Wiping the blood from our hands? Assessing the Dodd-Frank Act

Our smart phones, laptops and tablets connect us to the rest of the world in all sorts of ways, yet according to the director of the film Blood in the Mobile, Frank Poulsen, we might be more connected than we care to believe:

“I knew there was a war in Congo, but I didn’t know it had anything to do with my phone, I think we often forget, or maybe don’t know, how closely connected we are. Things that go on in Africa seem to be very far away and have very little to do with us, but it has a lot to do with us. My mission, as a film-maker, is to make these connections.”

Blood in the Mobile examines the trade of ‘conflict minerals’ within the Democratic Republic of the Congo (DRC) – armed groups control regions rich in minerals such as tin, tantalum, tungsten and gold, allowing them to use mining profits and illegal tax revenues to fund their ongoing military operations. State structures are weak within the DRC making, the remote eastern provinces, such as the Kivus and Katanga very difficult to regulate. As a result minerals are also smuggled across the border into the neighbouring nations of Rwanda, Uganda and Burundi – making them hard to trace.

The film serves as an interesting snapshot of life in eastern DRC before The Dodd–Frank Wall Street Reform and Consumer Protection Act was passed by US Congress in July 2010. Poulsen captures life in the eastern DRC as dangerous – young miners descend into the unstable and unbearably hot mines for days without resurfacing. Just before his arrival to Bisie mine, there had been a massacre at the hands of a militia group. Following his visit to the DRC, Poulsen expresses optimism at the prospect of the Dodd-Frank Act.

So what has changed?

When the Act was finally passed, it included two provisions that impact on the DRC’s mining industry. Section 1504 broadly looks to increase transparency, requiring all extractive companies to report how much they pay governments for access to their natural resources. Proponents of the legislation, such as Publish What You Pay, argue that it will allow NGOs and civil society to monitor corporate-government interactions and hold both parties accountable – ensuring natural resources are contributing to improving livelihoods. Section 1502 more specifically details the need for the Securities and Exchange Commission (SEC) to introduce requirements for companies extracting minerals within and around eastern DRC to disclose whether their products contain ‘conflict minerals’. A comprehensive review, released by the UN at the end of 2011, does a good job of outlining the effects it was seeing in eastern DRC. The report highlights areas of progress – extraction has been diverted away from conflict regions, resulting in reduced conflict-financing. This is a major success, and along with indications of increased production within areas where supply chain due diligence had been introduced, it points to the long-run potential for the Dodd-Frank Act to succeed.

However, the report describes the harsh economic reality of deepening poverty and rising unemployment that faces tens of thousands of artisanal miners and their families who depend on informal mining. The passing of Dodd-Frank has coincided with a sharp fall in mining production, damaging provincial and national government revenues and reducing their capacities to enact change in the regions affected. The driving force behind this “collateral damage”, as the UN group of experts so tactfully put it, would appear to be the de facto embargo that has descended on eastern DRC. This embargo was first brought into reality by a ban on mineral exports from the region, implemented by the Congolese government between September 2010 and March 2011. The embargo has continued as the EICC (Electronics Industry Citizenship Coalition) – a US electronics lobby group – immediately followed this with a decision to promote a ban on conflict/unidentified minerals which was widely adhered to by most major global corporations that had previously operated in the DRC. Moreover, the UN concluded that this embargo had driven an increase in smuggling into neighbouring countries such as Rwanda – a phenomenon that they suggested would benefit only select military officials. Thus it would appear that Section 1502 of the Dodd-Frank Act has undermined the livelihoods of the most vulnerable people in Congolese society.

As DRC expert Jason Stearns has suggested, we must be clear to avoid labelling the embargo as a direct effect of the Dodd-Frank Act. Firstly, the SEC rules on supply chain due diligence have not yet been promulgated. What it is more, Section 1502 simply states that companies must declare what steps have been take to implement due diligence – it does not outlaw them from operating in conflict areas. However, Eric Kajemba from the Observatoire Gouvernance et Paix (a Congolese civil society NGO, based in Bukavu) feels that the embargo was a knee-jerk reaction to the passing of the Dodd-Frank Act. He claims heightened suffering could have been avoided if international policy-makers had worked with the DRC government to gradually introduce the measures of traceability and due diligence.

Kajemba also argues that Dodd-Frank has been too short-sighted in scope – postulating that the “real emphasis needs to be on building strong institutions, not just embargoes and export bans”. This sentiment was echoed by Mvemba Dizolele speaking in debate hosted by Al Jazeera this month. Dizolele made it clear that amidst the Dodd-Frank debate, one thing has been lost. The voice of the Congolese people. “It’s great for the corporations to say ‘we have a certification process’, but what does it mean for the average Congolese person in the Kivus? Nothing!”.

As debates in the US over Section 1502 and 1504 continue to rumble on, with big business fighting to water down and delay the proposed reforms, and as the EU consider introducing similar regulations of their own, Mvemba Dizolele’s comments leads us to question the motivations driving such legislation. Understandably we don’t want the blood of a Congolese child labourer on our hands or in our electronic goods. As Poulsen asks, “these minerals end up in mobile phones, like my Nokia. Does that make me responsible?”

I believe that Dizolele get’s to the heart of the issue. The reaction to the Dodd-Frank Act has allowed governments and corporations alike to wipe their hands of the blood that comes with conflict minerals. Yet, in a Macbethian twist, the problem isn’t going away as quickly as we first hoped. With hindsight, we have seen that the shock-waves generated by the passing of the Dodd-Frank Act have created suffering on an unexpected scale. The Congolese constituency the Dodd-Frank Act seeks to protect, has been plunged deeper still into poverty. The DRC’s extractive industries need a more contextually-specific approach. Supply chain transparency is a necessary part of the reforms that need to be introduced, but more thought is required.

The SEC’s rules, and future reforms, surely need to be implemented with more caution, encourage companies to introduce ‘mitigation strategies’ instead of stopping production altogether (as suggested here by the UN) and appreciate that the issues of militarisation and corruption are firmly embedded into the culture of the eastern DRC’s extractive industries. Transparency reforms will succeed if they can engage the population and state to understand what happens to their resources, and will succeed if they can be built into new institutions that allow mines to operate without military involvement, that allow miners to work without human rights abuse, and that augment the capacity of civil society to call their government into account.

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