Groundbreaking: tin mining in eastern Congo. American legislation aimed at stemming violence in the region is the culmination of a 10year campaign by rights group
Groundbreaking: tin mining in eastern Congo

For 60 years, miners at the Nyakabingo mine have followed the same routine, each filing out of the pit with a heavy bag of black rock they hook on to a dangling scale.

But since last year there has been a change at Rwanda’s biggest tungsten mine. The miners’ load is now recorded by government agents, bundled into 50kg sacks and then heaved into a van. And each sack is bound with a bar-coded plastic label.

These white tags represent central Africa’s most effective response so far to a western-led programme meant to clean up supply chains in tantalum, tin, tungsten and gold. The aim is to end conflict in the neighbouring Democratic Republic of Congo by regulating a minerals trade that has funded rebel groups for more than a decade. These groups are financed partly by taking over ramshackle mines, running smuggling routes into Rwanda, Uganda and Burundi, then wreaking havoc in eastern Congo, often killing and raping civilians.

Rebels whom UN experts say are backed by Rwanda have attacked Goma, eastern Congo’s mineral trading centre. The “M23” mutineers continue to occupy parts of North Kivu province, of which Goma is the capital, threatening a regional war reminiscent of the 1998-2003 conflict that killed millions.

For Peet Muller, manager of Nyakabingo, the new way of monitoring the flow of tungsten is a practical concern. “I can’t work without the tagging system – if I don’t tag my product, I can’t sell my product,” he says, speaking outside a warehouse where the bar-coded sacks are stored overnight.

This system is a response to a “miscellaneous provision” of the 2010 Dodd-Frank Act – the overhaul of US banking regulation passed in the wake of the financial crisis. The provision requires large American companies to disclose whether their products may include conflict material mined in Congo or its nine neighbours and publish supply-chain audits.

The legislation is the culmination of a 10-year campaign by rights groups. The rulings on conflict minerals will now affect more than 6,000 companies across a host of industrial sectors, including Apple, Boeing and Ford.

“Every time you send a text message, that’s tantalum,” says campaigner Sasha Lezhnev of Enough Project, referring to a metal vital to electrical devices that is extracted from an ore called coltan. His group, which helped popularise phrases such as “blood phones”, has calculated that armed groups in eastern Congo made $185m from mining in 2008.

Dem Rep congo map

But more than two years after the act was passed, the ground­breaking legal effort to stem the violence appears to have had little impact on either smuggling or the larger conflict. In Rwanda, government monitors number only 100 for 450 mine sites. Some sell tags illegally; others fail to keep records in handwritten logbooks. They all clock off at dusk, leaving the night-time domain of smugglers wide open. In January four top Rwandan military officials were arrested for smuggling.

“The Rwanda tagging system is unable to guarantee that the material it tags is what it says it is, and as such it could be used to launder smuggled conflict material,” says Gregory Mthembu-Salter, an architect of UN due diligence procedures.

Perhaps more damagingly, companies have opted to boycott eastern Congo. Production of minerals in the province of North Kivu last year was down 80 per cent on 2008, official statistics show. What market remains has gone further underground but still funds armed groups.

“We’re getting the opposite of what they wanted. And we still have conflict,” says Emmanuel Ndimubanzi, head of North Kivu provisional government’s mining division, who says tens of thousands of jobs across the sector have been lost. A proposal in the act to spend $25m to help out-of-work find jobs and fund mineral tracing schemes was dropped. “Since 2007 we were making advances to ensure less and less smuggling, so this law was like you had someone just convalescing from a coma, and at that very moment you kill them.”

In a bleak office in Goma, Celestin Kubwirwa, an unemployed minerals trader, uncrumples an unpaid trading IOU. “This law is stopping us from working. Now we can’t sell to anyone,” says the 39-year-old, who sold his house after finding himself unable to repay personal loans. He says several traders have fled town because of similar debts.

Only five provincial mineral trading houses were still exporting in September, down from 29 in 2010. All supplied Chinese buyers. “The Chinese are the only ones left,” says Nguba Zirimwabagabo, another out-of-work minerals trader. “They impose a nothing price because the Americans no longer buy from Congo.”

Huaying, which exported 636 tonnes worth $4.8m in the first eight months of the year, is one of two Chinese trading houses the Congolese government this year banned for buying material “of dubious origin”. But Chinese workers could still be seen in September loading cassiterite, or tin ore, into lorries on the streets of Gom. Huaying won a waiver to export what it says is a sizeable stockpile but refused to show the Financial Times its warehouse.

Efforts to clean up murky supply chains from rebel to consumer have been under way since UN experts deemed smuggling “systematic and systemic” in 2001. This led the UN and the OECD to produce comprehensive guidelines on how to mine and trade minerals legitimately in the region.

The landmark US act has created the first compulsory framework to disclose the provenance of potential conflict minerals across the industry. But beset by delays, loopholes and vague guidance, it has complicated and impeded initiatives by industry, regional governments and international donors, as well as the UN and OECD. These include tagging schemes, chains of documentation and a mineralogical “fingerprinting” pilot scheme already under way.

Companies keen to ensure their minerals are “clean” will buy only tagged material. But the fact that Rwanda is able to export “conflict-free” is a worrying upshot. Donor-dependent Rwanda, still recovering from a 1994 genocide, is accused by UN experts, diplomats and Congo of masterminding, funding and arming a proxy rebellion in eastern Congo, in part to seek out the very material the legislation is meant to safeguard. The UN says Rwandan exports are rising in line with levels of smuggling from Congo, and that smuggling still finances Congolese rebels.

Barney Frank, the Democratic US congressman, accepts that legislation such as the act he co-authored “can cause short-term harm” but he expects it to succeed in the long term.

The act has hit some early hurdles. It instructed the US Securities and Exchange Commission to issue audit rules within 270 days, but they were delivered 16 months late and, following industry pressure, watered down.

“I will acknowledge we did not anticipate this delay in the rule and it was an unfortunate obstacle to the functioning of the legislation,” Mr Frank says. “The concept is fine. Uncertainty was a major problem for the industry but now that the rule is promulgated we will get a fair test of this. Much of the problems will diminish. They [the companies] will be able to end the boycott.”

But many obstacles lie ahead. According to the new framework, companies have until May 2014 to report audit findings on material they declare “conflict free” – but they might find it easier simply not to buy from Congo. The SEC says compliance will cost up to $4bn, up from an earlier estimate of $71m.

Uncertainties and concessions remain, including one that permits businesses to declare material “conflict undeterminable” for two years. The act also failed to determine how to conduct due diligence, ruling a recent five-step OECD framework appropriate but not compulsory.

Efforts to track Congolese minerals, especially gold – the easiest to smuggle and highest-value commodity still funding conflict – have barely started. US electronics group Motorola Solutions is leading efforts to source conflict-free tantalum, but only from mines in southern Congo. In the east, two industry-backed schemes have been started but cover only one mine in the Kivus. “There will be a constant problem of smuggling conflict minerals until tagging gets going in the Kivus,” says Mr Mthembu-Salter.

The Mintz Group, a US private in­vestigation agency, says only a “cat-and-mouse game” can determine supply chains in a sector characterised by “fly-by-night traders who operate in the dead of night with no paper trail”. A regional minerals trader agrees, saying: “I can fiddle any system.”

But one case has alerted companies, many of which claim Dodd-Frank compliance could cost $16bn overall, that they will not be able to claim due diligence is impossible. A Geneva court ruled last year that Luxembourg-based metal trader Traxys had no grounds to break an agreement in 2009 with buying house Tengen Metals over worries that the trader could not vouch for the provenance of its minerals. This followed concerns of UN ex­perts in 2009 over whether Traxys was sourcing materials from rebel-controlled mines via other mining houses.

Although “undoubtedly complicated …it was not impossible to conduct a proper due diligence”, the ruling said. Tengen, which Traxys contracted to supply cassiterite, showed it could trace its material. The court awarded Tengen $9.5m. Traxys, which “absolutely denies any knowledge” it purchased from rebel-associated sources, says it withdrew because the situation “was a mess”. It now participates in industry-sponsored tracking schemes in Rwanda and Congo.

Tengen owner and lawyer James Tidmarsh, who has since closed the business, calls Dodd-Frank “bad law”, unnecessarily limited to Congo and requiring only disclosure rather than verifications of conflict-free sourcing. “All these do-gooders attach such a stigma to eastern Congo – these big companies will just want to go elsewhere, but we were doing it right,” he says. Experts also worry that the law diverts focus from the causes of the war and that rebels turn to whatever is closest to hand. While metals are lucrative, so too are charcoal and people, who can be preyed upon for everything from taxes to forced labour.

“It’s so easy to say armed groups are fighting to control mines but the whole thing about mines has always been oversimplified – charcoal is much less sexy than coltan,” says a diplomat, referring to a trade that generated $25m in 2008, according to UN staff. Experts say ending conflict will require regional diplomacy and reform of Congo’s weak army as well as squeezing armed groups’ finances

UN experts say Dodd-Frank is a “critical catalyst for reform”, but there is a sense it has backfired. “Somehow we became victims of something meant to fix the global credit crisis,” says Sabin Sifumungu Kalume at the North Kivu mineral trading association. “These two – Dodd and Frank – they did this law without coming here first to investigate how it would affect us negatively, and now we’re the ones who are suffering.”

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