22 February 2017

Congo-Kinshasa: Trump Is Right On Congo's Minerals, but for All the Wrong Reasons

Photo: ichael Vadon/Daily Monitor
U.S President Donald Trump during his trail of campaigns.
analysis

A few weeks ago a British newspaper leaked the draft of an executive order proposing the suspension of a US law that imposes tight controls over the trade in Congolese gold, tin, coltan and tungsten.

Section 1502 of the Dodd-Frank Financial Reform Act requires US companies to carry out due diligence to ensure their products do not contain minerals sourced in conflict-affected areas in this central African country. Its main objective was to cut the financing of armed groups operating in the country.

But this objective was not entirely achieved. To be sure, armed group involvement decreased in some certified mines, but at the same time it shifted to gold which is not yet certified. Besides armed groups found other sources of revenue.

Dodd-Frank went into effect in July 2010 and immediately created a de facto boycott of mineral exports from the Congo and neighbouring countries. Companies found it easier to just stop sourcing from this region, instead of facing the high compliance costs for setting up and monitoring supply chain due diligence.

As such, the move by the Trump administration to repeal this section of the law sparked a wave of indignation and protest on social media and in the press. Global Witness called the decision

a gift to predatory armed groups seeking to profit from Congo's minerals as well as a gift to companies wanting to do business with the criminal and the corrupt.

But some have downplayed the gravity of the order. They have argued that a repeal will not have much effect since similar European law, soft law and corporate codes of conduct remain in place. Two online news sites IRIN and Mo are now reporting that Trump may have a point.

Fact check

The explanatory statement to the Trump draft executive order highlights the unintended consequences of Dodd-Frank. Top of these are job losses and lost livelihoods. On this point, Trump is right. In the age of "alternative facts", this calls for evidence.

Research has documented the effects of Dodd-Frank in the eastern Congo, the area that was most affected by the policy. Here a virtual boycott on exports had a number of socioeconomic consequences, as well as an impact on the organisation of supply chains.

First, there was a negative effect on incomes. This can be attributed to the de facto ban itself, but also to the accompanying certification programmes that were rolled out. In South Kivu, a certification system set up by International Tin Research Initiative created a monopoly for one export office and reduced prices on the local market. A similar monopoly was created by Mining Mineral Resources in Katanga, resulting in falling prices and ultimately miners' protests.

Second, an indirect effect on health care and child mortality has been documented. Researchers from the United Nations University conclude that the probability of infant deaths near the policy-targeted mines increased by at least 143%. This they attributed to mothers' reduced access to infant health care.

As Congolese miners struggled to sell their minerals, not to mention receiving a good price, their household incomes dropped. This had knock-on effects on the incomes of petty traders, shop and restaurant owners, taxi drivers and others operating in and around the mines. All this has affected people's ability to afford health care.

Third, the stricter regulations allowed non-Western companies to take more control over mineral exports from the region. In Bukavu, for example, two export offices trading with Chinese buyers remained active after the de facto ban.

Fourth, the creation of "islands" of certified mining sites has pushed more actors into illegality and smuggling. In eastern Congo, this means a move to gold mining. Thanks to its material characteristics - a small amount of gold is worth a lot of money - gold is easy to smuggle. On the other hand, the 3T minerals (tungsten, tin and coltan) are bulky and require more sophisticated processing.

Not surprisingly, most policy efforts so far have focused on 3T, while gold has for now largely remained below the radar. But, it's not just artisanal miners that have moved into gold, as documented by the UN and the Belgian research institute International Peace Information Service (IPIS) the same was true for armed groups. Dominic P. Parker and Bryan Vadheim, in a study under the title "Resource Cursed or Policy Cursed?" find that

the legislation increased looting of civilians and shifted militia battles toward unregulated gold-mining territories.

On the positive side, the "regulated" 3T mines saw an improvement in health and safety standards, a reduction in armed group control, and increased security for civilians. Some observers have also applauded the increased international attention for living and working conditions in Congolese mines.

Although these consequences were unintended, they were anticipated by local stakeholders as well as by some researchers and academics working in the region. A six-month presidential ban on artisanal mining activities issued by Joseph Kabila had already revealed some of the likely consequences. The ban was framed as an attempt to combat militarisation and "reinstall order" in the mines.

At the lifting of the presidential ban in March 2011, miners and traders in the Congo feared what a de facto ban created by Dodd-Frank would mean for them. They asked for more support in order for them to be able to comply with the requirements. Yet, in the campaign running up to Dodd-Frank the voices of local stakeholders were not heard. This case was well argued in an open letter signed by 70 (mainly) academics and researchers in 2014 and is persuasively demonstrated in the documentary We Will Win Peace.

All the wrong reasons

So the ensuing question is: Would Trump have listened to the Congolese miners?

The answer is, very unlikely. Section 1502 is just a small part of the Dodd-Frank Financial Reform Act, which was passed after the 2008 financial crisis to tighten oversight of banks and protect consumers. Under the influence of powerful corporate lobbying groups, the Trump administration is now looking into repealing several sections, including a disclosure rule requiring US oil, gas and mining companies to be transparent on the payments they make to foreign governments.

So despite the rhetoric of Dodd-Frank's unintended consequences on local livelihoods and the convenient use of - in this case - scientific evidence, concerns about Congolese stakeholders are not what motivates the Trump administration. Rather, as the explanatory statement explains, it is the fact that,

Compliance costs are estimated at 3 to 4 billion USD upfront, and 200 million USD per year thereafter.

These are evidently the wrong reasons.

The explanatory statement does include something else of interest. It says that a more effective way of addressing the problems of the Congo and adjoining countries will be sought. Talking about artisanal mining sector reform specifically, here are some ideas that emanate from the miners themselves:

creating more and viable artisanal mining zones where they can legally work;

providing them with technical and material assistance so as to increase their productivity;

facilitating access to credit;

supporting the empowerment of bottom-up miners' organisations instead of top-down cooperatives captured by elites.

But when it comes to addressing the problems of the Congo the more effective way is complex and politically messy. It involves more than just mining sector reform, but also political negotiations and peacebuilding efforts.

A mineral trader in Bukavu put it this way to me:

We are tired of all these decisions on our lives, being taken elsewhere. How can you refuse to buy the minerals that we export, but at the same time sell weapons to our armed groups? In both cases you are denying us a chance to live.

Will anyone listen to him now?

Disclosure statement

Sara Geenen receives funding from FWO (Research Fund Flanders) and VLIR-UOS (Interuniversity Cooperation Flanders). She is affiliated with CREAC (Belgian Expertise Centre for Central Africa). She thanks Marijke Verpoorten and Mollie Gleiberman for editing this piece

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