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.