Salvaging Reputations and Easing Guilt

When Wall Street nearly imploded in 2008, the ripples of economic chaos it created reminded countries of the extent to which a complex, cross border network combining financial, economic and political power can do. In the USA, the mass failure of banks shook the faith of the American public in successful corporations. There was a push for greater regulation of both the behavior and ethics of multinational companies. As a part of this drive to monitor the comportement of multinational companies, a clause was included at the end of the Dodd-Frank Act that had nothing to do with liquidity ratios or subprime mortgages. Act 4.15.2 asked that companies using “conflict minerals” such coltan, tin or other resources from the Democratic Republic of the Congo submit a report on their supply chain, signed off by an independent auditor, to demonstrate they were not funding armed groups.

This act pacified activists concerned over the role of high profile companies such as Apple and Intel in providing funding for militia groups in exchange for raw materials; it also salvaged the reputations of involved companies. Most importantly, by imposing new ethical standards for companies to abide by, this piece of legislation served to publicly excuse the USA’s role in promoting conflict in the region . Yet le Loi Obama, as it is known in the Congo, did little to ensure regional stability.

 Commercial and political power have long been entwined in the region, and so many multinational companies found it easier to sidestep the Congo rather than navigate the complex web of its politics. However, their past activities in the country resulted in the increasing dominance of the coltan mining industry in the DRC’s economy. In the early 2000s, tantalum-processing companies such as Cabot and H.C. Starck foresaw a prolonged demand for mobile phone products in the global economy. Coltan, a mineral containing tantalum, is rich in the Congo, and so these companies signed long term contracts to lock their supplies of coltan.  As these contracts created a shortage on the market, several farmers traded their plows for miners’ picks. The consequent explosion of the mining industry resulted in the increased production of coltan from 5 tonnes in 1999 to 90 tonnes by 2001.

A web of militia groups affiliated themselves with the mining business as they arose in the eastern Congo around 2006 and 2007. Ostensibly based on ethnic affiliations, the CNDP and the FDLR are formally enemies as they strive to defend their Tutsi or Hutu peoples from each other. Despite their professed purpose in guarding minority rights, their war is described to be one of economic opportunity. Rather than challenge the Rwandan government, the FDLR is far more focused on mining, as is the CNDP. Similarly, the Tutsi of the newer M23 formed in 2009 arose out of economic rather than political reasoning.

By 2010, the efforts legislated in Dodd-Frank to impose some control on the mineral trade would trim the income of armed groups but would do so at the cost of the precarious livelihoods of eastern Congo’s miners, diggers, porters and their dependents.

Several “conflict free” certification schemes sprung up, partly in reaction to Dodd-Frank, some to Congolese initiatives, and some to industry efforts to wipe stigma from their products. Yet the process of certifying minerals as conflict-free has unfolded at a glacial pace. The government is absent in many areas of the country, plagued by years of war and bad governance, and thus the delays are exacerbated by a lack of political will, corruption and bureaucratic inefficiency. Due to the dominance of the mining industry in the Congo, these schemes have hurt the incomes of average Congolese miners. While global market prices for conflict minerals such as tin increased from $18/kilo to $22/kilo from 2010 to 2014, the drop in mineral demand in the Congo has decreased miner incomes to $4/kg of tin mined from the original $7/kg.

 While Western multinational firms have withdrawn from the region, they have been replaced by Chinese firms who are even less committed to transparency schemes. Unbound by regulations demanding the mines are tagged as “conflict-free,” they benefit off the lowered prices in the region. 

In some regions, the slow pace of mineral-tagging has spurred the decision of unemployed miners to join local militias, directly counteracting the original purpose of the act. In others, regional militias have been incorporated into the Congolese army, and so the act in Dodd-Frank is no longer applicable toward them.

In a dramatically ironic twist of fate, former propagators of violence now benefit more from US regulations as the smuggling industry booms. A 2014 report released by the UN reported 98% of the gold produced in the Congo was smuggled out to be sold in neighboring countries. Although gold production was estimated to be 10000 kgs per year by the US Geological survey, official state export records only account for the departure of around 180kgs. Political power has thus shifted from control over mines to control over the clandestine routes over the border into the neighboring Rwanda, Uganda, and Burundi.

The extent to which Dodd-Frank 4.15.2 is effective in ensuring regional stability is thus limited. Although militia encampments such as M23 moved away from the mines in North Kivu, they relocated toward the Ugandan border, to better guard their trade routes. The links between the armed groups and the mines remains intact as mining and weaponry fund the shadow state.

 While the causes and effects of legislation can sometimes be traced in countries with a secure, centralized government, this was never the case in the Democratic Republic of the Congo in the 2000s. It is an example of how an act legislated in the USA has no guarantee of provoking specific consequences in foreign economies. Instead, in a country with gaps in its governance and an elite whose commercial power is supported by armed conflict, the average miners are disproportionately likely to suffer. As Dodd-Frank is in the beginning stages of review by the US Congress, perhaps it is worth analyzing pieces of legislation intended to help other countries to see whether it actually yields concrete results or only serves to ease the conscience of American consumerism.