Untapped Mineral Wealth in the Congo & the Effects of International Regulations (AsokoNews)


June 20, 2014
8454776149_1313917269_z

[av_three_fourth first]
[av_heading heading=’Untapped Mineral Wealth in the Congo’ tag=’h3′ color=’custom-color-heading’ custom_font=’#2f2d2e’ style=’blockquote modern-quote’ size=’27’ subheading_active=’subheading_below’ subheading_size=’15’ padding=’2′]
What are the effects of international regulations?
[/av_heading]
[/av_three_fourth]

[av_one_fourth]
[av_image src=’http://asokoinsight.wpengine.com/wp-content/uploads/2014/06/asokonews-article-template-logo.png’ attachment=’4569′ align=’right’ animation=’no-animation’ link=’manually,http://asokonews.com’ target=” styling=’no-styling’ caption=” font_size=” appearance=”][/av_image]
[/av_one_fourth]

[av_textblock]
[av_hr class=’short’ height=’0′ shadow=’no-shadow’ position=’left’]
[/av_textblock]

[av_one_half first]
[av_textblock ]

By Mark Hay | AsokoNews
20  June 2014

[/av_textblock]
[/av_one_half]

[av_image src=’http://asokoinsight.com/wp-content/uploads/2014/06/8454776149_1313917269_z.jpg’ attachment=’6018′ align=’center’ animation=’no-animation’ link=” target=” styling=” caption=” font_size=” appearance=”][/av_image]

[av_one_half first]
[av_textblock ]
Copper ore miners in eastern Congo (2011)
[/av_textblock]
[/av_one_half]

[av_one_half]
[av_textblock ]

Fairphone

[/av_textblock]
[/av_one_half]

[av_hr class=’short’ height=’50’ shadow=’no-shadow’ position=’center’]

[av_textblock ]
The latest news from the eastern region of the Democratic Republic of Congo has been a study in contradictions. In the second week of June, the anti-conflict mineral non-profit Enough Project released a report claiming that 67% of the region’s tin, tantalum, and tungsten mines are now free of the control of waning militias, opening the door to trade and drastically improving the lives of many. Yet in the same week, reports emerged of conflicts between armed Tutsi immigrants and local communities as well as renewed violence on the border between the Congolese and Rwandan militaries, reminding all parties and observers of the threat of chronic, low-level instability and regional war.

Conflict and wealth beneath the surface

A 2009 report estimated that around $24 trillion in untapped mineral ores lie beneath the Congo’s already numerous artisanal surface mines. Even without these tantalizing new lodes, the Congo is already the world’s 7th largest copper producer, the source of half of the world’s cobalt, and a major site for tantalum, tin, tungsten, gold, diamond and, perhaps, even oil. All of these resources are clustered in the Katanga, Kivus, Maniema, and Orientale provinces, each plagued by decades of violence, instability, and severe underdevelopment.

As of 2011, at least 25 international mining companies were chomping at the opportunity to partake in the development of these resources, many of which cannot be accessed by traditional surface miners. The state, utterly dependent on mineral development (which accounts for 80% of its export revenues and 30% of national GDP), has reason to embrace this interest; in 2009 Canadian First Quantum Minerals alone was the nation’s largest taxpayer and its social responsibility equated to 3% of the gross national income. But despite incentives on both sides, mining has been stymied for decades and outright blocked for much of the past four years.

Control measures

Growing recognition of local militias’ stranglehold over small miners and the role of mineral proceeds in perpetuating conflict and poverty led international actors to pass measures like Section 1502 of America’s 2010 Dodd-Frank Act, which required companies to report the presence of “conflict minerals” in their products. Subsequent bans on such minerals led to regional moratoriums on mining to crack down on corruption and militant cartels.

It also led, by 2011, to reductions of up to 65% in profits related to major tech industry minerals like tin, tungsten, and tantalum, devastating everyday miners in some of the country’s least provisioned and least secure regions while militias turned to smuggling.

Programs reacting to conflict mineral regulations by developing monitoring and certification programs began almost immediately. By 2012, the International Tin Research Institute had commenced programs in Katanga Province and moved over the next two years into the Kivus region. Their certifications, backed by regional monitoring, have allowed for the renewed sale of minerals on international markets, often for much higher prices.

In some mines, the Enough Project reports that earnings increased by as much as 40%. Whereas four years ago the Congo had no certified conflict free minerals, now at least 21 major companies source minerals publicly and to great acclaim from at least 22 major, certified mines.

Certification and market reentry was only possible by a major military commitment to disarming and dispersing local rebel groups. In November 2013, the Congolese military defeated the M23 rebellion, which had long dominated the region. By April 2014, the National Army and the UN had routed over 30 of the east’s 50-odd major militias. In the two months since, the military has made gains against the Allied Democratic Forces (ADF), a Ugandan rebel group, and the armed Democratic Forces for the Liberation of Rwanda, a group of post-genocide Hutu militants hiding in the Congo and perhaps the largest, most dangerous enduring militia. The renewed regional violence with Rwanda, however, brings such progress into question.

Though it’s still too early to discount the advancements made, according to Enough Project Congo analyst Sasha Lezhnev. “It’s really progressed quite a bit over the last several years,” Lezhnev told Asoko. “Remember that only a few years ago, these mines were almost entirely under the control of armed groups, which secured the lion’s share of the profits.”

Industrial mines have responded to the new space opened by the recent initiatives. Just last month, Rangold opened a major gold mine at Kibali in Orientale, a $2.5 billion project creating 7,000 jobs (80% for Congolese workers), and is set to generate 15.6 tonnes of gold this year and 329 tonnes by 2031.

Only a few similar mines have opened in the Kivus (with many already established in Katanga), but the gains in jobs, revenues, and infrastructure development have been notable and the potential for the development of unexploited deep earth veins is tantalizing.

Spurring new problems

Major challenges to corporate and local governance persist. Those watching certification programs seriously suspect that ore mined during moratoriums and at non-certified mines could easily be smuggled into clean shipments. This contamination could undermine the validity of existing programs and throw the region back under de facto sanctions. “Congolese public servants are expected to help implement and monitor mining actors’ compliance with the initiative,” Conflict Research Group Research Fellow Jeroen Cuvelier told Asoko. “But it is highly doubtful whether they are really capable of playing this role. My impression is that they are very often understaffed, badly remunerated, and poorly organized.”

Even successful monitoring and certification programs could have unintended consequences, added Cuvelier. One such program, he says, “has given rise to the emergence of buying monopolies at the local level. Only Congolese buying houses (comptoirs) meeting the standard of [the program’s] traceability scheme have been able to get their minerals sold to Western end users in the [tin, tantalum, and tungsten] industry, and this has given them the power to unilaterally impose certain conditions on their suppliers—forcing fixed prices upon them.”

8488216357_01361892e1_m

Many of the nation’s artisanal miners—up to 20% of the population in some regions—do not even have access to these outlets. “Many mines in the Eastern Congo are not controlled by state or non-state armed groups,” University of Antwerp PhD Candidate and Congo field researcher Sarah Geenen told Asoko. Yet current laws can block market access for them. Monitoring usually occurs at mines of scale, which have been accused of displacing artisanal miners.

The previously dominant militias have not disappeared either. “Minerals did not cause the conflict,” says Geenen. “It cannot be denied that they play a role in maintaining it, but breaking the link between minerals and conflict alone will certainly not put an end to conflict. The situation in the region is far too complicated for that and, besides, armed groups can rely on other sources of revenue.” Hutu groups have in the past benefitted from conflict timber and, as Cuvelier notes, some have begun erecting roadblocks and instituting new “local taxes”. Lezhnev sees security risks as a major concern for any new mining actors. “The Congo has not made much progress on demilitarizing and integrating the surrendering groups,” he told Asoko. Nor have they addressed underlying land concerns. All of this opens the region to the rebirth of disruptive conflict as soon as current initiatives flag for a moment, as this month’s violence may have demonstrated.

Government missteps

The fear that recent gains could be easily reversed stems ultimately from the key detriment to Congo’s development: the unreliability of its own government. Canada’s Fraser Institute in 2010 named the Congo the second worst global prospect for mining exploration largely due to President Joseph Kabila’s government’s habit of randomly revising contracts and floating nationalisation. Industry insiders often cry corruption as well, claiming that ministers require up to $10,000 in bribes just to acquire mining rights, and undersell to cronies for personal profit. As of March of 2014, international mining companies had a new reason to be wary, as Kabila floated new mining codes that may put in place double taxation requirements for the mining industry.

The government has also failed to carry out reforms, which could help to develop the infrastructure needed to increase mining and public services alike. The 2006 constitution guaranteed a devolution of power and retention of 40% of national mining revenues to local governments; however, leaders in Katanga claim this has yet to materialize. In March of 2014, Katanga was forced to freeze expansion at local mines due to electricity shortages, forcing many mines to rely on generators, drastically increasing operating costs.

While the challenges remain daunting, progress is tangible and Prime Minister Augustine Matata Ponyo Mapon, in place since 2012, is praised for keeping inflation in check and rooting out governmental corruption. Since his ascent, the economy has grown by 7%. Already hailed as a fair dealing reformer, Ponyo has promised to reign in state mining companies, liberalize investment in the electric industry and other infrastructure, and increase transparency in mining deals. It’s a tough road, yet the success of such policies could go a long way to making recent gains stick.
[/av_textblock]

[av_hr class=’default’ height=’50’ shadow=’no-shadow’ position=’center’]

[av_textblock]
Mark Hay is a graduate student at the University of Oxford and a freelance writer whose work is featured in Roads & Kingdoms, Slate, and VICE. He has significant research experience on the ground in Kenya, Somalia and Ethiopia. 
[/av_textblock]

Related stories


AsokoNews Brief

Sign up for our weekly Africa Business Digest, highlighting the Top 5 stories per sector