Progress and Challenges on Conflict Minerals: Facts on Dodd-Frank 1502

 

Miners in Eastern Congo

Minerals and Conflict

Justine Masika Bihamba

"10 years ago, we were under de facto control of armed groups...today, let's admit we are a long way from that. And if we’re honest, that’s in part because of Dodd-Frank – it came to shine the light on those illicit actors. Today, despite the problems with governance, you can feel more government control.Justine Masika Bihamba, Coordinator of the organization Synergy of Women for Victims of Sexual Violence

Conflict minerals have fueled and continue to help sustain armed violence in eastern Democratic Republic of Congo (Congo), linking them to the deadliest conflict globally since World War II.The four conflict minerals (gold, along with the 3Ts - tin, tantalum, and tungsten) are not the only sources of income to armed groups, but they are some of the most lucrative. The illegal exploitation of natural resources today is a manifestation of the grand corruption linked to violence that has marked successive governments in Kinshasa and the broader region since colonial times.

  • The U.N. Group of Experts on Congo found in 2016 that gold provides the most significant financial benefit to armed groups”[1] and “is the most lucrative and easily smuggled of the natural resources in the eastern Democratic Republic of the Congo."[2] A study from the Enough Project found that armed groups made an estimated $185 million from conflict minerals in 2008.[3] In 2007 the Pole Institute noted “minerals are a major source of income and of conflict in North Kivu as in the whole of the DRC,”[4] 

  • A mortality study by the International Rescue Committee looking at conflict-related deaths between August 1998 and April 2007 estimated that more than 5.4 million people died as a result of armed conflict in Congo.[5] There has been continuing violence since that study, but no definitive follow up has been conducted on the mortality toll.

 

The Law

Dr. Denis Mukwege

"A conflict-free minerals industry would contribute to ending the unspeakable violence the people of Congo have endured for years.” Dr. Denis Mukwege, Founder and Medical Director of Panzi Hospital

Section 1502 on conflict minerals of the Dodd-Frank Wall Street Reform and Consumer Protection Act is a transparency measure, one part of a comprehensive approach to Congo’s challenges. Passed in 2010 and implemented by the U.S. Securities and Exchange Commission in 2012, it creates a reporting requirement for all companies publicly traded in the United States with products containing any of the four conflict minerals. This creates a lever to support transparency, security, and the rule of law in the mining sector. Companies must now publicly disclose annually whether any of the gold or 3Ts in their supply chains originated in Congo or a neighboring country and, if so, describe the due diligence measures taken to determine the source of the minerals. Dodd-Frank 1502 does not require companies to divest from Congo or source from conflict-free mines. The law only requires companies to report on their mineral sourcing and due diligence practices.

  • The cost of compliance has been significantly overestimated by industry lobbyists. Claigan, an independent environmental consulting firm with expertise in supply chain management, estimates the total cost of Dodd-Frank 1502 compliance was approximately $140 million for 2014.[6] This is a fraction of the U.S. Securities and Exchange Commission’s estimate of $3-4 billion for the first year.[7]​​

“In 2014, we educated suppliers who mistakenly believed that CFSP-compliant smelters are, by definition, not sourcing from the Covered Countries, or whose conflict minerals policies indicated that they intend not to source from the Covered Countries at all.” – EMC Corporation (Source: Conflict Minerals Report 2014)

Impact

Consistent with its objective, Dodd-Frank 1502 along with related reforms has led to significant improvements in the transparency of corporate supply chains and to a major reduction in the number of 3T conflict mines in eastern Congo. More than 70 percent of the world’s smelters for the four minerals have now passed conflict-free audits.  Before Dodd-Frank 1502, there was no certification mechanism for distinguishing conflict mines (i.e. mines controlled by armed groups or the Congolese army) from conflict-free mines, and there were no federal transparency requirements for companies on conflict minerals. The law and related reforms have changed these circumstances and created a two-tier market whereby the price for untraceable 3T conflict minerals is significantly lower than the price for verified conflict-free minerals. This price difference has made the trade in 3T minerals significantly less lucrative for armed groups.

 

PROGRESS

 

 

Number of conflict free mines: 204 (as of April 2016)

 

 

Number of refiners that have passed audits: 230 (as of August 1st, 2016)

 

  • By 2014, the International Peace Information Service (IPIS) found that 70 percent of 3T mines it surveyed across several provinces in eastern Congo were not controlled by armed actors.[8] This is a significant change given that the U.N. Group of Experts stated as recently as 2010 that “in the Kivu provinces, almost every mining deposit [was] controlled by a military group.”[9] IPIS is currently updating this study. As of May 2014, nearly three-quarters (74 percent) of 3T miners were working in mines where no armed group involvement has been reported.[10]
  • As of August 1st, 2016, 230 out of approximately 321 smelters/refiners worldwide (over 70 percent) for the four conflict minerals have passed audits by the Conflict-Free Sourcing Initiative or associated programs, and an additional 41 smelters/refiners are participating in the program (i.e. are in the process of being audited) for a total of 256 participants (over 80 percent).[11]
  • There is now an emerging certification mechanism run by the International Conference on the Great Lakes Region (ICGLR), and mines have begun to be validated as conflict-free.[12] As of June 25, 2015, 141 mines in eastern Congo had been validated as conflict-free by multi-stakeholder teams made up of U.N. officials and Congolese civil society, business, and government representatives.[13]
  • In surveyed locations, “minerals that do not go through conflict-free programs sell for 30 to 60 percent less” than minerals verified as conflict-free,[14] thus reducing profits for armed group trying to sell conflict minerals.

 

"...Alcatel-Lucent does not want to prevent its suppliers from sourcing from legitimate mines located within the Democratic Republic of the Congo and its neighboring countries (as doing so could be detrimental to the legitimate economies and populations of those countries).” – Alcatel-Lucent (Source: Conflict Minerals Report 2013)

Mining Communities

Dodd-Frank 1502 must be fully implemented, not abandoned, and strengthened with livelihood projects and other support to mining communities.  As often occurs in places where black markets are disrupted by reform, Congo’s 3T mining sector is being affected by the transition to a conflict-free economy, and many miners have experienced livelihood challenges. The original conflict minerals draft legislation included resources for livelihood programs for mining communities, but unfortunately those provisions were omitted from the final law and thus resources were not forthcoming in a timely way, causing hardship for some communities. Some aid has been disbursed to support conflict-free mining, but more support for livelihoods projects is needed. The solution to uncovering and eliminating these harmful illicit markets is not to reduce transparency measures but rather to strengthen and expand them.

  • Livelihood projects should include alternative livelihoods programs and artisanal mining support. Project planning should involve concerted community consultations and decision-making, and projects should encompass microfinance programs, programs to increase women’s accessibility to mining and other livelihoods, and transition programs for child miners. Projects should also include aid for the formalization of artisanal mining—including the creation of artisanal mining zones, validation of more conflict-free mines, capacity building for mining cooperatives, provision of equipment, and development of safety standards for miners. [15]
  • Section 5 of the original “Conflict Minerals Trade Act” (introduced on Nov. 11, 2009) included provisions for livelihood support.[16] Since that time, the Enough Project has repeatedly called on the United Nations, the United States, and other governments to engage in a process of dialogue and reform in Congo that is broadly inclusive of Congolese civil society, business, and government representatives.[17]

Congolese Support

Archbishop Francois Rusengo

"Armed men have been free to exploit minerals away from any eyes. The formula for exploitation has been to attack civilians. To do that, they harm the women. When women are raped, the men are forced to flee, the children can’t survive, and the village is abandoned - then the area is free for exploitation.” Archbishop Francois Rusengo, Archbishop of Bukavu, South Kivu

Many Congolese communities and leaders—including Nobel Peace Prize nominee and Sakharov Prize winner Dr. Denis Mukwege, community activist Justine Masika Bihamba, and Archbishop François-Xavier Maroy Rusengo of Bukavu, South Kivu—support Dodd-Frank 1502. Leaders and activists support the law because they have seen direct positive impacts, because they believe in transparency and the rule of law, or both.

  • Dr. Denis Mukwege: "A conflict-free minerals industry would contribute to ending the unspeakable violence the people of Congo have endured for years. Government must not only enact strong legislation, they must be willing to enforce the law. Companies bear the responsibility of compliance and public disclosure, and acting transparently as consumers are increasingly aware of conflict-free components on the market. Tens of thousands of legitimate miners would benefit from a clean, transparent minerals industry…The mineral trade is one of the components that drive suffering in Congo.”[18]
  • Open letter signed by 31 Congolese civil society leaders, experts, and former ambassadors: “It is time for another broader push for reform on conflict minerals and natural resource governance in order to complement the Dodd-Frank legislation and deepen related minerals reforms. Dodd-Frank has been the primary driver of corporate and regional policy change on conflict minerals.”[19]

 


WATCH: Conflict Minerals Legislation - View from Eastern Congo

Congolese miners and human rights activists speak about the impact of Dodd-Frank in Congo in this video from 2012.

 

More Resources and Information

 


Citations

[1] U.N. Security Council, “Final report of the Group of Experts (2016),” S/2016/166, pg 2, May 23, 2016, available at;http://www.un.org/ga/search/view_doc.asp?symbol=S/2016/466..

[2] U.N. Security Council, “Final report of the Group of Experts (2016),” S/2016/166, para. 115, May 23, 2016, available at;http://www.un.org/ga/search/view_doc.asp?symbol=S/2016/466..

[3] The Enough Project Team and the Grassroots Reconciliation Group, “A Comprehensive Approach to Congo’s Conflict Minerals,” Appendix 2, p. 17 (Washington: April 2009), available at http://www.enoughproject.org/publications/comprehensive-approach-conflict-minerals-strategy-paper.

[4] Aloys Tegera and Dominic Johnson, “Rules for Sale: Formal and informal cross-border trade in Eastern DRC,” p. 40 (Goma: Pole Institute, May 2007), available at http://www.pole-institute.org/sites/default/files/regard19_anglais.pdf.

[5] Benjamin Coghlan, Pascal Ngoy, Flavien Mulumba, Colleen Hardy, Valerie Nkamgang Bemo, Tony Stewart, Jennifer Lewis, and Richard Brennan, “Mortality in the Democratic Republic of Congo: An ongoing crisis,” pp. ii, 16 (New York: International Rescue Committee, January 2008), available at http://www.rescue.org/sites/default/files/resource-file/2006-7_congoMortalitySurvey.pdf.

[6] Email correspondence with Claigan, August 2015.

[7] U.S. Securities and Exchange Commission, Release No. 34-67716, p. 302, August 22, 2012, available at http://www.sec.gov/rules/final/2012/34-67716.pdf.

[8] Between March 2013 and March 2014, International Peace Information Service (IPIS) researchers conducted research to map artisanal mining sites in eastern Congo. IPIS researchers found 116 of 167 cassiterite mines (70 percent), 26 of 31 coltan mines (84 percent), and 11 of 21 wolframite mines (52 percent) to be free of armed groups, making a total of 153 of 219 mines surveyed (70 percent) free of armed groups in eastern Congo. By contrast, IPIS survey results showed inverted proportions for eastern Congo’s gold mines, with only 330 of 943 gold mines (35 percent) surveyed free of armed actors. International Peace Information Service, “Infographic-Mapping Mining Areas in Eastern DRC,” January 28, 2015, available at http://ipisresearch.be/2015/01/infographic-mapping-security-human-rights-mining-areas-eastern-drc/.

[9] U.N. Security Council, “Interim report of the Group of Experts on the DRC,” S/2010/252, para. 77, p.17, May 24, 2010, available at http://www.un.org/ga/search/view_doc.asp?symbol=S/2010/252.

[10] Steven Spittaels, Ken Matthysen, Yannick Weyns, Filip Hilgert and Anna Bulzomi, “Analysis of the interactive map of artisanal mining areas in Eastern DR Congo: May 2014 update” (Antwerp: International Peace Information Service, May 2014), available at http://ipisresearch.be/wp-content/uploads/2014/04/20141031-Promines_analysis.pdf.

[11] Electronics Industry Citizenship Coalition and Global eSustainability Initiative, “Conflict-Free Smelter Program Indicators,” available at http://www.conflictfreesourcing.org/members/active-and-compliant-smelter-count/ (last accessed August 1, 2016).

[12] International Conference on the Great Lakes Region Mineral Certification Scheme, “ICGLR Regional Certification Mechanism (RCM) Certification Manual,” available at http://www.oecd.org/investment/mne/49111368.pdf (last accessed August 2015).

[13] Uwe Naeher and Yasmine Nzuma, “Summary of Joint Missions and CTC Mine Site Audits in Eastern DRC,” Federal Bureau of Geosciences and Natural Resources (BGR), Kinshasa, June 2015.

[14]  Fidel Bafilemba, Timo Mueller, and Sasha Lezhnev, “The Impact of Dodd-Frank and Conflict Minerals Reforms on Eastern Congo’s Conflict,” endnote 5, p. 20 (Washington: The Enough Project, June 2014), available at http://www.enoughproject.org/reports/impact-dodd-frank-and-conflict-minerals-reforms-eastern-congo’s-war.

[15] Fidel Bafilemba and Sasha Lezhnev, “Congo’s Conflict Gold Rush: Bringing gold into the legal trade in the Democratic Republic of Congo,” pp 15-17 (Washington: The Enough Project, April 2015), available at http://www.enoughproject.org/reports/congo%E2%80%99s-conflict-gold-rush; Holly Dranginis, “Doing Good, while Doing Well: Is There a Win-Win Formula for Investing Responsibly in Congo’s Minerals Sector?” pp. 5, 7 (Washington: The Enough Project, July 2014), available at http://www.enoughproject.org/reports/doing-good-while-doing-well.

[16] Conflict Minerals Trade Act, H.R.4128 111th Congress (2009-2010), section 5, “Sense of Congress on Assistance for Affected Communities and Sustainable Livelihoods,” available at https://www.congress.gov/bill/111th-congress/house-bill/4128/text?q=%7B%22search%22%3A%5B%22conflict+minerals+trade+act%22%5D%7D.

[17] The Enough Project Team and the Grassroots Reconciliation Group, “A Comprehensive Approach to Congo’s Conflict Minerals”; John Prendergast and Sasha Lezhnev, “Opinion: Electronics companies and consumers can help stop Congolese bloodshed,” San Jose Mercury News, July 28, 2009, available at http://www.mercurynews.com/opinion/ci_12931613; Enough Project, “Conflict Minerals: A Broader Push for Reform is Essential,” available at http://www.enoughproject.org/special-topics/conflict-minerals-broader-push-reform-essential.

[18] Panzi Foundation, “Statement from Dr. Denis Mukwege: EU Vote is a Victory for Human Rights,” May 20, 2015, available at http://www.panzifoundation.org/news/dr-mukwege-statement-eu-conflict-minerals-vote.

[19] “Open Letter: Conflict Minerals: A Broader Push for Reform is Essential,” October 30, 2014, available at http://www.enoughproject.org/files/OpenLetterConflictMinerals_October_2014.pdf.