SEC takes on humanitarian role over Congo’s ‘conflict’ minerals

The US Securities and Exchange Commission has become involved in the fight against the use of “conflict minerals” from the Democratic Republic of Congo. Exploitation of its vast resources has been at the centre of the country’s decades-long conflict. AAP

The US capital markets regulator, the Securities and Exchange Commission, has voted in favour of what has widely become known as the “conflict minerals” ruling.

Aimed at reducing the illegal trade in resources from the war-torn Democratic Republic of Congo, the rule requires manufacturers to disclose whether their products contain gold, tin, tantalum, or tungsten from Congo or its neighbours.

Since 1998, the DRC has suffered from the deadliest conflict seen since World War II. The war’s intractability stems largely from the role of the illegal exploitation of the country’s vast resources. A UN Group of Experts has been monitoring the illegal exploitation of resources from eastern regions of the Congo since 2002 and report annually on the activities on local, regional, and international actors involved in and benefiting from the illegal mineral trade.

New York-based NGO, Enough Project, has led the campaign against the trade in these minerals. The campaign believes cutting off financial support for the war will stop the widespread perpetration of crimes against humanity, including mass sexual violence.

Due to the success of this and other international campaigns, many people in countries like Australia and the United States are familiar with “blood minerals” and the role they have played in Congo’s ongoing strife. The visibility contributed to the US Congress adopting provisions within the Wall Street Financial Reform Act (aka the Dodd-Frank Bill) aimed at stemming the demand for conflict minerals.

Section 1502 of the Dodd-Frank Bill specifically refers to minerals originating from the Congo that are widely used in electronics, including tantalum (coltan), cassiterite, gold and wolframite. It requires US companies to disclose whether or not their products contain minerals originating from conflict-affected areas.

Each of these provisions was designed to increase the accountability of US companies that, knowingly or not, support armed groups in the Congo.

Reaction to the Dodd-Frank Bill has been mixed and number of critics point to the cost of compliance to US companies and the potential effects on Congo’s “legitimate” mining industry. One criticism that is commonly raised is that the rules could lead to US manufacturers refusing to buy any minerals from Central Africa. Such a boycott could have negative repercussions for what fledgling industry exists.

The other possible outcome would be enabling foreign companies to access the minerals at a lower cost, which does nothing to actually end the economic drivers of conflict. Enough Project rates manufacturers on their due diligence in auditing supply chains to exclude minerals from conflict areas. According to Enough’s rankings, the bottom 10 are all Asian companies, to which the new SEC rules would not apply.

Finally, retailers are exempt under the SEC ruling from having to disclose store brand products manufactured by third-party suppliers. As for those required to disclose, they have until 31 May, 2014 to issue their first report.

It is true that this new rule alone will not solve the conflict in eastern Congo. However, it has significant potential to reduce demand for these minerals, which is the first step in mitigating the war. The US is the largest consumer in tantalum in the world, accounting for some 40% of global demand. Cobalt, copper, and tantalum all play a large part in US military technologies, and the US has been relying on the Congo for these resources for decades.

The first publication of the UN Panel of Experts Report in 2002 caused embarrassment for Washington after it named a number of US officials and corporations that had been involved in the illegal exploitation of resources. In particular, the report exposed the involvement of the economic section of the US embassy in Kigali in the establishment of joint ventures to exploit coltan in eastern Congo.

In the Congo, the fight over resources is being exacerbated by the current global economic environment, in which powerful countries and corporations are in competition with one another over scarce resources. Without any institutional restraints on their behaviour, these actors have resorted to trading with warlords and militia groups in order to access these valuable commodities.

We should not assume that the critics of 1502 reflect the position of the companies affected by the ruling. Many of the major US companies whose products contain these minerals have been working for years on developing a way to trace their supplies and ensure their products are conflict-mineral free.

In 2010, a group of hi-tech companies and representatives of minerals industries met in Goma to audit mining sites and discuss ways of implementing a mineral tracking scheme. Representatives from IBM, Apple, and Intel were involved, looking for ways to address their own accountability without directives from their governments.

Mandating such self-regulation through measures like Section 1502 is a welcome measure and an important first step in addressing the source of the conflict in Congo. It remains to be seen how effective the implementation of these provisions will be.