Thursday, September 22, 2011

The Economist Confirms: Dodd-Frank a Disaster for Congolese

This week's Economist has an article confirming three of the most important points I made in my op-ed:
1) Dodd-Frank has resulted in a de facto embargo on exports of minerals from eastern Congo.
2) That embargo has had disastrous consequences for hundreds of thousands of miners and their dependents, as well as for the regional economy as a whole.
3) It has perversely helped, rather than hurt, the militia it was meant to target.

This article does contradict my reporting in one respect. It says miners blame the "American law" for their plight. The people I spoke to called it the "Obama law." This probably represents a regional difference: I was mostly in South Kivu, the Economist's reporter mostly, from what I can tell, in North Kivu. Here's an excerpt from the article:
The dusty streets of Goma, North Kivu’s capital and a mining hub, illustrate Congo’s ills. Metals dealerships dominated the city’s economy until last year but are mostly padlocked now. Repair shops and bars that relied on mining business are empty. So are most public offices. Local government, financed by mining taxes, is insolvent; salaries have not been paid in full for months. 
In the past year Goma has suffered a miserable decline. Hundreds of mines in the surrounding countryside have cut output by as much as 95%. At the Humule coltan mine a few gumbooted miners scramble up a red-earth ravine where last year there were thousands. Most stopped coming because they could no longer find buyers for their nuggets of coltan, a metal used in electronic gadgets. They blame what they call “the American law”. 
An obscure provision in the 2010 Dodd-Frank banking act forces companies listed in America to disclose the exact source of metals procured from Congo. The intention behind the law was good. Congolese militias and rogue army units, whose members rape and murder with abandon, finance themselves through mining and extortion from miners. The law tries to shame big buyers, such as Apple and Motorola, who use Congolese coltan, into dealing only with bona fide suppliers. But the effect has been to frighten them away from Congo altogether. 
So the local economy has dropped off a cliff. Some unemployed miners had been expected to join militias, though evidence that they have done so is scant. Still, militia leaders and corrupt army commanders targeted by the Dodd-Frank law are doing rather well. Unlike legitimate dealers, they run smuggling networks and take metals across borders to sell them. Officials in Burundi, Kenya, Rwanda and Uganda are complicit or turn a blind eye.

1 comment:

  1. Dodd-Frank all sounds good until you look under the hood at the unintended consequences. Our company works with artisanal miners throughout the Congo to help them export without a dime going to conflict groups. Dodd-Frank has been disastrous for them.

    It is critical to note that all the activists and U.S. politicians are quoting United Nations groups, the DRC Government and large NGOs who are applauding the bill, and not a single one of them are quoting chiefs, tribes and locals who are affected by it. Doesn't this say something very powerful to us?

    I can put them in touch with chiefs and tribes whose livelihoods have been utterly devastated by this bill, and the collateral damage is universal. There are six regions from which coltan and other minerals in the Dodd-Frank are mined and only one of them has ever had anything to do with conflict, the Kivus. And in that region there are thousands of hard-working ethical people making a living from mining without support conflict.

    Dodd-Frank has put them all out of business and it hasn't even been enacted yet. I'm in Tanzania right now supposedly to help a chief export his coltan using a highly visible, DR Congo government approved, well-documented process that ensures not a dime goes to conflict. We have to tell that chief that his people will go hungry because the smelters have vanished, and they all cite Dodd-Frank as the reason, saying they can buy these minerals anywhere and it makes no sense to go anywhere near the suspicions that Dodd-Frank puts on minerals from the Congo. The chief will be devastated, as will his people and the nearly 1 million honest people in the Congo who are finding their meager livelihoods completely destroyed by this over-reaching Act.

    All the politicians, NGOs, activists and special interest groups are all patting each other on the back for helping the Congolese. But not a single one of them dares to go to the miners themselves and ask what they think of it.

    The most condemning thing about Dodd-Frank is that it is a nuclear option. In order to take out the militia, they and the American government are willing to take down every innocent man, woman, and child throughout the Congo that depend on mining for their food. Such massive collateral damage is not acceptable under any circumstance. The United Nations stands by idly and does nothing.

    Mining is not the issue, the militia is the issue. Remove mining from the equation and the milita will exact its pound of flesh from the locals using other means. The only ones hurt will be the miners - 100% of them in all six regions. If there was every a place to send in a coalition of troops to destroy the militia, this is it. This whole thing could be handled with virtually no civilian collateral damage. Right now we're taking a route that before the bill is enacted, has already destroyed the local economy, what little of it their used to be, and the innocents who depend on it.