“We don’t understand why President Obama would want to cut off Congo’s minerals,” said Idrissa Assani, expressing a sentiment clearly shared by his fellow miners who sat together in the dark office of their mining cooperative. “It is the innocents who are vulnerable” and who will suffer most from “Obama’s law,” he said.--Laura Heaton, The Enough Project, April 20, 2011
Friday, October 28, 2011
Quote of the Day
The Critical Need for a Social Impact Assessment
How many Congolese children are going to bed hungry tonight because of Dodd-Frank 1502?
This is not a rhetorical question. In fact, we have no meaningful data regarding the extent of the harm caused by DF-1502. What we do know is the following:
1) The economy of eastern Congo was severely damaged by 30 years of kleptocracy under Mobutu and 14 subsequent years of war. As a result, eastern Congo is one of the poorest regions within Congo, itself one of the poorest countries in the world. Most of the economy is informal and subsistence in nature.
2) DF-1502 precipitated a de facto embargo of minerals from eastern Congo. This embargo began on April 1, 2011, after Western electronics companies, under pressure from Western NGOs, ordered major international smelting companies to cease accepting minerals from eastern DRC.
3) There were roughly 400,000 people working as artisanal miners in the Kivus before that date, more people than in any sector but agriculture.
4) Most of those miners supported families, meaning that somewhere between one and two million people depended directly on the mining trade for their livelihood. Mining was the region's major foreign currency earner.
5) Artisanal mining is difficult, dangerous work, but for most miners it is the best alternative within the universe of possibilities available to them.
6) The embargo led to a 75 to 90 percent drop in the export of tin, tantalum, and tungsten.
7) Of these "three Ts," the most important to the region was tin, or cassiterite, which miners are now able to sell at only one half to one third of its pre-DF 1502 value, to the extent that they can sell it at all.
8) The gold trade, to all appearances, has not been affected by DF-1502.
9) We have little understanding of the secondary economic impacts of the embargo. Visitors report visible signs of economic deterioration in Goma compared to the pre-DF period. Bukavu is less visibly distressed, but economic actors from market women to bankers report experiencing an economic downturn.
10) Numerous mining communities sprang up in remote locations in the Kivus. Once the embargo was put in place, these communities were virtually cut off from the outside world. The planes that had provisioned them no longer arrived, as the communities had nothing to sell.
The embargo is the direct, predictable result of actions taken by two Western NGOs: Global Witness and the Enough Project. They both campaigned for DF-1502 and threatened to cause reputational harm to companies that did not cooperate with them. They ignored warnings from credible Congolese mining experts of the problems they might cause, and failed to disclose those warnings in any of their reporting on the subject. Their actions led directly to the passage of DF-1502. As Jim McDermott, one of the provision's congressional sponsors, told a gathering of Enough supporters: "Without your efforts, this would not have happened."
This is not a rhetorical question. In fact, we have no meaningful data regarding the extent of the harm caused by DF-1502. What we do know is the following:
1) The economy of eastern Congo was severely damaged by 30 years of kleptocracy under Mobutu and 14 subsequent years of war. As a result, eastern Congo is one of the poorest regions within Congo, itself one of the poorest countries in the world. Most of the economy is informal and subsistence in nature.
2) DF-1502 precipitated a de facto embargo of minerals from eastern Congo. This embargo began on April 1, 2011, after Western electronics companies, under pressure from Western NGOs, ordered major international smelting companies to cease accepting minerals from eastern DRC.
3) There were roughly 400,000 people working as artisanal miners in the Kivus before that date, more people than in any sector but agriculture.
4) Most of those miners supported families, meaning that somewhere between one and two million people depended directly on the mining trade for their livelihood. Mining was the region's major foreign currency earner.
5) Artisanal mining is difficult, dangerous work, but for most miners it is the best alternative within the universe of possibilities available to them.
6) The embargo led to a 75 to 90 percent drop in the export of tin, tantalum, and tungsten.
7) Of these "three Ts," the most important to the region was tin, or cassiterite, which miners are now able to sell at only one half to one third of its pre-DF 1502 value, to the extent that they can sell it at all.
8) The gold trade, to all appearances, has not been affected by DF-1502.
9) We have little understanding of the secondary economic impacts of the embargo. Visitors report visible signs of economic deterioration in Goma compared to the pre-DF period. Bukavu is less visibly distressed, but economic actors from market women to bankers report experiencing an economic downturn.
10) Numerous mining communities sprang up in remote locations in the Kivus. Once the embargo was put in place, these communities were virtually cut off from the outside world. The planes that had provisioned them no longer arrived, as the communities had nothing to sell.
The embargo is the direct, predictable result of actions taken by two Western NGOs: Global Witness and the Enough Project. They both campaigned for DF-1502 and threatened to cause reputational harm to companies that did not cooperate with them. They ignored warnings from credible Congolese mining experts of the problems they might cause, and failed to disclose those warnings in any of their reporting on the subject. Their actions led directly to the passage of DF-1502. As Jim McDermott, one of the provision's congressional sponsors, told a gathering of Enough supporters: "Without your efforts, this would not have happened."
Tuesday, October 25, 2011
Fisking the UN's Letter to the SEC
Fred Robarts, in his capacity as the Coordinator for the UN Group of Experts on the DRC, has written to SEC Chair Mary Schapiro asking that Dodd-Frank 1502 be implemented provided companies be allowed to put in place "mitigation strategies" that they can prove are working. These mitigation strategies are discussed in OECD guidelines, which state the following:
But more than that, the entire letter is rife with errors, self-contradictions, mis-statements of fact, and unproven claims. If this were someone's random comment I wouldn't consider it worth responding to. I'd give it a "C" in a sophomore political science class--if I was feeling generous. Unfortunately, because of its provenance, it will be seized upon by all too many as a vindication of their work. (As indeed it has.) It may be crap, but it's UN-certified crap, and it will carry a lot of weight accordingly.
[Companies should take steps to] prevent or mitigate the identified risks by adopting and implementing a risk management plan. These may result in a decision to continue trade throughout the course of risk mitigation efforts, temporarily suspend trade while pursuing ongoing risk mitigation, or disengage with a supplier either after failed attempts at mitigation or where the company deems mitigation not feasible or the risks unacceptable.To say that this is a little vague is an understatement. Nowhere does Robarts' letter get more specific about how to incorporate the guidelines--or even consider their adequacy to the situation. In fact, the longer I look at it, the less I think of the letter. To propose a new strategy for the SEC to consider this late in the game is a case of too little too late. First, it's not clear that the SEC even has the latitude to consider this sort of proposal: It cannot substitute its own judgment for Congress's directives. As I understand it, the only course available to it at this point is whether to allow companies a reasonable amount of time and latitude to implement the law--and if so, to determine what constitutes "reasonable." It cannot impose its own set of conditionalities on companies. Second, this proposal isn't nearly as thought out as it needs to be. What mitigation strategies, exactly? What would constitute proof that they are working? Who gets to verify a company's finding to that effect? Third, I can't imagine that too many companies would be willing to enter the Congo under these conditions. As Wronging Right's Amanda Taub has argued, why would companies ever risk buying Kivu minerals, given the reputational and regulatory risks they would face?
But more than that, the entire letter is rife with errors, self-contradictions, mis-statements of fact, and unproven claims. If this were someone's random comment I wouldn't consider it worth responding to. I'd give it a "C" in a sophomore political science class--if I was feeling generous. Unfortunately, because of its provenance, it will be seized upon by all too many as a vindication of their work. (As indeed it has.) It may be crap, but it's UN-certified crap, and it will carry a lot of weight accordingly.
Saturday, October 22, 2011
Quotes of the Day
"We can not give you exactly the number of lives that are lost each day following the cessation of artisanal mining in the DRC and yet even if a child died or who is hungry or do not go to school because his father digger lacked money, this is a tragedy, it is a sad news that should challenge our humanity."
--Serge Mulumba, President of the CDMC, a mining cooperative that oversees and assists artisanal mining in the Democratic Republic of Congo.
“There are always unintended consequences to such sweeping but necessary changes... . Most of us, if not all, could foresee that this would be both challenging and bumpy. We are too far down the road to go back.”
--Joanne Lebert, director of Partnership Africa Canada's Great Lakes Program
--Serge Mulumba, President of the CDMC, a mining cooperative that oversees and assists artisanal mining in the Democratic Republic of Congo.
“There are always unintended consequences to such sweeping but necessary changes... . Most of us, if not all, could foresee that this would be both challenging and bumpy. We are too far down the road to go back.”
--Joanne Lebert, director of Partnership Africa Canada's Great Lakes Program
Thursday, October 20, 2011
An Apology
In my post on Enough's decision to call for a one-year delay in the implementation of Dodd-Frank, I reported that Enough's Sasha Lezhnev had told me that their report on the topic would be coming out soon. He has written to remind me that he told me that off the record. He is correct. It was a mistake to report that. I apologize to Sasha and the Enough Project team.
Quote of the Day
"U.S. Special Forces to Exterminate African Cannibals"
--Pravda headline regarding Obama's decision to send advisors to help hunt down Joseph Kony's LRA troops
It's official: Pravda, the old Soviet propaganda outlet, is now (slightly) more accurate than Rush Limbaugh.
--Pravda headline regarding Obama's decision to send advisors to help hunt down Joseph Kony's LRA troops
It's official: Pravda, the old Soviet propaganda outlet, is now (slightly) more accurate than Rush Limbaugh.
Blood Molecules
Tuesday's SEC roundtable on Dodd-Frank 1502 was a drily legalistic affair, with SEC staff grilling participants about how they should define key terms in the legislation, establish a feasible time-frame for its implementation, and how deeply they should drill into companies' manufacturing processes. The participants, including representatives from a variety of companies and investment firms as well as Global Witness and the Enough Project, provided responses that generally fell on polar ends of the discussion.
Some specialist electronics companies, soi-disant socially responsible investment firms, and the two activist groups asked that the SEC interpret the legislative terms in the broadest manner, interpret the law in the strictest sense, and implement it immediately. Opposing them were manufacturers such as Boeing and Kraft, which said that their supply chains are so complex and dynamic that they would need time and consideration to properly implement the law. Surely some common sense rules ought to apply, they said--or would they have to account for every stray molecule in their product?[1]
Gold companies also chimed in, arguing that their products should be treated differently from the other metals under consideration, the so-called three Ts: tin, tantalum, and tungsten. (Companies using zinc or lead in their products should be grateful to the alphabet gods that none of these metals' typical mineral compounds begin with the letter "T." Since these minerals are also mined in the Kivus, they're lucky we're not now speaking of the four or five Ts.)
If you enjoy Talmudic discussions about whether muffins baked in tin molds need to be stamped conflict free or not--and whether that depends on how old the tin molds are--then the SEC was the place to be. In a comment I am certain she immediately regretted, the mouthpiece for Kraft told the Commission that the ramifications of DF-1502 made her hyperventilate.
Some specialist electronics companies, soi-disant socially responsible investment firms, and the two activist groups asked that the SEC interpret the legislative terms in the broadest manner, interpret the law in the strictest sense, and implement it immediately. Opposing them were manufacturers such as Boeing and Kraft, which said that their supply chains are so complex and dynamic that they would need time and consideration to properly implement the law. Surely some common sense rules ought to apply, they said--or would they have to account for every stray molecule in their product?[1]
Gold companies also chimed in, arguing that their products should be treated differently from the other metals under consideration, the so-called three Ts: tin, tantalum, and tungsten. (Companies using zinc or lead in their products should be grateful to the alphabet gods that none of these metals' typical mineral compounds begin with the letter "T." Since these minerals are also mined in the Kivus, they're lucky we're not now speaking of the four or five Ts.)
If you enjoy Talmudic discussions about whether muffins baked in tin molds need to be stamped conflict free or not--and whether that depends on how old the tin molds are--then the SEC was the place to be. In a comment I am certain she immediately regretted, the mouthpiece for Kraft told the Commission that the ramifications of DF-1502 made her hyperventilate.
Wednesday, October 19, 2011
Quote of the Day
“For those of us who enjoy these products every day, I’d like to enjoy it with a clear conscience.”
--Senator Richard Durbin, D-Ill, at the SEC roundtable yesterday.
--Senator Richard Durbin, D-Ill, at the SEC roundtable yesterday.
Durbin, arguing that the conflicts in eastern Congo are being driven by "our insatiable appetite for iPads and BlackBerrys and cellphones,” favors an immediate implementation of DF-1502.
Tuesday, October 18, 2011
Eighty-Eight Less than Luther
I spoke last month at the New York City Bar Association* on the predictable but unintended consequences of DF 1502 on armed conflict and economic development in eastern DRC. The other speakers were Nicolas Grabar, a securities lawyer, who provided a wryly skeptical perspective on the law's likely effects; the redoubtable Kambale Musavuli, of Friends of the Congo, who laid out the context for understanding the situation in DRC; and Fidel Bafilemba, of Enough, who had the unenviable task of responding to me in English. I say unenviable because English is his 13th language; debating in a language you don't have near-native fluency in is a difficult proposition, and I imagine that much past your sixth or seventh language the remarkable thing is to be doing it at all.
I told the audience I had seven theses I wanted to nail to the church door, the church in this case being the heavily policed belief that going after the minerals, rather than the warlords, offered a shortcut to peace in Congo. After 30 years of Mobutu and 14 of war, there are no indulgences to reconstituting the state in eastern Congo.
1) Dodd Frank has resulted in a de facto embargo.
According to Reuters, there's been a 90 percent drop in mineral exports as a result of the law's passage. According to Enough, there's been a 75 percent drop. And according to the Economist, there's been a 95 percent drop in productivity from some mines. My own impression, by the way, was that many miners continue to work because they don't really have alternatives. But they aren't working as often as they used to, aren't selling nearly as much, and are making much less per kilo sold--often less than half of what they were making before DF. (Some minerals are being smuggled out to neighboring countries and relabeled as local product; others are being stockpiled.) Whatever the law's intentions, an embargo has been the outcome.
2) The hypothesis that DF 1502 will play a decisive or even significant role in ending the conflicts is speculative, at best.
Most of the conflicts today in the Congo are overdetermined: that is to say, they have multiple, interacting causes. These include disputes over land use, arguments over chiefly succession, and politically manipulated debates about who is or is not a citizen. While some of the militia are clearly ethnic self-protection forces, others get support from neighboring countries and still others have a millennial, "spiritual" component and take their inspiration from colonial-era struggles.
Another complication is that militia make money in a variety of ways, not just from taxing the mineral trade. When I was in Congo this summer, for example, the FDLR kidnapped some villagers in Shabunda and held them ransom, demanding $6,000 and six virgins (!). Other groups extort money from market places or even hospitals; others just clobber women returning from market and take the $20 they may have earned from selling beans or manioc or charcoal. It doesn't cost very much in that part of the world to run a militia. Guns are cheap, and there isn't much in the way of alternate livelihoods that would give young men reason to defect.
I told the audience I had seven theses I wanted to nail to the church door, the church in this case being the heavily policed belief that going after the minerals, rather than the warlords, offered a shortcut to peace in Congo. After 30 years of Mobutu and 14 of war, there are no indulgences to reconstituting the state in eastern Congo.
1) Dodd Frank has resulted in a de facto embargo.
According to Reuters, there's been a 90 percent drop in mineral exports as a result of the law's passage. According to Enough, there's been a 75 percent drop. And according to the Economist, there's been a 95 percent drop in productivity from some mines. My own impression, by the way, was that many miners continue to work because they don't really have alternatives. But they aren't working as often as they used to, aren't selling nearly as much, and are making much less per kilo sold--often less than half of what they were making before DF. (Some minerals are being smuggled out to neighboring countries and relabeled as local product; others are being stockpiled.) Whatever the law's intentions, an embargo has been the outcome.
2) The hypothesis that DF 1502 will play a decisive or even significant role in ending the conflicts is speculative, at best.
Most of the conflicts today in the Congo are overdetermined: that is to say, they have multiple, interacting causes. These include disputes over land use, arguments over chiefly succession, and politically manipulated debates about who is or is not a citizen. While some of the militia are clearly ethnic self-protection forces, others get support from neighboring countries and still others have a millennial, "spiritual" component and take their inspiration from colonial-era struggles.
Another complication is that militia make money in a variety of ways, not just from taxing the mineral trade. When I was in Congo this summer, for example, the FDLR kidnapped some villagers in Shabunda and held them ransom, demanding $6,000 and six virgins (!). Other groups extort money from market places or even hospitals; others just clobber women returning from market and take the $20 they may have earned from selling beans or manioc or charcoal. It doesn't cost very much in that part of the world to run a militia. Guns are cheap, and there isn't much in the way of alternate livelihoods that would give young men reason to defect.
Shut Me Up!
I asked representatives of Enough and Global Witness today whether they would join me in calling for a social impact analysis of the embargo "inevitable dislocations" that have been in place against Congolese minerals since April. Surely there are few things more important to know right now that what impact the law has had: who's been hurt, who's been helped, and why. I assured them that the call was for real: we could negotiate terms of reference and no doubt agree on proper unbiased researchers to conduct the analysis. There are plenty of such people: World Bank consultants, anthropologists and sociologists skilled at teasing out answers from survey questionnaires in fourth world contexts, micro-economists who have spent their lives studying artisanal mining, public health analysts practiced at mortality surveys. And they come cheap: Hiring three or four of these folks to do a reasonably thorough study couldn't possibly cost more than a hundred grand, peanuts in the scheme of things.
No will do, said Enough. We'll get back to you by next Friday, said Global Witness.
C'mon, guys. It should be apparent by now that name calling won't shut me up. Neither will questioning my motives or funding. But solid social science: That'll do it every time.
Here's to hoping.
No will do, said Enough. We'll get back to you by next Friday, said Global Witness.
C'mon, guys. It should be apparent by now that name calling won't shut me up. Neither will questioning my motives or funding. But solid social science: That'll do it every time.
Here's to hoping.
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