New Products and Analysis
This August, the US Securities and Exchange Commission (SEC) set out the final regulatory rules for the US Dodd-Frank Act 2010. It sets stringent standards for reporting on four widely used minerals and their derivatives: cassiterite, from which tin is extracted; coltan, from which tantalum is extracted; wolframite, used for the extraction of tungsten; and gold.
To help companies navigate the complex challenges associated with sourcing minerals from the high risk environments covered under the Act – including DR Congo and its nine neighbouring states – Maplecroft has released an in-depth report to identify the key issues and to provide guidance in meeting the new standards.
The aim of the US legislation – which is due to come into force in 2013 and will affect US-listed companies and their supply-chain partners – is to prevent the mineral trade perpetuating conflict in eastern DR Congo through increased transparency of the often highly complex supply chains of multinational companies. The report aims to highlight the implications of the Act to facilitate compliance, and covers the overall context of conflict minerals; international regulations and standards; details of Section 1502 of the Dodd-Frank Act, its requirements and implementing rules; as well as in-depth analysis and maps of the specific risks for companies sourcing from covered countries.
It will provide an essential tool for a wide range of companies listed in the US that will now be required to investigate and publicly disclose whether their products contain certain minerals from DR Congo and/or its neighbours at any stage of their supply chain and whether this mineral trade is perpetuating conflict. The rules affect manufacturers of a diverse range of products, from electronic equipment, to machinery, to food packaging and chemical products.
Key risks in DR Congo
There is an extremely high risk that conflict minerals sourced from eastern DR Congo will benefit either the commercial activities of the national army, or armed rebel groups.
The DR Congo national army (FARDC) is often regarded as an economic operator with strong interests in the mining sector. Artisanal miners are subject to abuse, with miners frequently forced to hand over part of their production to government soldiers. The FARDC has also been accused of granting illegal ‘concessions’ to mining operators. Moreover, the FARDC’s concentration in mineral-rich areas – sometimes, it is alleged, following staged ‘attacks’ by rebels – may partially account for its failure to protect the civilian population from the frequent and massive human rights violations committed by armed groups such as the Democratic Forces for the Liberation of Rwanda (FDLR), one of the most active rebel groups operating in the Kivus, which is itself known to control numerous mineral extraction sites.
Conflict minerals in Rwanda and the wider region
The latest Rwandan-backed rebellion underlines how conflict in the region is set to remain intractable at least into the medium term. Rwanda has intervened in DR Congo on several occasions since 1996, and in April 2012 allegedly helped to organise disaffected Congolese Tutsi FARDC officers into the Congolese Revolutionary Army (ARC, formerly known as the M23). It is highly likely that the ARC, which is also backed by Uganda, will make the capture of mineral resources a military priority, with much of its production smuggled into Rwanda and Uganda.
Minerals sourced from Uganda, Rwanda and Burundi are particularly likely to benefit armed groups. Companies sourcing minerals from Rwanda and Uganda are at heightened risk of suffering reputational damage due to international scrutiny over the ARC rebellion. Unexplained discrepancies between mineral production figures and export figures for some of the countries bordering DR Congo leave little doubt that there is an enormous cross-border trade in illegal minerals, and that governments are complicit in the trade. Alleged Rwandan and Ugandan support for the ARC means that companies sourcing minerals from these countries could be accused of complicity in the human rights violations perpetrated by the rebels.
In-depth country risk reports, briefings and labour standards reports are available for all countries and sectors. Register for trial access to see examples.
Jason McGeown, Head of Communications
Tel: +44 (0)1225 420000
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