Conflict minerals: demonise the criminals, not the miners

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On July 15, we published Conflict Minerals: Hands-Off Is Not a Solution by Stephen P. Groff, former Deputy Director of the OECD Development Co-operation Directorate, now Vice President of the Asian Development Bank. Today, we publish a reply from Chuck Blakeman, founder of the Crankset Group, who recently visited the Democratic Republic of Congo to promote small business growth.

Stephen Groff’s article Conflict Minerals: Hands-Off is Not a Solution is remarkably naive and removed from the actual problem, and represents a pervasively uninformed and simplistic view of what is going on in the DR Congo. As a result of the Dodd-Frank Act’s demonization of minerals instead of criminals, exportation of the four minerals covered by the Act has nearly evaporated from the Congo.

A recent article in The Economist says that 95% of mineral exports have evaporated, while Motorola’s Solution for Hope Project argues that “Tens of thousands of people in the DRC depend on artisanal mining, many operating in regions where conflict is not present. Their livelihoods and the economic stability of the region have been threatened by the de facto ban.”

Personal experience backs this up. Our company, Groupe Weyi, has 50 tons of coltan from a local tribe sitting in a warehouse. Six weeks ago we had a buyer. Today we can’t find anyone buying coltan from DR Congo, anywhere in the world.

Our export process is well documented, government approved and done through a highly visible process that tracks it from the mine to the ship – but no one is buying. The smelters all say that minerals coming out of the Congo are “radioactive” now. Why buy from there when they can buy from a dozen other places on the globe without risking misperception? They have simply left the area.

So while all of those who are thousands of miles away pontificate about how great this solution is, honest miners all across the Congo are now starving because they can’t find a buyer.

Everyone likes to say this isn’t impacting people on the ground. But please note who everyone is quoting – giant NGOs, giant organizations, giant corporations and giant governments. Nobody seems to have spoken to anyone on the ground. That should say something very powerful to us. Why don’t the supporters of Dodd-Frank produce a poll of people in the Congo to tell us how much they love this law? Because the only support they can find is people who don’t live there.

I can produce chiefs and whole tribes who have been devastated by this demonization of minerals instead of criminals. Dodd-Frank is like blaming houses for the presence of a burglar. It burns down every house in the town so the burglar has nothing to steal. The burglar will simply move on to steal from stores instead of houses. Meanwhile 1 million people in the Congo who depend on mining for a living are being devastated by the universal collateral damage of this “nuclear” option.

The militias existed long before they found minerals as a source of revenue. What in the world makes anyone think that burning down the entire mining industry in the Congo will put the criminals out of business? What an incredibly naive and simplistic solution. The criminals will simply find something else to steal.

These minerals are mined in six regions – five of which are hundreds to a thousand miles from the conflict zone and aren’t even connected by a road. Dodd-Frank burns all of them down, too. The very people you think this is supposed to protect are being destroyed.

Get the United Nations to grow a backbone and go in and root out the militia. Or require Kinshasa to grow a backbone. Do anything we can to rid the world of those militias, but don’t do it at the expense of every man, woman and child throughout the Congo related to mining. A nuclear option that demonizes minerals instead of criminals is not acceptable.

Groups like ours are the solution, not another bureaucratic process that will only make it difficult for honest people to export while the criminals scoff and pay a bribe to make it all go away.

Groupe Weyi is not a mining company, not a multinational, but a company incorporated in the DRC, majority owned by a Congolese, that works with local tribes to build a local, sustainable economy and solve poverty within 5-10 years in the Congo and 10-20 years in Africa. Exporting minerals is what the tribes feel right now is their best, most stable and sustainable source of income, and one that can create higher wages almost immediately.

Mining will also generate revenues for creating other longer-term, much better local economic options at a much higher level than micro-financing could achieve, including agriculture, herding and husbandry, aviation and water transportation. We are already building our first commercial river barge. We will also use profits to rebuild infrastructure, water, schools, clinics and other necessary services.

A local economy will never be built on the backs of large corporations or multi-national entities, but by the emergence local businesses throughout the Congo creating a sustainable local economy that is not dependent on large corporations or mining for their existence.

And it won’t be built by depriving people of their livelihood. Unconscionable is the best description of Dodd-Frank’s 1502 provision.

Useful links

OECD work on due diligence concerning conflict minerals

Transcript of remarks by US Secretary of State Hillary Rodham Clinton at the adoption ceremony of the Recommendation on Due Diligence Guidance on 25 May 2011

OECD Guidelines for Multinational Enterprises

Conflict Minerals: Hands-Off Is Not a Solution

Click for more information on OECD Due Diligence Guidance and the text itself

Today’s post is contributed by Stephen P. Groff,  Deputy Director of the OECD Development Co-operation Directorate

What do an artisanal miner in the Democratic Republic of Congo, computer companies, and the Organisation for Economic Cooperation and Development in Paris have in common? They all have a keen interest in ensuring that mining in Africa does not fuel conflict.

Last month, U.S. Secretary of State Hillary Clinton chaired a meeting celebrating the OECD’s 50th anniversary where ministers from OECD and developing economies agreed on a set of practical recommendations that will keep minerals from becoming “conflict minerals”.

And recently in Washington, there were an important series of events around conflict minerals bringing together 200 downstream companies to discuss approaches and take action to ensure responsible sourcing.

In fragile African states, illegal exploitation of natural resources has fueled conflict across the region for a decade. While data is scarce, it is estimated that up to 80% of minerals in some of the worst-affected areas may be smuggled out — bound for use by jewelers, the automotive and aerospace industries, producers of medical devices and other manufacturers around the world.

Trade and investment in natural mineral resources hold great potential for boosting growth and prosperity in the developing world. Too often though, misguided or illicit exploitation of these resources has contributed, directly or indirectly, to armed conflict, human rights violations, crime and corruption, and international terrorism, thereby impeding economic and social development. The story of “blood diamonds” is familiar to many — brought back into the spotlight recently by a controversial decision to allow diamond exports from Zimbabwe – but there are many other minerals that contribute to conflict across the continent.

In 2010 the US Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as the Dodd-Frank Act. This law has received a lot of attention because of its sweeping new regulation of the financial industry. Less known, however, is the fact that this same law (under Sec. 1502) imposes additional reporting requirements on publicly traded companies manufacturing products that could potentially be using “conflict minerals” (in particular tantalum, tin, tungsten and gold). The law obliges these companies to report to the Securities and Exchange Commission disclosing their tax, royalty and other payments on each project they operate. This provision will cover US and European companies as well as many from emerging markets that sell shares on US stock exchanges.

Until last month, companies did not have a set of government-backed recommendations on how to undertake supply-chain due diligence. The new OECD guidance clarifies how all involved — from local exporters and mineral processors to the manufacturing and brand-name companies that use these minerals in their products — can identify and better manage risks throughout the supply chain. The guidance is also designed to foster private sector engagement in sustainable sourcing practices that nurture revenue-generating trade in clean minerals, creating a peace dividend while supporting broader development goals.

The guidance seeks to avoid what all involved would consider an unhappy outcome: boycotting of mining in countries like the Democratic Republic of Congo (DRC). By incorporating the flexibility to allow trade to continue, it promotes responsible sourcing, bearing in mind that supply chains cannot become 100% conflict-free overnight. In this way, it avoids massive pull-outs that would have severe consequences for the poor populations that depend on mining for their bread and butter.

Responsible solutions are possible. For instance, “bag and tag” programs — a scheme to track the origin of tin and developed to implement to the OECD guidance — are now being used in the DRC and Rwanda by companies extracting and trading in minerals.

In a wide show of support, many have called on the Securities and Exchange Commission to refer to this guidance as providing reliable due diligence measures to meet the reporting obligations under section 1502. Such a reference to internationally agreed standards in the implementing rules being written now and anticipated to be issued in the coming months would ensure that companies will have one clear set of due diligence expectations throughout the entire supply chain, thereby avoiding multiple and potentially conflicting requirements for companies on how due diligence should be implemented.

Section 1502 of the Dodd-Frank Act and a whole-of-government approach to the implementation of the new guidance offered by the OECD are excellent examples of how we can deliver on a “new paradigm for development” — one that looks beyond aid. In her speech last month in Paris, Secretary Clinton emphasized that we need a “new approach to development that will better prepare developing countries to move from aid to sustainable and inclusive growth.” This work moves us solidly in that direction.

Useful links

Transcript of remarks by US Secretary of State Hillary Rodham Clinton at the adoption ceremony of the Recommendation on Due Diligence Guidance on 25 May 2011

OECD Guidelines for Multinational Enterprises

This article was also published in the Huffington Post