Published on November 15th, 2011 | by Jonathan Banco1
Conflict Minerals: Where Dodd-Frank, The Enough Project and Global Witness Went Wrong
It seemed easy and straightforward enough. Fighting in the Eastern Democratic Republic of the Congo (DRC) between a variety of warring factions has resulted in the death, rape and displacement of many in the region. Based on most accounts upwards of 5.4 million people died during the official war period of 1998-2003 and some 2.7 million since 2004. Keep in mind the majority of these deaths were not from combat or fighting per se, but rather from disease. Regardless the toll is far too many and something had to be done.
Two international advocacy organizations, Global Witness (based in the UK) and the Enough Project (based in the US) decided it was time to devote a great amount of their resources to the cause in attempt to influence policy makers, primarily in the US. Not only would this highly emotional issue resonate with donors, but the organizations also successfully found a way to get western consumers involved. This was done by discussing and addressing the involvement of conflict minerals, some of which end up in consumer electronics and the proceeds of which have, according to the organizations, been fueling the fighting.
Skip ahead to the amendment to Dodd-Frank, mainly a “financial reform” bill that forces companies to disclose where they source their minerals. This bill is a perfect example of addressing an extremely worthy cause from afar, without understanding the complexities of the situation and the negative externalities that come with creating a one-dimensional approach that is virtually impossible to implement in the current environment. It turns out, forcing companies to determine where the minerals they put in their products originated was far more expensive than was originally calculated when the Dodd-Frank rider was put together. In fact a recent study by Tulane University determined that the industry costs would be $7.93 billion, more than 100 times the $71.2 million the SEC believed it would cost initially. And what happens when businesses are faced with insurmountable costs levied upon them? They go elsewhere for business (or in this case resources). They can do this because these minerals, mainly columbite-tantalite (coltan), cassiterite, gold and wolframite, can be found elsewhere in the world and are much more important to the DRC economy than that of the bottom line of mining companies. Of course not all companies are doing this. Some including Motorola are attempting to comply.
Interestingly, this is, on the surface what the Enough Project, Global Witness and Dodd-Frank would like to accomplish, however we have a problem. Minerals are a huge industry thoughout an impoverished country like the DRC (not just in the east where the conflict takes place) and much of the mining that is done is done by legitimate means, by people who are attempting to make a living, not by those funding rebel (or DRC government) movements.
Now the last section concerning the impact on livelihoods is for the moment a very contentious debate and while the interest and subsequent action by western NGO’s and the US government is admirable, it’s still a great example of addressing a symptom rather than a cause. As a Congolese gentleman on a recent panel I attended said, conflict mineral legislation is not Congolese policy. Washington must work directly with Kinshasa to strengthen accountability throughout the mining sector (and the government in general) in order to end violent conflict and improve the livelihood of all Congolese – an absurdly complex and difficult, but incredibly necessary task.
Image Credit by unmas via Flickr under a CC license