Foreign enterprises address DRC conflict mineral trade

Foreign enterprises address DRC conflict mineral trade

The entry of mining companies into the DRC can work to ensure better supply chain management and decrease the conflict mineral trade in the country.

The Democratic Republic of Congo  (DRC) is home to the greatest humanitarian crisis since World War II. The country has the lowest nominal GDP per capita in the world, and over 5.5 million people have died since 1998. Yet, according to the 2010 Extractive Industries Transparency Initiative (EITI) report, the government received over $875M in government revenues from its mining sector and still has over $24 trillion in untapped deposits of raw materials.

Although the mining of tin, tantalum, tungsten, gold, copper, and other lucrative minerals is a massive source of wealth, it is also the root of a great deal of suffering. Artisanal mines are held to neither voluntary principles nor legally enforceable standards. Additionally (or consequently), artisanal mines in the DRC receive variable and low wages, allow hazardous working conditions, and employ children as 20 to 40 percent of the workforce.

But most importantly, revenues from artisanal mines owned by armed groups fund and drive conflict in the region. Michael Nest, author of Coltan, found that around 11 percent of profits from the conflict mineral trade in the DRC are funneled directly to armed groups. The Democratic Forces for the Liberation of Rwanda (FDLR), a Hutu militia group engaged in last week’s clashes between the Congolese army (FARDC) and M-23 rebel group in eastern Congo, reports that over 75 percent of its revenues come from the trade of conflict minerals.

Child mining workers in DRC

Artisanal mines in the DRC receive variable and low wages, allow hazardous working conditions, and employ children as 20 to 40 percent of the workforce. Foreign enterprises can help address the issue.

Several human rights groups, including the Enough Project, Motorola Solutions for Hope, and Global Witness, are working on the issue of conflict minerals in the Congo. As a consequence of the limited number of large-scale players at the extractive stage, conflict mineral advocacy and legislation around is largely focused on “cleaning up” supply chains.

Examples include the Enough Project’s Conflict Minerals Company Rankings, which ranks the largest electronics companies on their efforts towards using and investing in conflict-free minerals used in their products, and Dodd Frank Section 1502, which urges companies to undertake due diligence measures to “ensure that their supply chains do not contribute to conflict or human right abuse in the Democratic Republic of the Congo or the broader African Great Lakes region.” Pressure from human rights advocacy groups is concentrated on widely known, consumer-facing retail companies, such as Apple, Motorola, and other electronics producers, as the source of the human rights violations, despite the fact that they operate on the opposite end of the supply chain.

The general consensus in the human rights community is that multinational enterprises exacerbate rather than ameliorate human rights abuses in weak, conflict-ridden states. However, those concerned with human rights should instead advocate for responsible international investment, especially when it is viewed as a substitute to artisanal mining rather than in isolation.

Multinational enterprises (MNEs), especially branded and/or publically listed corporations, are accountable by international standards such as the UN Global Compact, domestic litigation such as the Alien Tort Claims Act, and reputational risk that can affect everything from stock prices to frontier investment options to human resource strategies. When MNEs begin production, the security in the region improves, the central government receives substantial revenues that can be directed towards development, and the surrounding community benefits from philanthropy projects that also aid business operations such as infrastructure improvements and construction of schools and health clinics.

A notable caveat to promoting industrial mining operations is employment. There are an estimated 750,000 to two million artisanal miners in DRC. According to Nest, an estimated 10 million people, or 16 percent of the population, are dependent on small-scale mining of minerals for their livelihood. Industrial mining only uses a tenth of the labor of artisanal mining, so when advocating for widespread conversion from artisanal to industrial mining, it must be coupled with a plan to generate employment substitutes.

Not only must human rights groups recognize the potential of promoting responsible industrial mining, but the Congolese government must also recognize its value.  Instead of addressing core barriers to entry like political insecurity, the Congolese government is considering implementing changes to their ten-year mining code that would further deter international investors. A draft of the proposed amendments demonstrate that the government is seeking to raise taxes and royalties from miners, cut exemptions and institute a windfall profit tax.

Even more significantly, the DRC government is considering mandating a 35 percent stake in all mining projects (a dramatic increase from the 5 percent currently required by the 2003 Mining Code), which would be acquired for free and cannot be diluted. This would make potentially profitable projects unprofitable, and, given the political and operational risk already inherent in DRC investments, the government should not introduce the additional threat of financial risk when seeking to attract more responsible international investment.

Many groups have tried to “save” the Congo.  Human rights groups. President Joseph Kabila and his government. Foreign states. Most recently, the U.N. intervention brigade. All have failed to instate long-term security and opportunity. It may be time to loop in a less traditional player: multinational extractive companies.

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