Since the anti-fur campaigns of the 1980s and 90s, the responsible consumerism movement has been gaining momentum. Wildlife products, genetically modified foods, apparel, cosmetics and jewelry—to mention but a few—have come under scrutiny.
Similarly, attempts to responsibly address mining of gems and minerals in the extractive sector, like diamonds and gold, gained prominence in the early 1990s when the link between mining and violent conflict became apparent. Starting with the Kimberly Process for “conflict diamonds” in 2000, this culminated with the U.S. effort intended to reduce the proliferation of conflict minerals under the Dodd-Frank Act (2010).
On February 8th, 2017, a leaked U.S. Presidential Memorandum revealed President Trump's intent to repeal Section 1502 of the Dodd-Frank Act (2010) on the basis of high administrative costs and negative impacts for communities in the Democratic Republic of the Congo. At the time of writing, the Republican majority in the House of Representatives approved a replacement bill for the Dodd-Frank Act (2010), the Financial Choice Act. The Senate has not yet ratified it, although most analysts believe it is just a matter of time until they do.
The underlying premise for Section 1502, also known as the Conflict Minerals Provision, is the assumed causal relationship between extractive industries and armed conflict. The Provision prohibits any U.S. registered or listed corporation from procuring mineral resources associated with armed conflict. These minerals include tantalum, tin, gold and tungsten. With the repeal of the Dodd-Frank Act (2010) imminent, it is an opportune time to reflect on whether consumer-driven governance initiatives such as the Conflict Minerals Provision have a role to play in reducing armed conflict.
Support for Section 1502
Ardent proponents of 1502 in academia and the mainstream international NGO sector say it’s having a beneficial impact in reducing the flow of revenue to armed actors in the DRC. Secondly, it’s underscoring the need for the responsible procurement of inputs into popular consumer products such as electronic devices. Companies in turn want to tell consumers that their products are conflict-free. Support for 1502 is coming from many quarters including the mining, technology, and industry sectors. Even the Catholic Church has weighed in asking the Trump administration not to repeal it.
Support for conflict minerals legislation also comes from further afield. On January 24th, 2017, the EU approved the text of a conflict minerals regulation, which will “cover 95 percent of all EU imports of tin, tantalum, tungsten and gold.” China too is moving toward a more transparent extractives production and supply regime. Together with the OECD it has developed the Chinese Due Diligence Guidelines for Responsible Mineral Supply Chains.
Advocates say that even if it falls short of expectations now, it is the right policy. Over the long haul, if implemented well, it can greatly reduce the likelihood that minerals can fuel war.
Good Intention Gone Wrong?
The criticism centers on the negative characterization of mining communities in post conflict settings. It assumes that many or most mining communities in the DRC are plagued by violence. A further assumption concerns the extent of the linkages between armed actors and artisanal mining sites.
Country-specific factors that would impact implementation were according to the critics also overlooked. This included the limited governance capacity within the DRC, the lack of local capacity development, and inadequate stakeholder engagement.
To get a better picture on the conflict minerals debate, I contacted Professor Philippe Le Billon, an expert and thought leader in natural resources governance. Le Billon states:
The many efforts undertaken to curtail the links between minerals and armed conflicts in DRC are laudable, but nearly two decades after the problem of 'conflict minerals' in eastern DRC first came to international attention, there remain many problems with the design and implementation of anti-conflict mineral initiatives.
One of the unintended consequences has been the loss and displacement of the mineral trade from communities, said to support between 8-10 million people. Certain buyers are avoiding the DRC altogether. As a consequence of the embargo-like effect, poverty is on the rise. Infant mortality within the proximity of regulated “conflict mineral” sites has, according to an UN WIDER study (2016), increased by 143 percent since enactment of 1502. Income loss is a key contributing factor that has resulted in a sharp decrease in the “consumption of infant health care goods and services.”
Another unintended consequence is the creation of monopolies in the form of mining cooperatives. These cooperatives are usually under the control of local strongmen, but also international actors. Mining Mineral Resources (MMR), headquartered in Lubumbashi, and backed by the Malaysian Smelting Corporation, has become the largest buyer of 3T minerals in the DRC.
The result is that wages for artisanal miners are down, no longer tied to market prices but to prices set by the cooperatives. These miners have in some cases responded by selling their ore to organized criminal networks in an attempt to get fair pricing. In this way 1502 has not stopped conflict in the region, it has exacerbated tension.
Conflict-free Minerals: Quixotic or Realistic?
At the other end of the value chain, implementation has also been challenging. SEC filings from 2014, 2015, and 2016 show that only one percent of the companies were able to declare their products as conflict-free. And 80 percent of companies were unable to determine minerals used in their products as conflict-free.
In 2015, 79 of 100 companies surveyed in 2015 failed to meet the minimum SEC reporting criteria that would ensure their suppliers were not using minerals associated with armed conflict. Only 15 percent of the companies surveyed conducted audits beyond their direct suppliers.
There are two main reasons for this lack of compliance. First is the heavy burden of tracking complex and interconnected global supply chains. For example, according to a Harvard (2017)study, Apple uses over 200 suppliers and 242 smelters. The second reason is that the U.S. government has not enforced the reporting criteria or penalized companies in violation. According to Amnesty International (2015), there is a need for greater punitive action against companies filing incomplete, false or misleading conflict mineral reports.
According to an open letter by a wide-array of academic and activists, only “a small fraction of the hundreds of mining sites have been reached by traceability or certification efforts.” And at sites where certification is taking place, the measures, have not resulted in a complete cessation of armed conflict.
Taking Conflict out of Artisanal Mining: Next Steps
For Professor Le Billon, consumer-driven governance efforts such as the Conflict Minerals Provision are only one component of a more comprehensive strategy needed “...to transform conflicts, reduce human rights abuses, and bring about viable long-term livelihoods in eastern DRC.”
This should be articulated against some of the broader goals “to help bring about a transformation of the mining sector in eastern DRC" and elsewhere. Included in this should be "reforms in revenue management, land control, labor conditions, and a combination of education and formalization, to transform the artisanal mining sector.”
At the same time, there remains a need to broaden the scope of reform initiatives to the artisanal gold mining sector. For instance, in the DRC, artisanally mined gold is said to support upwards of 80 percent of miners, and bears direct linkages to the armed conflict. The sheer scale and sophistication of illicit gold mining and trafficking operations currently render it an intractable challenge.
At a fundamental level, sectoral policy initiatives such as Section 1502 should not be viewed as a silver bullet to resolving deep-seated governance challenges in fragile state contexts. There is a need for a broader approach to resolving armed conflict and state fragility, of which sectoral reform agendas are just one important tool.
However, Le Billon cautions against “removing 1502 without a better alternative,” which “will mostly signal a 'back to business as usual' attitude on the part of the U.S. government." While far from perfect, 1502 signals the powerful role that consumers can play in applying pressure to governments and business. It must be reformed and strengthened but it’s a good first step. Let’s hope the U.S. Congress agrees.