Brief report on the Dodd Frank law workshop

On 27 February 2012, SARW organised a workshop in Kinshasa on the American Law "Wall Street Reform and Consumer Protection Act", widely known as the "Frank Dodd Law" , taken from the name of the two American senators who proposed it.

Among the participants, there were representatives from the Ministry of Mines, civil society delegates and provincial Heads of Division of the mines of the Provinces of Sud Kivu, Nord Kivu and Maniema, the PROMINES coordinator, delegates from World Bank, embassy of the United States, European Union, civil society of Kinshasa, Ghana, United States, Belgium and South Africa. A delegate from the Executive Secretariat of the International Conference for the Great Lakes Region (CIRGL) also took part.

The participants were presented with the points of view of the Congolese government, Embassy of the United States and several other experts invited to the works.

For more than a decade, there has been general consensus on the natural resource curse of the DRC and that of the Great Lakes region and on the fact that these resources are the cause for conflict experienced in this African region. The link that has been established today between natural resources and armed conflicts, in which the illicit mineral trade has been defined, raises the question as to why such riches in the earth do not benefit a nation. In order to tackle this phenomenon several initiatives have been initiated on a national, regional and international level. It is in this context that the Dodd Frank law was adopted by the American Senate in July 2010.

Even before its effective application expected for 2012, this law has already had effects within the DRC. One of the Dodd Frank effects was noted when the Congolese Government decreed the suspension of artisanal mining activities in the East of the country. Partly due to these effects, the Dodd Frank law immediately sparked heated discussions on its merits and its consequences on artisanal miners and on the economy in general.

Some supported the application of the Dodd Frank law, others thought that it would impose an actual embargo on Congolese minerals. SARW organised open discussions on this matter in order to outline the different questions raised both in the DRC and outside the country and to make concrete recommendations to the Congolese government and to the American government not only for the applicability of this American legislation, but also for the general governance of the Congolese mining sector.

The participants thus highlighted problems raised since the promulgation of the Dodd Frank law, evaluated the positive and negative effects on the area, and lastly made important recommendations.

1. Effects of the Dodd Frank Law

a) Positive effects

The Dodd Frank law has an important psychological effect by convincing national and international mining stakeholders of the necessity to clean up the mining activities in eastern DRC;
It could contribute to a healthy supply chain of Congolese mining products, as well as combating the illegal mining of natural resources and therefore the eradication of war minerals;
It could improve the control of mineral production and marketing statistics.
It increases the raising of awareness amongst all stakeholders with respect to mining fraud and contraband.
The Dodd Frank law speeds up the implementation of the traceability and certification procedure stipulated by the Congolese Government;
The rigour of this law speeded up the demilitarisation of the mining sites; it also facilitated the training of mine police and strengthening of the mining representatives’ capacity. It also led to the establishment of a framework for increasing awareness between the stakeholders involved:
It accelerated the introduction of provincial committees to monitor mining activities and facilitated the approval of mineral purchasing agencies in Maniema:
The law facilitated the mobilisation of resources on a national and international level in order to contribute to the cleaning up of the mining sector.

b) Negative effects of the Dodd Frank law

Boycott of mining products from eastern DRC by buyers and final users;
The promulgation of the Dodd Frank law has had the effect of creating unemployment, a decrease in artisanal revenue, aggravation of mining fraud
Closure of several mineral buying agencies in North and South-Kivu;
Difficulties in the operating of State services and paralysis of economic activities in the east of the DRC;
Relocation of buying agencies from North and South Kivu to Katanga;
It has caused an increase in organised crime owing to unemployment of the artisanal miners in the provinces concerned.

2. Application of the Dodd Frank law

The following recommendations were adopted by the participants:

To the American Government

The participants recognised the importance of the Dodd Frank law and recommended that the American financial market regulation agency, or Securities and Exchange Commission (SEC), introduce measures of execution as soon as possible;
Extractive companies registered on the United States Stock Exchange must not only respect the measures of the Dodd Frank law. They are also invited to respect the application measures of the different initiatives or other international, regional and national laws on transparency, and favour the Public and Private Partnership process.
The participants have noted the difficulty in rendering effective the Dodd Frank execution measures in the conditions of insecurity which reign in the eastern provinces of the DRC. They therefore invite the American government to support national efforts aimed at securing the eastern part of the DRC by putting an end to the existence of the different armed groups.
To the International Conference for the Great Lakes Region (ICGLR)
The participants recognised the regional scale of the conflict minerals problem. They have therefore recommended that the Dodd Frank law be applied uniformly to the entire ICGLR. All the ICGLR countries must be involved in the traceability process in order to discourage mafia networks.

To the Congolese Government

With regard to the effects of the Dodd Frank law in the promotion of transparency in the mining sector, the Congolese government must introduce a Congolese law on transparency by integrating all the current initiatives, in particular the elements of the Dodd Frank law, the European initiative of the OECD and ITIE principles. The objective is to make transparency compulsory in DRC.
In order to ensure mining which contributes to development and peace in DRC, the Dodd Frank law should encourage the local transformation of Congolese minerals prior to exportation. The companies registered on the United State stock exchange and which are directly involved in the mining or purchase of minerals should be obliged to set up mineral transformation industries in eastern DRC. The Congolese government must extend the law by forbidding the exportation of non-transformed minerals throughout Congolese territory, as is the case in Katanga.
The Congolese government must reform its entire mining administration in order to suitably equip State structures to correctly pay agents, officials, policeman and soldiers and to punish those who carry out acts which are against the law. The Congolese government must apply decentralisation and retrocession, and develop alternative economic sectors such as agriculture and stockbreeding.
Provincial governments must introduce local mineral certification procedures within the ICGLR instruments.
The Congolese government must legally and politically secure investors and promote the industrialisation process of the DRC mining sector. It must involve the Chinese in all international and national discussions on the transparency and traceability process in respect of their role in the mineral trade.
The Congolese government must make continual efforts to demilitarise all mining sites and ensure the safety of persons and goods, set the boundaries of and approve the artisanal zones by identifying all the stakeholders and introducing the application of a procedures manual translated into the local languages.
It has been recognised that the Dodd Frank law will be added to the transparency measures and initiatives already applied in DRC. The Congolese government is obliged to enforce the commitment documents signed by the different mining stakeholders before lifting the mining activity suspension measure in eastern DRC by the President of the Republic.

To Civil Society

The participants have recognised that the success of the Dodd Frank law requires as much involvement as possible from the population. Civil society has been identified as an important player in the success of the Dodd Frank law. For this reason, the conference recommended the creation of a work synergy between the Congolese, American and European civil society organisations within the framework of the advocacy for transparency in natural resource governance. It is therefore necessary to strengthen the partnership between American, Congolese and European civil society. Maintaining of regular contact between the civil entities (NGOs) operating in the field close to mining squares in order to ensure regular monitoring of requirements for the qualification of mining squares.
The participants recommended the setting up of provincial ITIE committees for the promotion of the transparency initiative on a local level.
Organising as soon as possible a Workshop on traceability in general in order to assess the Congolese mineral trade situation, in which all stakeholders will take part.

To the European Union

With regard to the European Initiative for Transparency Directives, the participants have noted the complementarity with the Dodd Frank law. But the question of exemptions provided for in the European Directive with regard to the distribution of all information was of concern to the participants who recommended its withdrawal from the European project, because there is the risk of shadiness whereas the Dodd Frank law claims to make everything public in order to comply with the transparency requirements. The participants encouraged the European transparency initiative and stated that it would like to see this initiative take into account the matter of tax havens.

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