Donald Trump’s decision to suspend the conflict minerals legislation has sparked an outcry among mainly Western NGOs. “The conflicts mineral law would jeopardize the fragile peace in the Congo”.
Last February, the White House leaked the draft of a presidential memorandum which provides justifications for the suspension for the next two years the Conflict Minerals Rule (CMR) adopted by the Securities and Exchange Commission (SEC) in 2012 in the wake of the approval of the Dodd Frank Wall street reform and Consumer Protection Act of 2010.
This legislation is intended to discourage American companies from using such minerals, namely tin, tungsten and tantalum (the 3 T) and gold to manufacture their products. So far, section 1502 of the Dodd Frank and the CMR require that companies file due diligence reports with the SEC to prove that they do not source their products from areas controlled by armed groups in the East of the Democratic Republic of Congo. Backers of the legislation hoped it would thereby eliminate a source of financing for armed groups in the Congo.
Yet, according to the White House, there is a serious gap between well meaning intentions and the situation on the ground. “While the Conflict Minerals Rule has discouraged American companies from purchasing materials sourced in the DRC and adjoining countries, there have been both positive and negative unintended consequences, including some job loss” says the White House in an explanatory statement to justify the suspension. “In addition to lost livelihoods associated with the Conflict Minerals Rule, the SEC also estimated in 2014 that American companies would be forced to incur upfront compliance costs of $3 to $4 billion with $200 million per year thereafter”, pursues the document. It concludes that to respond to these unintended consequences, a more effective mean of addressing the problems of the DRC would be a targeted approach that focuses on specific companies known to be engaging in illegal activities that contribute to the financing of armed groups.
Since Section 1502 permits the President to order the Commission to temporarily waive the requirements of the CMR if it is in the national security interest of the US, the explanatory statement argues that there is “mounting evidence” that the disclosure requirements contained in the Conflict Minerals rule have instead caused not only harm to some parties in the DRC but have also thereby contributed to the instability in the region and threatened the United States’ national security interests.
The announcement of the suspension caused an outcry among a number of American NGOs, including Enough which was founded by former State Department and National Intelligence Council staff member, John Prendergast and which is supported by the Hollywood star, George Clooney. According to Enough, the main lobbyist for the conflict minerals legislation, “rolling back the conflicts mineral law would jeopardize the fragile peace in the Congo”. Enough’s associate director of policy, Sasha Lezhnev and former deputy assistant secretary of state for Democracy, Human Rights, and Labor, Steve Feldstein in an article published by US News on the last 24 February argue that owing to the anti-conflict minerals American legislation, the situation in eastern Congo has improved in recent years.
It has forced corporations to be accountable for where their minerals come from, changing longstanding practice from purposeful opaqueness to mandatory transparency, due diligence and public accountability. Accordingly, in 2016, there were even record-level exports of conflict-free Congolese minerals. Moreover, say Lezhnev and Feldstein, this “potential decision would undermine peace and security at a particularly sensitive moment”. They warn that if militias are allowed to rearm and increase operations, this could provide a pretext for Kabila to suspend the constitution on emergency grounds and stay in power indefinitely. Human Rights Watch points out that the due diligence costs for American companies have been exaggerated by the SEC. Accordingly, “an independent assessment by Elm Associates submitted to the SEC found that actual costs would be far lower closer to $800 million, and that those costs were decreasing over time”.
Other circles however consider that the suspension of the law might be rather a good thing since its main victims have not been the armed groups but rather the artisanal miners of eastern DRC. A recent study from the United Nations University suggests that child mortality in villages located near mines in the region increased by at least 143% since Dodd-Frank was enacted, as a result of the decrease of the miners’ revenues which caused reduced the mothers’ access to health care. The IRIN news agency reported on the last 14 February, that local miners have been paying a heavy price for the implementation of the American legislation. The certification process is complex and only large companies can fulfil the conditions. This has enabled a company like Mineral Mineral Resources (MMR) which sells its minerals to Motorola and Fairphone to retain a monopoly on the purchase of minerals at the Kisengo mines in Katanga and to impose prices on miners. According to local traders, MMR is selling coltan only for U.S. $ 20-24 per kg, whereas the same product is sold for the double in Kigali (Rwanda).
“Trump is right but for the wrong reasons”, writes Sara Geenen from the Antwerp-based Institute for Development Policy and Management. In her view indeed, the real reason by Trump why the measure was taken was to save US companies’s time and money. Because of the hassle and the complexity of the procedures, many of these companies found it easier to source their minerals from elsewhere than the Great Lakes region, contributing to the crisis of the mining sector in eastern DRC. So, in such context, the suspension might be a good thing for all those who depend on the revenues of the mining activity such as petty traders and shop owners operating in or around the mines of Eastern Congo. In fact, as suggests the Paris-based newsletter Africa Mining Intelligence, the main beneficiary of the complex certification mechanisms and therefore the most hostile to Trump’s decision is the recently born due diligence industry. Beside America’s global technology provider PTC which has Motorola among its clients, audit giants such PwC and KPMG or consultants such as RGP, Squire Patton Boggs, Kumi Consulting and Assent Compliance have been indeed reaping much of the benefits for helping companies to report that the minerals they purchase from the Great Lakes are conflict-free.