IOA Analysis in brief | To spare US companies accounting costs, the new US presidential administration may end due diligence measures that retard the sale of minerals which finance Central African insurgencies and terror groups.
- The Dodd-Frank Act as amended in 2015 requires US companies to verify the origin of minerals from 10 African states where they may have been smuggled
- The new US presidential administration is on the verge of scrapping the conflict mineral avoidance measures in an anti-regulation campaign gone awry
- If Central African governments could tackle corruption and make the mining industry legitimate, the trade in conflict minerals would dry up at its source
The US government responded to international revulsion at the trade in conflict-minerals by requiring American manufacturers to report on the origin of certain minerals that could conceivably have come from Central Africa’s conflict regions. The measure is outlined in section 1502 of the landmark 2010 financial sector reform measure, the Dodd-Frank Wall Street Reform and Consumer Protection Act. Consumers wanted the law, humanitarian and human rights groups clamoured for it, and American industry went along as a public relations measure. Now, however, the new US president, Donald Trump, is pursuing an agenda to overturn all the accomplishments of the previous administration of Barack Obama. As a businessman himself, first and foremost, the president also despises any and all regulations on businesses. The US administration is therefore reviewing the Dodd-Frank Act with an eye on gutting the law. Should article 1502 be suspended, American firms will be free to revert to their old manner of conducting business, turning a blind eye to the source of the raw materials they use.
These materials make possible the murderous and nation-destabilising activities of some of Africa’s most destructive rebel groups. These are terrorist groups, in essence, that randomly kill civilians and disrupt lives in the Central African Republic (CAR) and the Democratic Republic of Congo (DRC). They operate illegal mines, smuggle out not just blood diamonds but valuable minerals essential to the manufacturing of modern technologies and use the profits to perpetuate their aggressions and human rights violations. By facilitating their finances, the US government will not only set back Africa’s anti-terror and anti-insurgency efforts but will indirectly become a state sponsor of terrorism.
Conflict minerals are latter day blood diamonds
The London-based human rights watchdog Global Witness defines conflict minerals as “natural resources whose systematic exploitation and trade in a context of conflict contribute to, benefit from or result in the commission of serious violations of human rights.”
These valuable, natural resources cause widespread misery, while profiting insurgencies and corrupt government officials who allow the trade for their own enrichment. The three main conflict minerals smuggled out of the DRC — in addition to gold, which is not destined for American industrial usage — are cassiterite, tantalum and wolframite. Also smuggled out of CAR, these minerals are essential for the manufacture of such indispensable modern items as automobile airbags, cellular telephones, laptop computers and mp3 players. In fact, without these minerals, these items could not be made. Cassiterite is also a component in the production of tin.
The American companies that purchase these minerals do not deal directly with rebel groups. Rather, they purchase through mineral brokers, middlemen who take possession of illegally trafficked minerals and pretend to be the mineral’s point of origin. These brokers are in the business of laundering conflict minerals. The amended Dodd-Frank Act requires American manufacturers to do more thorough due diligence as to the origins of their raw materials.
Legitimising Central African mining is the ultimate solution to conflict mineral trade
Legitimate mining operations would drive conflict mineral traders out of business. Central Africa must be more business friendly, which the US president, who loathes red tape, can appreciate. More investor-friendly economic policies that facilitate new businesses should be accompanied by the opening up of more mining sites, greater regulation of artisanal mining and the lowering of taxes on mining operations. More mining would be done openly and lawfully. Such measures would give the DRC government a revenue windfall of 870% over current mining licensing fees.
Perhaps the replacement of the Kabila regime will allow such reforms. In January, Joseph Kabila, heir to the Kabila family business of running the DRC begun by his father, acquiesced to international pressure and agreed to surrender power to a democratically elected government by the end of 2017. The painstaking negotiations, spearheaded by DRC church groups, that brought Kabila to his decision may yet be undone. If so, the reason will be the very foundation of the conflict mineral trade: government officials enjoying the profits, knowing that the destruction they empower will harm ordinary DRC civilians but that the benefits will never reach them. Hopefully, a new and enlightened administration will use legal mining revenue to rebuild war-torn areas and give employment to residents who now collaborate with illegal mining.
US backtracking on conflict minerals will encourage world users to continue the trade
In June 2016, the European Union (EU) member states agreed to a cessation of conflict mineral trade within their continent. The means of policing the trade was modelled after the successful regimen of the Kimberly Process that proved effective against the trade of conflict diamonds. While this was a step forward, trade in conflict minerals continues unrestricted in the Middle East, which is a major consumer of these materials and is not subject to sanctions in Asia or Russia. By withdrawing the accountability rules that requires American firms to police the source of their inputs, the US government will ensure that the developed world outside Europe will also tolerate the trade.
Not just CAR and DRC are vulnerable, if the Dodd-Frank Act requirement that US manufacturers perform due diligence to ensure the legal provenance of the minerals used in their products is dropped. Minerals originating from the countries specified in the law would also be vulnerable to illegal smuggling, namely Angola, Burundi, Malawi, Republic of Congo, Rwanda, South Sudan, Tanzania, Uganda and Zambia. Such verification will end if the law is gutted because such accounting costs companies money. The financial fortune of terror groups and insurgencies would soar in response.