Hard to implement US conflict mineral law
SARW calls for measures to make law work in DRC
Even though it has not been implemented yet, the section of the US Dodd-Frank that aims to help stem the trade in conflict minerals in the east of the Democratic Republic of Congo (DRC) has stirred up considerable controversy - with critics pointing to the negative impact the law has apparentlly already had on the livelihoods of thousands of artisanal miners and to the fact that its demand for US-registered companies to ensure that their supply chain is clean will be extremely difficult to monitor.
One of the most respected organisations in the field, the Southern Africa Resource Watch (SARW), has just sent a letter to the US Securities and Exchange Commission, which is tasked with finalising the Dodd-Frank regulations, urging it to adopt measures that will make the legislation effective - and not allow companies to continue with 'business very much as usual'.
SARW agrees that the legislation, if properly implemented, could contribute to increasing transparency and reducing conflict linked to resource exploitation in DRC but argues that if the final regulations do not take into account local conditions and realities, the legislation could prove to be entirely ineffective. Indeed, in a country where the state does not provide basic services to its citizens and where artisanal mining is the only livelihood for large numbers of poor and vulnerable people, SARW is concerned that the introduction of Dodd-Frank's controversial Section 1502 could, unintentionally, leave many of these people with no means of survival.
Having conducted extensive research in eastern Congo, particularly into the trade in 'conflict gold', SARW also feels that the legislation does not take into account the current realities on the ground - including less conflict and more corruption, different conditions at different mining sites, and unreliable sources of information.
But SARW's main concerns are with the actual implementation of the law. Without a huge and permanent monitoring system in place, it will be impossible to verify company submissions that their supply chains are clean of conflict minerals - and putting a huge monitoring system in place will be impossible. Indeed, the law will make the lives of companies slightly harder by forcing them to provide reports - but it will not necessarily affect the way they actually operate since they can claim that they conducted 'reasonable' investigations.
However, SARW believes that Dodd-Frank can make a real difference if key steps are taken. Firstly, SARW believes that the debate about Dodd-Frank could help create a genuinely consolidated approach to dealing with 'conflict minerals' in the DRC that would be far more constructive and impactful by combining the best aspects of the various initiatives that now exist in the DRC – including the Public Private Alliance, the ITRI initiative, and the German Federal Institute for Geoscience and Natural Resources initiative.
The law's reliance on companies to do their own due diligence and its acceptance of audits conducted by independent private sector auditors in the DRC, which are notoriously dishonest and unreliable, is worrying but this could also lead to real change if minimum standards are enforced, namely
Extraction-site monitoring reports that reflect at least weekly visits;
The identity of miners, traders, and government officials interviewed and observed during their work;
A general assessment of the social, gender, and health conditions at the extraction and raw-processing sites; and,
The prices paid for a range of sample transactions between miners and traders, and any fees, taxes or other payments either miners or traders are required to make.
Even so, SARW remains sceptical about the impact of Dodd-Frank because of the weakness of Congolese state institutions. Many State agents have become little more than ‘tax collectors’. But there is still a chance that the law can have a beneficial impact as long as the regulations approved by the SEC are based not just on theory but on the situation on the ground.