and integrated it into American law through the Dodd-Frank Act. Section 1502 of this Act requires the American Securities and Exchange Commission to formulate rules that oblige companies to disclose the origin of their minerals. These rules provide for a three-stage control procedure over companies quoted on Wall Street.[xx] In the first stage, companies must determine whether they use wolframite, coltan, cassiterite and gold. If so, they must conduct an investigation and mobilise “reasonable” means to locate the origin of their minerals. If companies publish in their annual reports the steps that have allowed them to conclude their minerals were not extracted in the DRC or neighbouring countries, their products will be labelled “DRC conflict free”. Companies unable to give any indication of the origin of their minerals or those that have found that they originate from the DRC or neighbouring countries must determine the exact origin of the minerals in order to ensure they have not been supplied from rebel-controlled mines. A detailed report is required at this stage, including an assessment by an external auditor. Their products will not receive the “DRC conflict free” label unless they demonstrate that their minerals were supplied from mines under the control of government forces rather than other armed groups. By requiring companies to check and publicise this information, American law gives consumers the power to punish those companies that have acted unethically.
Not only does the Dodd-Frank Act represent a qualitative leap forward by making observance of the principle of due diligence compulsory, it also encourages the EU, another major importer of Congolese minerals, to follow suit. The EU is currently preparing regulations similar to the Dodd-Frank Act.[xxi]Meanwhile, on 1 March, the Congolese mining authorities began to introduce the traceability procedures developed with German technical assistance and to formalise the informal sector in the east of the country.
III. The limitations of controls and regulations: a problem of governance
The control and regulate approaches are complementary, but face serious feasibility, reliability and security problems related to the more general problem of governance in eastern DRC. These approaches have therefore already had unexpected consequences. Their lack of impact has led to a de facto embargo since the beginning of April.[xxii]
The initiatives conceived by international actors depend on the producer countries for their implementation. Producers and the International Conference of the Great Lakes Region (ICGLR) certainly receive technical assistance from foreign partners, first and foremost from Germany.[xxiii] Apart from the fact that it lacks coordination and risks leading to the existence of several certification systems in the Great Lakes, this technical assistance is not enough to compensate for the notorious lack of administrative capacity. With regard to certification, the Great Lake countries themselves believe the task is too much for them and have all asked Washington for a period of grace.[xxiv] Even the best organised state in the region, Rwanda, has requested more time, like the DRC, which is still wondering how it is going to administer an informal and violent mining zone as big as the United Kingdom. Even if all the Great Lakes countries were to introduce national regulations on certification and traceability, they do not have the administrative capacity required to ensure compliance (there have been no increases in either the budget or staffing of the provincial mining departments in North and South Kivu). The lack of capacity to maintain customs administration means that the problem of smuggling remains. This is especially acute in the case of gold (90 per cent of gold is smuggled, compared with 35 per cent of cassiterite[xxv]). Constrained to implement a policy that they do not have the resources to implement, the countries of the Great Lakes region are at an impasse.
In addition to the capacity of national administrations, the traceability and certification initiatives depend on the integrity of these administrations and the politicians who are giving the orders. However, corruption is rife in the natural resources sector. The problem of corruption overshadows the attempts to police and regulate the sector. The so-called Goma jet affair, which ended in the release of foreigners arrested in exchange for US$3 million and no proceedings against General Bosco Ntaganda, speaks volumes about the extent of corruption in the mining sector.[xxvi] This corruption is going to cast serious and lasting doubts on the reliability of any strictly national certification system.[xxvii]While the trade in gold between Uganda and the DRC and coltan/cassiterite between Rwanda and the DRC has been documented in reports published by the UN and NGOs, Uganda has said it no longer imports gold from the DRC and Rwanda says that most of the cassiterite it exports is of Rwandan origin.[xxviii]Finally, because of the possibility of fraudulent certificates, even buyers acting in good faith are always at risk of buying “certified” blood minerals.
Due diligence poses a more subtle problem of reliability – the quality and independence of audits. The credibility of due diligence rests completely on an independent third party’s exhaustive verification of statements made by companies. The form these audits should take has yet to be defined but it is indispensable that they are able to present full guarantees of independence and that they cover the entire supply chain from the mines to the electronics companies.
Far from having been reduced, the militarisation of production sites has increased during the last two years because of the military operations conducted against armed groups and the integration of militias into the army.[xxix] The consequence of this militarisation is violence against civilians and the emergence of mafia behaviour by mine operators. Considering the corruption and problems of unpaid wages that affect the security services[xxx], to entrust them with the trading centres is not very reassuring. The question that needs to be asked now is to what extent the militarisation of mining sites, which will intensify with the new wave of integration of armed groups, is compatible with the process of administrative, social and environmental certification.[xxxi] Transferring control of the mining zones from the armed groups to the FARDC does not mean there will be a drastic fall in the violence and exploitation perpetrated against the population, because the army is the main source of violence[xxxii]. It is still unpaid and the integration of the armed groups looks more like a game of pass the parcel. As military control of the mining zones and some trade routes is the basis for the militarisation of the local economy, the integration of armed groups and demilitarisation of the mines agendas are eminently contradictory.
These feasibility, reliability and security problems show the extent of the challenge facing state governance in the Great Lakes area in general and eastern DRC in particular. The existence of an undisciplined and unpaid army, the militarisation of the eastern DRC economy, the size of the informal economy, the extent of corruption among the networks of the elite means that major reform of the army in particular and the administration in general is required. The solutions currently proposed to deal with the problem of conflict minerals can only avoid these delicate issues for a while, issues already set out in the Kassem report in 2002. At a time when the world is involved in a race to obtain raw material, the problem of conflict minerals needs political and not technical solutions. No technical solution will stop the trade in minerals from promoting conflict. Only governance based on the rule of law will make the proposed technical solutions feasible. In the event of failure, there is a risk that one of the economic engines of the Great Lakes region will quite simply grind to a halt.
http://daccess-dds-ny.un.org/doc/UNDOC/GEN/N02/621/79/PDF/N0262179.pdf?OpenElement. This report ruled out an embargo or moratorium on raw materials exports from the DRC, but insisted on the need to impose sanctions (assets freeze and travel ban) to stop the illegal exploitation and trading of natural resources. In addition to these measures, the report also insisted on accompanying institutional measures, particularly reform of the army and international regulation of trade in minerals.
[iv] See the Final Report of the UN Group of Experts on the Democratic Republic of Congo Pursuant to Resolution 1857 (2008), Security Council, 2009, listing Thaisarco, Afrimex and other companies buying minerals from armed groups at http://www.un.org/ga/search/view_doc.asp?symbol=S/2009/603; and the Final Report of the UN Group of Experts on the Democratic Republic of Congo Pursuant to Paragraph 6 of Resolution 1896 (2009), Security Council, 2010, which highlighted the FARDC’s involvement in the minerals trade, at http://www.un.org/ga/search/view_doc.asp?symbol=S/2010/596.
[v] Article 21 of Resolution 1856, at http://daccess-dds-ny.un.org/doc/UNDOC/GEN/N08/666/94/PDF/N0866694.pdf?OpenElement, “Urges all States, especially those in the region, to take appropriate steps to end the illicit trade in natural resources, including if necessary through judicial means, and, where necessary, to report to the Security Council, encourages in particular the Government of the Democratic Republic of the Congo, to work with specialist organisations, international financial institutions and MONUC, as well as the countries of the region, to establish a plan for an effective and transparent control over the exploitation of natural resources including through conducting a mapping exercise of the main sites of illegal exploitation.“
[vi] See List of Individuals and Entities Subject to the Measures Imposed by Paragraphs 13 and 15 of Security Council Resolution 1596 (2005) at http://www.un.org/sc/committees/1533/pdf/1533_list.pdf, Security Council, updated on 1 December 2010.
[vii] For more details on FARDC’s involvement in the illegal exploitation of minerals, see Faced with a Gun, What Can You Do? Global Witness, July 2009, at http://www.globalwitness.org/library/global-witness-report-faced-gun-what-can-you-do and The hill belongs to them : the need for international action on Congo’s conflict mineral trade, Global Witness, December 2010.
[viii] RDC : minerais de sang, plus d’exploitation minière illégale plus de guerre, Kongotimes, 21 September 2010.
[ix] A series of cases implicating senior military officers in the trade of minerals came to light. A BBC investigation at the end of 2010 revealed that General-Major Amisi Kumba, number 2 in the FARDC chain of command had done a deal with a mining company granting it the right to exploit the Omate mine in exchange for 25% of the gold mined there. See http://www.bbc.co.uk/news/world-africa-11722142, BBC, 10 November 2010. Another affair implicated Bosco Ntaganda (on the list of individuals subject to UN Security Council sanctions and sought by the International Criminal Court) and a jet transporting four foreigners and US$ 6.5 million to buy gold. It was intercepted at Goma on 3 February 2011 when it was loading a cargo of 435.6 kg of gold ingots, under the supervision of Ntaganda’s men. RDC : Bosco Ntaganda, pour une poignée de dollars, udpsmedia, 23 February 2011.
[x] The interactive map of mineral sites produced by the IPIS is available at:http://www.ipisresearch.be/maps/MiMiKi/Areas/web/index.html. Instructions on how to use the map are available at: http://www.ipisresearch.be/mining-sites-kivus.php
[xii] See the Final Report of the UN Group of Experts on the Democratic Republic of Congo Pursuant to Paragraph 6 of Resolution 1896 (2009), which raises questions about the companies: Traxys (Belgium) and Thaisarco (Thailand). Following this report, Thaisarco published a press release announcing it was suspending its purchases of cassiterite in the DRC.
See http://www.itri.co.uk/pooled/articles/BF_NEWSART/view.asp?Q=BF_NEWSART_313589, ITRI, 10 July 2009.
[xx] The American Securities and Exchange Commission formulated thesepropositions on 15 December 2010 and they were due to come into force on 15 April 2011 but their implementation was delayed following the complaints of the Great Lakes countries and lobbying by the industry. The electronics industry, a major consumer of these minerals, is the most affected.
[xxi] Article 14 of the European Parliament Resolution of 7 October 2010 on Failures in Protection of Human Rights and Justice in the Democratic Republic of Congo at http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P7-TA-2010-0350+0+DOC+XML+V0//EN; article 8 of European Parliament Resolution of 15 December 2010 on the Future of the EU-Africa Strategic Partnership Following the 3rd EU-Africa Summit at http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P7-TA-2010-0482+0+DOC+XML+V0//EN.
[xxii] Trading companies have indicated to trading counters that they will not buy any more minerals without certification. That will mean considerable losses for the Rwandan trade balance (whose exports of coltan, cassiterite and wolframite represented around 28% of exports in 2009) and especially for North Kivu, whose exports already fell last year (by 16% for coltan and by 37% for cassiterite 2009-2010). Crisis Group interview, mines administration and trading counter representatives, Goma, April 2011. See also Killing the Economy in the Name of Peace? The New US Conflict Minerals Legislation for the DRC, Pole Institute, 14 August 2010.
[xxiv] Letter dated 18 February 2011 from the director of the Rwandan Mines and Geology Authority to the Electronic Industry Citizenship Coalition and letter dated 25 February 2011 from the president of the FEC Mines Committee of North Kivu to the president of the Securities and Exchange Commission. Radio Okapi, 1 April, Loi Obama sur les minerais du sang : la société civile du Nord-Kivu demande un moratoire.
[xxvi] The foreigners were finally released on 25 March after paying a fine of US$ 3 million. RD Congo : libération de quatre étrangers soupçonnés de trafic d’or, Afrique en ligne, 26 March 2011. Another recent affair concerns the traffic of 2.5 tonnes of gold, which vanished in North Kivu in January 2011, was intercepted in Kenya in February and vanished again after an employee of the Kenya Revenue Authority given responsibility for the investigation was killed. In a surprise visit to Nairobi on 3 March 2011, Kabila announced the creation of a joint commission of investigation to clarify this affair. See the article Kenya : enquête sur le commerce illégal d’or en provenance de la RD Congo, Afrique en ligne, 9 March 2011. Also see The Criminalisation of an Economic Sector in Eastern DRC, Pole Institute, November 2010.
[xxviii] The hill belongs to them: the need for international action on Congo’s conflict mineral trade, Global Witness, 14 December 2010.
[xxxi] For example, the Bisie mine is one of ITRI’s pilot sites and since 2009 it is under the control of former militia men integrated into the army. The Forces Républicaines Fédéralistes and several Mai-Mai groups have recently been integrated into the security forces. Crisis Group interview, members of MONUSCO, Goma, April 2011.
[xxxii] Third Joint Report of Seven United Nations Experts on the Situation in the Democratic Republic of Congo, Human Rights Council, 9 March 2011 at http://www.unhcr.org/refworld/pdfid/4d8b45432.pdf.