Painting by Cheri Samba

Lokuta eyaka na ascenseur, kasi vérité eyei na escalier mpe ekomi. Lies come up in the elevator; the truth takes the stairs but gets here eventually. - Koffi Olomide

Ésthetique eboma vélo. Aesthetics will kill a bicycle. - Felix Wazekwa

Friday, January 6, 2012

Does the UN think Dodd-Frank has "backfired"?

The UN Group of Experts' most recent report was released just before the New Year (you can access it here). Unfortunately, it did not receive much coverage in either local or international press, despite its detailed research into the financing and arming of armed groups in the eastern Congo. Other highlights include a Hollywood-worthy case of gold smuggling involving a basketball star, a war criminal and American businessmen; and how Burundian opposition politicians are dabbling in armed rebellion.

I will be posting an interview with the Group here shortly about the whole report, but let's first take a look at one issue that did receive coverage in the press: conflict minerals. A Reuters article published on Friday, December 30 was headlined "Conflict Minerals Crackdown Backfiring in the Congo," and suggested the Group's report had concluded that the Dodd-Frank legislation in the United States had failed by pushing the mineral trade underground.

This produced consternation at the UN. Members of the Group of Experts were alarmed, as this was not the impression they had tried to give in the report. In an emailed comment, Steve Hege - who is in charge of armed groups for the Group of Experts - wrote to Congo Siasa:
[The story's] content and headline misrepresented the Group’s findings on the impact on Dodd Frank bill in the eastern DRC. As per our previous letter to the SEC, the Group of Experts findings and recommendations have remained consistent that the U.S. legislation on supply chain due diligence in Central Africa has overall been quite positive and a critical catalyst for reform.
Advocacy groups in the US were also jerked from their New Year revelry, as this news came almost at the same time as the Securities and Exchange Commission announced yet another delay in the issuing of regulations to enforce the Dodd-Frank bill and the prospects of a watering-down of these rules appeared to grow.

So what does the Group's report say?

Unsurprisingly, the report steers somewhere between the stark opposites of "Dodd-Frank is going to bring peace to the eastern Congo" and "Dodd-Frank has plunged hundreds of thousands into misery." On the one hand, it says that the yet-to-be-enforced legislation (as well as the recent California state law) has led to a steep fall in production in the eastern Congo, producing "rising unemployment and worsened poverty among the tens of thousands of people who depend on artisanal mining, with a consequent sharply negative impact for the economies of the affected regions as a whole." (para. 368) In addition, there has been an increase in smuggling of ores, which has benefited select military officers.

But it also says that the legislation and advocacy efforts have led to a shift in mineral production from conflict to non-conflict sites, bringing about "a reduction in the level of conflict financing provided by these minerals." In particular, sites in northern Katanga and Rwanda that have begun complying with due diligence guidelines have seen an increase in production (although the Group also warns that some minerals appear to be smuggled into Rwanda and then passed off as "clean.")

Given this nuanced picture, what should the US government do? Steve Hege again:
The only solution to these outcomes is for the SEC to publish its rules expeditiously which should allow responsible commercial actors to begin once again purchasing minerals from the Kivus while conducting supply chain due diligence in compliance with the UN Group of Experts and OECD guidelines. This can happen if the key concept of mitigation is incorporated into the SEC rules allowing for purchases of supply chains where military criminal network involvement is identified provided that they can demonstrate time-bound progress in marginalizing military involvement.

This sentiment is echoed in the Group's submission to the Securities and Exchange Commission from October 21, 2011:
Scrapping or weakening Dodd Frank is not the solution to [these problems]. The solution is for SEC regulations to incorporate the UN Group of Experts and OECD due diligence guidelines' concept of mitigation. Mitigation allows companies purchasing from mines where FARDC criminal networks are in operation to continue purchasing provided they have put in place mitigation strategies and can prove they are working. [my emphasis]
By this, the Group is referring to their own due diligence guidelines (see here), which were endorsed by the Security Council in 2010, and which place greater emphasis on risk-mitigation than the Dodd-Frank law. 


blaise said...

I don't think anything meaningful will be done as long there is a democrat president in the white house. It seems to me that republicans are more business oriented while democrats are more social oriented. They apply their different logic when approaching the situation in Congo. We had more result with Bush the second than with Clinton.
Don't forget Albright and Rice who vows to protect Rwanda interests.

Anonymous said...

Dear Jason,
Thanks a million for this posting! I'm always grateful for your passion about day-to-day affairs of this great country which has unfortunately been conspired against by so many saboteurs. Here are my reflections in relation to this posting:
First and foremost, the complexities of the geographical and historical backgrounds of the DR Congo and the Great Lakes region of Africa surely bring a new focus to the peace-building framework. The realities on the ground are so complex that they cannot be made to agree with traditional ways of peace-building and conflict-resolution, for they contain both historical and geographical features.

However, although historical background constitutes a significant resource to achieving stable structures in the region, any peace arrangement to this end, should not ignore or overlook the geographic, physical and geological features that characterizes the region: presence of lakes serving for natural borders and with interposed islands, cross-flowing rivers, expanded forests, extensive mountain ranges, and above all the presence of a geological scandal!

In January 2008, a peace conference, Programme AMANI was held in the town of Goma, the North Kivu capital, chaired by Father Apollinaire Malu Malu-- the then president of the electoral commission-- where all the different existing political parties and militias in the eastern region, mainly in both North and South Kivu gathered together to iron out their differences and then find a new way forward to a peaceful coexistence in the region. The conference ended with the signing of the Goma Peace Act on 23 January 2008 by all the armed groups. But, later in August of the same year, the Congrès National pour la Défense du Peuple (CNDP)-- the party that was led by Laurent Nkunda and which among all others signed the Act-- unilaterally broke the ceasefire and launched an all-out offensive that has, so far provoked the displacement of more than 250,000 people.

The Mission d’Organisation des Nations Unies au Congo (MONUC) now MONUSCO, despite being according to Carlos Rodriguez Soto(2009), the largest UN peacekeeping mission in the world, has been unable or unwilling to protect the population, who have demonstrated angrily against it. Little wonder that its sometime-appointed commander, Spanish General Diaz de Villegas, resigned from the post in a space of two weeks of the appointment. Other MONUC commanders have complained that their mandate and rule of engagement deny them any possibility to launch surprise attacks. However, one may again critically look at this outbreak in economic terms: first, as Rodriguez (2009) points it across, it is not a coincidence that the war broke out at the beginning of August, just when the government of Joseph Kabila has signed a US$ 9 billion contract with China. Secondly, this region is known of holding 80 percent of the world reserves of coltan (combination of columbio and tantalo that which, if combined, produces a mineral indispensable in the manufacture of cell phones, laptops and latest-generation military equipment); its mines in Kivu are almost at ground level and for the last few years the mineral has been extracted by mostly children and youth exploited by armed militias, who later on ferry the coltan by lorries or helicopters to airports of some neighbouring countries, from where it is flown to destinations in the United States, United Kingdom, Belgium and the Netherlands. Shockingly enough, Rwanda, a country which does not have this mineral in its own, appeared as one of the world’s leading exporters of coltan.

Indeed much more homework needs to be done for the liberation of the DR Congo. Any personal feedback is welcome on my

Anand said...

Interesting post. Thanks. I am growing more and more concerned about the potential for the Dodd-Frank debate to disunify DRC advocacy. I think it is centrally important to have a unified front when dealing with the US congress regarding DRC issues. I totally understand the necessity of the debate, I just hope that all parties involved establish points of agreement and go from there. From the outside looking in, it seems somewhat fractured. This is concerning, especially now.

Chuck Blakeman said...

We represent Chiefs and their tribes trying to sell coltan/tantalum from anywhere in the Congo. Not a single ounce of artisanal coltan has sold to a legitimate buyer in 16 months now. There are no buyers - none - for artisanal minerals. 400,000 miners and their families (app. 1,000,000 people) have been moved from abject poverty to utter destitution, not by Dodd-Frank, but by the simplistic "cell phones are evil" fundraising cry from Enough Project and Global Witness.

Dodd-Frank could be in place today and no smelters will buy from any area where NGOs like Enough and Global have demonized the minerals instead of the criminals.

Since Enough had denied this de facto embargo, we asked them to provide the name of just one smelter in the world who would buy artisanal tantalum, either from warehouses or as yet unmined. In a five-way conference call, they recommended we sell to the Chinese, some of the worst human rights violators on earth. Proof that Enough has lost its way entirely on this issue and is much more concerned about keeping their highly successful fundraising mantra going than actually protecting the human rights of the Congolese.

Meanwhile, the militia are smuggling even more than ever (UN Panel of Experts).

Dodd-Frank won't work because:

a) it targets a symptom (ONE source of revenue), not the cause (the militia themselves
b) creates massive collateral damage in the hopes of catching a militia or two in its path (1 million Congolese starving as a result and the militia are doing as well as ever).

Dodd-Frank is a nuclear option that burns down the entire central African mining industry to attempt (badly) to take care of a small region in the Congo. Five of the six mining regions in the Congo aren't even connected by road to the conflict area - they are all devastated by this, as are 10 surrounding countries.

Dodd-Frank will not be implemented. It's impossible to administrate and even if perfectly executed, would not remove the militia. It is patterned after the Kimberley diamond process. Three years after Kimberley was implemented, the British army had to go in to Sierra Leon and clear out the militia who were still doing just fine. Dodd-Frank would have the same result.

Demonize criminals, not minerals. Australia doesn't need Dodd-Frank to govern their massive tantalum mining because they don't have militia. The UN needs to grow a spine and go after the militia. If they don't, no amount of Dodd-Franking will solve this. It will only make it worse for those in the path of the nuclear bomb that Dodd-Frank is to central Africa.

Anonymous said...

Thanks for the article Jason. I'm in shock that the report of NBA Dikembe Mutombo and oil billionaire Kase Lawal didn't make world news!!!?? Doesn't Mutombo usually advocate against conflict minerals in his country homeland?! Why isn't this talked about? He's suppose to be helpng his people but caught making deals w/Bosco Ngtanda and being funded by Nigerian Lawal is on the US Obama's advisory board and one of Nigeria's president Goodluck boards too! What a disgrace!

Anonymous said...

It is beyond UNCONSCIONABLE to see that those who have profited from the BLOOD MINERALS in the Eastern provinces of DRC would not let go but rather are more than ready to wage another assault against the very prospect and attempt (however FEEBLE) to redress already calamitous endless war conditions. The REUTERS article is just another deliberate propaganda effort perpetrated in order to weaken the already toothless DODD-FRANK bill rules to be issued by SEC. The pious plea of "Conflict Minerals Crackdown Backfiring in the Congo," does not watch. It reminds us of the pyromaniac crying “Fire!!”. This is a clear testimony of the extent to which the BLOOD THIRSTY “canaille” would go to achieve for ever their spoliation and murderous traffic regardless of the 8 Million body count these conditions have visited upon the much abused Congolese people. This is the main reason that the “canaille’ would rather see the Kinshasa government puppet maintained while the pillaging continued unabated in the East, his silence handily bought!!!.


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