Section 1502 of the Dodd-Frank requires companies under the jurisdiction of the Security and Exchange Commission (SEC) to report annually on whether they are using minerals from the DRC. One provision of the law is that it can be expanded to the origin of minerals in other, unspecified neighboring countries of the DRC. This bill is supposed to force companies to determine and disclose whether coltan, tin, gold, and wolframite used in their products originated in war-ton areas of Congo. All companies, regardless of whether they are importing to the US raw or processed minerals, or as finished components, are expected to report on the due diligence they have undertaken to verify their supply chain and avoid conflict-promoting metals. The legislation is expected to resolve conflict in the east of the DRC and clean the supply chain of what is commonly known as conflict minerals.
The Dodd- Frank Act is not the first or only initiative to deal with conflict minerals in east DRC. We have in place since 2002 a modern Mining Law and a number of important Ministerial Decrees by the Government of the DRC. We have also the protocol against illegal exploitation of natural resources and the regional mechanism for certification of natural resources by the International Conference of the Great Lakes Region (ICGLR). Some of the international initiatives endorsed by the Congolese government include the due diligence principles adopted by the OECD and the UN sanctions against anybody who engages in the illegal extraction and trade of cassiterite, columbite-tantalite, wolframite and gold from the Eastern DRC that benefits belligerents. MONUSCO is also establishing “centers of Negoce” to secure mineral trading. The DRC is also implementing the Extractive Industries Transparency Initiative (EITI) and together with ‘PROMINE’, a World Bank-DFID joint project, it attempts to regularize the mining industry, including the artisanal and small-scale mining. Finally, after much international pressure, the world’s major tin smelters have organized under Itri a certification scheme for the Eastern Congo. These initiatives have failed to reduce trade in conflict minerals and to promote peace. The first test of the efficacy of these initiatives came with the President Kabila’s recent moratorium on exports of minerals from the Kivu Provinces. Reports about uninterrupted illegal exports of cassiterite by Chinese enterprises as well as some gold traders speak volumes. Most of these initiatives simply attempt to deal with symptoms and not with the real problem. Is the Dodd Frank Act different?
If the intention is to bring peace and regulate mineral trade from DRC eastern part then we should not expect much from the legislation. There are indications, however, that Dodd Frank could only yield limited success.
First, a foreign designed policy cannot solve a problem that requires an internal solution. The Dodd- Frank Act cannot be expected on its own to end trade of this nature because for it to succeed, the US government will require an extensive network of monitors in the Eastern Congo. Only such a monitoring system will give its law the necessary strength for it to be taken seriously by the private sector. However, it is not sustainable to expect another country to establish and operate such a network and to exercise this immense control and power over the natural assets of the Congo. Unless Dodd-Frank supports existing internal efforts to deal with the problem, it will not yield positive results. Any semblance of success will be superficial and not sustainable. The Dodd Frank can only succeed if it is supporting and closely integrating with national mechanisms. In the absence of a Congolese designed and owned national strategy to combat the conflict minerals, it is not assured that the Dodd Frank will succeed despite its good intention.
Second, Dodd-Frank, as the other mentioned initiatives, deals with the symptom rather than the cause. We know that illegal acts involving natural resources are a manifestation of state inability to establish its authority across its territory. We also know that resources which are not under the control of the state are exposed to looting. The protection of minerals from looting is first and foremost a national issue. Looting will not stop until these resources are put under Congolese state protection. What is happening in the Eastern Congo is a symptom of a much bigger malaise that is holding the DRC—the absence of the state authority. The DRC is a dysfunctional state par excellence. It is really a stereotype of an African state rich in resources but poor in governance. It points to various issues, and the most critical ones are the conception of power and the organisation of society. The Kabila government has been unable to reorganise the national army and security organizations as well as the administration to give them the monopoly of power to fairly protect and regulate respectively the country’s strategic minerals. Any genuine support to the Congolese must focus on rebuilding the Congolese state. The Obama administration has been reluctant to invest in efforts intended to build the Congolese state. A strong and capable state is the only long term solution to conflict minerals. The USA continues to perpetuate an approach whereby a sick Congo continues to receive interventions not to cure it but to keep it alive but sick. If the Obama administration is serious about helping the DRC, it should work closely with the Congolese government (that will come in after the November 28 presidential and parliamentary elections) to come up with a comprehensive intervention to reform the Congolese army (The FARDC elements must be withdrawn from the mining sites) and administration (reinforcing border control). The legislation will not end conflict mineral trade unless a functional state emerges.
Third, the main weakness of the legislation is its heavy reliance on companies to do their own supply-chain due diligence and on third-party auditors. If a U.S. company gets its minerals from the DRC, it must be able to verify that it did not buy them from militias, warlords or a trader who works for such belligerents. It is a very naïve expectation that these complicated economic and military relationships will be understood and recongnized by the auditors. It is one thing to come up with a policy, it is another thing to implement and enforce it. Due diligence is difficult to monitor and enforce. While Dodd Frank provides a strong case for due diligence, we cannot ignore the complexity of the process involved and the resulting uncertainty regarding the "peace impact" of such policies. We cannot also predict how companies will react to it on the ground. We know that morality is the least concern of companies in the pursuit of their bottom line.
Fourth, Congolese minerals can be exported and sold under a foreign packaging. This is exactly what is happening currently. We know that coltan from the DRC finds its way into Burundi and Rwanda. Why would the Dodd Frank concentrate on the DRC minerals and ignore minerals being exported from Congo’s neighbors. Rwanda apparently has put a certification scheme in place with the help of the German Institute for Geosciences and natural Resources for its minerals. The Institute is also working with the Congo’s Ministry of Mines, le Centre d’ Evaluation, d’ Expertise et de Certification (CEEC) and le Service d’ Assistance et d’ Encadrement du Small Scale Mining (SAESSCAM) on a 12-year plan to develop institutional capacities for the certification of minerals in South Kivu. However, under close scrutiny Germany’s support for the Central-African mineral industry is neither balanced nor entirely free of self-interest. The Congolese project appears to receive far less enthusiastic support from Germany compared to the rapid progress the Rwandan project does. We should also not forget that Germany has the largest transformation plant in Europe. Germany does not have mining companies in the DRC but is in need of sustained supply of minerals to maintain its transformation plant which is of great importance for its economy. Without access to minerals German economy will face serious challenges. This could also explain why the Germans have been pushing for the EU Raw Material Initiative to protect the EU access to raw materials.
Fifth, the nature of globalization will not allow Dodd-Frank to be effective. Trade in conflict mineral has multiple actors with different allegiances, interests and take a multitude of forms. You do not need to register on the New York Stock Exchange to trade in Coltan. The European Union wants to put in place a similar legislation. Companies can bypass the NYSE, the London and Toronto stock exchanges or any other stock exchanges. Today the exploitation of the DRC minerals is not controlled by Western interests, as evidenced by the rapid growth of the Chinese tin comptoir T.T.T. Mining which has been buying and exporting the majority of Congolese cassiterite traded in Bukavu and Goma. The mining majors, for example, which are often closely associated with western powers’ strategic interests, are not involved in mining in the East. Equally companies from new emerging power—the BRICs— could source fund in their own countries without going on the NYSE. Dodd-Frank may reach only players who are not the problem or the least of the Congo’s problems.
Ever since the Dodd-Frank Act was debated by US Congress, views and voices started to press for a more cautious approach. A May 2010 article titled “Controlling Enablers in the Conflict-Minerals Trade” for example argued that pinning all hopes to succeed against the belligerents on to the Dodd-Frank Act mandated disclosure obligations are unrealistic. They must be combined simultaneously with the rebuilding of the state with primary focus on the security sector reform. An article recently published by the New York Times under the title “How Congress devastated Congo” bluntly blamed Dodd-Frank for the current misery among the artisanal miners.
Dodd-Frank will only be implemented in 2012. No one can predict with any confidence whether the US law will promote (favour) peace and stop conflict minerals in the DRC. The changes that people might already be observing are simply changes in tactics and approaches from the sellers and buyers of the DRC conflict minerals. The game on the ground has not changed. The real secret in understanding what is happening in the East of DRC is the unpacking of the real forces that continue to exploit the minerals. The actual actors in the devastation of the DRC in recent time have been Congolese themselves and neighbouring countries, unlike the earlier phase of King Leopold II and the Belgian rule. The Congolese army is deeply implicated and some neighbouring countries are reluctant to leave the DRC, using security pretext. Unless Dodd-Frank includes a security dimension in its efforts, it will not contribute much to peace and stability in the DRC.