"Africa is, indeed, coming into fashion." - Horace Walpole (1774)

8.04.2011

the DRC minerals mess

Jason Stearns has a must-read interview with Congolese civil society leader and mining expert Eric Kajemba on the effects of the Dodd-Frank Act, Enough and Global Witness, and the de facto ban on Congolese minerals that has developed as a result of their efforts. Kajemba:
The motivation behind the law is very good - to impose transparency. But it the implementation has been the problem. We are not in a country with a functioning government, you cannot just assume that certification and due diligence can spring up overnight. Plus, there were efforts under way already by other actors to impose transparency; ironically, the Dodd-Frank law slowed these efforts down, as they were financed by the minerals trade
One of the most frightening effects of the Dodd-Frank legislation is the chaos that it has created in sectors of the economy not at all related to the conflict mineral trade. Kajemba:
But there have been other consequences as well, for example, with other aspects of the local economy. For example, in places like Shabunda, people relied on planes to bring them goods and merchandise - rice, sugar, and so on. Those same planes then left with minerals back to Bukavu. But now that the planes cannot transport minerals [due to the export ban and embargo] they don't fly there with goods any more. So the impact has been huge in many areas.
Aside from Congolese who now have no access to critical staples like rice and sugar, Dodd-Frank has also created a host of problems in DRC's legitimate mining sector - non-militarized mines in non-conflict areas. Mark Drajem, Jessie Hamilton, and Michael Kavanaugh write in Business Week:
Loch traveled with Katanga’s local mining minister to certify that tantalum from the mine that Motorola Solutions, a maker of communications equipment for governments and businesses, wants to purchase was in no way connected to the Congo’s armed conflict. Production at the mine had all but stopped, idling workers who dig for ore with hand tools. “This was a non-conflict mine in a non-conflict area, but it was being harmed by the U.S. legislation,” Loch says.
They further note that, "Congolese mineral exports are down 90 percent due to a new rule requiring U.S. companies to avoid indirectly financing rebel groups."

John Prendergast, The Enough Project, and Global Witness are directly responsible for this completely predictable havoc, as are the American legislators and industry personnel who took their testimony as gospel, let them write section 1502 of the legislation, and ignored dissenting voices in the debate over the minerals. We now have a situation in which the already tenuous economy of the eastern DRC is further deteriorating. Ordinary Congolese are suffering far more than the militias at whom this legislation was targeted. And I, for one, would like to know what the people who caused this problem are going to do about it.

10 Comments:

Blogger JM said...

Global witness doesn't seem that reliable in terms of keeping tabs on Debeers and the like anyway

Thursday, August 04, 2011 8:12:00 PM

 
Blogger Shakeer said...

Do you agree with Kajemba that disclosure regulations were a good idea, just that the rushed nature of the ban/embargo created problems?

Thursday, August 04, 2011 8:57:00 PM

 
Blogger texasinafrica said...

Shakeer, I think that the idea of creating transparency in general is a good idea, but the notion that any of this is doable in today's DRC as is was nuts. The timeline is less important than the lack of functioning institutions, which take way longer than a few months (or years) to develop.

Thursday, August 04, 2011 11:09:00 PM

 
OpenID scootles7 said...

I got an e-mail from Enough (still on the list from my naive days) saying that the SEC was being pressured by companies and members of Congress to alter or delay the regulations they are supposed to issue.

Would this change anything for the better in the DRC? Or has the specter of Dodd-Frank already done the damage, making it any changes in the regulations ineffective?

Thursday, August 04, 2011 11:16:00 PM

 
Anonymous MichaelZ said...

I'm curious to hear more about how the havoc was "completely predictable." Giving concrete examples of what types of due diligence Enough and the rest of the groups could have done would be helpful to bolster your ultimate claim that these groups bear most of the responsibility (and not the Congolese government). My sense is that there certainly are these examples, but it would be helpful both for your own argument, and for Enough et al, if the missed opportunities were outlined in a bit more detail.

Friday, August 05, 2011 8:39:00 AM

 
Blogger texasinafrica said...

MichaelZ, I think we're thinking about this in slightly different terms. When I say "completely predictable," I'm not referring so much to "missed oppportunities" as I am referring to the fact that since the DRC has virtually no functioning government institutions in the east, it should have been obvious that supply chain tracing is going to be almost impossible under the current conditions. Almost everyone in the east (especially people involved at any stage of the mineral trade - including customs agents) can be bribed to falsely certify minerals as "conflict-free" or to look the other way when a shipment passes. Because of these pre-conditions, it was incredibly naive to think that companies would have any alternative other than to boycott Congolese minerals; there's just no way around it given the present conditions.

I think Enough et al's primary mistake was putting the cart before the course. A focus on security sector reform, an honest assessment of the root causes of the conflict (which have very little to do with minerals), and the re-establishment of basic order are all necessary pre-conditions for tracing and due diligence schemes to work. By making the latter their primary concern, not only is Dodd-Frank not actually helping with the violence problem, it's also making life worse for average Congolese.

Scootles7, if the implementation of the regulations were to be delayed, it might reopen the mines and allow the comptoirs and others involved in the trade to get back to work. However, it's not clear that companies would buy those minerals either given that even conflict-free Congolese minerals are now viewed as tainted. It's a huge mess and one I'm not sure will be easily remedied.

Friday, August 05, 2011 9:37:00 AM

 
Blogger Joe Powell said...

This is more of an fyi, but important when you say 'Dodd-Frank' that people know there is also an excellent provision in the Act (1504) for broader extractives transparency - publishing all payments NYSE companies make country-by-country.

Sunday, August 07, 2011 6:31:00 AM

 
Anonymous John said...

Presumably you saw this?:
http://www.nytimes.com/2011/08/08/opinion/how-congress-devastated-congo.html

Sunday, August 07, 2011 11:16:00 PM

 
Blogger texasinafrica said...

Thanks, Joe - yes, I need to do a post on section 1504. Linked to something good the other day on African Arguments about its effect on Equatorial Guinea.

John, see the newest post. :)

Monday, August 08, 2011 7:28:00 AM

 
Blogger Nell Okie said...

In all fairness, Laura, you should admit that you never consented to a civil discussion with Enough,
who gave you plenty of opportunities.

As you were so opposed to this legislation, did you contact Congress prior to the vote.

You have viciously attacked John Prendergast forever, beginning with his hairstyle!?!

As for your being an expert on Congo??? Self-anointed?

Do I sound angry with you! You bet. Why, Laura! Because of your mean-spiritedness.

I would never, ever let you teach a child of mine.

Monday, August 08, 2011 2:58:00 PM

 

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