Pickaxes into plowshares? Two visions for development in the DR Congo

The Democratic Republic of the Congo is a rich land – in theory, at least. Below its soil lie some of the world’s largest reserves of copper, cobalt, tin, tantalum and considerable amounts of gold and diamonds. It is the type of wealth that is measured in billions of Dollars and which has fuelled the industrial revolution in Europe and beyond.

In practice, the DR Congo is poor. Its population of 66 million produces only an average of 230 Dollars per year and person in goods and services, making it literally the poorest country in the world, if measured by that metric.

Little wonder that many people want to change this unfortunate state of affairs. And little wonder, too, that most of these people are looking at the wealth beneath their feet for a solution. The Congolese government, its people, the international community, international and local business – they all have high hopes for the mining sector. For them, mining, and especially large scale operations, are the ticket to a brighter future for the Congo and its people, not to speak of the profits involved.

But mining brings with it a whole host of problems. Apart from obvious issues with environmental degradation, the incredible amounts of money involved with mining projects have so far arguably done more bad than good for the Congo and despite being a major branch of the Congolese economy since colonial times, most Congolese have yet to profit from the riches that are ripped from their soil every day. Can mining really hold its promises for the development of the DR Congo, or are there alternative, better ways for the government, donors and businesses to invest in a brighter future for the Congolese people?

Read the rest on Contributoria.

Conflict minerals in the Congo: a look at the new GoE report

The United Nations Group of Experts on the Democratic Republic of the Congo is maybe the authority on anything conflict related in the central African country. Tasked with briefing the Security Council twice a year on all developments related to the extensive sanctions against various actors in the DRC, their reports offer a wealth of information on everything from conflict financing to outside intervention. The upcoming report has now been leaked to African Arguments. This blog post explores the information it offers regarding the use of resources in the context of conflict in eastern DRC and elsewhere in the country.

Conflict minerals are important aspects of every GoE report, the current one being no exception. In the second paragraph of the executive summary, the GoE states that

Many armed groups in eastern DRC have derived funding from the production and trade of natural resources. […] The Group estimates that 98 percent of the gold produced in DRC is smuggled out of the country, and that nearly all of the gold traded in Uganda – the main transit country for Congolese gold – is illegally exported from DRC. […] While initiatives by OECD and ICGLR have advanced the validation of mining sites and improved adherence to conflict – free and child labor – free international standards, armed groups and the FARDC [Congolese army] continue to control many mining sites and to profit from mining and the minerals trade.

The limits of the concept of “Conflict Minerals”

It should be noted that the GoE never speaks of “Conflict Minerals” itself. The term is the invention of advocacy groups* and its implication that the occurence of minerals can prolong or even cause conflict and violence is contested.

A critical perspective on the concept of conflict minerals is supported in some parts of the GoE report. For example the group notes that the M23 – the most prolific armed group in eastern Congo during the year of 2013 – didn’t derive any income from direct involvement in the minerals trade (§32). Rather, the M23 concentrated on levying taxes on property and transport (which of course may have included mineral transports). The territory controlled by the M23 had no major mineral deposits, despite being the site of major violence and fighting during the eventual defeat of the M23 at the hands of the FARDC and U.N. troops.

This is not to say that resources, including minerals, are unimportant factors in the development of conflicts and violence. But their relevance clearly depends on the local context and this should be reflected in advocacy work and policy.

Dirty Gold

Coltan may be the best known conflict mineral from eastern Congo, but presently gold may be more important when it comes to the financing of armed groups. The GoE puts the sum lost in taxes due to smuggling of the precious metal and the corresponding profits for armed groups in the millions of Dollars – of the estimated 10,000 kg of gold mined in the DRC per year, only 180,76 kg is declared to government authorities (§170). Some of the most violent attacks by armed groups described in the report were targeting gold mining sites (for example §65).

For some armed groups, like the Rwandan FDLR and Raia Mutomboki, their involvement in gold mining and trade is their main mode of financing (§95, 168). The  limited traceability and high mobility of the mineral has resulted in an extended trade networks that reaches from small scale mining operations in eastern Congo to the Ugandan capital Kampala and onwards to Dubai in the United Arab Emirates (§198).

Gold mining is of course also an important source of income for many artisan miners who have little choice in who is benefiting from the downstream trade. With regard to this group, the myriad ways the GoE lists that are employed by gold traders to fraud their way to a larger share of the profits are highly interesting ($177ff).

That armed groups and criminal actors are able to profit from the gold trade is attributed by the GoE mainly to the reluctance of the Ugandan and Congolese governments to engage in a effective regulation of the sector. Existing laws are not enforced and known actors are allowed to act openly in eastern Congo and Uganda alike.

The three Ts

Tin, tungsten and tantalum (which can be found in the mineral coltan) are the best known conflict resources produced in the Congo. They occur mainly in the provinces of North Kivu, South Kivu and northern Katanga. Their production and trade is one of the most profitable sectors of the economy in eastern Congo and a large part of the production is smuggled out of the country via Rwanda (§200).

At several points in the report the GoE indicates the involvement of Rwandan authorities in the smuggling activities (for example §204). Smuggled ore from the DRC is tagged in comptoires in Rwanda, which hides it true origin and dramatically increases its selling price (§200). This should make clear that any certification mechanism based on “tagging and bagging” can not rely on measures solely controlled by the Rwandan government.

The lure of ivory

Showing that the use of resources to finance conflict is highly opportunistic, at least one armed group switched from poaching for ivory to attacks on gold mines, according to the GoE (§65).

Nonetheless, at least 310 elephants (and likely many more, §225) were poached in 2012 and 2013. Poaching is often done by locals in close cooperation with corrupt members of the security forces (§229). South Sudanese nationals are also heavily involved in poaching activities in Congo’s Garamba national park.

The main transit country for ivory from Congo is Uganda, its destination are usually markets in eastern Asia.

Oil: the new kid on Congo’s conflict block

Like many other countries straggling Africa’s enormous rift valley, the DRC is hoping that this geological formation may feature crude oil deposits. Uganda is already preparing to start production, while the DRC is still in the early stages of exploration. These activities are controversial mainly because of the environmental threat they pose, but the GoE also mentions some connections between the exploration activities and armed groups in eastern Congo.

Parts of exploration Block III, owned by French company Total, are for example in the area of operation of the FRPI, an armed group responsible for considerable displacement among the local population. The report (§59) mentions that Total has demanded from the government to resolve the security issues posed by the presence of the armed group, but the company declined to discuss how the situation has been reflected its social and environmental assessment of its exploration activities.

Recommendations

The GoE recommends that companies

Conduct due diligence in minerals purchase in the Great Lakes region, in addition to investing in traceability schemes.

This is mainly in accordance to the demands of many advocacy organisations. In addition, the various governments are asked by the GoE to strengthen their laws, the application of these laws and their cooperation to limit the smuggling of natural resources from the DR Congo.

My take on the information on resources in the context of conflict provided by the report is that activities of policy makers and advocacy organisations should focus on realising the potential associated with natural resources in the Congo. While minerals and other resources can be used to finance conflict and in some cases their presence contribute to specific acts of violence, they also provide much needed economic opportunities for many people in the DRC.

To achieve this goal, governments in the region as well as in Europe and America need to enforce stronger regulations regarding the circumstances under which these resources are produced and traded. Transparency is key here and companies should be forced to provide information about the conditions under which their raw materials were produced to consumers.

What are your thoughts on the report?

*According to google, “conflict minerals” were first mentioned online in 2009

 

Can the E.U. stop armed groups profiting from the mineral trade?

Conflict Minerals are the new Blood Diamonds. The term refers mainly to three metals, tantalum, tungsten and tin, originating in Eastern Congo. Advocacy groups like the ENOUGH Project have pushed hard to put the contribution that the mining and export of these metals make to the war chest of Congolese rebel groups on the international agenda and have had some success. As part of the Dodd-Frank Wall Street reform act, the U.S. has put in place regulation that forces U.S. listed companies to disclose if they are using any of these metals from Congo or its neighbouring countries in their products and if yes, what they are doing to keep them “conflict free”.

The Dodd-Frank act doesn’t force companies to actually do something, if they find out that money from the mineral trade in their value chain benefits armed groups. It just provides the disclosure that advocacy groups like ENOUGH need to put public pressure on these companies.

Dodd-Frank has been quite successful in a sense: Out of fear of bad publicity, most Western companies simply switched to other sources for the metals, sending the economy of Eastern Congo into a crash. As many experts have cautioned before the law was enacted, violence didn’t subside – the armed groups just switched to other modes of financing themselves.

Now the European Union discusses a similar legislation and it will be interesting to see if any lessons from Dodd-Frank will make it over the Atlantic. So far, the debate in Europe has mainly revolved around the question, which part of the supply chain will be covered by the proposed legislation. In its broadest version, every European-registered company would have to publish similar information to the U.S. Dodd-Frank act, including retailers. But this doesn’t play well with European industry interest groups, which fear an increase in bureaucracy and negative publicity for their members, reports Politico:

European Trade Commissioner Karel De Gucht said last month that he wants to be sure any EU policy builds on the U.S. mandate and encourages broader action. However, in recent days, EU trade officials have also begun considering a less stringent proposal that would apply only to European-owned metal processors, a lobbyist close to the discussions said. That proposal would exempt most of Germany’s manufacturing companies, which largely import their minerals from non-European processors.

The problem: European smelting companies process only a small part of the world’s tantalum, tungsten and tin. The market is dominated by smelters in China and Malaysia, who wouldn’t necessarily fall under the proposed E.U. regulation. This would render the law ineffective, because metals from conflict regions would just be processed in smelters without reporting obligations and could then be imported to the E.U. as finished products without a declaration of origin. To be effective, the E.U. regulation would need to cover at least one stage of the value chain above the smelting level.

But the E.U. faces another obstacle, as has become apparent with the application of Dodd-Frank: stopping armed groups from profiting of the minerals trade doesn’t necessarily stop conflicts. Just take the example of the Democratic Republic of the Congo:

As a result of the steps being taken, militias have seen their prices for the minerals drop by more than 55 percent, reports Sasha Lezhnev, Enough’s senior policy analyst.

But even with reduced income from mineral sources, the last year has seen an incredibly high level of violence in the DRC, with the rebel group M23 even taking control of the regional capital Goma for a few weeks. The reason is simple: conflict is born out of political confrontation, not greed, and the Congo offers many more means to finance an armed struggle than minerals. Considering this, Dodd-Frank and the proposed E.U. legislation should be sold as conflict reducing mechanisms, but measures to increase general transparency along mineral supply chains, which would be a perfectly valid reason to enact these kind of laws.

This post is part of my ongoing obsession with the relation between natural resources and conflict on the African continent. Read on to find further insights on this topic and be sure to check back regularly! I will update this article frequently with long and short posts in the manner of a slow live blog.

When oil companies become advocates for peace

Commonly, oil companies are associated with less than benign influence on conflicts. This reputation is well earned: oil money financed a whole chain of Nigerian military rulers, kept the Sudanese regime afloat during the worst massacres in Darfur and continues to play a dubious role in filling the coffers of authoritarian regimes, like in Angola and Equatorial Guinea.

But this interpretation overlooks the potential — and in some cases actual — positive impact that oil companies can have on political and violent conflicts. Arguably, the Chinese government is one of the lynchpins of keeping the peace between Sudan and South Sudan. The interest of China is clear: keep the oil flowing. But the net effect on this particular aspect of the region’s many overlapping conflicts has been positive.

A recent article on the blog African Arguments is another example of the positive influence oil companies can have on active conflicts. Written by a consultancy, it reports on an ongoing diplomatic push to finally resolve the dispute over Western Sahara — spearheaded by French energy giant Total.

There is even talk of Kosmos lobbying the US administration and Total the French government to support a major new diplomatic initiative.

Of course, other parties are interested in a resolution as well, not least because the United Nation voiced fears that Sahrawi youth living in refugee camps are easy pickings for recruiting agents of regional Islamist groups. But with oil prices set to rise and promising geological structures present off the Sahrawi coast, interest in exploration and exploitation will rise. As the article notes, international companies are unlikely to take the risk of acting in the current legal limbo:

Oil exploration permits have been issued by both Morocco’s state Office National des Hydrocarbures et des Mines (Onhym) and Polisario’s government-in-exile, the Saharan Arab Democratic Republic (SADR), but the international consensus is that no significant exploration can be undertaken until the dispute is settled.  This follows a legal opinion by the UN General Counsel that stated that exploration and extraction of mineral resources in Western Sahara would be illegal “only if conducted in disregard of the needs and interests of the people of that territory”.  It has generally been viewed that exploration for reserves of oil and gas would run counter to this; thus they should stay in the ground pending a definitive resolution.

What do you think, do commercial interests of oil companies offer the chance to positively influence conflicts in Western Sahara and elsewhere in Africa?

Rich Links: Nile politics and geothermal power

Some reading material for the weekend:

Egypt is the looser of a new era of Nile politics

Amid internal commotion and regional power shifts, Egypt’s historical dominance over the politics of the Nile catchment area has diminished. New King of the hill is Ethiopia, which has secured an alliance of upstream countries against the ‘colonial era’ treaties that govern the Nile’s waters. Monde Diplomatique

Exploitation of Western Sahara’s resources

The value of its resources are one of the main reasons for Morocco’s continued occupation of Western Sahara. The main piece of the puzzle is phosphate, with Western Sahara being the world’s largest producer of this essential mineral. Think Africa Press

Ethiopia’s geothermal plans

The East African country plans to become the major power exporter in the region, with work starting on a 1 GW geothermal plant, to the first stage of 20 MW going online in 2015. This in addition to the 6 GW Renaissance hydroelectric dam on the Nile river, which will also be finished around that date. Jeune Afrique (French)

Congo basin states sign agreement to protect timber

Six Central and West African states have signed the Brazzaville Declaration, a legally not binding agreement to take concerted action against illegal logging and smuggling of timber. Logging is one of the main economic activities in the Congo basin (the second largest rainforest system in the world) and illegal activities deprive the states of substantial income. Voice of America

Other stuff

  • The U.S. has expressed interest in taking part in the Congolese Inga 3 hydroelectric project on the Congo river: Jeune Afrique (French)
  • Nigeria has launched the Nigerian Geological Service Agency to further the diversification of its resource industry: African Mining Brief
  • Kenya will start giving out new mining licences in November: African Mining Brief
  • Decreased rainfall has led to a higher risk of conflicts over access to water in Tanzania: afrika.info (German)
  • Angola and the Congo (DR) are looking to extend the railway network between the two countries for the benefit of mineral exports: Jeune Afrique (French)

Rich links: Nile water diplomacy and copper corruption in the DRC

Again, lots of interesting stuff to read from around the internet:

Angola ends talks about a strategic partnership with Portugal

Disgruntled because of Portuguese investigations of high ranking government officials, Angolan president dos Santos has made clear that his country is no longer persuing a strategic partnership with its former colonizer. This is a heavy blow for Portugal which is still caught in the repercussions of the financial crisis and was hoping to profit from its ties with the African country. Especially the oil sector is of interest to Portuguese companies. allAfrica/Deutsche Welle

Sale of Congolese copper producer raises corruption concernas

Congolese government-owned mining company Gécamines is preparing to sell its stake in one of the countries largest copper producer, Kamoto Copper Company. It is unclear if Gécamines has notified the Congolese government of the deal, as is required by law. No details have been published, either by Gécamines, the government or Fleurette Group, the potential buyer. Fleurette is an offshore company tied to Dan Gertler, an Israeli businessman with a colourful reputation and long history in Congolese mining. Africa Progress Panel | Global Witness

Egypt renews its diplomatic offensive for control of Nile waters

Three Egyptian ministers will embark on a diplomatic tour de force through Nile basin countries to try and secure Egypt’s share of the Nile’s waters. Still based on colonial-era contracts, upstream countries like Ethiopia and Uganda are eager to change the current terms. Martin Plaut

International personnel returns to In Amenas

BP has confirmed that its international employees are set to return to In Amenas. The gas facility gained international notoriety when terrorists affiliated with Al Qaeda invaded the plant in January 2013. 37 hostages and 29 of the attackers were killed during a three day long siege and the subsequent assault by the army. Jeune Afrique

More short links:

 

Panda protects Virunga: WWF files complaint against SOCO at OECD

In an interesting twist of the battle over oil exploration in the Virunga National Park in Eastern Democratic Republic of the Congo, environmental protection NGO WWF has put in a formal complaint about SOCO International plc at the OECD in Paris.

WWF today has filed a complaint alleging that British oil company Soco International PLC has breached international corporate social responsibility standards. WWF contends that, in the course of Soco’s oil exploration activities in and around Virunga National Park, the company has violated environmental and human rights provisions of the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises. – WWF press release

The WWF goes on to allege that SOCO has used state security to put pressure on local communities. SOCO denies the claims that it breached international standards in its activities in the DRC:

SOCO would like to make it clear that all alleged breaches of the voluntary guidelines raised are absolutely ill-founded, tendentious and not supported by the facts. – SOCO press release

Cynics will argue that it would be impossible for SOCO to work in “close collaboration” with the government of the Congo and still hold up international standards of good business behaviour, seeing that corruption, mismanagement and violence against opposition is deeply ingrained in the politics of the country. But even by Congolese standards, the government’s plans to let SOCO explore possible oil reserves in and around the Virunga National Park are contentious.

Virunga is a UNESCO designated Worl Heritage Site and supports a unique rainforest ecosystem. It is also home to some of the last populations of mountain gorillas and many other rare species. Recent legislation introduced into the Congolese parliament now tries to undermine the current regulations that forbid any exploration activity in national parks.

Adding to the environmental concerns, Virunga is also situated in an active conflict zone. Possibly as many as 50 different rebel groups are active in the park and surrounding provinces with the official army acting as one of the greatest human rights violators in the conflict.

H/T Jeune Afrique

Rich Links: Natural Gas in Tanzania, Nuclear Power in South Africa and More

As always, the best links from around the internet:

New policy on natural gas coming soon in Tanzania

The government of Tanzania is on the verge of passing a new national policy on natural gas exploitation. So far the country has no specific official policy in that sector and the new legislation wants to address specifically the issue of local content. AllAfrica/Tanzania Daily News (2)

South Africa aims for new nuclear power plants

The South African government pushes for the construction of new nuclear power plants to increase the generation of nuclear energy from 1,800 MW to 9,600 MW per year by 2030. Key financial decisions are planned to be taken this financial year. South Africa currently runs the only active nuclear power plant on the African continent and pursues a large nuclear capacity under the label of “clean” and indigenous energy. AllAfrica/SouthAfrica.info

Resources in the DR Congo

A detailed look at the trends and challenges of the natural resources sector in the Democratic Republic of the Congo. Ventures Africa

The dangers of the use mercury in gold mining

Mercury is used by the great majority of artisanal gold miners in Africa, numbering millions, but its use results in dramatic health problems. A new international treaty aims to reduce the amount of mercury used, but changing entrenched practices in local communities will be hard. The Economist

Search for oil kills whales off Madagascar

A sonar system, operated by Exxon Mobile to explore oil fields off the Madagascan coast, is the reason for the death of dozens of melon-headed whales. This is the finding of an independent scientific commission. Global Post

Three alternatives for South Sudanese oil

The governments of South Sudan and Kenya are currently planning the establishment of a new pipeline corridor to transfer Sudanese oil to the Indian Sea at Lamu. This article argues that the better alternatives would be to transfer the oil by either rail or road. AllAfrica/Pambazuka News

High hopes for Rwandan mining sector

The Rwandan government wants the country’s mining exports to triple by 2017. AllAfrica/Rwanda Focus

Rich Links: Sudan fuel price protests and Congo’s oil law

The most important developments and most interesting reads around resource politics in Africa from around the internet:

End of fuel subsidy sparks violent protests in Sudan

In an attempt to limit government spending, the Sudanese fuel subsidy was cut in a surprise move, sending fuel prices at the pump sky-high. Prices almost doubled overnight, from $2.83 to $4.71. Protests erupted in the capital Khartoum and around the country, leading to at least 29 deaths. The demonstrations were said to be the largest of President Al Bashir’s 24 year rule. Schools were closed and the internet connection to parts of the country is cut off. Al Jazeera

Why hasn’t Botswana diversified out of Diamonds

Interesting Analysis on the question, why Botswana despite its sound political institutions and solid economic growth has so far not managed to move away from an extraction-based economy. Why Nations Fail

Congo’s oil law

The DRC’s proposed oil law would open the door to exploration in national parks (especially Virunga) and doesn’t provide any means to ensure transparency in the allocation of contracts and revenues. Think Africa Press

Ghana’s gold production likely to drop by 18%

Due to falling world market prices, gold producers are cutting their production in Africa’s second largest exporting country. This could have severe consequences for government revenues, with oil production already well below targets. The government has won elections mainly on the promise of investing heavily in power production and other infrastructure and planned on using funds from resource extraction to deliver on these promises. Mining Review