Congolese Coltan (Title Page)Thank you for joining us. Many of you have heard of “blood computers or phones”: consumer electronics products that contain components, which both ignite and fuel conflict around the developing world. In this presentation, we will be exploring the issue of Congolese Coltan, what it is, why you should care, and what you – as a business leader and consumer – should do about it.
War in the DRCThe Democratic Republic of Congo is one of Africa’s largest countries. Endowed with vast natural resources, the country stands at the centre of what could be termed “Africa’s World War”. The Democratic Republic of Congo (or DRC for short) has suffered two devastating wars since the early 90’s. The first war in 1996 began as direct result of the 1994 Rwandan genocide. The second began in 1998 and pitted government forces against rebels backed by Uganda and Rwanda. Since ’98, an estimated 5.4 million people have died due to direct and indirect results of the fighting.
The EconomyDespite its natural bounty, the DRC is one of the poorest countries in the world, with an unemployment rate of 85% and 79% of the population living on less than $2 per day. The economy is dominated by the mining sector, with minerals for the electronics industry as the main export and the largest attraction for foreign direct investment.
Conflict PersistsDespite a peace deal and the formation of a transitional government in 2003, national organizations remain incapable of ensuring basic security for communities, providing management of natural resources, and addressing the problems of corruption and poverty. Armed forces, including the both the national army and various rebel militia groups, continue to perpetrate violence against the civilian population, including abductions, looting, forceful recruitment of child soldiers, and rampant sexual violence. Sustained conflict and resource exploitation have also caused a significant decline in the once flourishing gorilla and elephant populations.
Key Term: Conflict MineralsMineral resources remain one of the key drivers of conflict in the DRC, with all sides taking advantage of the chaos. Opposing armed forces jockey to control the most valuable mines and transportation routes, and to impose “taxes” on others involved in the trade.
Key Term: The 3T’sArmed groups trade in the 3Ts: the mineral ores that produce Tungsten, Tin, and Tantalum. The DRC accounts for over 20 percent of the global production of tantalum (commonly referred to as “coltan”) and is estimated to contain an astounding 80% of the world’s reserves.
Key Term: ColtanColtan is a metallic grit that occurs in river deposits and is obtained by panning, much like gold. Through refinement, coltan becomes powder twice as dense as steel and highly resistant to heat and corrosion, sometimes called “magic dust”. Its ability to store and release an electrical charge is vital in the manufacturing of portable electronic equipment, such as mobile phones and computers. Other applications include surgical equipment, turbine blades for jet engines, and lining for chemical reactors. With high worldwide demand and a limited supply, many players are eager control this valuable mineral in the DRC.
Mining Sites and ProfitsMining sites are spread across eastern Congo and vary from large-scale operations employing upward of 2,000 miners to scattered holes mined by just a few. Conflict mining is “artisanal” – that is, it uses manual labour and simple tools. Armed groups profit from the minerals trade by two primary means. First, by controlling the mines and forcing miners to work in desperate and dangerous conditions, paying them an average of $1 to $5 per day. The second is by placing a “tax” on transporters, local and international buyers, and at border crossings. While it’s hard to know for certain, it is estimated that armed groups in the DRC earned approximately $185 million from the trade in 2008 alone.
The Supply ChainOnce miners dig, pan and bag the coltan, it’s smuggled through neighbouring countries including Rwanda and Uganda, often mixed with legally mined ores. Traders frequently misreport these resources as having originated in Rwanda, Uganda, or other countries to avoid the taint of “conflict minerals” originating from the DRC. As an example, in the first half of 2008, Rwanda reported 2679 tons of tin exports, yet its largest tin mine only produces 5 tons per month. Coltan is then exported (mainly to Asia) for refining. Processing companies sell the refined tantalum to the manufacturers of electronics components. In turn, these components are supplied to the makers of consumer electronics like cell phones, computers, and digital cameras.
United Nations ReportIn 2001, the United Nations issued its Report of the Panel of Experts on the Illegal Exploitation of Natural Resources and Other Forms of Wealth of the Democratic Republic of the Congo. The report generated several key conclusions with regards to conflict minerals:Conflict in the DRC is mainly about coltan, diamonds, copper, cobalt and gold. “The wealth of the country is appealing and hard to resist in the context of lawlessness and the weakness of the central authority.”“Exploitation… by foreign armies has become systematic and systemic.”The private sector plays a vital role in the war by preparing “the field for illegal mining activities.” Some companies have gone so far as to trade arms for natural resources.“Because of its lucrative nature, [the conflict] has created a “win-win” situation for all belligerents… Business has superseded security concerns. The only loser in this huge business venture is the Congolese people.”
Key Term: Resource CaptureResource capture occurs when the degradation and depletion of a renewable resource (a decrease in supply) interacts with an increase in demand, encouraging powerful groups within a society to shift resource access in their favour.
Rwanda’s Role & Resource CaptureDemand for coltan fuelled war through the trading of arms and other resources, perpetuated by illegal mining activities. High global demand, limited supply, and high price created a lucrative environment. Everyone wanted access. Armies – both legitimate and rebel – occupying the area use coltan to fund their fighting, thereby creating an even more powerful force to control the resources. Locals were either driven out or forced to mine. This situation creates environmental scarcity, whereby the riches of the land are being stolen by outsiders and sold for profits to keep them there… this is “resource capture”. The UN report accuses Rwanda’s Army – among others – of funding its military by taking control of mineral mines, and looting coltan and cash reserves en mass. Military experts suggest “that the official defense budget of Rwanda cannot alone cover the cost of their war and presence in the DRC.” It is “a self-financing war.” Rwandan exploitation is “systematic, efficient, and organized,” with both formal and informal linkages between governments, businesses, armies, and individuals. The conclusions of the UN report are suggestive of “resource capture” by Rwanda.
Corporate Complicity Although the UN has not directly blamed DRC’s conflict on the private sector, they have suggested that the companies trading minerals are essentially creating the “engine for the conflict” and that they should accept at least some responsibility for their role in purchasing illegally mined materials. Much of the public concern has centred on high profile companies, such as Apple and Intel, who use tantalum in their products. In particular, the smartphone industry shows no sign of slowing down, with revenues expected to hit over $200 billion by 2013. In short, demand for Congolese Coltan will only increase.
Canadian Companies in the DRCIn 2009, it was estimated that Canadian-owned mining assets in the DRC stood between $2.7 billion and $5.2 billion… Nearly one-fifth of Canadian mining assets in Africa. The UN’s 2001 report accused eight Canadian companies (among others) of stealing resources from the DRC.
Barrick Gold and Anvil MiningIn 2005, Human Rights Watch accused Canadian company Barrick Gold of making agreements with two Eastern DRC militia groups that had murdered hundreds of civilians. In return for the gold mines, the militias were given housing, trucks, and other forms of support. Most recently, Anvil Mining was faced with a class action suit in 2010, launched by a group called the “Canadian Association Against Impunity”, which includes conflict survivors and representatives from various NGOs. The group alleges that Anvil provided vehicles and planes in 2004 to Congolese troops suppressing a small uprising in the mining town of Kilwa, killing more than 70 people. Anvil concedes that it did allow Congolese troops to use its vehicles, but claims that had no choice in the matter.
“Tragedy of the Commons”Dr. Gad Saad of Concordia University, states that when it comes to issues such as “blood computers or cell phones” consumers are affected by the “tragedy of the commons”. In other words, most people would say that they support saving those who are suffering abuses in the DRC; however, after learning of a connection between the product they purchase and its related human rights abuses, they don’t change their behaviour. They feel their actions would be inconsequential.
“Concentric Circle of Influence”Dr.Saad also suggests part of the problem is that we as consumers do not see the people of the DRC as part of our “concentric circle of influence”. An example he uses to illustrate this point is that a non-specific plea for assistance to help children in Africa is typically ineffective, whereas a plea requesting money for your sponsor child, whose picture sits on your fridge, has a much greater impact on behaviour.
Supply Chain AuditingCommodity-based supply chains are complex. Due to prevalent smuggling and the nature of the world market, it’s often difficult for purchasers to gain guarantees that minerals are conflict-free. Nonetheless, human rights activists lobby for companies to be held responsible for tracing the origin of their supply.
Dodd Frank ActIn 2010, lobbyists succeeded in adding a provision to the U.S.’s Dodd Frank Wall Street Reform Act, requiring publicly traded companies to report on the measures they are taking to ensure that minerals in their supply chain don’t benefit warlords in the DRC.
Challenges with Dodd FrankThe challenge with the Dodd Frank amendment is twofold. First is the difficulty in establishing and verifying a mineral’s original source; the supply chain may already include hundreds or even thousands of participants before it arrives as a capacitor in your new iPad. Second is the cost to verify compliance. Critics assert that the proposed compliance measures will not accurately verify the absence of conflict materials, simply due to the complexity of the supply chains involved. Some have even taken to calling the legislation “Sarbanes Oxley on Steroids”.
Contradictory Impacts Critics go further to suggest that legislation may actually bring harm to those it is intended to help. They claim it serves as a de facto embargo on any minerals mined in the DRC. Many companies who once sourced minerals from the DRC have sought alternative sources of supply, as they don’t want to be accused of financing warlords in the country. This has had a devastating impact on the miners in the country, who have seen their income drop from a few dollars a day to nothing at all. They argue that as the demand for DRC minerals decreases, prices will drop, further hurting local miners, all the while benefiting buyers who don’t adhere to the same standards of social responsibility. At the same time, demand from other non-conflict sources will rise, thus raising costs for companies that do business legitimately.
Proponents of Dodd FrankProponents assert that the law does not prohibit use of the minerals, but rather, simply requires that companies discovering they have sourced DRC conflict minerals must report so to the SEC (Securities and Exchange Commission). The Congolese government has publicly expressed its support for the Dodd Frank changes, and the measure is backed by mining sector officials in the areas most affected. In addition, Global Witness has stated that they “are absolutely not calling for companies to pull out, [acknowledging that mining] is a legitimate source of livelihood.”
Conflict Free Smelter ProgramIn response to the new law, in December 2010, two industry groups – the Electronic Industry Citizenship Coalition and the Global E-Sustainability Initiative – representing companies such as Apple, RIM, and Intel, formally launched the Conflict Free Smelter Program, which “aims to identify smelters that can demonstrate through an independent third-party assessment that the raw materials they procured did not originate from sources that contribute to the conflict in DRC.” The program also supports recommendations from The Organization for Economic Cooperation and Development Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High Risk Areas. With input from the UN and relevant countries, the guidance report essentially recommends that the electronics industry:Establish good information systems to identify and assess their material risk,Establish strategies to manage such risk,Have a third party verify their efforts, andReport on overall efforts. The cost of implementing the Conflict Free Smelter Program varies according to who is asked. The SEC estimates compliance at a modest $16 million, while the electronic interconnect industry (only a small part of the electronics industry as a whole) estimates their compliance will cost $269 million for just the first year.
Canada’s ResponseIn Canada, Bill C571 – the “Trade in Conflict Materials Act” – was tabled earlier this year by NDP MP Paul Dewar, with the support of the Liberal Party. If passed, it will hold Canadian companies accountable for the means through which they gather resources. Because Canada has no national securities regulator, responsibility for its oversight will be left with an ombudsman, who will produce an annual report naming and shaming companies that continue to use conflict minerals.
Consumer ActionConsumers can effect change by putting pressure on technology companies who use coltan, by supporting laws that will regulate the industry, and by spreading the word about the human rights abuses taking place in countries like the DRC. They can also influence change by how they choose to spend their dollars. By demanding that they be given an option to buy “fairly traded” phones and other, they will create further incentive for companies to take action against conflict minerals.
In this presentation, we have learned about the escalating demand for coltan and its role in perpetuating the devastating conflict that dominates the Eastern Democratic Republic of Congo. We have discussed the key finding of a UN Report on the continued conflict and resource exploitation in the region. We have explored the roles that both corporations and consumers have to play in the violence, and we have presented an overview of the legislation in response to the crisis. Finally, we have outlined what you – as a business leader and consumer – can do about it. Thank you for joining us.
CONGOLESECOLTAN “The only loser in this huge business venture is the Congolese people.” from The United Nations’ Report of the Panel of Experts on the Illegal Exploitation of Natural Resources and Other Forms of Wealth of the Democratic Republic of the Congo Cohort A Team 7 Travis Reynolds| Dennis Maltais| Christina Kanjer| Michael Dinsmore| Amanda Berry
key learnings Coltanand Conflict in the DRC UN Report of the Panel of Experts on the Illegal Exploitation of Natural Resources and Other forms of Wealth of the Democratic Republic of the Congo Corporate Complicity Consumer Complicity Legislative Response Call to Action
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Cohort A Team 7 Travis Reynolds| Dennis Maltais| Christina Kanjer| Michael Dinsmore| Amanda Berry