Global Watch

Conflict minerals and blood diamonds are forever

DRC's blood diamonds.jpg

Once one of the hottest “African issues,” conflict minerals and so-called blood diamonds are back on the international agenda.

In one of the first executive orders signed by US President Donald Trump during his first month in office, President Donald Trump, has re-directed attention back to the issue that used to, and still does, evoke much emotion and controversy.

“Conflict” or “strategic minerals and “blood diamonds,’ was a hotly debated issue at the turn of the century, with much international media attention focused on the consequences of the scramble for strategic minerals and diamonds in Africa.

The public was often shocked by visual material, smuggled from conflict areas under trying circumstances, depicting appalling conditions in central Africa, particularly the Democratic Republic of Congo (DRC), Sierra Leone and the Marange diamond fields of in Zimbabwe.

Hollywood chipped in with the 2006 blockbuster, Blood Diamond, with Leonardo DiCaprio in the leading role as an ex South African mercenary – partly shot in Mpumalanga,

Efforts by human rights organisations, the United Nations and national governments, (particularly Canada) to get the lawlessness and conflict regulated that epitomised the scramble for cheap minerals, finally jolted the international community into action

This included the so-called Kimberley Process, attempting to keep "conflict diamonds" out of the mainstream rough diamond market.

The Kimberley Process was also a key influence in the drafting of the US Dodd-Frank regulation on conflict minerals, which has now been suspended by President Trump while signing an executive calling  for a review of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Dodd-Frank Act

The act was born out of the 2008 financial crisis in the US and the excesses that preceded it. Its intent was to implement comprehensive safeguards to monitor and regulate financial institutions to minimise heir potential failure risk to the entire US economy and protect clients and shareholders.

Passed by Congress in 2010 it only went into force in 2014 after a court challenge by companies to the obligations required by the act.

“Conflict minerals” had nothing to do with the 2008 financial debacle in the US, but as US based mining expert, Christopher Ecclestone, wrote:”... in the time honoured tradition of the US cobbling together omnibus bills that include everything but the kitchen sink and serve as a mass transport for the pet projects of any legislator who has enough pull (or blocking) power to get their hobby horse grafted on,” Section 1502 of the act, aims to stop ‘conflict minerals’ from the DRC and neighbouring counties.

At the time the Dodd-Frank Act was stitched together central Africa, also referred to as the Great Lakes region, was often in the news because of the unrest and conflict fuelled by the international demand for “strategic minerals” available in abundance in the region.

The “strategic” or “conflict minerals” of central Africa, is highly sought after by modern technology for use in advanced computer chips, cell phones and semiconductors, include tantalum, gold, tin, cobalt and tungsten.

Section 1502 of Dodd-Frank is a disclosure requirement for US listed companies to determine whether their products contain “conflict minerals” – carrying out supply chain due diligence. It requires more transparency and ethical behaviour in business dealings.

 Ultimate aim

The ultimate Dodd-Frank aim is to deny warring factions and warlords in the DRC of revenue.

With his signature, initially suspending Section 1502 for two years, critics argue Trump has all but scrapped Dodd-Frank and has unequivocally shown his support to big business. 

After the signing, Trump remarked: “This is a big signing, a very important signing.  We're bringing back jobs big league. We're bringing them back at the plant level. We're bringing them back at the mine level. The energy jobs are coming back."

Dodd-Frank contains a clause allowing the President’s to suspending of Section 1502 for “national security reasons,” which Trump used to motivate his decision, stating,”... it is my determination that it is in the national security interests of the United States to waiver the requirements of the Conflict Minerals Rule.” 

Trump also directed the US State- and Treasury Departments to find an alternative plan to “address such problems (conflict and war) in the DRC and adjoining countries.”

Conflicting responses

The order is a victory for companies that fought vigorously (including in courts)  to have the Conflict Minerals Rule overturned, arguing that compliance is not only costly and erodes US companies' global competitiveness but has also led to job losses.

Predictably, human rights advocates — who had celebrated the Conflict Minerals Rule as a major step towards stabilizing the conflict–ridden DRC, were appalled. According to them Congolese warlords and unethical US corporations will be the big winners and Trump’s executive order would jeopardize many years of effort to identify minerals from the conflict zones dotted across the Great Lakes region.

The human rights organisation Global Witness said: “Any executive action suspending the US conflict minerals rule would be a gift to predatory armed groups seeking to profit from Congo’s minerals as well as a gift to companies wanting to do business with the criminal and the corrupt.”

Many other human rights groups echoed this sentiment and agreed with the view that: “It is an abuse of power that the Trump administration is claiming that the law should be suspended through a national security exemption intended for emergency purposes. Suspending this provision could actually undermine US national security.”

Most tellingly, however, was the response of the regional, 12-member International Conference on the Great Lakes Region (ICGLR), immediately responded by warning that the repeal of the Conflict Minerals Rule would make it more difficult to ensure minerals extracted in the region were conflict free.

An ICGLR statement, decrying Trump’s order, also warned that:” This might ultimately lead to a generalized proliferation of terrorist groups, trans-boundary money laundry and illicit financial flows in the region."

Alternative

The seemingly insoluble impediments in arresting the trade in “conflict minerals” and “blood diamonds” – driven by greed and easy profit – should never be the reason why alternatives to shut existing loopholes not be considered.

Christopher Ecclestone raised one such option in an Investor Intel  article, criticising the Dodd-Frank act and the hypocrisy in singling out the DRC, justly posing the question:” Were they really interested in conflict minerals or making a token gesture?

 Beyond the DRC there are numerous conflicts around the world and minerals continue appearing out of those conflict areas.”

” In theory all metals should be on the ’conflict minerals’ list. It is the conflict zones that should be listed and changed as circumstances change. The mistake of the current structure is it targets the metal rather than the conflict”.

This appears to be a splendid option worth pursuing by those interested in finding a workable solution to the dilemma of “conflict minerals” and ”blood diamonds.”

by Garth Cilliers

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