Reuters reports that “buried inside the US financial reform bill passed on Thursday by the US Senate is a little noticed amendment aimed at regulating a market far from Wall Street – international trade in minerals from the Democratic Republic of Congo and neighbouring countries.” The amendment, starting on page 2,279 of the bill, requires companies that engage in the trade and use of “conflict minerals”, defined as coltan, cassiterite (tin ore), wolframite, gold and their derivatives, to file an annual report with the Securities and Exchange Commission to declare if they are sourcing their supply chain from the DRC, or an adjoining country.
However due diligence, audit and disclosure requirements are detailed and complex, leading to the risk that manufacturers of global electronics brands will be forced to avoid using minerals from African countries, thereby damaging their economies.
John Kanyoni, head of the North Kivu exporters association, argued that the new US regulations cut across a wide range of existing initiatives to bring transparency in the mining sector in eastern DRC. “By asking all the manufacturers to track every piece of metal in every single item they make, it is just telling them don’t buy from DRC and adjoining countries – which is an embargo de facto. The consequence of the US regulations will be that thousands of Congolese will be jobless and might most probably be joining the armed groups”. He also pointed out that taxes collected on the minerals trade currently account for more than 30% of the provincial government’s budget.
The amendment to the bill, which is likely to be signed into law by President Obama in the next few days, requires disclosure of due diligence measures taken, independent audits performed, list of ‘non DRC conflict-free’ products made, conflict mineral processing facilities, the mineral country of origin and the efforts made to determine the mine of origin. Meanwhile the US State Department will be drawing up a strategy to address the link between human rights abuse and mining and producing a map of mineral rich zones under the control of armed groups.
The bill only allows for a period of up to nine months before the regulations on companies come into force and the first disclosure will be required for the first full fiscal year beginning after that. Meanwhile the State Department has six months to carry out its tasks. Stringent demands, combined with this short timescale, make an embargo on Africa more likely.