Dodd Frank Act

This week, the political battle lines were drawn over the effectiveness in the DRC of the Dodd-Frank legislation, passed in the USA in July 2010. Section 1502 of the law calls on US companies to disclose the areas from which they source their minerals, in order to reduce the purchase of natural resources that are funding conflict in countries such as the DRC. However, whilst this is a significant step in encouraging greater transparency and corporate responsibility, there have been claims that it has been detrimental to the lives of many civilians in the country.

Arguably, the issue of unemployment has been exacerbated: those involved in legitimate mining have in some cases lost their jobs along with those with military ties. Michael Loch, in charge of the supply chain corporate responsibility for Motorola Solutions, said of one mine where unemployment had struck: “This was a non-conflict mine in a non-conflict area, but it was being harmed by the US legislation“. In a piece for the New York Times, the op-ed contributor David Aronson argued that economic difficulties have only increased since the law was passed. He warned of reports in South Kivu that children have been leaving education because their families can no longer pay for it. He added that others are threatened with hunger in the area, as they have not been able to turn to mining for extra cash at a time when crop disease has damaged the harvest of cassava. Such scenes seem reminiscent of the final months of 2010, when the DRC government issued a ban on mining in the east of the country, and thousands found themselves out of work.

For critics, the crux of the matter lies in the unintended effects of the Dodd-Frank legislation. The National Association of Manufacturers in the USA believed that the provision could lead to American businesses paying out as much as $16 billion annually, even if the Securities and Exchange Commission (SEC) has refuted this figure, putting it closer to $71 million. In such circumstances, some of these traders have began to source minerals from elsewhere, leading to one estimate that Congolese mineral exports have been reduced by 90% since the passage of the law. If the act leads to a de facto ban on mining, with companies choosing to leave the DRC altogether, the issues faced by civilians at the end of 2010 are likely to resurface.

Others have argued, however, that the onus put on businesses is not excessive. Salil Tripathi, director of policy at the Institute for Human Rights and Business, pointed out that the UN Framework for Business and Human Rights and Guiding Principles is in existence to help organisations judge which sources are linked to conflict. Jason Stearns, former Coordinator of the UN Group of Experts on the Congo, has even argued that the Electronic Industry Citizenship Coalition may be taking an extreme position against DRC exports intentionally, in an attempt ” to try to water down Dodd-Frank and delay its due diligence measures as much as possible”.

In theory, the best way to judge the success of the law is merely to ask the opinion of those whose lives it has directly affected: the Congolese civilians. However, even this appears highly difficult to gauge. David Aronson has accused Western advocacy groups such as the Enough Project of failing to take local opinion into account enough when lobbying for this legislation, quoting many Congolese individuals who are against the law. In response, others have drawn attention to the formation of ‘GATT-RN’ in March 2011: a coalition of human rights groups from North Kivu that support the act and that have come together to challenge human rights violations connected with natural resources. Additionally, in May 2011, 50 Congolese NGOs expressed their support for the law. Clearly, at this point it is hard to know which groups and individuals are truly representative of broader public opinion.

The consequences of the Dodd-Frank act have certainly not all been negative. Sasha Lezhnev, policy consultant at the Enough Project, suggested that the law has led to more convictions of military commanders. For example, Colonel Balumisa Chuma, along with 12 soldiers, was recently arrested in South Kivu for carrying cassiterite illegally. Furthermore, there are signs that organisations have been making moves to improve their sourcing practices. USAID is setting up a community mining scheme, whilst Motorola Solutions has established a Solutions for Hope project in Katanga using a minerals pipeline that is not connected to conflict. Large multinational bodies such as Malaysia Smelting Corp have expressed interest in buying into certification and traceability initiatives.

The connection between rebel armed groups and illegal mineral trafficking is fairly well-established. Although Aronson states that the main militias profit more from kidnapping and extortion than the use of natural resources, protesters frequently accuse troops of all backgrounds of mineral trafficking in North and South Kivu provinces and Maniema: areas where stocks of cassiterite, coltan and gold are particularly abundant. A report of the UN in June 2011 suggested that many Congolese rebel branches in the Kivus continue to profit from mining. It is this belief in the tie between minerals and conflict that has led Tearfund to campaign for legislation similar to the Dodd-Frank act to be passed at an EU and UK level, although the organisation would be calling specifically for it to be compulsory for oil, gas and mining companies to publish the payments they make to foreign governments.

If the link between minerals and conflicts is accepted, it is easier to support the argument made by both Salil Tripathi and Sasha Lezhnev that job losses are an unfortunate economic side-effect of the Dodd-Frank law, but that changes must not be stopped “part way through“. To them, ending long-term violence in the DRC is a complex process, but at this moment international onlookers must “establish conditions in which economic activity that promotes peace and sustainable development can flourish“. At last, future reforms, such as the US monitoring of traceability schemes, are “no longer pipe dreams, because of the window opened by the legislation“. Indeed, the idea of a total boycott of Congolese resources seems unhelpful given that other countries such as China will continue to source conflict minerals without fear of legal sanction and, in fact, at a reduced rate if they are the only traders in the area. What is needed now is new legislation to ensure that business is still conducted with the DRC, but that it is compatible with responsible supply chains and sustainable growth. The guidelines issued by the Organisation for Economic Cooperation and Development in May 2011 may form part of this solution.


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