Issue Of Conflict Mineral Mining In Congo

It is no major secret that the area of land that makes up the Democratic Republic of the Congo (referred to in this paper by its shortened name, the Congo) has been in a state of conflict for the past 40 years or more, with sporadic periods of peaceful existence (relatively speaking, of course); the country has seen many atrocities, ranging from coup d’états, to the “recruitment” of child soldiers, to random violence, and unfortunately, violence against women. Another “known” secret of the country is how the conflicts are funded. It is known that an army requires the “three B’s”: Bullets, Beans, and Bandages. These required resources must be funded by some means, and with the Congo being mineral rich, this makes it fairly easy. The minerals in question are not simply taken from the mines, and sold on the market; that is to say, this is not a victimless crime. The mine workers are either physically assaulted (to include sexually), threatened with physical violence, or are outright killed for not meeting production demands. After the minerals are taken by force from the mining area, they are sold to further finance paramilitary operations. With the term “minerals” being as broad as it is, the minerals that are being referenced not only within this writing, but by the world at large when referring to conflict minerals are tin, tantalum, tungsten, and gold. According to the UN Security Council’s “Final Report of the Group of Experts”, the most valuable resource that is illegally obtained and sold is gold and gold ore (UN Security Council). Despite the atrocities that are happening within the Congo, there is hope for a reform to how operations are handled; there now exist organizations that help to not only bring awareness to the epidemic, but to assist the victims of conflict minerals and show major companies how to reduce or eliminate conflict minerals from their supply chains.

Dilemmas and Victims

As stated in the previous section, the issue of conflict mineral mining is not victimless. In response to the U. S. financial crisis in 2008, former U. S. President Barack Obama passed the 2010 Dodd-Frank Act. While most of the Act covers various financial regulations, within the 2, 300 page document lies Section 1502. This section of the Act requires any company that uses gold, tungsten, tin, and/or tantalum to at the very least make an effort to determine if the minerals come from the Congo. In the event that the minerals do come from the Congo or an adjoining country, the company must perform a review of their supply chain to determine if the purchases of the minerals are funding the many armed paramilitary groups within the Congo. In 2012, the U. S. Securities and Exchange Commission (SEC) issued a final ruling that implements the section, with the first reporting period to the SEC starting in January of 2013. While this may not sound like a major issue, one must first understand that many companies have a globally diverse supply chain, in an attempt to curb costs. While the manufacturing site for the final product may have the required minerals, it is often cheaper to retrieve these resources from an area such as the Congo. According to a report published in January 2017 by the Harvard Business Review, an astounding 80% of the companies that were included in the study were unable to verify if their resources came from “conflict areas”, 19% stated that they had “no reason to believe” that their resources came from conflict areas, with the remaining 1% declaring with no uncertainty that their resources were “conflict free”. This is largely driven by the fact that many companies have supply chains that are too complex to track, as well as the fact that the rise in cellphone use and electric car manufacturing is causing many companies to continue to rely upon the supply chains that originate within the Congo.

Apple is a perfect example of a company that claims to be trying to clean up its resource supply chain, but is coming up short; since smartphones require cobalt for their Lithium-Ion batteries, coupled with the doubling of cobalt prices since 2016, the Congo is fast becoming the preferred site for this resource (Patterson and Wexler). An acting chief executive of a mine in response to questions of deaths and injuries of miners stated, “Of course, people die. This is really sh***y work” and would go on to refer to his workers as “barbarians” that would sell their safety equipment; this was his reasoning as to why he did not issue the required equipment to them. In 2014, a reporter from the website “Mashable” took a visit to the Congo to view the conditions for herself. She initially spoke to a one Serge Patrick who was a miner who lost his job in the local mine. Mr. Patrick had to sell most of his belongings to feed his family, but even that was not enough, as he stated in the interview that one of his children starved to death.

During the interview, a small crowd gathered to participate in the interview session, with many of them fielding complaints about what they referred to as “the Obama Law”, or the Dodd-Frank Act as we know it. Their complaints were along the same vein that the law was causing more trouble than it was solving; since more companies were eliminating conflict minerals and resources from their supply chains, they were losing their jobs. This creates a dilemma; companies do not want to be associated with conflict and human rights violations, (this does tend to be bad for profit margins and business in general, never mind the ethical issues) so they stop using conflict area mines, or even going as far as stopping from receiving resources from the area all together, conflicts or not.

Looking on the other side of the coin, there is much suffering from the use and gathering of minerals from areas of conflict. In a 2013 report from “globalpolicy. org”, approximately 100, 000 people were forced to flee their homes and over 100 people lost their lives from the fighting that occurred in Sudan. The fighting was between two “Arab tribes” in the region over the rights to gold mines in the area. As of the writing of the report, approximately 1, 000, 000 people were living in refugee camps in the region; while this alone brings logistical and hygienic problems, many camp occupants brought their cattle, goats, and other various livestock with them. This posed a threat of mass disease, as many of the animals either could not be confirmed to have been vaccinated, or have not been vaccinated due to the rampant poverty of the area. While many of the policies and reactions to the conflict mineral and resource supply chain are to be found in the West, the parties that are truly affected are the miners and their families.

In an “Op-Ed” article written by Mr. Denis Mukwege in 2015, from 1999 to 2015, the hospital he helped to found in the Congo has rendered aid to an estimated 40, 000 victims of rape. In the article, he states that the “rebel groups” have been using sexual violence against women as a weapon, in their fight to control the region. It has been well documented that the paramilitary groups of the region have been abducting and using “child soldiers” within their ranks. While the men of the city or village are away at the mines or looking for work, their families are, for lack of better descriptive terms, decimated. This is furthered by the increasing lack of work in the regions, as more and more companies find themselves being pulled into the spotlight regarding conflict minerals and resources, as previously stated.

Public Ignorance and Political Solutions

While searching for supplies for a child’s birthday party, one of the first stops (if not the only stop) is the party supply company “Party City”. While roaming their vast inventory of various party supplies, ranging from balloons to cake toppers, and even Halloween costumes, one does not contemplate where these wares are coming from, much less their supply chain. As American consumers, we are oblivious to how the goods we are there to purchase come into our possession; amidst the brightly colored shelves, hiding in the shadows of the fluorescent lighting, lies a less festive secret. In a list compiled by Tulane University, Party City showed up at the bottom of the 1, 262 company list that ranked how companies complied with Section 1502 of the Dodd-Frank Act. When looking at the list, one can see that even Microsoft appeared on the list, even though the tech giant was able to achieve a near perfect score.

As stated earlier in this writing many companies have trouble determining whether or not their resources used in manufacturing originate from areas of conflict, or if the mines used to collect the manufacturing resources use funds to finance paramilitary groups. A company such as Microsoft, which found itself generating $110 billion USD in revenue fiscal year 2018 alone is able to gain the resources required to trace its supply chain, and make the necessary changes. A much smaller company such as Party City, which reported only $561 million USD in the first quarter of fiscal year 2018, this may not be financially possible. This raises the concern that if a company that is literally designed to capitalize on celebrations and their inherent happiness is using resources that originate within conflict zones, that there are other companies that are generally trusted and viewed by the American public as being “wholesome” that are engaging in the same practices. With the introduction and passing of the Dodd-Frank Act in the United States, companies are now required to report any potential usage of conflict minerals or resources that may be within their supply chains. Some newer companies may not have the knowledge of how this process is handled, or if they are required to report. There are however, many resources available for these companies, their stakeholders, and the general public to educate themselves on the process. The U. S. Securities and Exchange Commission’s website contains a fact sheet that not only outlines the background of the Dodd-Frank Act, but how the process operates, as well as to whom it applies.

A further search online yields the U. S. State Department’s website regarding the issue; this site links to the Office of Threat Finance Countermeasures, provides more information on the background of Section 1502 of the Dodd-Frank Act, and has further resources to not only inform the general public, but any companies that may be required to report supply chains that either potentially or do use conflict area resources or minerals. A resource found while performing research for this writing led to “National Law Review”; the website not only outlined the requirements under the Dodd-Frank Act Section 1502, but is also updated if there are any updates to the Act, or court rulings that apply to it. One such update was an Appellate Court decision, which found that the rule requiring companies to describe products that used conflict minerals or resources in the manufacturing of said products as not being “DRC conflict free” (Murray and O'Leary). It describes the case in detail, and provides the final ruling. As with any law, there are those that believe they are being held to standards that are near impossible to meet. This was not the case; the Dodd-Frank Act Section 1502 was designed to help protect those who are unable to protect themselves. The Act was set in place to hold companies responsible for their actions and supply chains, not to stifle business.

The end goal of the Act being that if companies stop using conflict area resources and minerals, the mines will lose value, resulting in the paramilitary groups within the areas leaving. It can be safely assumed that once the paramilitary groups leave, and some semblance of order can be restored to the afflicted region, the mines will be eligible for use again, and will re-open. This will increase employment rates in the area, and subsequently decrease the poverty level. In April of 2017, the U. S. Securities and Exchange Commission passed an action that would provide more freedom to companies with regards to reporting. Under the revision, any company that believed there was minerals or resources within their supply chains that originated from a conflict area did not have to trace the refineries or smelters used by the suppliers; it also dropped the requirement for the companies to have their internal findings audited by a third party. While this gives companies more freedom in regards to their supply chains, one cannot help but wonder if this will be viewed as a loop hole that is waiting to be exploited. If a company is no longer required to have their findings audited by an outside party, there exists the concern that false reports may be filed. It may take years for the U. S. Securities and Exchange Commission to discover that a fraudulent report was filed, which means that a company is able to file false reports, and not only profit from the suffering of the miners in the conflict areas, but to fund the paramilitary groups in the areas as well. With regards to refineries and smelters, a company may be able to “cut” the product as it is being manufactured. This loophole could potentially be exploited by using a percentage of the conflict free mineral or resource, and adding an even larger percentage of less expensive conflict area mineral or resource. The company would be able to claim ignorance, thus protecting themselves from the U. S. regulations.

Closing Statement

For years, the Congo has found itself in a state of conflict; this has resulted in casualties that have surpassed the numbers of any previous conflict in the world. The conflict in this area has only been exacerbated by the existence of mineral and resource deposits that can be mined using cheap local labor. Section 1502 of the Dodd-Frank Act hoped to quell this, but has caused a dilemma; this dilemma being that since companies have stopped or reduced their usage of conflict minerals and resources, jobs local to the mines have been lost, paramilitary groups have increased their levels of fighting over productive mines, and violence against women and children has increased in the area. Companies have been able to stand on the moral ground that their products are conflict free, but one must consider the cost of it; either continue normal operations and fund paramilitary groups, or adjust operations and cause the increase of violence in the area.