Painting by Cheri Samba

Lokuta eyaka na ascenseur, kasi vérité eyei na escalier mpe ekomi. Lies come up in the elevator; the truth takes the stairs but gets here eventually. - Koffi Olomide

Ésthetique eboma vélo. Aesthetics will kill a bicycle. - Felix Wazekwa

Saturday, June 4, 2011

Cautious optimism for mining in the eastern Congo

(This posting has been updated in a new posting on June 15: See here).

I feel the urge every time I type the words: "conflict-minerals" to provide a disclaimer: Conflict minerals are not the real problem with the Congo, and focusing excessively on them will distract from the deeply political nature of the Congolese crisis, which lies more in the capture of the state by private interests, who see little profit (and perhaps some harm) in creating strong, accountable state institutions.

But a second urge soon follows, aimed at my friends who would like to throw the conflict-minerals baby out with the bathwater of a dumbed-down Congo hysteria. This urge is to say that minerals do form a large part of the conflict economy in the East, and are thus a significant reason for the problems in governance in the Kivus region. Ask any Kivutian: minerals matter in the Wild West of Masisi, Fizi, Shabunda or Lubero.

Coming back into the light? Perhaps...


Having performed my ritual ablutions, I can get to the meat of this posting: Where do we stand with regard to this issue? The last few weeks have seen a flurry of activity, which Congo Siasa has been silent on due to travels and miscellanea.

First, I would like to remind readers of consultations that took place in March and were never thoroughly reported (at least to my knowledge). President Kabila and his advisors met with the key constituencies - businessmen in particular - to figure out a way forward as they were heading towards an end of the mineral export ban. While the export ban was a disaster for local communities, the recommendations coming out of these consultations made quite a bit of sense. They included:
  • requirements for all artisanal miners to form cooperatives and to register with the state
  • for comptoirs to add value to minerals prior to export through basic sorting and processing, so that the state would make more profit
  • making tracing and tagging supply chains mandatory for all actors involved - this would be implemented through the international industry group ITRI
This measures are outlined in the new report by Global Witness, published about three weeks ago. They also describe how pressure from Kinshasa to reform the mining sector before the elections has led to the demilitarization of Bisie, the most important tin mine in the region, where army units have been largely replaced by mining police (despite a brief occupation by Mai-Mai forces there last month).

In the meantime, international actors have been moving as well. In a meeting in Paris on May 19th, all 34 members of the Organization for Economic Cooperation and Development (OECD) - together with Argentina, Brazil, Lithuania, Latvia, Peru, Romania and Morocco - signed onto a joint framework for due diligence on conflict-free supply chains. While these guidelines are voluntary, it's another step in the direction of creating international norms of due diligence in this sector. The Securities and Exchange Commission (SEC) in the US, for example, has already referenced the OECD guidelines in their draft regulations as the model for what due diligence should look like. 

Finally, and perhaps most importantly, several major international companies appear to be retreating from their rejection of due diligence - which have included threats of boycott of the Congo or just exporting minerals to China and India - and investing in these efforts. The main such company is Malaysia Smelting Corporation, which has been the biggest buyer of Congolese tin in the past. On May 21st, the Congolese mining minister announced that MSC was going to take over all the Sakima concessions - which include some of the largest tin mines in the country - in Maniema, North Kivu and South Kivu. This would be the first step towards switching from artisinal to indistrial mining in the region. For now, all of the mines in the Kivus (with the exception of Banro's gold mines) are mined with picks and shovels. MSC has also indicated that it will invest $10 million in tagging and tracing schemes through ITRI, the tin industry coalition. That suggests that MSC intends to continue to produce for the US an European markets. 

Other industrial actors may get involved, as well, including a quixotic foray into Rwanda by Rajesh, the largest jewelry manufacturer in India. Bloomberg reported that Rajesh exports may invest up to $1 billion in developing a gold refinery and a diamond business in Kigali. While Rwanda may have some gold - I don't think it is very much - they don't have any diamonds to my knowledge, and probably the vast majority of these precious minerals come from the Congo. Rajesh did indicate that they would try to set up some traceability scheme to ensure that their trade would not dip into conflict minerals. But gold is much more difficult to trace than tin and tantalum, both because it can be easily smuggled, but also because the gold mines are very remote and it could be harder to set up tagging schemes there.

There are still reasons to be skeptical. Ten million dollars will not be nearly enough in the long run to set up tracing schemes. And, as Global Witness and I have pointed out in the past, the current ITRI schemes just record the origin of the bags but do little to account for the militarization of the trade route, as well as other ways through which armed actors can profit. They only way to really control for military racketeering is through nuts-and-bolts investigations through independent monitors. Enough and several industry groups (Motorola and HP, I think) recently submitted a proposal for such an oversight group, based on a draft that Steve Hege and I elaborated in 2009; Global Witness is also calling for something similar.  

In addition, Rajesh's venture still seems bizarre and perhaps misplaced, given how complex and mired in abuse the gold trade is. Recent reports from the Misisi gold mines in Fizi - some of the biggest gold pits still artisanally mined in the Congo - suggest that Congolese army officers continue to control the trade there.

But while much remains to be done, these developments are welcome steps in something that looks like it might be the right direction. 

3 comments:

LNFAW said...

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David Aronson said...

cautious optimism not at all language i would use to characterize mood here in Bukavu towards dodd frank or conflict minerals. Real anger at perceived failure to consult; dismay that law may already have unintended but predictable negative econ consequences; and frustration that real problems continue to go unaddressed. THis true from comptoir owners to creseurs to reliable ngo activists. much more tk

Jason Stearns said...

@ David - That they badly screwed up the implementation - agreed; that they should have consulted - of course; but that we should throw out Dodd-Frank due diligence or water down the SEC regulations, as some are recommending - don't think so. And I think that is more or less in line with some - if not all - of civil society in the Kivus is saying.

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