Beyond Conflict: to the regional trade in minerals from Eastern DRC

Beyond Conflict: to the regional trade in minerals from Eastern DRC
Harrison Mitchell and Nicholas Garrett
September 1, 2009
Beyond Conflict: Reconfiguring approaches
to the regional trade in minerals from Eastern DRC
Contents
ASM
Communities and
Small-Scale Mining
ASM
Communities and
Small-Scale Mining
Table of Contents
Executive Summary
6
Recommendations
9
1. Introduction
20
2. Situation analysis
23
Insecurity in Eastern DRC
24
Political Economy
25
Conflict Financing
26
3. The Trade in Minerals from Eastern DRC
31
Trading Chain
32
Trading Volume
33
North Kivu Exports
33
South Kivu Exports
35
Livelihoods
36
Fiscal Linkage
38
Impact of the Global Financial Crisis
39
4. Reforming the Mineral Trade in Eastern DRC
41
Interventions: The Feasibility of Control Measures
44
Private Sector Obligations
46
Medium- to Long term intervention: Formalization of the Artisanal Mining Sector
49
5. Beyond DRC: Production and Trade in the Great Lakes
51
Rwanda
52
Rwandan Exports by Trading Company
55
Uganda
Burundi
57
Tanzania
61
6. Regional Economic Integration
63
Regional Integration Framing Reform
64
7. The Way Ahead: Strategic thinking on trade-led development in the Great Lakes region
69
Mineral Sector Development Strategy
71
Value Addition and Energy Generation
74
Transport Infrastructure
75
Access to Finance
76
Regenerating the Agricultural Sector
77
8. Conclusion
78
Bibliography
81
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Reconfiguring approaches to the regional trade in minerals from Eastern DRC
List of Acronyms
AM Artisanal Mining
LSE London School of Economics and Political Sciences
ASM Artisanal and Small-Scale Mining
LME London Metal Exchange
BGR German Federal Institute for Geo-Science and Natural
Resources
LSM Large-Scale Industrial Mining
CAMI Cadastre Minier
MINITERE Ministry of Land, Environment, Forestry, Water
and Mines, Rwanda
CASM Communities and Small-Scale Mining Secretariat
(World Bank)
MONUC United Nations Organization Mission in the Democratic Republic of Congo
CEEC Centre d’Evaluation, d’Expertise et Certification des
Substances Minérales Précieuses et Semi-Précieuses
MPA Metal Processing Association
CEPGL Economic Community of the Great Lakes Countries
CNDP Congrès National pour la Défense du Peuple
MPC Mining Processing Congo
NGO Non-Governmental Organization
COMESA Common Market for Eastern and Southern Africa
OECD Organization for Economic Co-operation and Development
CSO Civil Society Organization
OCC Office Congolais de Contrôle
DDR Disarmament, Demobilisation and Reintegration
OFIDA L’Office des Douanes et Accises
DFID United Kingdom Department for International Development
OGMR Rwanda Geology and Mines Authority
DGI Direction Générale des Impôts (DRC)
PARECO Alliance des Patriotes pour la Refondation du Congo
DGRAD Direction Générale des RecettesAdministratives, Judiciaires, Domaniales et de Participation
PPA Partnership Programme Agreement (e.g. between donor and company)
DRC Democratic Republic of the Congo
REC Regional Economic Commission
EAC East African Community
REDEMI Régie d’Exploitation et de Développement des
Mines/Mining Production and Development Board, Rwanda
EAD Entités Administratives Décentralisées
EITI Extractive Industries Transparency Initiative
FARDC Forces Armées de la République Démocratique du
Congo (Congolese National Army)
FDLR Forces Démocratiques de Liberation du Rwanda
RIEPA Rwanda’s Investment and Export Promotions Agency
SADC Southern African Development Community
SAESSCAM Service d’Assistance et d’Encadrement du
Small-Scale Mining
SME Small and Medium sized Enterprise
FEC Federation of Congolese Enterprises
UN United Nations
GoB Government of Burundi
GoDRC Government of the Democratic Republic of the Congo
UN GoE United Nations Group of Experts
USAID United States Agency for International Development
GoR Government of Rwanda
GoT Government of Tanzania
GoU Government of Uganda
ICGLR International Conference on the Great Lakes region
KPCS The Kimberley Process Certification Scheme for Rough
Diamonds
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Acknowledgements
The authors would like to acknowledge the contributions of the following people in the productions of the report. Estelle Levin (Resource Consulting Services Limited), for her significant contributions to the entire report;
Jennifer Hinton, for the section on Uganda’s ASM sector; Prof James Putzel (London School of Economics and
Political Sciences) for commenting on drafts of the report; and Alexander Neumueller for general support. We
would also like to thank our numerous interviewees and local fixers for having supported our work. Final thanks
to Mark Craemer for his excellent photos of the mineral trade in eastern DRC used throughout this report and
to Veronique van Vlierberge, our great designer. For more information on Resource Consulting Services, please
visit www.resourceglobal.co.uk
Cover Photo: © Mark Craemer, 2009
Back Cover Photo: © Mark Craemer, 2009
We would like to acknowledge Nick Bates, Holger Grundel from DFID and the Trading for Peace team at DFID for
input into the report.
This report reflects the views of the authors and not necessarily the views of the funding organisations.
List of tables
Table 1: Mineral Exports from North Kivu (Goma and Butembo)
33
Table 2: Arrivals of Minerals at Goma Airport in 2007 by Province
34
Table 3: Aggregate Exports from Bukavu, South Kivu 2007-2008
35
Table 4: Mineral Exports from the Kivus, 2007-2008
36
Table 5: Effects of a top down mineral certification of origin scheme
46
Table 6: Rwanda domestic production of Wolframite, Cassiterite, Tantalum and Gold: 1989, 1996, 2005,2007
53
Table 7: Rwandan Based Trading Companies
55
Table 8: Rwanda Exports of Wolfram & Tantalum 2007-2008
55
Table 9: Regional Economic Commissions
66
List of Graphs
Graph 1: Cassiterite Exports from Goma, North Kivu, 2007-2008
35
Graph 2: USD/tonne mineral prices, Bukavu, 2007-2008
36
Graph 3: International copper prices
37
Graph 4: International gold prices
37
Graph 5: International tin prices
37
Graph 6: Governance feedback loops in Eastern DRC
50
Graph 7: Rwandan Cassiterite Producers and Exporters, 2007
54
Graph 8: Perceived Geogrpahical Coverage of the EAC - COMESA - SADC Free Trade Area (FTA). 68
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Reconfiguring approaches to the regional trade in minerals from Eastern DRC
List of Boxes
BOX 1: Security, Peace and Development in DRC
10
BOX 2: Insecurity as a problem for the trade in minerals
29
BOX 3: Human Rights in Eastern DRC’s mining sector: The Right to a Livelihood 31
BOX 4: Estimating exports from Eastern DRC
36
BOX 5: The Challenge of the Gold Trade
49
BOX 6: The Risk of Advocacy Self-Defeat: Perspectives of CSR managers
50
BOX 7: Cross border policing: the need for cooperation
58
BOX 8: The Ugandan Mining Sector at a glance (2008)
59
BOX 9: The Gold Trade from DRC to Uganda
61
BOX 10: Eastern DRC: Infrastructure preferences as voiced by traders
77
The Communities and Small-scale Mining (CASM) initiative was launched in 2001, in response to a critical need
for integrated, multi-disciplinary solutions to the complex social and environmental challenges facing ASM communities, and improved coordination between those working in this sector.
CASM is a global networking and coordination facility with a stated mission to “to reduce poverty by improving
the environmental, social and economic performance of artisanal and small-scale mining in developing countries.” CASM is currently chaired by the UK’s Department for International Development and is housed at the
World Bank headquarters in Washington, D.C.
Resourced by a multi-donor trust fund, CASM currently receives its core funding from the UK and the World Bank,
supplemented by program support from Japan, amongst others, Canada, France and the US. Several companies,
trade associations and charitable funds, such as Tiffany & Co Foundation, also contribute finances to CASM’s
work program. CASM funding has leveraged significant additional funding for work in the ASM sector.
www.artisanalmining.org
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Executive Summary
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
In April 2009 we published Trading Conflict for De-
presence of a number of armed groups who act with
velopment, which provided an in-depth analysis of
impunity, high levels of violence, including sexual vio-
the link between the mineral trade (tin, tungsten and
lence, and the militarisation of the economy, includ-
tantalum) and conflict and development dynamics
ing the mineral trade. In this context, military control
in Eastern DRC. The paper emphasised that security
of the trade in minerals is another symptom of gener-
sector and governance reform, coupled with mineral
al insecurity in Eastern DRC, rather than the principal
trade formalisation, are an essential first step for the
cause of insecurity or sexual violence as some mis-
international community, local and regional stake-
takenly stipulate. The non-militarised trade in miner-
holders to put an end to the conflict and to increase
als in the Kasais, southern Katanga, Bandundu and
development benefits from the trade, which sustains
large swaths of Maniema, Ituri and Equateur under-
the livelihoods of one million persons regionally. In
lines this argument.
contrast to popular discourse on the mineral trade,
the report suggested that interventions in the eco-
This is not to suggest that a link between the min-
nomic domain in the form of a ban on minerals or
erals trade and conflict dynamics do not exist, but
a disruption of the trade in minerals are unlikely to
rather to emphasise that intervening in the trade in
solve the issue of insecurity in Eastern DRC. In fact,
minerals is not enough to solve the insecurity crisis.
depending on how such measures would be imple-
Instead, policy makers should focus on consolidating
mented, they could worsen the situation.
the security sector in order to impact positively on
conflict dynamics, while at the same time support
The slow progress of a joint MONUC and FARDC oper-
governance reform, which is essential to both guar-
ation against the FDLR in the second quarter of 2009
antee the sustainability of these positive impacts and
and continuing human rights abuses have increased
to provide a platform on which to build a successful
the urgency with which the international commu-
development process.
nity is seeking means to end the conflict in Eastern
DRC. Most significant is suggested legislation by the
We explain our argument by first providing an over-
US Senate to place a due diligence requirement on
view and analysis of the regional trade in minerals
electronics companies that source tin and other met-
from Eastern DRC, including a baseline assessment
als from Eastern DRC. This proposition has in turn,
of its links to conflict and development dynamics.
prompted suggestions from the UN, pressure groups
This assessment explains the on the ground reali-
and industry groups as to what such a scheme might
ties, which are at the very heart of our scepticism
look like. This follow-up paper takes a holistic view
towards the potential success of interventions in the
of the regional trade in minerals from Eastern DRC
economic domain. For example, it is simply not pos-
and constructively critiques the various engagement
sible to disconnect the FDLR from its revenue from
strategies that pressure groups, the UN and other
the gold trade through an economic strategy. The as-
stakeholders have recently proposed. It also makes
sessment of the trade also provides an overview of
its own suggestions for trade reform and urges policy
the important poverty reduction contribution, such
makers to set the correct priorities when engaging
as the trade’s fiscal linkage and employment func-
with the mineral sector.
tion, which it currently provides and which can be
expanded with the right strategies.
We believe that the primary reason why there is insecurity in Eastern Congo is because the Congolese
Secondly, we expand on our regional perspective of
state is unable to control the monopoly of violence
the trade and introduce how successfully the DRC’s
and protect its citizens. This has translated into the
neighbours, Rwanda, Uganda, Burundi and Tanzania,
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BOX 1: Security, Peace and Development in DRC
Like all other observers, we wish to see an end to the terrible violence that pervades the Eastern
DRC. The US Secretary of State Hillary Clinton’s recent affirmation that systematic rape occurring in
the DRC amounts to a crime against humanity is a stark reminder of the violence, which people in
the region have to live with every day.1 In this context, our analysis of the political economy, mineral
trade dynamics, and intervention strategies are not in any way an endorsement of any illegal acts,
acts of violence, or neglected responsibility on behalf of actors within the mineral trade. For example, our assessment that due diligence mechanisms are not likely to solve the insecurity crisis is not
an endorsement of actors buying from the FDLR, an illegal activity we suggest should be pursued
through terrorist legislation. Nor is it an uncaring dismissal of the human rights abuses committed
by the Congolese armed forces and other military groups against the civilian population; such acts
should and must be addressed. Rather our analysis is a realistic assessment of the likely outcomes
of suggested economic interventions, and a recommendation for stakeholders to place significant
effort into establishing and reforming the security sector to solve issues of insecurity. As with all our
recommendations, these are focussed toward security, peace and development in the DRC.
1
Lee, Matthew, Clinton sees evil in sex crimes in eastern Congo, Associated Press, 11 Aug 2009
have leveraged their own mineral production and
portunities outside of the mining sector, and the need
trading sectors in various ways for development. This
to rebuild energy and road infrastructure in order to
regional assessment of the development impact, but
increase the efficiency and profitability of the trade.
more importantly the regional development potential
of a reformed trade leads us to believe that proc-
With these strategies in mind, we hope that this re-
esses of regional economic integration, which are
port further advances the debate around the min-
strengthening in East Africa, provide an increasingly
eral sector in Eastern DRC. We urge stakeholders to
important analytical perspective of the trade, than
take action to end the insecurity in the region and
the “loot thy neighbour” strategy that was seen to
to implement strategies to maximise the mining sec-
prevail during the past two Congolese wars.
tor’s impact on poverty reduction and development
through positive engagement.
These dynamics are important for the reform approaches suggested in this paper that seek to leverage the full development potential of the minerals
trade both domestically and regionally. Reform approaches include both suggestions of reform of the
mineral trading regime, but also approaches at the
macro level, such as the need to develop a development vision for Eastern DRC, to rehabilitate the agricultural sector so as to provide viable economic op-
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Recommendations
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The following are directional recommendations
lieve the contested monopoly of violence and result-
designed to focus policy makers and other stake-
ing insecurity in the Eastern DRC are principal causes
holders on the most pressing issues in Eastern
of violence, economic predation and torpor in Eastern
DRC. Further specific strategies are elaborated in
DRC. It is also the principal impediment to reform, pov-
our April 2009 report Trading Conflict for Develop-
erty reduction and development in Eastern DRC’s eco-
ment and will also feature in our forthcoming pub-
nomic, political or social spheres. Interventions should
lications, which will be available on our website
therefore be aligned and integrated with security sec-
www.resourceglobal.co.uk.
tor reform priorities, as far as possible. For example,
the incorporation of economic security into demobili-
1. Security Sector Reform:
sation and disarmament and reintegration (DDR) programmes is a crucial, although highly neglected, element of any successful strategy to bring about peace. Recommendation 1a: Build a Functioning National Army, Police and Judiciary
A top priority for the GoDRC, with assistance from
the international community, should be to build a
functioning national army based on a unified chain of
command, which is both operationally effective and
2. Improve Governance
Structures by establishing
accountability mechanisms
and training
accountable. While it is difficult to reform an army
that is in a conflict situation, stakeholders should
identify and act upon engagement opportunities. At
the very least there should be a unified framework
of foreign assistance to pursue one approach to doctrine, training and provisioning and the establishment
of an effective and accountable payment structure to
Recommendation 2a: Rebuild
administrative structures in Eastern
DRC by establishing accountability
mechanisms and a retraining
programme with incentive structures
to end harassment of economic actors
ensure soldiers are housed appropriately and receive
living wages to feed themselves and their families.
This is critical to progress governance reform. Administrative structures in Eastern DRC need to be rebuilt.
Recommendation 1b: Align and
integrate interventions in the mineral
trading sector with Security Sector
Reform Priorities
Current structures of governance are patchy and locally negotiated, undermining any possibility that the
larger population will benefit sustainably from any
economic activity. International efforts must support
the expansion of a state in the DRC that is capable
In the Consultative Group Meeting on the DRC in Paris
of making effective interventions that, in turn, en-
in 2007 bilateral and multilateral actors suggested,
courage the development of productive forces within
“security sector reform (SSR) across the three pillars
the country. This reform must include extensive re-
– army, police, and justice – is the key to sustainable
form of administrative structures including putting
development in DRC”.1 The government and partners
in place accountability mechanisms for malpractice
also stressed the importance of combating sexual vio-
and retraining administrators so that they under-
lence, violence against children, and impunity.2 We be-
stand better their purpose and are able to do their
jobs effectively. These reforms are essential in order
1
Consultative Group Meeting, Paris, 2007
2
Ibid
to address the prevalent culture of abuse of position
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
in the Congolese Administration whereby, for example, civil servants ritualistically misappropriate state
techniques in order to address food security and
earn export revenues at a significant level;
revenues. This also presents an opportunity to tackle
• Restructure and reorganise the coffee sector as
early problems of harassment of economic actors by
eastern DRC’s most significant agricultural export
the administration, which is a significant obstacle to
earner.
growth in peaceful parts of DRC, such as Katanga,
• To ensure the sustainability of these interventions
where the administration habitually abuses its power
it will be important to quickly draw on the experi-
to arbitrarily impose fines and other forms of sanc-
ences of the older generation as well as on posi-
tions on economic actors, if they don’t comply with
tive local experiences in order to define a DRC ag-
extra-legal requests.
ricultural policy at the national and the provincial
levels;
3. Strengthen the Economy
• Investing heavily in transport infrastructure to
make remote rural regions more accessible, reinvigorate local markets, lower prices and reduce
Recommendation 3a: Launch and
support programmes to increase the
productivity of labour and land in
agriculture
In pre-conflict times Eastern DRC’s economy (North
and South Kivu in particular) were based on agricultural production. Redeveloping agricultural productiv-
insecurity.
• Coordinate programmes in the artisanal mining
sector to promote agricultural activity as an alternative livelihood
Recommendation 3b: Improve
Access to Finance and Break Trading
Monopsonies
ity is essential for improving food security and lessening the population’s dependence on artisanal mineral
A principal reason the population derives only small
production (and poaching) for survival. This is also
benefits from economic activity in Eastern DRC is in-
in line with local people’s perception of mining as a
adequate access to finance and the monopolistic or
marginal activity compared with agriculture, is seen
oligopolistic structure of trading regimes. This often
as a higher status activity, at least in North and South
results in debt bondage of small producers. These
Kivu, which are not traditional mining areas. Some
trading monopsonies are often the sole providers of
concrete steps include:
finance for starting up any commercial activity; however, these arrangements seldom operate on equita-
• Reinvigorate small-scale agricultural production
ble terms. In order to increase the benefits people
by facilitating the return of displaced rural popu-
can derive from economic activities and release the
lations to their farms and villages, which in turn
entrepreneurial potential of the Congolese people,
depends on the right security conditions and in-
it is important to improve access to finance and to
vestment in infrastructure, particularly roads and
markets. The latter is directly related to more long-
water management, and agricultural extension
term interventions, such as the development of infra-
services;
structure, especially roads, that facilitates access to
• Create and/or restart arable and pastoral agricul-
resource-rich areas, the provision of microcredit and
tural producer organisations, including at cross-
savings alternatives for miners, and a sustained effort
border level, as a first step towards the recon-
along these lines by development agencies. In order
struction of commercial agriculture, which can
to improve access to finance in the short-run, the fol-
make use of modernised agricultural entrants and
lowing steps could be undertaken:
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A remote mining site in Walikale © Mark Craemer 2009
• Use mobile phone banking to increase access to
saving and transactional services;
• Provide incentives to encourage the proliferation
and proper regulation of microfinance organisations and producer cooperatives;
• Support the long-term development of a formal
banking and finance sector, as well as necessary
Recommendation 3c: Promote
Investment in the reconstruction
of energy infrastructure through
multiple mechanisms including barter
agreements, cross border investment
schemes and state incentives for
pooled private investment
financial architecture.
• Regional institutions such as COMESA’s PTA (Pref-
Insufficient, costly and unreliable energy prevents
erential Trade Agreement) Bank might consider
the existence of value added production processes,
guaranteeing funds for a cross-border bank to be
which retards domestic resource mobilisation proc-
set up, facilitating cross-border trade. Regional
esses and adversely affects the state’s revenue base.
banks also have a role to play in financing Micro-
It also encourages dependence on charcoal, with
Finance Initiatives (MFIs) and local businesses.
its associated devastation to forest ecosystems. It
• The possibility of re-opening the CEPGL “Banque
is therefore imperative to reconstruct energy infra-
pour le Developpement Economique des Grands
structure in Eastern DRC. The following are priority
Lacs” (BDGL) should be seriously considered.
steps:
• The legal framework for regional commercial
banking requires further study.
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Reconfiguring approaches to the regional trade in minerals from Eastern DRC
• Improve security in Eastern DRC
• Seek investment agreements over energy production from methane exploitation on Lake Kivu
replicating Rwanda’s efforts
• Given the DRC’s limited financial means to pay for
significant energy infrastructure in the short-run,
Recommendation 3d: Promote
Investment in the reconstruction
of road infrastructure and prioritise
the reconstruction of roads that are
important to trade, particularly in
agricultural commodities
it should explore barter agreements with investors, who have the financial means to install this
Dilapidated transport infrastructure is a key con-
infrastructure
straint to development in Eastern DRC. It prevents
• In the short-run seek preferential energy import
cost- and time-efficient transport; it facilitates mili-
agreements between Rwanda and the DRC for
tary taxation of trade, and prevents the development
energy to be generated from Lake Kivu gas on the
and opening up of rural markets, making monopson-
Rwandan side
istic control more possible. This works particularly to
• Install and maintain cross border power lines
the detriment of small producers and rural people,
• Maximise cross-border cooperation in the man-
who depend on trading for their survival. The follow-
agement and exploitation of joint energy reserves
ing are priority steps:
and the planning of energy investments
◦◦ Work through regional bodies and REC’s
• Address the issue of insecurity in the Kivus
◦◦ Accelerate joint exploitation of Lake Kivu
• Draw on grassroots data generated by Trading for
methane gas and Lake Albert oil
• Install and maintain cross border power lines
Peace research to prioritise infrastructure development, i.e. focus on primary roads/routes of im-
• Orienting energy development towards local de-
portance to trade first (see infrastructure section).
mand and local supply possibilities in order to ef-
• Part-finance the building and securitisation of
efficient air transport links to the non-rebel held
fectively address the energy deficit
◦◦ Update and operationalise existing ideas
areas of Maniema and Northern Katanga through
for the optimal use of local energy produc-
PPAs. This starts with building safe airstrips in the
tion sites in order to attract investment
five main mining locations and ensuring that air
◦◦ Look at the Rwanda Investment Group’s
transport can run profitably and safely. Expand
money pooling model for investments
this approach as spaces of security expand also
option and try to replicate the model
in other geographical areas.
amongst the Goma based Congolese
• Develop infrastructure with a view to achieving
elite with a view to getting strategic in-
maximum benefit for the agricultural sector so as
vestments underway on the Congolese
to aid medium term economic diversification.
side. Policy makers should support this
• In line with EAC recommendations, the SADC Sec-
process by convening a meeting to dis-
retariat should draw up a regional infrastructure
cuss the options.
development master plan in cooperation with
member states that will provide regional entry
points for donor support.
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4. Reform Trading Regimes,
including the Mineral Trade
improving access to finance, infrastructure development and agricultural redevelopment.
• Commit to longer-term reform of governance
As detailed in this report and elsewhere, military
structures, particularly a rebuilding and reform of
groups continue to benefit from various rent-seeking
the administration.
mechanisms imposed upon all trading activity in East-
• Support long-term professionalisation and for-
ern DRC, including the trade in dairy products, char-
malisation of the artisanal mining sector, and con-
coal and minerals. We suggest here that economic in-
sider the role traditional authorities can play in
terventions outside the framework of security sector
such a process.
reform programmes, such as mineral trade control
mechanisms, are likely to have limited impact on the
• Fully support the EITI in the mining sector, including the ASM sector.
security situation where military groups are able to
easily diversify their revenue sources. It is therefore
Other Policy makers:
important to develop an approach to trade reform
• Support the Congolese government in developing
that is integrated into SSR reform, to allow for reform
an integrated strategy for the sustainable devel-
to be sustainable and effective.
opment of Eastern DRC, incorporating environmental security priorities.
• Support the consolidation of the national army,
Recommendation 4a: Establish
economic interventions that stimulate
sustainable development
the police and the judiciary in Eastern DRC
• Support the promotion of entrepreneurialism and
economic diversification in Eastern DRC, including
improving access to finance, infrastructure devel-
Interventions within the economic domain are a nec-
opment and agricultural redevelopment.
essary step towards reforming Eastern DRC’s trading
• Support governance reform, particularly with a
sectors. In line with the above recommendations on
view to training and capacitating the administra-
security sector reform, interventions in the economic
tion in Eastern DRC at all levels, so as to improve
domain will not solve issues of insecurity in and of
the investment climate and generate regulatory
themselves. However, such interventions could ex-
and oversight capacity.
pand the constituency for peace if it can be demon-
• Ensure that policies are implemented which have
strated that commercial success does not rest upon
a realistic chance of success given the severe im-
contesting or controlling the monopoly of violence.
plementation constraints on the ground (logistical, governance and security sector issues).
The following recommendations are geared towards
• Support long-term professionalisation and formal-
the mineral trade as an example of how economic in-
isation of the artisanal mining sector, including ef-
terventions might nurture longer-term development
forts to educate miners on responsible practices
in any of the myriad trading activities that constitute
the fabric of Eastern DRC’s economy.
and to create an enabling environment.
• Advance the EITI in the ASM sector.
• Publish disaggregated statistics on imports of
GoDRC
minerals from the Great Lakes region into their
• Develop a development strategy for Eastern DRC.
territories. Such data should be made available to
• Commit to reforming the FARDC.
the relevant local governments and the general
• Commit to promoting entrepreneurialism and
public.
economic diversification in Eastern DRC, including
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Reconfiguring approaches to the regional trade in minerals from Eastern DRC
All other stakeholders:
• Due diligence requirements should be imple-
• Press home country governments to support the
mented by companies operating in and buying
consolidation of the security sector in Eastern DRC.
from the Eastern DRC, as part of the formalization
• Press home country governments to support governance reform in Eastern DRC.
and professionalisation of the sector.
• Press the GoDRC to support security sector re-
• Press home country governments to support the
form, particularly a reform of the FARDC.
promotion of entrepreneurialism and economic
• Global purchasing and trading companies should
diversification in Eastern DRC, including improv-
ensure that minerals purchased from DRC’s
ing access to finance, state mobilisation of private
neighbours have been properly taxed in their
investment, infrastructure development and agricultural development.
country of origin.
• The companies should publish their payments to
• Interventions must be designed with due proc-
all governments in line with the EITI.
ess to consultation with all stakeholders. This will
• Collaborate with end-users working on supply
help ensure that the measures are appropriately
chain transparency, in line with the ongoing initia-
designed, locally owned and sustainable.
tive by GeSI and the EICC in the electronics sector.
• Develop collaborative appropriate responses in
Pressure Groups
consultation with all stakeholders.
• Contribute to conflict resolution by engaging with
the causes of conflict, instead of placing all em-
Trading Houses (Comptoirs):
phasis on conflict symptoms (such as the militari-
• Stop trading with the FDLR and other rebel groups,
sation of trade), which would include developing
as well as the FARDC and continue to press the
campaigns around citizenship issues and access
GoDRC to support security sector reform, particu-
to land.
larly a reform of the FARDC.
• Support sustained engagement with, and reform
of the artisanal mining sector.
• Ensure that minerals exported from DRC have
been properly taxed.
• Engage and partner with industry for sustainable
reform and continue scrutinising industry actors
to expose malpractice and abuses.
• Publish payments to all governments in line with
the EITI.
• Develop appropriate responses in collaboration
• Make control mechanism suggestions that are
with all stakeholders.
implementable, first and foremost, rather than
Development NGOs and Agencies:
utopian.
• Contribute to the development of an integrated
End Users:
strategy for the sustainable development of Eastern
• Continue to work on supply chain transparency,
DRC, incorporating environmental security priorities.
in line with the ongoing initiative by GeSI and the
• Contribute resources and expertise to security
EICC in the electronics sector.
sector reform in Eastern DRC.
• Develop an industry wide approach to contributing to trade reform in Eastern DRC.
• Support long-term engagement with the artisanal mining sector and invest in artisanal mining communities; they need sanitation, water, and
Processing Industry:
schools too and have particular needs in relation
• Stop trading with the FDLR and other rebel groups,
as well as the FARDC.
to health, child labour, gender-based and ethnicbased discrimination, as well as economic and
environmental programmes too.
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• Support long-term professionalization and formal-
difficulties ineffectively implementing trade policies.
isation of the artisanal mining sector, including ef-
While this discussion is most relevant to the DRC,
forts to educate miners on responsible practices
there remains considerable scope for improvement
and to create an enabling environment.
of the export regimes across the Great Lakes region.
• Ensure all other stakeholders are taking an inte-
Concrete steps are:
grated approach to tackling the security and development challenges in Eastern DRC, including
balancing social, economic, political and environmental priorities.
• Apply Customs Procedures that are Simple, Predictable and Transparent.
• Harmonise the customs and tax regime with that
• Publish opinion and feedback on the likely devel-
of the East African Community (EAC), which could
opment impacts of the actions of the other stake-
be done within the COMESA-EAC-SADC tripartite
holders to ensure all interventions are planned
arrangement, and implement decisions already
optimally for achieving the higher goals of devel-
taken on the reduction of authorised border serv-
opment and security.
ices
• Consider Partnerships with Other States and
5. Increase state revenue to
expand the financial base for
the state to function
Services.
• Establish a one-stop customs shop to ease export
and import formalities.
• In the run-up to the establishment of a one stop customs shop the countries of the Great Lakes region
should consider joint customs posts, which could:
Recommendation 5a: Simplify and
standardise cross-border trade
regulations, to reduce or eliminate
delays, increase predictability of
costs to traders and increase revenue
collection by state authorities
◦◦ Significantly reduce the waiting time at
borders,
◦◦ Reduce smuggling opportunities,
◦◦ Allow for peer review of procedures and
figures at the same time as decreasing
capacity building costs (improving conditions of service, sensitisation, supervi-
As discussed in our chapter on the fiscal linkage, the
sion and training of customs personnel).
operational difficulties of the DRC’s export regime
◦◦ States should consider public-private
are first and foremost the responsibility of the Go-
partnerships with international contrac-
DRC. Inefficient and confusing border procedures
tors for state services. One reason why
incur significant costs for exporters and the GoDRC,
undervaluation and misdeclaration oc-
while also providing opportunities for rent-seeking
curs is because state services collude
and incentives for smuggling. For businesses, border-
in it. In the short-term the various state
related costs are both direct, such as expenses re-
services could be partnered with inter-
lated to supplying information to the relevant border
national contractors, who can help build
authority, and indirect, such as those arising from
local capacity, as has happened in Ka-
procedural delays, lost business opportunities and
tanga province.
lack of predictability in the content or enforcement
◦◦ The personnel of the state services
of regulations. For regional governments, the cost of
should receive adequate training and
inefficiency includes incomplete revenue collection
wages to reduce their incentive to take
due to smuggling and under-declaration, as well as
advantage of rent-seeking opportunities,
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
bearing in mind that as a result of the ex-
• RECs should agree to hold a rotating annual, region-
tended family support structure a mere
al mineral trade forum that includes stakeholders
increase in wages alone is unlikely to root
from Burundi, DRC, Rwanda, Uganda and Tanzania.
out petty corruption. Community sensiti-
This would be an opportunity for dialogue amongst
sation may also be required.
the regional ministries of natural resources and all
other state bodies that have a stake in the mineral
trade, i.e. customs, ministry of industry etc. Part of
6. Regional Economic
Integration
this dialogue would involve sharing lessons learned
from domestic trade formalization experiences.
• Policy makers and RECs should encourage domes-
Recommendation 6a: Frame Reforms in
the Context of Regional Integration and
Development
tic mineral sector development implementation, but
should at the same time also coordinate the alignment of domestic resource mobilisation strategies
between neighbouring countries to allow for symbi-
All trades from Eastern DRC have significant regional
otic growth. This ambitious task should be underlain
development implications and trade reform should
by an understanding of the sector development pri-
be framed in the context of ongoing initiatives in
orities of each country. RECs should act as a bridge
regional integration. This is most likely to work only
builder between their member countries to maxim-
if each government works its own private sector
ise mutual economic benefit between them.
groups. It is in the domestic domain where govern-
• Donors should seek the revival of the CEPGL as
ments can incentivize members of the shadow econ-
a host forum for future mineral trade discussion
omy to become formal. Rwanda is doing just this,
rounds of concern to Burundi, DRC, and Rwanda,
for example, through its Mining Sector Development
with a view to establishing an intermediary platform
Strategy, which was developed thorough private sec-
for discussions, prior to the full integration of COME-
tor consultation and could serve as an example for
SA, the EAC, and SADC. Issues of particular concern
neighbouring countries. Concrete steps are:
are infrastructure, energy and export practices.
• The GoDRC should develop a coherent position
towards regional economic integration.
• The GoDRC should proactively engage with vibrant processes of regional economic integration
in East Africa and reconsider its prioritisation of
Central African regional economic integration,
given the miniscule economic benefit central
economic integration will bring, compared to east
oriented regional economic integration.
7. Dialogue to kick-start the
reform process
Recommendation 7a: Convene an
Independently Facilitated Forum
and Dialogue to establish a basis for
economic and trade reform, including
the minerals trade
• Regional economic commissions (RECs), such
as the EAC, COMESA, and SADC, should develop
In order to progress a reform agenda, a good start-
a common stance toward the trade in minerals
ing point for a reform process would be to convene
from Eastern DRCDRC and seek common oppor-
an independently facilitated forum and dialogue. This
tunities to help support and reform the trade be-
idea of a minerals-specific stakeholder forum builds
fore they eventually form a single REC.
on the Trading for Peace forums that have so far encompassed a number of sectors and have produced
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tangible results, such as cooperation between coun-
The independent facilitator should contact each
tries at border posts and cross-border dialogue on
stakeholder group and request a brief. This collection
issues of trade both on the local, as well as on the
of viewpoints will be a solid foundation from which
national levels.
to facilitate the dialogue and convene the dialogue
based on the following principles:
Suggested participants are:
• The Governments of Burundi, DRC, Rwanda, Tan-
• Getting the right questions on the agenda
◦◦ The independent facilitator and support-
zania and Uganda
• The private sector – including the Federation of
ing body should play a key role in ensur-
Congolese Businesses (FEC), traders associations,
ing that the most important questions
négociants, and mid level international customers
are aired and discussed.
such as smelters and electronics manufacturers.
• Form decisions on a consensus basis
◦◦ The independent facilitator and supporting
• Prominent comptoirs and négociants regardless
of their political affiliation
body should ensure that decision-making
• The United Nations, including MONUC
processes are accepted as legitimate by
• Constructive experts (e.g. on security reform, de-
all stakeholders. It is suggested that deci-
velopment, artisanal mining)
sions be made on a consensus basis.
• Constructive pressure groups
• Identify and engage with spoilers
◦◦ The independent facilitator and support-
• Bi-lateral and multi-lateral donors and policy-makers
• International trading and governance bodies
ing body should identify both spoilers (and
• Existing mineral concession holders
develop strategies to either co-opt, trans-
• Prospective mineral concessions holders (e.g. mining
form, or punish them) and the principal
companies interested in operating in Eastern DRC)
beneficiaries (and consider whether these
• Representatives of regional integration bodies,
are groups one wishes to engage with).
e.g. COMESA, the ECA, SADC, and the ICGLR
• Constructive development NGOs and agencies
The forum should appoint a committee comprising
stakeholder representatives to oversee the imple-
An independent African country or a regional trad-
mentation of the recommendations made in the dia-
ing bloc should be selected to house the dialogue as
logue. The committee should be properly resourced
not all stakeholder groups may be comfortable par-
to enable it to take the actions decided upon by the
ticipating in the forum if it is held in any of the stake-
dialogue and to hold stakeholders accountable over
holder countries. South Africa has experience hosting
their willing participation in the implementation
peace talks. COMESA has experience and the nec-
phase.
essary infrastructure to host such a forum, given its
co-organisation of previous Trading for Peace forums.
Donors should mobilise funds in advance of the
meeting, if possible, to allow the committee to move
The UN Secretary General, as the representative of
swiftly in implementing the recommendations. The
the international community, should appoint an in-
forum should initiate a widespread public awareness
dependent emeritus facilitator, to facilitate the dia-
campaign on the actions chosen, and the benefits for
logue. The facilitator should be a well-respected Af-
local actors, and ensure that information is available
rican with a formidable track record, and should be
and accessible to all relevant stakeholders.
supported by an appropriate independent body not
engaged in advocacy or trading activities.
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Beyond Conflict
Reconfiguring approaches to the regional
trade in minerals from Eastern DRC
1.Introduction
ASM
Communities and
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
Workers in the mines use rudimentary tools. Long-term engagement with the artisanal mining sector can help improve the professionalism and livelihoods of miners. © Mark Craemer 2009
In April 2009 we published Trading Conflict for De-
The slow progress of a joint MONUC and FARDC oper-
velopment, which provided an in-depth analysis of
ation against the FDLR in the second quarter of 2009
the link between the mineral trade (tin, tungsten and
and continuing human rights abuses have increased
tantalum) and conflict and development dynamics
the urgency with which the international commu-
in Eastern DRC. The paper emphasised that security
nity is seeking means to end the conflict in Eastern
sector and governance reform, coupled with mineral
DRC. Most significant is suggested legislation by the
trade formalisation, are an essential first step for the
US Senate to place a due diligence requirement on
international community, local and regional stake-
electronics companies that source tin and other met-
holders to put an end to the conflict and to increase
als from Eastern DRC. This proposition has in turn,
development benefits from the trade, which sustains
prompted suggestions from the UN, pressure groups
the livelihoods of one million persons regionally. In
and industry groups as to what such a scheme might
contrast to popular discourse on the mineral trade,
look like. This follow-up paper takes a holistic view
the report suggested that interventions in the eco-
of the regional trade in minerals from Eastern DRC
nomic domain in the form of a ban on minerals or
and constructively critiques the various engagement
a disruption of the trade in minerals are unlikely to
strategies that pressure groups, the UN and other
solve the issue of insecurity in Eastern DRC. In fact,
stakeholders have recently proposed. It also makes
depending on how such measures would be imple-
its own suggestions for trade reform and urges policy
mented, they could worsen the situation.
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Communities and
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makers to set the correct priorities when engaging
as the trade’s fiscal linkage and employment func-
with the mineral sector.
tion, which it currently provides and which can be
expanded with the right strategies.
We believe that the primary reason why there is insecurity in Eastern Congo is because the Congolese
Secondly, we expand on our regional perspective of
state is unable to control the monopoly of violence
the trade and introduce how successfully the DRC’s
and protect its citizens. This has translated into the
neighbours, Rwanda, Uganda, Burundi and Tanzania,
presence of a number of armed groups who act with
have leveraged their own mineral production and
impunity, high levels of violence, including sexual vio-
trading sectors in various ways for development. This
lence, and the militarisation of the economy, includ-
regional assessment of the development impact, but
ing the mineral trade. In this context, military control
more importantly the regional development potential
of the trade in minerals is another symptom of gen-
of a reformed trade leads us to believe that proc-
eral insecurity in Eastern DRC, rather than the prin-
esses of regional economic integration, which are
cipal cause of insecurity or sexual violence as some
strengthening in East Africa, provide an increasingly
mistakenly stipulate. The non-militarised trade in
important analytical perspective of the trade, than
minerals in the Kasais, southern Katanga, Bandundu
the “loot thy neighbour” strategy that was seen to
and large swaths of Maniema, Ituri and Equateur un-
prevail during the past two Congolese wars.
derlines this argument.
These dynamics are important for the reform apThis is not to suggest that a link between the min-
proaches suggested in this paper that seek to lev-
erals trade and conflict dynamics do not exist, but
erage the full development potential of the minerals
rather to emphasise that intervening in the trade in
trade both domestically and regionally. Reform ap-
minerals is not enough to solve the insecurity crisis.
proaches include both suggestions of reform of the
Instead, policy makers should focus on consolidating
mineral trading regime, but also approaches at the
the security sector in order to impact positively on
macro level, such as the need to develop a develop-
conflict dynamics, while at the same time support
ment vision for Eastern DRC, to rehabilitate the agri-
governance reform, which is essential to both guar-
cultural sector so as to provide viable economic op-
antee the sustainability of these positive impacts and
portunities outside of the mining sector, and the need
to provide a platform on which to build a successful
to rebuild energy and road infrastructure in order to
development process.
increase the efficiency and profitability of the trade.
We explain our argument by first providing an over-
With these strategies in mind, we hope that this re-
view and analysis of the regional trade in minerals
port further advances the debate around the min-
from Eastern DRC, including a baseline assessment
eral sector in Eastern DRC. We urge stakeholders to
of its links to conflict and development dynamics.
take action to end the insecurity in the region and
This assessment explains the on the ground reali-
to implement strategies to maximise the mining sec-
ties, which are at the very heart of our scepticism
tor’s impact on poverty reduction and development
towards the potential success of interventions in the
through positive engagement.
economic domain. For example, it is simply not possible to disconnect the FDLR from its revenue from
the gold trade through an economic strategy. The assessment of the trade also provides an overview of
the important poverty reduction contribution, such
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2. Situation analysis
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An in-depth political economy analysis of the con-
to land and water between rural populations. It is
flict in the Kivus is beyond the scope of this report.
3
precisely because conflict revolves around other
We would like to draw interested readers’ attention
things that the minerals trade can serve as a sub-
to a recent policy document by Dominic Johnson of
stitute source of revenue for parties who have
the Pole Institute in Goma, which mirrors our under-
lost their other, really important livelihoods. His-
standing of the causes of conflict in Eastern DRC. It is
torically, there was seldom fighting around con-
very much written from a local perspective and chal-
trol of the cassiterite mines of Walikale, the gold
lenges the current popular discourse equating miner-
mines of Lubero, the coltan mines of Masisi or the
al exploitation as the primary cause of, and sustaining
pyrochlore mine of Lueshe in Rutshuru (please
the ongoing conflict. The popular discourse - princi-
also refer to box 2 below). In South Kivu, large-
pally driven by Western pressure groups and popular
scale artisanal gold mining began as a means for
media - risks turning policy makers’ attention away
displaced populations in remote areas to survive.6
from developing appropriate engagement strategies,
With these two important perspectives in mind, the
including effective steps towards peace:4
following sections briefly outline political economy
• Historically the economy in the Kivu provinces
was based on agriculture and long-distance trade,
issues of direct relevance to the trade in minerals in
Eastern DRC.
not mineral exploitation. The mining sector gained
prominence as an economic activity when agriculture was destroyed by conflict and mineral ex-
Insecurity in Eastern DRC
ploitation became the easiest source of revenue
for the population. Mining areas are not seen as
Severe and chronic insecurity is preventing the devel-
“special” by the Kivu population and jobs in min-
opment of Eastern DRC. Insecurity is an obstacle to
ing are not seen as something to aspire to in the
building institutions, reforming political and govern-
way they are in provinces where there was a co-
ance structures, and achieving social and economic
lonial mining economy such as Katanga, Kasai,
improvements and affects all aspects of life for the
Maniema or Ituri. Rather mining always was and
people of this region. The mineral sector, which gen-
remains a socially marginal activity in the Kivus.
erates the necessary foreign exchange to sustain
• The economic dimension of conflict in Kivu (which
Eastern DRC’s import dependent economy, is also af-
began in 1993) is far more about rights of access
fected, preyed upon and used by military groups to
to land and control of trade routes, than it is about
help fund their activities and line private pockets.
5
minerals. The history of conflict in Kivu shows that
the existence of a trade in minerals is not a fac-
Denying military groups access to mineral resources,
tor favoring either conflict or its absence. Conflict
which some pressure groups and the UN Group of
is linked to nationality and ethnicity and to po-
Experts are advocating as a conflict resolution mech-
litical and administrative power. In the economic
anism, does not necessarily equate to an increase in
domain this has to do with competition around
security. Stakeholders should take care in suggest-
control of trade routes and trade revenues be-
ing interventions that may well increase insecurity
tween elites and with competition around access
by encouraging the various groups to increase taxation and extortion of the local population and seek
3
For an excellent summary of the political economy of the conflict in Eastern
DRC, please refer to Vlassenroot, K. and Raeyemakers, T. (2009), Eastern Congo’s Intractable Security Conundrum,…
4
Johnson. D. (2009), Discussion paper on Eastern DRC, Pole Institute
5
Johnson. D. (2009), Discussion paper on Eastern DRC, Pole Institute
other ways to diversify their income sources. This is
not an argument to allow military groups unfettered
6
Johnson. D. (2009), Discussion paper on Eastern DRC, Pole Institute
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
access to resources, but rather to reiterate that the
Kigali, to such a degree that the two countries have
principal means of resolving the crisis of insecurity in
subsequently agreed to restore full diplomatic ties. In
DRC is reform and investment into the security sec-
addition, the operation did much to restore the cred-
tor. The reform of the mineral sector, while urgent,
ibility of MONUC, the reputation of which had been
is a separate development problem, which involves
badly damaged by the CNDP’s advance across North
governance reform and technical interventions, as
Kivu in late 2008.8
recommended above, to ensure the sustainability of
The hope for lasting peace expressed by the GoDRC
reform efforts.
and the GoR in the context of this operation has not
immediately materialized, as the operation was not
Political Economy
allowed to achieve sustainable results given its unrealistically short time frame. The FDLR, which is a major
There remains considerable activity by all the different
security threat for both the DRC and for Rwanda, re-
military groups in Eastern DRC, many of whom are com-
mains present in South Kivu and has reclaimed some
mitting human rights abuses on a regular basis. A joint
of its positions in North Kivu following the withdrawal
Congolese-Rwandan military operation that began on
of the RDF in February. Analyst assessments revealed
January 20th 2009 (known as Umoja Wetu) took many
that far from breaking down during the fighting, the
international observers by surprise. This, and the arrest
FDLR’s command and control structure in fact func-
of General Laurent Nkunda, the military leader of the
tioned perfectly adequately throughout the fighting,
CNDP, has led to a reconfiguration of the political econ-
with battlefield movements being directly controlled
omy of North Kivu.7By mid-February, the operation had
by the organization’s leader, Ignace Murwanashya-
forced out the FDLR from several of its key positions, es-
ka, from his base in Germany (via satellite phone).9
pecially around the town of Masisi, and the strategically
More significantly, these same assessments further
important gold mines of Lubero (both in North Kivu). In
revealed that the FDLR’s withdrawal from Masisi and
addition, it had resulted in the deaths of at least 100
Lubero during the operation had been far from dis-
FDLR fighters, and the surrender - and repatriation to
organized, and thus probably represented a ‘tactical
Rwanda - of 390 more (out of a total FDLR force of about
withdrawal’. As a result, it has become clear that far
4,500). It also led to the recovery of significant stocks of
from being close to final defeat, the FDLR remain a
FDLR weaponry.
significant military threat.10
By late-February, the FARDC, RDF, and MONUC sourc-
In response to Umoja Wetu, the FDLR carried out
es were claiming that the operation had resulted in
retaliatory action against the civilian population
a significant disruption of the FDLR’s command and
and committed a number of serious human rights
control structures, and had paved the way for a fi-
abuses and war crimes.11Since March 2009 MONUC
nal defeat of the group. Moreover, by the time of its
has been supporting FARDC operations against the
official conclusion (on March 3), Umoja Wetu had
FDLR (known as Kimia II), with the objective of stifling
achieved much away from the battlefield. In particu-
FDLR counterattacks and eventually dismantling the
lar - and not least because the operation did end on
time, with a complete withdrawal of RDF troops from
Congolese territory - the operation also resulted in a
general thawing of relations between Kinshasa and
7
The RDF officially withdrew again from Eastern DRC – as previously agreed - on
or about 25 February 2009.
8
http://www.reliefweb.int/rw/rwb.nsf/db900SID/VDUX-7U8JPB?OpenDocument,
accessed 12/8/2009
9
Ibid.
10
Ibid.
11
United Nations (2009). ‘Interim report of the Group of Experts on the Democratic Republic of the Congo’. United Nations Security Councili. S/2009/253.
Available
at
http://www.reliefweb.int/rw/rwb.nsf/db900SID/EGUA7S9RVT?OpenDocument
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rebel group. Without the backing of the military and
May 2009:
organizational skill of the RDF, the Kimia II has only
CNDP
progressed slowly and the operation is facing internal difficulties, such as with the integration of former
CNDP soldiers relating to emerging parallel commend
structures and delay in the disbursement of FARDC
salaries. The latter has eroded discipline within the
newly integrated FARDC units, generating FARDC
lootings and attacks on the civilian population. The
integration of the CNDP into the FARDC, agreed fol-
• Weapons seizures from the FARDC and other
sources (§34)
• Taxation of transport routes and economic activity (§23 and 36)
• Part-control over the Bisie cassiterite mine as part
of the FARDC’s 1st integrated brigade (§39)
• Control over the Bunagana border post until January 2009 (§46)
lowing the arrest of General Laurent Nkunda, is at risk
of breakdown over the payment of soldiers.12General
December 2008:
FARDC capacity constraints and operational difficul-
CNDP
ties imply that Kimia II will not achieve its principal
• Seizure of FARDC weapons stocks (§ 25 and following)
objective of re-establishing security unless security
• A “pool” system of financing, a sophisticated fi-
sector reform is progressed significantly, which will
nancial network of Congolese and Rwandans in
allow these issues to be addressed.
the diaspora (§ 30)
• Cash and kind donations by the business community in Goma (§ 31)
Conflict Financing
• Blackmail of the business community in Goma (§ 31)
• Taxation of the food and charcoal trade, as well as
The April 2009 report Trading Conflict for Development
road toll (§ 33)
revealed that military groups in Eastern DRC benefit
• Protection money from wealthy farmers (§ 34)
from highly diverse revenue sources, including miner-
• Cattle (§ 34)
als, and that the FDLR benefits from strong economic
• Control of the import and export processes at the
and political support from the diaspora in OECD countries, such as FDLR leader Ignace Murwanashyaka,
based in Germany. The FDLR is listed as a terrorist
group by the US State Department.13 The December
Bunagana border post (§35 to 47)
• Remittance flows and individual financiers (§48
and following)
• Local mineral transport taxation (§57 and following)
2008 and the May 2009 report by the UN Group of Experts on the Illegal Exploitation of Natural Resources
May 2009:
and Other Forms of Wealth in the DR Congo suggests
14
that military groups benefit from the following sources
of income:
FDLR
• Control over cassiterite and gold mining sites
(§54, 64, and 105)
• Attacks on civilians (§ 54)
• An extensive international support network allegedly involved in fund-raising activities and organ-
12
http://www.reuters.com/article/congo/idUSLI291088
13
Garrett, N. and Mitchell, H. (2009), Trading Conflict for Development, DFID, LSE,
CRG: p22
14
We have chosen the UN Group of Experts’ data on this occasion, as their work
is generally accepted by both the public and the private sector, as well as civil
society as providing valuable insights into the on the ground dynamics. We
recognise the limits imposed on the UN Group of Experts’ work by its limited
mandate and its resource constraints. It is in all likelihood that conflict financing
patterns extend beyond the list of noted occurrences in the list below.
izing international money transfers (§ 60)
• Collaboration with the FARDC (§ 62)
• Support networks in Burundi (§ 63)
• Charcoal production in the VIrunga National Park
and charcoal tax (§ 65)
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
December 2008:
BOX 2: Insecurity as a problem for
FDLR:
• Trade in mineral resources - cassiterite, gold, col-
the trade in minerals
tan and wolframite areas under their control in
North and South Kivu (§72 and following)
A recent attack on a mining commu-
• Taxation of the charcoal trade (§113)
nity near the Bisie Cassiterite mine in
• Involvement in the drugs and timber trade (§113)
Eastern DRC, which killed 16 people
and wounded 451, prompted a press
May 2009:
release from Global Witness, a leading
pressure group on the issue of miner-
FARDC
als in the Eastern DRC. The press re-
15
• (Non-payment of salary related) lootings and robberies (§19 and 30)
lease stated that the attack “is a stark
reminder of how the fight to control
• Minerals and part-control over the Bisie cassi-
Congo’s mineral wealth is a key driver
terite through the FARDC’s 1 integrated brigade
of violent conflict in the country,” and
(§24, 39)
that “The killings at Mpama show how
st
• Control over the Bunagana border post (§48)
Congo’s mineral wealth provides an
• Robbery (§30)
incentive for violence, and how the
• Collaboration with the FDLR (§62)
mines in the east are a focal point for
• International arms shipments (§69)
armed groups’ activities.” 2
December 2008:
We find this analysis lacking consideration of the important fact that the
FARDC16:
“perpetrators looted belongings and
• Joint control over mineral deposits with PARECO
and FDLR (§81 and 135)
money” and then fled, rather than establishing a presence, which would
• Taxation of transport hubs (§86)
constitute ‘control’ over the area.
• Taxation of rural markets (§94)
While a comprehensive analysis of the
• Domestic sale of military equipment (§105 and
attack is forthcoming pending details,
following)
the information thus far would sug-
• International sale of military equipment (§146)
gest that the attack once again highlights how general insecurity in the
This diversity of revenue sources of the military
region presents a challenge for eco-
groups supports the argument that armed groups will
nomic activity, including the mineral
take advantage of whatever source they can control,
production and trade. This is why the
mineral, agricultural, financial or otherwise. Although,
focus on consolidating the security
of these, the mineral trade provides the greatest
sector is presented as the most pressing issue in this report.
15
16
The FARDC falls outside of the investigative mandate of the UN Group of Experts, we have listed incidents where they have nevertheless been mentioned
in the UN reports
1
AFP, 16 killed in attack on DR Congo mine, 13 August 2009
2
Global Witness, Bisie killings show minerals at heart of
Congo conflict, 18 August 2009
The FARDC falls outside of the investigative mandate of the UN Group of Experts, we have listed incidents where they have nevertheless been mentioned
in the UN reports
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ASM
Communities and
Small-Scale Mining
Extortion by military groups is widespread. Security Sector Reform should be the top priority to ensure that economic actors can benefit from
their work. © Mark Craemer 2009
source of income (see below). Insecurity slows down
community and the GoDRC will be logistically unable
the potential of economic activity to contribute to de-
to stop or disrupt this principal income source of the
velopment, particularly in the minerals sector, which
FDLR, unless they disband the FDLR.
is the most significant in the region.
The FARDC also remains a serious source of insecuBoth the FARDC (operating in parts of Ituri, North Kivu,
rity in the Eastern DRC. Some FARDC brigades have
South Kivu, Northern Katanga and Maniema) and the
established coercive governance structures around
FDLR (predominantly South Kivu, and selected parts
certain mining areas with the intentional provision
of North Kivu) are embedded in highly mineralized ar-
of security and institutionalization of a regulatory
eas where they employ similar patterns of extortion
system and tax system.18 Generally speaking, in the
to benefit from mineral production and trade. The
majority of mines in the Eastern DRC, workers and
FDLR runs exploitative security governance struc-
intermediate traders continue to be obliged to pay
tures around some mines, including in rare instances
‘taxes’ on their production/trade volume.19 These tax-
forced labor coerced through violence. The FDLR and
es are typically placed at levels high enough to gener-
other dispersed military groups pose a formidable
ate significant revenue for the armed groups, but low
challenge as they benefit from scattered resources,
as opposed to point resources. The FDLR’s principal
revenue source is the taxation of gold mining and
trade in South Kivu and North Kivu. The international
Republic of the Congo’. United Nations Security Council. S/2008/773. Available
at http://www.un.org/Docs/journal/asp/ws.asp?m=s/2008/773
17
17
United Nations (2008). ’Final report of the Group of Experts on the Democratic
18
Compare Garrett, N. Sergiou, S. and Vlassenroot, K. (2009), Negotiated Peace
for Extortion, Journal of Eastern African Studies, 3: 1— 21
19
In some mines the miners are both miners and combatants.
Resource Consulting Services
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
BOX 3: Human Rights in Eastern DRC’s mining sector: The Right to a Livelihood
A grassroots perspective of economic activities and insecurity in Eastern DRC provides an important counterweight to the popular discourse driven by pressure groups, which are currently
focusing their advocacy on the minerals trade in Eastern DRC and its links with conflict dynamics.
Advocates’ focus on how minerals allow armed groups to derive their income disregards an important livelihoods element and is based on a misunderstanding of poverty dynamics on the ground.
The portrayal of the miners purely as victims who are forced to mine against their will disregards
the fact that many, if not most of the Congolese who operate in the sector are actively trying to
access the economic activities and trading networks. They choose this as the most viable activity
for surviving in this difficult economic environment, and because other economic activities such as
agriculture have been rendered unviable by the conflict.1 While forced labor does exist, an exclusive
focus on this aspect ignores the more common scenario of people choosing to mine or trade simply
because it is the most viable livelihood option available and necessity forces them to do so.
In their account of conflict dynamics and natural resource extraction in the Kivus, Vlassenroot and
Romkema suggest that to a certain extent, the informalization of the local extraction of natural
resources could even be explained as a democratization of local mineral production.2 The advantages of mining activities are no longer limited to multinational companies or national elites, but
also spread to the grassroots level and create an alternative source of income for many households. Interventions, which may reduce the value of minerals or further informalize and criminalize
the trading chain, will affect these householders potentially in a severe manner.
The account of Joseph, a cassiterite miner in Walikale provides an important illustration of what it
means to try and make a livelihood in a conflict situation: “I’m a miner, not a farmer. The difference
is that I can eat every day and make enough to have a family and feed my children. You cannot be
a farmer in this insecure environment, because you never know whether you can stay to see the
crops grow, or whether the soldiers force you off your land. And what else is there for us to do? As
a miner I have money today and I know that my survival depends on me. You may think that this
is wrong, but I invite you to live here [in Walikale] for a while, only then will you understand what
poverty means and why we chose to mine. There is simply nothing else left for us to do.” 3
Joseph’s comments are illustrative of two important aspects of artisanal mining. Firstly, artisanal
miners are not necessarily profit driven but first and foremost poverty driven and, in the case of
Eastern DRC, survival driven. Secondly, artisanal mining is often performed by one member of a
household as part of a set of economic activities that the household undertakes in order to earn a
livelihood, whether on site or in a different geographical location.4
1
Compare: Vlassenroot, K. and Romkema, H. (2002), The Emergence of a New Order? Resources and War in Eastern Congo, Journal of Humanitarian Assistance,
available at: http://www.jha.ac/articles/a111.htm, accessed 27/7/2009
2
Compare: Vlassenroot, K. and Romkema, H. (2002), The Emergence of a New Order? Resources and War in Eastern Congo, Journal of Humanitarian Assistance,
available at: http://www.jha.ac/articles/a111.htm, accessed 27/7/2009
3
Interview in Walikale, North Kivu, June 2008
4
Levin, E. (2005), ‘From Poverty and War to Prosperity and Peace? Sustainable Livelihoods and Innovation in Governance of Artisanal Diamond Mining in Kono
District, Sierra Leone’. Unpublished MA Thesis, Department of Geography. Vancouver: University of British Columbia. At http://www.resourceglobal.co.uk/index.php?option=com_docman&task=cat_view&gid=36&Itemid=41. Hayes, K. (2008). “Artisanal and small-scale mining and sustainable livelihoods in Africa.”
Published by CFC, PACT, and CASM. At http://www.pactworld.org/galleries/default-file/CFC_Paper_ASM_Livelihoods_in_Africa-FINAL.pdf
Resource Consulting Services
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ASM
Communities and
Small-Scale Mining
The dynamics of economic activity are highly resilient to change, and control interventions into the
economic sphere run the risk of direct opposition by the local population that could render them
ineffective. As one coltan trader put it: “It’s a pleasure when you make some profit, to know that
you have done this yourself, even if you put your life in danger always. Even if the war ended and
the president tried to put a stop to this commerce, I would find a way to continue”.5
Presenting all economic activities as bad oversimplifies a highly complex set of interactions. Interventions should be considered for their probable impact on the local population as well as the
armed groups operating as parasitical entities over them. A ban on, whether intended or unintended, or a disruption of the present economies of Eastern DRC risks creating additional violence
rather than reducing it, including violence against the ordinary miners who depend on the activity
to survive (see above).6
Although this analysis integrates the position of the grassroots population into its analysis, it does
not neglect the existing links between conflict and economic activities. All it shows is that the incorporation of economic security into demobilization and disarmament and reintegration programs
is a crucial, although highly neglected, element of any successful strategy to bring about peace.
Interventions in the mineral trading sector should therefore be aligned and integrated with security
sector reform priorities.
5
Stephen Jackson, ‘Our Riches are being looted!’: War Economies and Rumour in the Kivus, D.R. Congo, Unpublished Paper (2001).
6
Ibid.
enough so as not to jeopardize the overall viability of
extraction and trade.
Insecurity remains the key obstacle to the trade
contributing more to development. In line with our
recommendations, we believe that once security
improves, the development benefits from the trade
can improve exponentially, so long as the reigning
institutional infrastructure can be configured so that
it produces developmentally beneficial governance
outcomes and the physical infrastructure can be rehabilitated.
Life in the mining settlements. With long-term engagement, the
life of these miners can be improved. © Mark Craemer 2009
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30
3. The Trade in Minerals
from Eastern DRC
ASM
Communities and
Small-Scale Mining
ASM
Communities and
Small-Scale Mining
Porters begin a 2 day journey to take tin ore from remote mines to regional transport hubs. Improved infrastructure can help these workers
improve their livelihoods. © Mark Craemer 2009
The trade in minerals is one of the primary economic
occupations in Eastern DRC and a common thread
Trading Chain
that draws together dozens of stakeholders in the
The trade begins in remote mining sites in Ituri, Kasai
Great Lakes region. Importantly it generates the nec-
Oriental, Maniema, (Northern) Katanga, North Kivu,
essary foreign exchange to sustain Eastern DRC’s
Orientale, and South Kivu21, from where the miner-
import dependent economy. This places it at the
als are often first transported by foot, then by car or
heart of the region’s future development trajectory.
truck and finally by plane to the main export centers,
The artisanal mining sector presently contributes to
such as Goma, Butembo, Bukavu, and Uvira. From
employment, fiscal revenues, and secondary econo-
here they are exported through Burundi, Kenya,
mies.
Rwanda, Uganda, and/or Tanzania.22
20
20
Garrett, N. (2009), Linkages in the Mining Sector in Katanga, LSE
21
For an in detail profile of artisanal mining, refer to Garrett, Nicholas. Walikale.
Artisanal Cassiterite Mining and Trade in North Kivu – Implications for Poverty
Reduction and Security. Washington D.C.: Communities and Small-Scale Mining, 2008.
22
For a detailed profile of the trade in natural resources in the Kivus refer to
Tergera, A. and Johnson, D. (2007), Rules for Sale: Formal and Informal Cross
Border Trade in Eastern DRC, Pole Institute. May 2007
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32
Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
Gold, tin ore (hereafter cassiterite), tantalum (col-
Trading Volume
tan), and tungsten (wolframite), are the primary export minerals. While gold is of significantly higher
A statistical overview of the trade in minerals from
value and is also the principal rebel-traded mineral,
Eastern DRC quantifies the official and unofficial
it is estimated that as much as 95% of Eastern DRC’s
trade values and volumes. This can help determine
artisanal gold production is traded informally . The
the configuration and varying degrees of a-legality
authors will investigate the gold trade in a follow-up
and thus the opportunities for engaging with the
publication and this section therefore focuses on the
shadow economy segment of the trade. Additionally,
trade in cassiterite as an example of the three Ts24,
in the following sections, we compare the trade in
which represent the bulk of the volume of the trade
minerals using data from DRC and Rwanda in an at-
and which are exported via the following routes:
tempt to understand the regional dimensions of the
23
• Goma – Bunagana - Kampala – Mombasa/Dar es
Salaam (N. Kivu-Uganda-Kenya/Tanzania)
• Goma – Gisenyi – Kigali – Mombasa/Dar es Salaam
trade and to discern how regional cooperation can
bring about more developmentally tangible benefits
from the trade.
(N. Kivu-Rwanda-Kenya/Tanzania)
• Bukavu – Kigali – Mombasa/Dar es Salaam (S. Kivu-Rwanda-Kenya/Tanzania)
The analysis in this section emphasizes the trade in
cassiterite, which was the largest reported export
• Uvira – (Bujumbura) - Kigoma – Dar es Salaam (S.
Kivu-Tanzania)
commodity from North and South Kivu both in terms
of volume and value in 2007-2008, primarily due to
the significant rise in value.
Exporters in the regional trading centers work with
international brokers often based in Europe, who
help link the trade from the Great Lakes region to the
North Kivu Exports
rest of the world, arranging transport from the Indian
Ocean ports of Mombasa and Dar es Salaam, where
the minerals are shipped to Europe and to multina-
Table 1: Mineral Exports from North Kivu
(Goma and Butembo)
tional smelting companies in Malaysia,25 Thailand,
2008
(Jan to Nov)
2,007
 
China, and India.26 Once processed, large quantities
 
tonnes
USD
$/tonne
tonnes
of tin are bought by solder manufacturers or elec-
Cassiterite
10,175
$27,566,421
$2,709
12,502
tronics contract manufacturers, who turn the solder
Wolframite
767
$2,881,995
$3,757
441
into usable components such as capacitors, and add
Coltan
74
$714,495
$9,629
56
Source: Division of Mines, North Kivu. Exports from North Kivu include material leaving from both Goma and Butembo.
them into electronic devices. 27
23
Various interviews by Nicholas Garrett, South Kivu Province, DRC, 2007 - 2009
24
The trade in gold, which is the principal earner of the FDLR, has an entirely
different trade profile due to its high value to volume ratio. Gold is transported
via Tanzania, but also by plane from Bujumbura, Kigali and Entebbe.
25
Garrett, N. and Mitchell, H., ‘Electronics Groups Alarmed as Congo Rebels Take
Over Tin Source’, Financial Times, March 5, 2008
26
See ’Final report of the Group of Experts on the Democratic Republic of the
Congo’. United Nations Security Council. S/2008/773. Available at http://
www.un.org/Docs/journal/asp/ws.asp?m=s/2008/773 pp. 22-23.
27
Garrett, N. and Mitchell, H., Electronics Groups Alarmed as Congo Rebels Take
Over Tin Source, Financial Times, March 5, 2008
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Communities and
Small-Scale Mining
BOX 4: Estimating exports from Eastern DRC
The main cassiterite production area in North Kivu is Walikale, which is estimated to account for
up to 70% of cassiterite exported from Goma1. The most important contributor is the Bisie mine.
Minerals leave Walikale by plane and by truck for Goma and Bukavu.
The airport at Goma serves as a transit hub for minerals from all over Eastern DRC. In 2007, the
Division of Mines in Goma recorded 2,381 tons of cassiterite arriving from other provinces at the
airport, in addition to 6,675 tons from North Kivu. However, on a normal day, six planes, transporting two tons of around 50% tin-content grade cas­siterite each, fly four rotations from the Kilambo
airstrip in Walikale alone. This suggests that 48 tons arrive in Goma per day from Walikale, which
is 17,520 tons per year2. Flights operate seven days a week, if the weather permits. Factoring
fluctuations in output, it is prudent to deduct 20% of that sum, which leaves 14,000 tons per year.
Deliveries by road fluctuate dramatically depending on the security situation and weather affected road conditions, but can add approximately 10% over the year. In addition, roughly 30% of
cassiterite arriving in Goma comes from other parts of Eastern DRC, which would give a figure of
just over 19,600 tons, calculated 40% from 14,000. Official exporters process the cassiterite up
to an export grade of up to 65% tin content, with around 30% of weight lost in the process. This
leaves a net volume of 13,700 tons of export grade cas­siterite leaving from Goma. This compares
with official exports of 10,175 tons of cassiterite in 2007, or an estimated under reporting from
official figures of approximately 35%. Using average prices of value established in 2007, this suggests an estimated value of $37m, compared with the official export value of $27.6m.
1
Garrett, Nicholas. Walikale. Artisanal Cassiterite Mining and Trade in North Kivu – Implications for Poverty Reduction and
Security. Washington D.C.: Communities and Small-Scale Mining, 2008.
2
Ibid.
Table 2: Arrivals of Minerals at Goma Airport in 2007 by Province
Tonnes
Cassiterite
Per cent per province
Wolframite
Cassiterite
North Kivu
6675.3
 
73%
Maniema
1638.5
156.1
18%
Katanga
521.6
 
6%
Orientale
221.7
 
2%
Kasai-Oriental
 
52.1
Resource Consulting Services
Wolframite
75%
25%
-
34
Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
Graph 1: Cassiterite Exports from Goma, North Kivu, 2007-2008
South Kivu Exports
The following figures were provided by the
Private Sector Federation (FEC) representing
the mineral exporters based in Bukavu28. Bukavu, like Goma, reported an upswing in mineral exports between 2007 and 2008. Most
dramatic was the increase in price, which, as
in North Kivu, drove the increase in export
volumes. Note that the dollar per ton price
average in cassiterite in Bukvau in 2007 is
$700 more, possibly reflecting higher costs or
higher export grade, while the average $/ton
Graph 2: USD/tonne mineral prices, Bukavu, 2007-2008
figures for wolframite and tantalum are similar. As in the case in Goma, some of Bukavu’s
exports originate in other provinces, including
North Kivu.29
Table 3: Aggregate Exports from Bukavu, South Kivu 2007-2008
2,007
2008 Jan to Nov
Tonnes
USD
$/tonne
Tonnes
USD
$/tonne
Cassiterite
3,481
$12,267,960
$3,524
4,196
$43,777,538*
$8,263*
Wolframite
328
$1,270,430
$3,870
157
$1,097,856
$7,008
Tantalum
192
$1,914,352
$9,947
295
$4,156,543
$14,100
Source: Private Sector Federation, South Kivu. *Average prices are corrected due to a March export of 216 tonnes from the Comptoir Panju to Thailand worth an
average price of $55,037/tonne. Such a significant increase suggests misreporting. This figure was removed from the calculations to achieve averages.
28
The figures are lower than official figures obtained in Kinshasa. However, Kinshasa figures also do not match the figures reported in Goma, and so for the purposes of this document,
two separate statistical data points were chosen rather than the centrally consolidated figures. All figures should be understood as approximate only.
29
The Division of Mines in North Kivu reported 185 tonnes of cassiterite and 65 tonnes of wolframite transferred from Goma to Bukavu in 2006.
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ASM
Communities and
Small-Scale Mining
Accumulative Mineral Exports from the
Kivus
Livelihoods
The Production of gold, cassiterite, tantalum and
Export figures from North and South Kivu give totals
tungsten, as well as other minerals and precious
for cassiterite of 13,656 tons in 2007, and 16,698 for
stones in Eastern DRC (excluding Ituri) is exclusively
2008 (Jan to Nov). Adding an estimated December
artisanal, with the World Bank’s Communities and
2008 figure of 1/11 of the total values provides a fig-
Small-Scale Mining Secretariat (CASM) in 2007 sug-
ure of approximately 18,216 tons. Given average $/
gesting the total number of miners in Eastern DRC
ton values established by Bukavu’s Private Sector
(North and South Kivu, Maniema) at 400,000.30 Fac-
Federation, this puts the value of the trade at just un-
toring five dependents per miner, up to 2 million peo-
der $50m in 2007 and approximately $150m in 2008.
ple could be dependent on artisanal mining and trade
in Eastern DRC for their subsistence. The World Bank
Based on estimates based on transport volumes from
suggests that up to 1/5 of the population of the DRC
the main mine in North Kivu, cassiterite exports from
is dependent on artisanal mining.31
Goma have been under-reported by approximately
35%. This would suggest that up to 18,400 tons of
The attractiveness of artisanal mining as a livelihood
cassiterite was exported in 2007, and 24,500 tons
opportunity tends to fluctuate with world mineral
in 2008, with the respective estimated total export
prices. Raw material prices have fallen dramatically
values of cassiterite of up to $65m and $200m (us-
since the summer of 2008 and while the price of cop-
ing average of $8,263/ton from Bukavu). Including
per collapsed, the price for gold has remained rela-
both wolframite and tantalum, the trade is potentially
tively stable while tin, tantalum and tungsten have
worth approximately $215m.
fallen to a level that still allow artisanal production to
sustain livelihoods.
North and South Kivu Mineral Exports, in total 2007-2008, and plus the estimated underreported volume of 35%
Table 4: Mineral Exports from the Kivus, 2007-2008
2007
2008 (Jan-Nov + Dec estimated)
Bukavu
Goma
Total Kivus
plus 35%
est.
Bukavu
Goma
Total Kivus
Total + Dec est.
plus 35% est.
Cassiterite
3,481
10,175
13,656
18,435
4,196
12,502
16,698
18,216
24,592
Wolframite
328
767
1,095
1,479
157
441
598
652
880
Tantalum
192
74
267
360
295
56
351
383
517
Sources: Division of Mines, North Kivu. Private Sector Federation Bukavu. Plus 35% estimation based on calculations on under reporting from Goma and are
estimates only. Total + Dec est. Figure is based on 11 months of available data from Jan to Nov – actual figure might be lower due to the outbreak of violence.
30
D’Souza, K. (2007), Artisanal Mining in DRC Key Issues, Challenges, and Opportunities, CASM
31
The World Bank (2008), Growth with Governance in the Mining Sector, The
World Bank
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
Copper January 1st, 2008 – August 14th, 2009
Graphs 3: International copper prices. Source: London Metals Exchange
Gold: August 2007 - August 2009
Graph 4. International gold prices. Source: InfoMine.com
Tin January 1st, 2008 – August 14th, 2009
For security and efficiency cassiterite is transported by plane to
regional capitals. This airlink is also the only way food and other
supplies can reach communities in remote areas.
© Mark Craemer 2009
cluding miners, mine support workers, porters, intermediate buyers, civil servants, security forces,
transporters, assayers, urban day laborers, exporters, state officials, and mineral processors.32With the
trade also producing significant spillover effects into
neighboring countries, creating jobs in processing,
transport and administration a conservative estimate
for 2009 is that up to 1 million people in the region
Graph 5. International tin prices. Source: InfoMine.com
The trading chain is highly complicated and involves
local, national, regional and international actors in-
32
Garrett, Nicholas. Walikale. Artisanal Cassiterite Mining and Trade in North
Kivu – Implications for Poverty Reduction and Security. Washington D.C.: Communities and Small-Scale Mining, 2008.
Resource Consulting Services
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37
ASM
Communities and
Small-Scale Mining
are dependent on Eastern DRC’s minerals sector for
Taxes may not only affect growth, but growth may
their livelihood.
affect the capacity of the state to tax because sustained growth involves the growing formalization of
Fiscal Linkage
the economy and the development of a manufacturing sector both, of which make tax collection easi-
The fiscal contribution of the trade in 3T minerals
er.35 It is worth mentioning, however, that high tax
from Eastern DRC has increased over the past years,
ratios do not necessarily generate disincentives for
with tax revenues from the trade accruing to US$
investment and growth as many neoliberals argue.
4 million in 2008.33It is worthwhile questioning the
benefit of increasing revenue for the Congolese
Advocates of more statist interventions point to the
state, in a context where historically equitable sub-
fact that taxes are necessary to finance public goods
national redistribution of wealth has not occurred.
(education, health, and infrastructure), which are
Broadening the revenue base is one avenue towards
necessary for physical and human capital accumu-
creating the financial basis to bring about incremen-
lation. Indeed, the potentially positive contribution
tal change in the institutions of the state and to en-
of taxation to growth is a standard result in many
dow these institutions with the necessary means to
endogenous growth models that incorporate public
become a vehicle for the larger governance reform
finance and public services (Barro and Sala-I-Martin
process.
1992).36 Our analysis subscribes to the latter school
of thought, which is why we have emphasized the
The success of this strategy largely depends on the
fiscal linkage above. Readers interested in the sub-
extent to which a tax system contributes to produc-
national redistribution of wealth should follow ongo-
tive capacity building. There is no robust evidence
ing discussions around the EITI ++ initiative that is
to suggest that tax ratios as a percentage of GDP
looking at the transparent and developmentally ben-
have any systematic relationship with economic
eficial sub-national redistribution of state revenue.
growth (Easterly and Rebelo, 1993). The difficulty of
establishing any relation is due to the complexity of
Whereas total exports had slowed down towards
disentangling both the effects of the absolute and
the end of 2008 and early 2009, the trade rebounded
marginal rates of taxation, and nominal and effec-
late in the 1st quarter of 2009. This may translate into
tive tax rates on economic growth, as well as iso-
a similar or higher tax contribution in 2009, depend-
lating the growth effects of different types of taxes
ing on global price developments.37 The gold trade,
(trade, income, consumption).
however, remains almost entirely informal, with significant leakage to Burundi, Tanzania, Uganda, and
It is also difficult to disentangle the tax regime from
Rwanda, as illustrated in the regional case studies
other macroeconomic (such as monetary policy) and
further below.
microeconomic policies (such as industrial policy)
that affect the growth path.34 Moreover, the capac-
Taxation on mineral exports from DRC involves a
ity of the state to tax does not necessarily translate
number of bodies, and is currently under review.
into similar capacities such as undertaking indus-
Bodies that apply taxes include the Direction Géné-
trial policy. Finally, there is the issue of endogeneity.
rale des Impôts (DGI), Direction Générale des Re-
33
Garrett, N. and Mitchell, H. (2009), Trading Conflict for Development, DFID, LSE,
UGhent, RCS
35
Ibid.
36
Ibid.
Di John (2008), Fiscal Reforms, Developmental State Capacity and Poverty Reduction, UNRISD, p. 31
37
Bavier, J. (2009), Congo tin exports rebound despite UN, campaigners, Reuters
16/6/2009
34
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
cettes Administratives, Judiciaires, Domaniales et
pect of an ASM dominated sector, in particular the
de Participation (DGRAD), L’Office des Douanes et
direct and indirect employment functions and the
Accises (OFIDA/customs), Entités Administratives
export-focused fiscal linkage. However its contribu-
Décentralisées (EAD/provincial tax) and a number
tion is retarded by insecurity born of the presence
of other agencies including the Centre d’Evaluation,
of military groups, which predominantly affects the
d’Expertise et Certification des Substances Minérales
ability to nurture the trade and encourage wider and
Précieuses et Semi-Précieuses (CEEC).
better functioning secondary economies and value
added processes. It is also affected by institutional
The North Kivu Division of Mines Annual Report 2007
undercapacity in the administration of the trade,
and an update provided in October 2008 present a
which particularly affects its fiscal contribution.
series of figures that calculate some of the revenues
that accrue to some of the Congolese state institutions. The figures are incomplete and notably absent
are amounts received by the central taxation department, the DGI. Nevertheless, the figures suggest that
Impact of the Global Financial
Crisis40
the minimum amount received by Congolese national and regional bodies from the minerals trade from
The fall in prices of base metals associated with the
Eastern DRC amounts to US$2,012,995 in 2007 and
global economic crisis significantly reduced the pric-
US$ $4,362,102 for the first three quarters of 2008,
es received by artisanal miners for their minerals.
which amounts to an increase of over 100%.
While the effect on production in Eastern DRC re-
38
mains under-researched, the negative effects of the
If the present level of fraudulent exports of around
global economic crisis on copper production were
35% could be reduced, the fiscal linkage would
highly visible and publicized, especially in the Con-
strengthen further. An obstacle is the operational dif-
golese/Zambian Copperbelt. There was ample evi-
ficulties of the DRC’s export regime. Inefficient and
dence of firms scaling down, temporarily stopping
confusing border procedures incur significant costs
production, closing down (sometimes overnight),
for exporters and the GoDRC, while also providing op-
and postponing planned production or investment
portunities for rent-seeking and incentives for smug-
plans. Just as jobs were lost in LSM, the ASM market
gling. For businesses, border-related costs are both
for copper and cobalt collapsed and artisanal min-
direct, such as expenses related to supplying infor-
ers were set adrift. Moïse Katumbi, the Governor
mation to the relevant border authority, and indirect,
of Katanga, estimated that perhaps 300,000 mine
such as those arising from procedural delays, lost
workers in the formal and informal sectors lost their
business opportunities and lack of predictability in
livelihoods in the latter half of 2008.41 Intelligence
the regulations. For governments, the cost of ineffi-
reports in December 2008 suggested some of the
ciency includes incomplete revenue collection due to
redundant miners had migrated to Eastern DRC to
smuggling and under-declaration, as well as difficul-
join armed groups.42
ties in effectively implementing trade policies.39
Minerals production and trade in Eastern DRC generates the standard economic linkages one would ex-
38
Original figures provided in DRClese Francs, exchange rate in 2007 of 500Fc/
USD, in 2008 550Fc/USD.
39
Compare H. Sunman and N. Bates, Trading for Peace, DFID, 2007
40
Responsible Business Approaches towards Artisanal and Small-Scale Mining:
Ensuring Lessons from the Boom for the Time after the Bust, PACT, Resource
Consulting Services (forthcoming)
41
Wild, Franz, Congo Copper, Cobalt Miners Restart Production After Price Fall,
says Governor Moise Katumbi, South Africa Resource Watch, March 02, 2009
42
Interviews with Western intelligence officials, Katanga and Eastern DRC, December 2008
Resource Consulting Services
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ASM
Communities and
Small-Scale Mining
In Eastern DRC, the price of the principal mineral,
tin, was severely affected, but it was still profitable
to mine it. There was nevertheless evidence of some
migration towards gold, the price of which remained
stable over the course of the economic crisis.43While
gold was not immune to the global crisis, it has
weathered the storm far better and remains a viable
sector for artisanal miners. Many ASM gold miners
(or orpailleurs) interviewed in the Mambasa area of
Province Orientale in DRC in June 2009 had migrated
from the tin and tantalum (coltan) mines of Eastern
DRC due to a combination of the insecurity in the region and the low prices of these minerals compared
to gold.44
43
Interviews with Western intelligence officials, Katanga and Eastern DRC, December 2008
44
Responsible Business Approaches towards Artisanal and Small-Scale Mining:
Ensuring Lessons from the Boom for the Time after the Bust, PACT, RCS
Resource Consulting Services
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40
4. Reforming the
Mineral Trade in
Eastern DRC
ASM
Communities and
Small-Scale Mining
ASM
Communities and
Small-Scale Mining
All stakeholders wish to see an end to the militari-
that much of the benefit from minerals derives from a
zation of the economy in Eastern DRC. In response,
form of illegal taxation also suggests that there would
a variety of interventions in the economic domain
be little difference between a coffee trader and a
have been proposed to improve control of the min-
mineral trader at a roadblock. Both would be subject
eral trade in Eastern DRC. This section constructively
to the same coercion that results from the military
critiques these proposed control mechanisms and
occupation of a civilian area.
their likely effectiveness to either stop or reduce the
A strategy towards ending the conflict that focuses
conflict.
primarily on economic interventions that seek to
As the main economic driver in the region, minerals
control the mineral economy elicits three main ques-
contribute significantly to the war economy, a fact
tions:
that is undisputed amongst observers.
45
Yet, while
minerals receive attention as the principal source of
1. Is a focus on removing the economic benefits
income of the FARDC and FDLR, relatively little atten-
derived from the mineral trade sufficient to
tion has been given to the fact that the ongoing con-
alter incentive structures and up the stake in
flict and pervasive presence of military actors has led
peace?
to the entire economy becoming militarized.
2. Is it possible to implement effective control
measures (targeted or general) to restructure
This has important implications for stakeholders
these incentives and up the stake in peace?
wishing to exert control over the mineral trade via
3. What is the cost-benefit of this approach as
economic interventions as a means to solve issues of
opposed to other approaches such as a direct
insecurity. Primarily, it suggests that restricting an in-
military intervention, or economic formaliza-
come from minerals may simply lead a military group
tion through a political process? In particular,
to obtain an income elsewhere, including increased
what are the costs to the local population of
extortion of the local population, already struggling
economic interventions?
to survive. Thus, emphasis might be better placed on
dealing directly with the source of insecurity – the
It is beyond the scope of this report to assess the
armed groups – rather than placing too much im-
incentives of the various armed groups and their
portance on trying to control one source of income.
constituents in the DRC, except to point out that ob-
Diversified economic activity, including remittances,
servers in the region have shown that the conflict is
will likely prove impossible to control effectively.
clearly not simply for economic gain.46Even if a rational economic profit motive goes far in explaining the
This is not an argument against control mechanisms,
behavior of political and military elites, placing it at
but in the short term at least, it is more likely that
the centre of the analysis neglects the complexity of
depriving belligerents of income from the mineral
the war economy in Eastern DRC, ignores a number
sector would result in them increasing their income
of critical issues and actors, and is questionable as
from other sources, or diversifying more intensely to
a solid base for developing adequate policies for en-
more uncontrollable and undetectable minerals, such
gagement. The key arguments against this approach
as gold and diamonds. Any change in the geography
are:
of the economics of the region will lead to a reposi-
• The insecurity in Eastern DRC is a symptom of
tioning of all actors, including belligerents. The fact
the inability of the Congolese state to control
45
See for example, RCS Trading Conflict for Development, April 2009, Global Witness, Faced with a Gun What Can You Do, July 2009, United Nations, May 2009
46
Johnson, Dominic, Minerals and Conflict in Eastern DRC, Pole Institute, July
2009. http://www.pole-institute.org/site%20web/echos/echo114.htm
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
the monopoly of violence and broader govern-
during wartime can largely survive in peacetime
ance failures. The persistent contestation of the
conditions.49
monopoly of violence is denying the necessary
stability to expand and strengthen the reach of
Taking these arguments into account it is worthwhile
the state to the East, which further underlines the
focusing on the feasibility of suggested control meas-
need to focus on security.
ures, to gauge their likely effectiveness in modifying
• War economies include all economic activities
the behavior of the various military groups in order
that are carried out in wartime and attention
to end or reduce violence. Any suggestions must be
must thus also be given to shadow economies
grounded in the political, economic, cultural and in-
and coping or survival economies, which are
stitutional realities of Eastern DRC. For example, en-
causally interlinked. In addition, war economies
forcement mechanisms, which delegate oversight to
are enmeshed with the political, cultural and
the Congolese state, are unlikely to succeed, given
emotional economies of the conflict.47 At play is
the fact that the state is under-resourced and unable
not simply control over resources and territory,
to maintain the most basic of state services. In ad-
but also deep underlying tensions stemming from
dition, it fails to recognize that many actors within
ethnic dimensions, past grievances, and ingrained
the state or military structures have an interest in
cultural nuances, which are all significant contrib-
maintaining the status quo.50 Actors who are eco-
uting factors.
nomically profiting by participating in the shadow
• War economy activities are not always so different
economy may well have an interest in peace, so long
to economic activities developed in peacetime. In
as their profit motive can be fulfilled in peacetime.51 It
peacetime, competition over control of natural re-
is therefore important not to discount particularly the
sources is a common facet of larger political strat-
established formal economic operators, such as the
egies to escape control by the political centre, for
exporting companies, as important agents in a secto-
example, or to support local power complexes.
ral reform process.
Moreover, the political economies that surround
the extraction and trade in natural resources can
Below we identify some of the key suggestions for
produce powerful centrifugal forces that not only
intervening in the mineral trade and discuss their
further fragment the state but also create ‘multi-
feasibility given the prevalent implementation con-
ple unstable, ungovernable spaces’.48
straints in the DRC. The feasibility of the project must
• War economies have the potential to persist in
be considered the key factor, given the potential in-
post-conflict contexts and in some cases are
terventions have for negatively impacting the local
hardly affected by peace processes. Even if some
economy. Thus, the likely impacts of the suggested
adaptation is needed to reach new forms of ac-
approaches, particularly on local communities, are
commodation with the political centre, mecha-
also reflected upon. Both existing and new alterna-
nisms of exploitation that have been instituted
tive approaches to the mineral trade, including shorter-term measures to formalize the minerals trade, as
well as longer-term projects of regional economic in-
47
48
Goodhand, Jonathan. “From War Economy to Peace Economy? Reconstruction
and State Building in Afghanistan.” Journal of International Affairs 58, no. 1
(2004): 15-175. In his analysis of the Bosnian war economy, Andreas makes
a similar point and points at the need for a bottom up, clandestine political
economy approach. Andreas, Peter. “The Clandestine Political Economy of War
and Peace in Bosnia.” International Studies Quarterly 48, no. 1 (2004):29-52.
Korf, Benedikt, and Hartmut Fünfgeld. “War and the Commons: Assessing the
Changing Politics of Violence, Access and Entitlements in Sri Lanka.” Geoforum
37, no.3 (2006): 391-403.
tegration, are discussed.
49
Cramer, Christopher, and Jonathan Goodhand. “Try Again, Fail Again, Fail Better? War, the State, and the ‘Post-Conflict’ Challenge in Afghanistan.” Development and Change33, no. 5 (2002), 885-909.
50
RCS, Trading Conflict for Development, April 2009, Global Witness, Faced with
a Gun What Can You Do, July 2009
51
RCS, Trading Conflict for Development, April 2009
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Communities and
Small-Scale Mining
Due diligence measures will help the professionalization and formalization of the mining sector, but in themselves are not a solution to the
insecurity in Eastern DRC. © Mark Craemer 2009
Interventions: The Feasibility of
Control Measures
that would in theory allow its members to know the
A number of control measures have been suggested
The measures suggested have invariably focused on
for the mineral trade in the Eastern DRC, most no-
the minerals, which form the largest proportion of
tably by pressure groups52 and the United Nations,53
exports by volume – the so-called three Ts – tin, tung-
and include a proposed Congo Conflict Minerals Act
sten and tantalum, with the UN and some pressure
of 2009 in the US Senate for electronics companies
groups calling for more stringent due diligence also in
to conduct due diligence on their mineral supply
the case of gold. The implication of these suggested
chains54. The Act is currently referred to committee
mechanisms, either implicit or explicit, is that through
and at the time of writing it is too early to say what
the correct application of due diligence and/or track-
will appear in the final document. However, the ac-
ing and tracing mechanisms, the mineral trade can
tion has spurred the tin smelter association, ITRI,
be de-militarized to produce a positive impact on the
which represents the main purchasers of tin from the
problems of insecurity in the region.
mine of origin in eastern DRC.55
DRC, to propose a tracking and tracing mechanism
The introduction of due diligence and track-and-trace
mechanisms will certainly have positive effects on
52
The Enough Project, Eastern Congo: An Action Plan to End The World’s Deadliest
War, July 2009; Global Witness, Faced with a Gun What Can You Do, July 2009
53
The Group of Experts on the Democratic Republic of the Congo: S/2008/773,
Rec 14, Dec 2008; S/2009/253, Section XI, S/2009/253, May 2009
54
http://www.govtrack.us/congress/billtext.xpd?bill=s111-891
the sector, most notably by bringing transparency to
55
ITRI, DRC Tin Supply Chain Initiative, July 2009 http://www.itri.co.uk/pooled/
articles/BF_NEWSART/view.asp?Q=BF_NEWSART_313589
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
supply chains and creating pressure for operators to
Secondly, while the measures above taken together
professionalize their activities. However, current sug-
should produce pressure on supply chain operators
gestions place either too much faith on these mecha-
for self-discipline in accordance with legal require-
nisms to solve entrenched problems of insecurity, or
ments, regulatory regimes to enforce or monitor
too much faith in the ability of the Congolese govern-
compliance are lacking. It is unclear whether these
ment or international bodies to effectively implement
interventions could be successful even with a large
these mechanisms.
and costly intervention from both the Congolese government and the international community via, for ex-
Generally speaking the measures draw on four main
ample, MONUC.
modes of control, with some initiatives incorporating
a combination:
Supply chain due diligence is an important part of good
1. Due diligence: Market to mine tracing mecha-
business practice for a whole host of reasons. Greater
nisms to assure mineral legitimacy and legality
visibility of the supply chain behind first-tier suppliers
2. Certificate of origin: in-country tracking meas-
enables the communication of best business practices
ures to assure site or country of production
3. Investigation or punitive measures, typically
against individuals or companies
up and down the supply chain, and can lead to innovations for improved supply chain efficiency and sustainability gains. The implementation of due diligence
4. Geographical and geological mapping of various
schemes in the DRC mineral trade is a welcome step
mine sites and their minerals, contributing to sci-
to increase transparency and professionalism in the
entific ‘fingerprinting’ of mineral supply chains
sector. Furthermore, supply chain due diligence can in
theory help induce the formalization of the informal
Blanket sanctions on mineral exports have not been
and a-legal sections of the trade as operators are put
endorsed by any of the main observers in the conflict,
under pressure to reveal their legitimacy. With the right
mainly because it is widely recognized that this would
incentives, such as access to outside markets and rec-
have a serious negative impact on the one million arti-
ognition of legal rights, a-legal and largely formal ac-
sanal miners and families dependent on the trade for
tors can be coaxed into the formal sector to assist and
their livelihoods. However, both the pressure group
participate in due diligence schemes.
Global Witness and the UN have recommended targeted sanctions focusing on specific mines where miner-
However, besides assisting with the formalization and
als are financing armed groups or their leadership.
professionalization of the sector, it is unlikely that the
56
implementation of a due diligence scheme will result
This is a viscerally appealing action, but it faces some
in the removal of military beneficiation from the min-
significant challenges. First and foremost, any targeted
eral trade. Instead, it is far more likely that:
sanctions against a specific mine or area, while po-
• Military involvement will become hidden (e.g. doc-
tentially affecting the income of any parasitical military
umentation forged, or front companies set up);
force, is likely to have a disproportionately worse effect
• Military groups will diversify their income or tac-
on the mineworkers who will lose their jobs. They will
tics of income collection (see above);
need to obtain an income through other means, which
• Militarized minerals will be laundered into legiti-
may mean migration, or engaging in other problematic
mate supply chains, including smuggled over po-
activities such as the illegal wildlife trade, poaching for
rous borders and laundered elsewhere, as is hap-
food, or even joining a military brigade.
pening already (see below);
• Monitoring will be incomplete, ineffective and
56
Global Witness, Faced with a Gun What Can You Do, July 2009, UN,
S/2008/773, para 72, 131, 134. Recommendation 13
corruptible or coercible.
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Communities and
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Table 5: Effects of a top down mineral certification of origin scheme
Likely
Unlikely
Increase transparency and traceability in the international trade
Eliminate avenues to launder ‘conflict’ or corruption minerals at
sub-national level
Assist formalisation, including taxation, at export level
Assist formalisation at artisanal, small scale and other informal
point of origin levels
Encourage legal or mostly legal actors to comply
Remove illegal actors/military groups from supply chain
Place greater scrutiny on downstream chain in minerals which
may lead to more focus on upstream labour rights and environmental issues
Solve issues of human rights abuse, inequality, poverty, insecurity
etc. upstream
Place significant burden on states to monitor, albeit with enhancement in technical expertise, and possibly create new opportunities
for corruption, rent seeking and misclassification
Solve issues of corruption, rent seeking and deliberate misclassification in state institutions
In addition, without provision to fulfill the profit mo-
be of serious concern to proponents of a similar kind
tive of the shadow economy actors, due diligence re-
of scheme for minerals in Eastern DRC.
quirements may incentivize these actors to further
The lack of political will to seriously invest in these
informalize, rather than vice versa.
projects should also not be discounted both domestiA close analogy to the proposed schemes in East-
cally and internationally60, particularly given that sev-
ern DR Cong is the Kimberley Process Certification
eral interviewees have suggested that many of the
Scheme for Rough Diamonds (KPCS), which empha-
interests in the mineral trade in Eastern DRC connect
sizes internal control systems to guarantee point of
to political elites in Kinshasa, while Eastern DRC does
origin and the private sector’s complementary system
not have the same strategic importance as Afghani-
of warranties system, which ‘carries’ the KPCS certifi-
stan, Angola or Somalia.
cate through to consumers.
57
Unfortunately, despite 10 years of hard work, the
Private Sector Obligations
KPCS is unable to guarantee point of origin for its
diamonds in artisanal mining countries, primarily be-
Requirements of the private sector have largely fo-
cause the size and geography of the artisanal min-
cused on the international trading relationships from
58
ing sector make this logistically extremely difficult.
DRC. Congolese exporters (comptoirs) on the one
There is a potentially insurmountable gap between
side, so the argument goes, should be obliged to ob-
the necessary requirements of the scheme to fully
tain appropriate documentation to demonstrate the
guarantee the origin of diamonds by monitoring
origin of their minerals; international traders and sub-
artisanal diamond mining areas, and the ability or
sequent buyers on the other, should exert further due
political will of governments to meet those require-
diligence pressures on the trade.61
ments. In practice, this means that the scheme cer59
tifies diamonds of uncertain origin, a fact that should
We agree that the private sector should have “know
your customer” and due diligence provisions. The
57
See www.kimberleyprocess.com
58
Garrett, N, Mitchell, H. and Levin, E. (2009), Regulating Reality, Egmont Institution for International Relations and DFID
59
Smillie, Ian, Vote of No Confidence, Kimberley Process, 28 May 2009 http://
www.diamondintelligence.com/magazine/magazine.aspx?id=7895
60
ibid
61
Compare Global Witness (2009), When faced with a gun, what can you do,
Global Witness
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Reconfiguring approaches to the regional trade in minerals from Eastern DRC
mineral sector is not only problematic due to militarized mining, but also owing to the appalling labor
BOX 5: The Challenge of the Gold
Trade
and social abuses and environmental damage, which
Crucially, the suggested tracking and
tracing mechanisms fail to address
the elusive trade in gold - the primary
source of income for the FDLR – and
like the underground diamond tradeessentially impossible to monitor at a
sectoral level, perhaps even with massive investment into control measures. Gold is problematic for good reasons: the trade is essentially undetectable as it is mined from remote sites,
transported in small quantities and
sold informally. In addition, there are
significant and well-established trading networks in the neighboring countries of Burundi, Tanzania and Uganda,
which link this informal trade to the
global economy. The resilience of the
gold trade to track and trace measures has the potential to completely
undermine efforts to remove military
beneficiation from the mineral trade,
particularly by the FDLR, which controls extensive gold mining operations
in South Kivu.
The investigative approach currently
undertaken by the UN is likely to identify some of the individual traders who
are guilty of trading with the FDLR, but
not all of them, despite best efforts.1
In addition to the difficulty of meeting evidential requirements, a lack of
political will, and the ability for illegal
operators to quickly change business
fronts are also likely to hamper these
efforts.
are commonplace at the level of the mine. Transparency and observation of the supply chain will help
regulators observe and private sector actors appropriately engage with their suppliers to attempt positive reform. However, while due diligence is a necessary first step towards the professionalization of the
sector, in itself it is not enough to solve the problem
of military beneficiation in the mineral sector, which
do and will operate along informal channels. Rather
the due diligence mechanisms will serve to clarify
links between the already formal trade and legal actors, as well as encourage shadow economy actors to
formalize if correctly incentivized.
Currently, the risk-freest response for the private sector to be able to guarantee that its products do not
contain minerals that may have been associated with
conflict dynamics is to completely withdraw from purchasing from Eastern DRC. Rather than stopping the
trade, this will simply alter it as it creates a space for
other buyers, who are not subject to the same scrutiny
and pressure, to step in. Previous interventions into
the trade by the DRC’s Ministry of Mines in North Kivu,
like a trading ban on cassiterite from Walikale for safety concerns in the Bisie mine in 2008, merely resulted
in an alteration in the configuration of the trade. These
alterations included road transportation via South
Kivu, where the ban was not in effect.62 The suspension was lifted in April 2008 by the Governor of North
Kivu, after complaints by the local population that the
ban on minerals going out had effectively stopped
food supplies and equipment coming in to the area.63
Traxys, previously one of the largest purchasers of minerals from Eastern DRC has suggested that it will cease
buying from the DRC64, while some global electronics
1
In Trading Conflict for Development, we suggested that traders caught trading with the FDLR be prosecuted under terrorist legislation (as the FDLR has now been designated as a
terrorist organisation in the US).
62
Garrett, N. (2008), Walikale – Cassiterite Mining and Trade in North Kivu,
CASM
63
Global Witness, Faced with a Gun What Can You Do?, pg 53
64
Reuters, Traxys says will stop buying eastern Congo tin, 4 May 2009
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BOX 6: The Risk of Advocacy Self-Defeat: Perspectives of CSR managers1
The Corporate Social Responsibility managers of some of the leading electronics brands explained
their experiences with pressure group advocacy on the issue of minerals and conflict in Eastern
DRC in the following way:
“Imagine you are the CSR manager of a company that sells billions of dollars worth of electronic
goods and you know you have customers with a conscience. One day NGO representatives come
into your office and tell you that your product may contain conflict minerals. The next morning
you realize that the same NGO has started to talk to your customer through the press. The next
afternoon your sales manager tells you about a call from a sales representative, who was asked
whether it was true that the product was fuelling conflict.“
You don’t know what to answer. You don’t know Eastern DRC, the region the NGO is talking about,
because your company doesn’t source minerals directly. Unfortunately that also means you cannot rule out any negative externalities of the trade. In the meantime your PR department is going
ballistic, because your brand name and the word conflict are too often printed and mentioned in
the same sentence. The next morning you gather your troops in a meeting room and a response
is internally identified: we will urge our suppliers not to source from Eastern DRC; we will try to
put as much distance between our valuable brand and this conflict issue on the ground.
The next day a representative from the government development agency is in your office. He
explains the issue from a development perspective and suggests that the minerals are not only
associated with conflict, but also with livelihoods and basic survival. The suggestion is that instead of withdrawing from the trade, you should help to reform it. This is unknown territory for
you, but given that your company subscribes to a triple bottom line approach, you agree to a
dialogue. You speak to the CEOs of your competitors and you collectively agree to start your own
industry wide research into the subject. You are aware that a development process takes some
time, but you are willing to take the risk, so long as it is acknowledged that you are actively trying
to contribute to a solution.
Then the train hits the wall.
NGO campaigns start that hold your brand responsible for conflict and rape. Another pressure
group report openly suggests very stringent measure that could apply to companies and individuals found to be purchasing from the region, such as prosecution by the International Criminal
Court or being reprimanded by your home governments. At the same time your sales representative keeps calling your sales manager about a response to the question about your brand, conflict
and rape. The government development agency representative calls you the next day to ask you
about the extent that you can commit to a reform process. You remind him that you are the CSR
manager of one of the best known brands in the world, but that this is an industry wide problem.
You say to him that you have not decided yet, whether you want to commit the brand. Instead
you refer him to the industry representative body.
The next morning you gather your troops in the meeting room: You decide to urge your suppliers
to completely withdraw from Eastern DRC; you will put as much distance between your valuable
brand and this conflict issue on the ground. The risk of getting burned by the pressure groups is
too high to commit your brand to support a reform process.
1
A composite presentation based on a series of interviews with CSR managers of electronics company, May-July 2009
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
companies were privately suggesting they would sug-
• Security of tenure
gest to their suppliers to purchase elsewhere.
• Legal recognition and protection under the law
65
• Training and professionalisation68
The implication of a withdrawal of the formal private
sector, particularly of international actors, is primarily
For a further discussion on formalization of the ASM
the loss of a potential partner in the reform of the
sector, see the section on Uganda below.
sector.66 Given the right regulatory and market based
incentives, international purchasers in particular are
Where fledgling democratic institutions find it difficult
likely to respond to requests from downstream sup-
to assert themselves vis-à-vis entrenched interests, the
pliers, and so should be included in the process of
full development potential of natural resources will not
reform within the sector. In addition, the general resil-
be realized so long as security around natural resource
ience of the trade suggests that it will to continue re-
deposits is negotiated locally69 or a transformation is at-
gardless of control measures, but with further crimi-
tempted by applying economic sticks and carrots in the
nalization and informalization. In all likelihood, this
form of sanctions or similar.70 While these practices can
will be to the detriment of the development of the
offer some positive outcomes, in all likelihood the state
DRC and provide an opportunity for military actors
would be weakened further – continuing the negative
to expand their trading networks. Thus stakeholders
feedback loop of governance weakness.
should ensure that the private sector actors legally
trade, and encourage the adoption of due diligence
However, notwithstanding the continuing governance
in their operations, but ensure that the private sector
weakness and high risks, there are enough positive
remains positively engaged for the long term.
trends to say that the moment is right to help promote trade and productive economic activity, which
Medium- to Long term
intervention: Formalization of
the Artisanal Mining Sector
remains the primary focus to achieve development
through growth. A formal minerals sector would
clearly represent a ‘regional public good’71, with the
DRC potentially emerging as a positive economic
contributor to the development trajectories of itself
and its neighboring countries in the medium to long
The resilience of the artisanal mining sector to con-
term. In any such transformation there will always be
trol measures means that any sustainable interven-
losers. Those who have benefited from an absence of
tion in the ASM sector actually entails formalization
regulation, from the militarization of economic activ-
of the sector. Formalization is not a solution to the
67
security problem, but does enable a sustained inter-
68
Interview with Jennifer Hinton, 7 August 2009
action with the community allowing for certain formal
69
Garrett, Nicholas, Sergiou, Sylvia and Vlassenroot, Koen (2009) ‘Negotiated
peace for extortion: the case of Walikale territory in eastern DRC’, Journal of
Eastern African Studies, 3:1,1 — 21
70
Goodhand, Jonathan. “From War Economy to Peace Economy? Reconstruction
and State Building in Afghanistan.” Journal of International Affairs 58, no. 1
(2004): 15-175. A war economy includes both the production, mobilisation and
allocation of economic resources to sustain a conflict and economic strategies
of war aimed at the deliberate disempowerment of specific groups. A shadow
economy comprises actors who profit from war, but whose objective is not
necessarily to wage war, and who may have an interest in peace, so long as
they regard peace as compatible with their profit motive. A coping economy
comprises population groups whose economic decisions are motivated by the
imperative to cope or survive, rather than to profit.
71
Goodhand, Jonathan. “From War Economy to Peace Economy? Reconstruction
and State Building in Afghanistan.” Journal of International Affairs 58, no. 1
(2004): 15-175.
measures such as due diligence requirements to be
implemented in return for certain benefits, namely:
65
Various interviews and conversations with company and NGO representatives,
January 2009 – July 2009
66
Levin, E. (2003) The Business of War? Constructive Corporate Engagement in
the Coltan Trade in the Democratic Republic of Congo. Unpublished paper. At
http://www.resourceglobal.co.uk/index.php?option=com_docman&task=cat_
view&gid=36&Itemid=41.
67
Hinton, Jennifer, SMMRP Strategy paper, August 2009
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Small-Scale Mining
ity, and from the opportunities of unauthorized rent-
can best be described as a shadow economy, to a
seeking, will potentially become spoilers and try to
formal economy. Actors in a shadow economy in-
prevent change or find new ways around it.72 There
clude in particular those who profit from insecurity,
will also be others, much larger in number and all the
but whose objective is not necessarily to cause or
way through from miner to local official to exporter,
sustain insecurity and who may have an interest in
who have had to cope with or suffered from the in-
stability and development, so long as they regard
formality of mining and the trade in minerals, simply
stability and development as compatible with their
because the formal systems have become so cor-
profit motive.74Incentivizing the shadow economy to
rupted that they inhibit rather than facilitate mining
transfer their activities to the formal economy would
and trade.
help provide a local basis for formalizing the ‘coping
73
economy’ and contribute to both bottom-up reform
Implementing a process of reform, which engages
of governance structures and opportunities for those
with stakeholders in the trade, is a promising way
structures to strengthen.
to transform the trade, a large portion of which
6
4
A-legal trade
not invested in
formal economy
3
Vulnerable
actors unable &
unwilling to
formalize
Negative
Feedback loop
2
Further informalization,
criminalization, rent
seeking and economic
stagnation or decline
5
DRC fails
to benefit from
formal trade
1
6
Failure to
engage and
formalize a-legal
shadow economy
4
Previously a-legal
trade invested in formal
economy
Informal and
shadow economy
behavior
continues
3
Investment in
formal economy
provides opportunity
to strengthen
institutions
Positive
Feedback loop
Formalization
process creates
opportunities to
empower
vulnerable
stakeholders
2
Create incentives
and opportunities
for a-legal actors to
formalize
Further formalization and
rationalization of trade
5
1
Identity
opportunities
for engagement
with a-legal/
shadow
economy
actors
Graph 6: Governance feedback loops in Eastern DRC
72
73
Garrett, Nicholas, Sergiou, Sylvia and Vlassenroot, Koen (2009) ‘Negotiated
peace for extortion: the case of Walikale territory in eastern DRC’, Journal of
Eastern African Studies, 3:1,1 - 21
Sunman, H. and Bates, N., Trading for Peace, DFID, 2007
74
Goodhand, Jonathan. “From War Economy to Peace Economy? Reconstruction
and State Building in Afghanistan.” Journal of International Affairs 58, no. 1
(2004): 15-175.
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5. Beyond DRC:
Production and Trade
in the Great Lakes
ASM
Communities and
Small-Scale Mining
ASM
Communities and
Small-Scale Mining
A large part of the controversy over the exploitation
spective recent GoR actions, such as the mobilization
and trade in DRC’s minerals has focused on the role
of the domestic mining sector and moves by GoR to
of neighboring countries. The following sections in-
improve relationships with neighboring countries.
vestigate specific regional issues of relevance to
the trade in minerals from Eastern DRC, focusing
The assumption that Rwanda has no minerals in its
on Rwanda, Burundi, Uganda and Tanzania. Indeed,
own soil has contributed to a portrayal of the cur-
the rich mineral deposits in Eastern DRC were used
rent insecurity in the Kivus as a ‘resource conflict’.77
to finance both Rwanda’s and Uganda’s war efforts
In fact, discoveries of cassiterite, tantalum, tungsten
during the two past Congolese wars.75 Today we are
and gold in Rwanda date back to the 1930s. In the
seeing significantly different political and economic
Rwanda National Innovation and Competitiveness
strategies emerging.
(RNIC) Program, Rwanda’s minerals industry stakeholders have set the aim to “generate US$106m in
Rwanda, for example, has aligned its domestic min-
minerals industry export receipts in 2011, and cumu-
eral sector development strategy with the larger de-
lative receipts of US$387m over 2007-2011 for pub-
velopment strategy of diversifying its economy. It fo-
lic sector investments of US$14m, through export
cuses on service provision in the regional economies,
revenue generation for the export-focused metals
its domestic mining sector and the mining sector of
and precious stones sectors, and import substitu-
Eastern DRC. It also focuses on value-addition to its
tion for the domestically-focused quarries sector.”78In
domestic production and exports from Eastern DRC.
2007 Rwanda’s annual domestic cassiterite produc-
The implications of these two approaches suggest
tion was at 1,041 tons79, which compares to official
that an analysis of Rwanda’s and other neighboring
monthly exports of 1,138 tons from the Kivu prov-
countries’ engagement with the trade in minerals
inces in the same year.
is appropriate from at least two perspectives: first,
recognition of the headway that the countries have
While Rwanda’s current domestic production is small
made in terms of developing their own mining sec-
compared with that of the Kivus, the country has
tors is fitting. Second, stakeholders, need to under-
potential. The sector has been a major export con-
stand the challenges that the mineral traders based
tributor and job creator for Rwanda, with around $81
in neighboring countries pose to the development of
million USD in export revenues recorded in 200880
the DRC and the region as a whole.
and an estimated 35,000 mining sector jobs created.81 Despite the global financial crisis, the industry
and its secondary economies are expected to remain
Rwanda
significant contributors to the growth and increased
competitiveness of Rwanda.82
Rwanda’s ‘Vision 2020’
76
document presents both a
vision for the nation to strive for, and a clear frame-
77
Stephanie Nolan, ‘How rebels profit from blood and soil’, Globe and Mail, October 29, 2008
78
‘A new minerals industry strategy for Rwanda – Preparing for growth’, cabinet
paper, Government of Rwanda, Ministry of Land, Environment, Forestry, Water
and Mines (MINITERE) (2006),
79
Source: Government of Rwanda: OGMR(2008), Mineral Status of Rwanda,
OGMR
80
Reuters. Rwanda is set to triple mining revenues, available at http://www.
mineweb.net/mineweb/view/mineweb/en/page504?oid=75696&sn=Detail,
accessed 31/3/2009
work designed to advance development programs
for the country’s social and economic progress. In
the medium-term Rwanda aims to achieve significant
third sector growth and become a service-based
economy. Understanding this goal helps put into per-
75
Various interviews with Ministry of Natural Resources staff, October – December 2008
81
Source Government of Rwanda: OGMR(2008), Mineral Status of Rwanda,
OGMR
76
http://www.enterprise-development.org/download.aspx?id=548
82
Government of Rwanda, Ministry of Land, Environment, Forestry, Water and
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
In 2006 Rwanda’s Investment and Export Promo-
Inspiring Investor Interest
tions Agency (RIEPA) approved about $55million USD
worth of mining projects.83 The first fruits of Rwanda’s
Rwanda has worked hard to make its mining sector
domestic sector development strategy can best be
attractive to foreign investors. The success of this
seen in the wolfram (tungsten/wolframite) sector. It
strategy is largely due to macro dynamics, such as
is difficult to compare historical data, so not too much
political stability and predictability, as well as a will-
should be read into the significant positive trend
ingness to continually improve. On the microman-
shown in table 6 below, which depicts a wolfram pro-
agement level, three factors stand out:
duction increase of 3,341% since the inception of privatization in 2005. It is clear from our research that
a number of new private sector led ventures, such
as Wolfram Bergbau, Pyramid International, Rwanda
Allied Partners and Africa Primary Tungsten have
The establishment of the Rwanda
Investment and Export Promotion
Agency (RIEPA)
generated production increases through investment
RIEPA facilitates and assists the strengthening of the
in upgrading mining facilities.
supporting industry institutions of the mining sector
by solidifying the legal and regulatory framework, deTable 6: Rwanda domestic production of Wolframite,
Cassiterite, Tantalum and Gold: 1989, 1996, 2005,2007
1989
1996
2005
2007
Wolframite (tonnes)
184
22
87
2,988
Cassiterite (tonnes)
215
1141
Tantalum (tonnes)
8
490
Gold (kg)
17
Source: REDEMI production statistics 1989 – 2007 / Ministry of Natural
Resources Production Statistics 2007.As quoted in Freedman J.(2007). Pilot Project on Certification of Minerals Produced in Rwanda, BGR. Note:
REDEMI production includes output at 8 concessions plus a small amount
purchased by independent buyers from smaller, artisanal managed concessions.
veloping the Kigali Mining Campus, improve distribution channels, developing Rwanda’s national brand
and promoting opportunities in the Rwandan minerals sector.
The mining company ‘Pyramides’ has stated that
‘RIEPA is implementing its objectives successfully.
Examples of incentives are tax exemptions to upgrade production and processing capacities and the
voidance of import tax for mining machinery.’84 The
Association of Comptoirs in Goma sees RIEPA as a
model that should be implemented in the DRC where,
The increase in output is a positive signal, but there
for example, tax breaks should occur when investing
remain different levels of investment, production,
significantly into the mining sector.85
performance and social commitment among the investors. Therefore, if the full benefit of relying on private investors to help with fiscal receipts and social
development is to be realized, intelligent regulation
The establishment of the Rwanda
Geology and Mines Authority (OGMR)
coupled with the right incentive structures will have
The OGMR focuses on the administration, regulation,
to be considered priority areas.
support and promotion of the growth of the mining
sector, as well as the coordination of the activities of
Mines (MINITERE) (2006), ‘A new minerals industry strategy for Rwanda – Preparing for growth’, cabinet paper, p.3, 2006
83
http://allafrica.com/stories/200805270740.html
84
Mahmound Saleem, Interview with Pyramides, Nicholas Garrett (23 October
2008).
85
John Kanyoni - Federation of Goma based Traders, Interview, Nicholas Garrett
(24 October 2008).
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all the various other parties involved in the execution
which deterred serious investors, as opposed to 30+-
of minerals industry activities. The OGMR has a key
year exploitation licenses found in other countries.
role to play as the central coordinator for the indus-
The four-year rule attracted companies that were in-
try, liaising with other government bodies involved in
terested in short-term profiteering, as opposed to re-
the minerals sector to facilitate a coordinated and ef-
sponsible, long-term investors. The government’s in-
fective approach towards sector development.
tention to direct the country’s development is clearly
86
recognizable, as the majority of contracts signed so
far are performance-based, which reserve the gov-
The new mining law
ernment the right to review contracts if the company
does not perform as agreed87.
The new mining law is at parity with international
standards and ensures predictability in the application of the law for investors. This law removes some
of the direct regulatory obstacles such as the issuance of renewable four-year exploitation licenses,
Graph 7: Rwandan Cassiterite Producers and Exporters, 2007
86
Government of Rwanda, Ministry of Land, Environment, Forestry, Water and
Mines (MINITERE) (2006), ‘A new minerals industry strategy for Rwanda – Preparing for growth’, cabinet paper 2006
87
Interviews with mining sector stakeholders, Nicholas Garrett, Kigali, October
2008 – January 2009
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
Rwandan Exports by Trading Company
Table 7: Rwandan Based Trading Companies
Rwanda Cassiterite Exports +
2007
2008 (Jan to Sept)
kg
USD
USD/kg
kg
USD
USD/kg
Africa Primary Tungsten SARL
45,273
$206,381
$4.56
125,900
$1,309,961
$10.40
Afriprom SARL
10,399
$65,748
$6.32
-
-
-
Albert Mupenzi
10,399
$65,748
$6.32
-
-
-
Centrale Multi Services
178,488
$1,185,370
$6.64
313,548
$2,992,077
$9.54
Copimar
341,730
$2,205,682
$6.45
320,986
$3,475,488
$10.83
ETS Munsad (or Damien MUNYARUGERERO)
150,257
$1,038,937
$6.91
350,585
$3,369,419
$9.61
Eurotrade International
67,066
$377,799
$5.63
22,039
$225,550
$10.23
Imperial Trading Company SARL
204,312
$1,493,624
$7.31
-
-
-
2,156,357
$14,168,370
$6.57
1,079,078
$8,888,965
$8.24
Metrade Overseas
-
-
-
105,234
$1,051,457
$9.99
Minerals Supply Africa Ltd
-
-
-
429,539
$4,691,506
$10.92
32,280
$268,687
$8.32
19,568
$198,719
$10.16
Metal Processing Association (MPA) *
Multiserve Consult SARL
NRD Rwanda Ltd
62,749
$777,905
$12.40
44,000
$489,471
$11.12
Phoenix Metal SARL
345,978
$2,378,688
$6.88
101,942
$859,349
$8.43
Redemi
102,011
$715,525
$7.01
12,227
$126,218
$10.32
-
-
-
61,828
$1,186,783
$19.19
87,570
$668,887
$7.64
-
-
-
Rwanda Metals
Sodem SARL
Trading Services Logistics
338,850
$2,562,116
$7.56
225,900
$2,569,341
$11.37
Valence Kalinda
227,188
$1,585,168
$6.98
162,333
$1,878,532
$11.57
4,360,907
$29,764,636
$7.09
3,374,707
$33,312,837
$10.80
TOTAL
Source: Rwanda Ministry of Statistics, Disaggregated Statistics, 2007-2008 (Jan-Sept). + All exports declare origin Rwanda. Exchange rates: Original figures provided in
RWF. Exchange to USD are based on interbank averages for the year. 2007: 562RWF/USD; 2008: 557/USD. * Figures from the Ministry of Mines Office in Goma show that
MPA Gisenyi exported 1,068,000 kg of cassiterite from DR Congo to Rwanda in 2007
Table 8: Rwanda Exports of Wolfram & Tantalum 2007-2008
2007
2008 (Jan-Sept)
Domestic production
tonnes
USD
$/tonne
tonnes
USD
$/tonne
Wolframite
2998 tonnes *
2757
$18,907,207
$6,858
1259
$9,417,248
$7,480
Tantalum
490 tonnes *
1105
$18,156,879
$16,432
706
$14,166,851
$20,066
Source: National Institute of Statistics Rwanda, Disaggregated Export Data. * Source: REDEMI production statistics 1989 – 2007 / Ministry of Natural Resources Production
Statistics 2007. As quoted in Freedman J. (2007). Pilot Project on Certification of Minerals Produced in Rwanda, BGR.
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Box 7: Cross border policing: the need for cooperation
The comparison of the 2007 mineral export figures from the Provincial Division of Mines in Goma
with the official import statistics of Rwanda reveals a serious disconnect between the two countries’ reporting of the export and import of minerals.
Transit goods are not reported in the import and export statistics of the country,1 however, in
2007, Rwanda reported no imports of cassiterite from the DRC at all, despite cassiterite exports
by Rwanda-based traders of approximately 3,000 tons in excess of its indigenous production.
The same year, the Provincial Division of Mines in Goma officially reported that 1,068.8 tons of
cassiterite were officially exported from Goma to Rwanda by the Kivu Resources subsidiary MPA
Gisenyi. These imports are not reported in the Rwandan statistics. All other Congolese exports
are reported in DRC as having worldwide destinations, which are: Belgium (7,660 tones), UK (521
tones), Austria (68 tones), Holland (24 tones), Hong Kong (187 tones), Thailand (190 tones), China
(40 tones), Malaysia (308 tones), India (82 tones), and Russia (23 tones)2.
The fact that there are no import declarations in Rwanda, even for items declared at the Congolese side, combined with the fact that in 2007, 3,000 tons of cassiterite were exported by Rwandabased traders in excess of its indigenous production, suggests two possibilities:
The material is taxed at the Congolese border, but declared as transit goods before undergoing
processing and value addition in Rwanda and being exported as material of Rwandan origin.
The consignments are informally exported raw material from DRC that is declared as material of
Rwandan origin before export from Rwanda3.
From the information available to the researchers, it is not clear which one of these activities is
taking place. Yet, the fact that Rwanda-based traders process and export over 3,000 tones of –
potentially untaxed – cassiterite that in all likelihood originates from Eastern DRC, is a challenge
the Rwandan state will have to tackle head on. A reluctance to do so will continue to provide
opportunities for lobby groups to label the entire mineral trade in the Great Lakes region illegal,
which will naturally harm Rwanda’s own domestic mineral sector development strategy.
1
Interview with Ministry of Natural Resources Representatives, Kigali, (Nicholas Garrett), December 2008
2
Ndimubanzi, E. (2007), Annual Report 2007, Division of Mines of North Kivu
3
A small percentage of this figure could also be unrecorded imports from Burundi and/or Southern Uganda, however the likelihood that it originates from DRC is exponentially higher, given the significantly higher production volumes originating from
DRC.
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
Uganda88
As little as 10 years ago, the mining sector in Uganda
was still in its infancy. Despite a favorable geological
Uganda has undertaken a series of investments into
environment for mineral deposits and several identi-
its mining sector that has begun to turn the sector
fied prospect areas, Uganda’s mining sectors contribu-
from a marginal to a valuable contributor to GDP, par-
tion to the economy in 2000 accounted for less than
ticularly for foreign exchange. In particular, a project
0.7% of GDP and 7% of exports. Since 2003, a major
to engage and formalize the artisanal mining sector
initiative, known as The Sustainable Management of
could prove a valuable example for other countries in
Mineral Resources Project or “SMMRP”, has been
the region looking to develop theirs.
undertaken by the GoU, the World Bank, the African
Development Bank and Nordic Development Fund to
develop the mineral sector, with positive results.
BOX 8: The Ugandan Mining Sector
at a glance (2008)
Value
Taxes, Royalties, Fees, Rents: 3bn UGX
(2007)
Value of Mineral Production: 96bn UGX
(2007)
Employment
LSM: 2000 Ugandans,
ASM 150,000 Ugandans (60% women)
ASM and dependents as % of population 900,000 (2.87%)
Minerals mined:
Beryllium; clay; cobalt; columbium;
copper; gold; gypsum; iron ore; lime;
limestone; pozzolanic
materials; salt; sand; tin; tungsten; tantalum, columbium, vermiculite, garnet,
tourmaline, fluorite, kaolin, marble
Support of the artisanal mining sector can help workers like these
vastly improve the efficiency of their operations and make a better
living.
Minerals mined by ASM:
Gold, clay and aggregates, tin, tantalum, niobium, tungsten, stone, sand,
salt, semi-precious stones (2008)
88
This section draws primarily from the paper written by Hinton, Jennifer, SMMRP Strategy Paper August 2009
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The SMMRP was designed to compliment changes in
◦◦ Crucial for foreign investment, good gov-
Uganda’s legal framework which occurred under the
ernance of land use and resources such
Mining Policy (2001), Mining Act (2003) and Mining
as water
Regulations (2004). As a result of the development of
5. Improvement of management and Administra-
the sector issued licenses and non-tax revenue has
tion through training
more than doubled between 2004 and 2008 .
89
Supporting the Artisanal Mining Sector
Included in SMMRP is a significant component for
the artisanal mining sector, which directly employs
A significant part of the SMMRP program has been
more than 130,000 women and men in Uganda, with
the support and development of the artisanal mining
an additional 900,000 indirectly benefiting. ASM cur-
sector. Early on, it was recognized that the Ugandan
rently comprises more than 95% of the minerals sec-
ASM sector employs a significant number of people
tor workforce in Uganda and accounts for more than
and is growing further. This is primarily due to the fact
90% of the production of minerals.
that ASM is easy for unskilled persons to enter.
The SMMRP has five main components:
The Ugandan government saw efforts in the ASM sec-
1. Strengthening governance and transparency
tor directly impacting upon their goal to ease poverty
in the management of the minerals sector
in the country. Previous efforts in the 1990s by the
through the following initiatives
government to make ASM illegal failed, as they have
◦◦ Supportive legal framework for LSM
elsewhere, but effectively marginalized the sector
◦◦ Effective institutions
and denied miners and avenues to become part of
◦◦ Geological Information
the formal economy. The recognition that the sector
◦◦ Transparent mining cadastre
will remain as long as it is a viable economic alterna-
2. Small Scale Mining and Community Development through:
tive has lead to the development of suitable policies,
which include incentive based approaches towards
◦◦ Institutionalization of extension services
formalization of the sector.
◦◦ Capacity building for ASM advisory services
◦◦ Strengthening mining associations
The move towards a national strategy for the ad-
◦◦ Improving local capacity for mineral re-
vancement of the ASM sector has begun with the
source management
development of a set of policies and interventions
◦◦ Sharing Best practice
suited to the context of ASM in Uganda. Part of this
◦◦ Small grants
3. Environmental
and
strategy is the recognition that for ASM miners, the
Social
Management
Framework through
benefits of formalization must outweigh the cost of
licenses, fees and taxation to properly incentivize the
◦◦ Building Institutional Capacity
sector towards formalization and professionalization.
◦◦ Building partnerships between govern-
The SMMRP has identified the following critical needs
ment institutions
◦◦ Establish and streamline responsible environmental and social regulations, pro-
in the ASM sector:
1. Formalization through organizations and supportive policies, laws and regulations.
cedures and guidelines
4. Geo-information development through training
2. Technical training and assistance in finding
mineral deposits and environmentally-friendly,
safe mining and mineral processing methods.
89
Hinton, Jennifer, SMMRP Strategy Paper August 2009
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
3. Improved business skills for increased
profitability and access to financing for
necessary equipment and infrastructure.
4. Market development and increased income opportunities through value added
processing, fair pricing and improved linkages between producers and markets.
5. Gender mainstreaming in policies and
programs.
6. Increased support for marginalized,
opportunity-rich areas, like North and
North-eastern Uganda.
7. Expanded support for building minerals producers, given their critical role in
National Development vis-á-vis the construction sector.
8. Partnerships to support other priorities
related to community health and development.
9. Political will and institutional commitment to support all facets of the sector.
The SMMRP supported a Training and Awareness
Campaign for Artisanal and Small Scale Miners
in Uganda which began a formalization training
and awareness campaign for ASM miners. The
Box 9:The Gold Trade from DRC to Uganda
There are many examples of how ASM related
revenues stimulate other livelihood opportunities and not just in direct relation to service
provision around the mine itself. Significant
quantities of gold are currently exported
fraudulently from northern DRC to Uganda.
In a similar manner to the diamond traders of
West Africa, major traders in Uganda travel to
a major trade centre such as Dubai or Shanghai where they transform their gold into cash
and purchase containers worth of consumer
goods for freight transport via Mombasa, road
through Kenya and Uganda, back to the DRC.
There is currently a vibrant trade in motorbike
kits (110 per container), which are assembled by young men who are trained as skilled
workers in workshops all along the Aru/Arua
border. From Ariwara the bikes are sold all
over northern DRC and, even after transaction, shipping and assembly costs, they generate 50% profit for the trader. This is one
(perhaps unusual) example of repatriation of
economic opportunity, even though the initial
trade may be largely fraudulent.
campaign comprised a number of projects including the production of a handbook, training
workshops and community based training and
local officer sensitization.
In addition to policy specifically focused on the
ASM sector, the SMMRP has begun to address
the interaction between ASM and LSM. Although
previously thought of in competition with each
other, recent thinking regarding the interaction
between LSM and ASM has begun to propose
each of the sectors in fact have different requirements and can coexist in a mutually beneficial manner.
Finding ways to help ASM workers to develop
non-mining incomes and livelihoods must be
a fundamental part of any policy to address
ASM. The issue of scale, however, is an important consideration and this has major implications for the timeline for transition. The
number of people working in ASM is vast.
Many of them will, eventually, leave ASM of
their own accord when there are simply no
more accessible minerals to mine. Planned
programs for transition are currently only at
the local, project level, funded by individual
mining companies, development agencies, or
some national government initiatives. There is
little joined-up thinking, and even less by way
of a collaborative framework with targets, resources and milestones. (Hayes, 2008: 45)
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Burundi
The gold is then sold to traders in the capital, Bujumbura, and exported from there. The international air-
The economy is predominantly agricultural with more
port in Bujumbura is one of the most direct routes
than 90% of the population dependent on subsist-
through which gold from South Kivu leaves the region
ence agriculture. Economic growth depends on cof-
and reaches world markets.96
fee and tea exports, which account for 90% of foreign
exchange earnings (2008).90 The country’s domestic
Global Witness have undertaken some preliminary
mining sector is relatively small and entirely arti-
field research into the mining sector in Burundi and
sanal, with the World Bank’s Community and Small-
the following paragraph is adapted from their 2009
Scale Mining Secretariat (CASM) estimating the total
report “Faced with a gun, what can you do”97: Gov-
number of artisanal miners to be less than 50,00091,
ernment statistics suggest that in 2007, Burundi pro-
with Global Witness suggesting around 100,000.
92
duced 50.6 tons of cassiterite, 51.5 tons of coltan,
Including dependents and people involved in the
443.4 tons of wolframite and 2,422.75 kg of gold. Be-
trade in minerals, about 300,000 persons (3.45% of
tween January and September 2008, it produced 33
the population) depend on the mining sector for their
tons of cassiterite, 91.28 tons of coltan, 342.27 tons
livelihood. The principle minerals mined and traded
of wolframite and 1,826.85 kg of gold.98 However,
are gold94; nickel; peat; tantalum; tin; and tungsten,
the director of the Burundian Mines Directorate ex-
but production estimates are difficult to ascertain,
plained that these figures were collected at the point
given the government’s capacity constraints in the
of export and therefore refer to Burundi’s mineral
collection of reliable production figures.
exports rather than its domestic production.99 Glo-
93
95
bal Witness also obtained extracts of export statisBurundi is an important export transit hub for miner-
tics collected by the Burundian customs authorities,
als produced in South Kivu, some of which originate
which provide different figures for mineral exports; in
from FDLR and FARDC controlled mines. Burundian
some cases, these are higher, in others, lower than
customs controls face the same capacity constraints
those collected by the Ministry of Mines.
as their Congolese counterparts, but given the easily concealable nature of gold, which is the principal
The discrepancies could be explained in part by a
export mineral from South Kivu by value, a large per-
high level of fraud. The government’s own report on
centage is fraudulently exported into Burundi and
the mining sector states: “Fraud is so intense that the
Tanzania across Lake Tanganyika, or through the
production recorded by state agencies only repre-
many informal crossing points along the Ruzizi river
sents a tiny part of the reality.”100 The report states
that marks the Burundi-DRC border north of the lake.
that cross-border trade between Burundi and the
DRC has always existed and that minerals originating
90
145
https://www.cia.gov/library/publications/the-world-factbook/geos/
by.html, accessed 30/7/2009
91
Hayes, K. (2008), Artisanal and Small-Scale Mining and Livelihoods in Africa,
Common Fund For Commodities, p. 56
92
Global Witness interview with Damien Mbonicuye, Director, Direction des
Mines et Carrieres, Ministry of Water, Energy and Mines, Bujumbura, 12 March
2009, quoted in Compare Global Witness (2009), When faced with a gun, what
can you do?, Global Witness, p. 73
from the DRC, such as gold, cassiterite and coltan,
96
Compare Global Witness (2009), When faced with a gun, what can you do?,
Global Witness, p. 73
97
Compare Global Witness (2009), When faced with a gun, what can you do?,
Global Witness, p. 74
98
Ministry of Water, Energy and Mines, “Production miniere du Burundi”, September 2008.
99
93
Hayes, K. (2008), Artisanal and Small-Scale Mining and Livelihoods in Africa,
Common Fund For Commodities, p. 56
94
http://minerals.usgs.gov/minerals/pubs/country/2000/bycnmimpfrrwsemyb00.pdf, accessed 30/07/2009
Global Witness interview with Damien Mbonicuye, Director, Direction des
Mines et Carrieres, Ministry of Water, Energy and Mines, Bujumbura, 12 March
2009.
95
http://minerals.usgs.gov/minerals/pubs/country/2006/myb3-2006-by.pdf, accessed 30/07/2009
100 Ministry of Water, Energy and Mines, “Production miniere du Burundi”, September 2008.
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60
Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
transit through the port and airport in Bujumbura be-
dependent on ASM in their livelihood.103 The princi-
fore being exported further afield. It does not provide
ple minerals mined by the country’s ASM sector are
any figures or indication of the proportion of Congo-
diamonds, gemstones, gold, gypsum, lime, limestone,
lese minerals passing through Burundi.
salt, sand, stone (crushed and dimension), and tanzanite (2006), with artisanal miners accounting for
We suggest the fact that the principle mineral traded
most of the country’s colored gemstone produc-
by the FDLR is easily concealable high value gold and
tion.104 ASM features in Tanzania’s Poverty Reduction
the Burundian customs capacities are amongst the
Strategy Paper, where the government pledges to de-
poorest in the world, it is utopian to assume that a
velop ASM technologies, to develop a system to en-
stringent control of the informal gold trade is possible
sure safe and sustainable ASM, to train a minimum of
in the short- or medium-term. It is more promising in
90% of registered ASM workers in safety awareness
the short- to medium-term to focus on the causes of
by 2010 through safety awareness campaigns and
the conflict, instead of its symptoms (See chapter 4
monitoring visits.105 As in the DRC, ASM in Tanzania is
on trade controls above). While a control system may
at the one hand a poverty driven coping mechanism,
go a long way to formalize the international trade in
and on the other hand a comparatively more lucra-
gold, for the specific case of the Great Lakes Region it
tive profession than e.g. agriculture.106 A USAID-spon-
will be more effective to stop the war and free South
sored study in Tanzania confirmed that ASM miners
Kivu’s gold mines of the grip of the FDLR, than it is
earned on average six times more than the average
to spend millions of dollars on a control system that
wage from agricultural labor.107
has no chance to be effective given the realities on
The Mererani-based Good Hope Program is one ini-
the ground.
tiative set up to address the poverty dimension by
trying to rehabilitate child miners and impoverished
Tanzania
families. Good Hope provides skills training such
as carpentry, tailoring and auto mechanics. By do-
The Tanzanian economy depends on agriculture,
ing this, it helps families break the dependence on
which accounts for more than 40% of GDP, provides
tanzanite mining however it can only reach perhaps
85% of exports and employs 80% of the population.
101
10% of its target population and progress may only
In 2006, the country was the world’s only producer of
be temporary as the fundamental causes of poverty
tanzanite. It also played a significant role in the global
remain and success is fragile.108
production of gold, accounting for nearly 2% of the
world’s gold output. Other domestically significant
mining and mineral processing operations included
cement and diamond.102
The Tanzanian Government suggests that up to
1,500,000 persons are active in its domestic artisanal
mining sector, including of 5 dependents, this means
that 22.38% of the Tanzanian population could be
101 https://www.cia.gov/library/publications/the-world-factbook/geos/tz.html,
quoted in Hayes, K. (2008), Artisanal and Small-Scale Mining and Livelihoods
in Africa, Common Fund For Commodities, p. 64
102 Hayes, K. (2008), Artisanal and Small-Scale Mining and Livelihoods in Africa,
Common Fund For Commodities, p. 64
103 Hayes, K. (2008), Artisanal and Small-Scale Mining and Livelihoods in Africa,
Common Fund For Commodities, p. 11
104 Hayes, K. (2008), Artisanal and Small-Scale Mining and Livelihoods in Africa,
Common Fund For Commodities, p. 11
105 Hayes, K. (2008), Artisanal and Small-Scale Mining and Livelihoods in Africa,
Common Fund For Commodities, p. 19
106 Nicholas Garrett, interview with Tanzanian Government official, Mwanza,
January 2009
107 Phillips, L.C., H.Semboja, G.P.Shukla et al., (2001) Tanzania’sPrecious Minerals
Boom: Issues in Mining and Marketing, African. Economic Policy Discussion
Paper Number 68, Equity and Growth through Economic Research (EAGER), as
quoted in Hayes, K. (2008), Artisanal and Small-Scale Mining and Livelihoods
in Africa, Common Fund For Commodities, p. 46
108 IRIN News (2006) Gem Slaves: Tanzanite’s child labour. 06 Sep. www.globalexchange.org, quoted in Hayes, K. (2008), Artisanal and Small-Scale Mining and
Livelihoods in Africa, Common Fund For Commodities, p. 20
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ASM
Communities and
Small-Scale Mining
The principle relevance of Tanzania’s ASM sector to
ernment and the markets rather than trying to cre-
the trade in minerals from Eastern DRC is its func-
ate a shared economic livelihood model. Examples
tion as a destination for gold fraudulently exported
include the Small Miners Association of Tanzania.
from South Kivu. In interviews conducted in Mwanza
These associations have consolidated their mem-
and Mbeya it became evident that large quantities
bership and impact through the creation of umbrella
of gold from South Kivu arrive on a regular basis and
bodies such as the Federation of Mining Associations
are laundered into legitimate Tanzanian gold mining
of Tanzania (FEDEMA) and the Regional Mining As-
This presents a problem for
sociation (REMA).112 These groupings may give raise
the Tanzanian government and gold mining industry,
to indigenous capital formation and could therefore
as Tanzania has made considerable inroads into as-
be a domestic catalyst of a higher development con-
sisting and formalizing its domestic ASM gold sector.
tribution by the Tanzanian SSM sector and a path to
On the international level, for example, Tanzania is
upgrade from ASM to SSM activity.
and trading operations.
109
a member of the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development,
Particularly for some of the more progressive and
which acts as an advisory and consultative body to
potentially developmentally effective collaborative
promote the contribution of mining, minerals and
projects between LSM and ASM in Tanzania, the
metals to sustainable development. The Forum will
fraudulent gold exports from South Kivu could be-
remain in existence until the end of 2010 unless there
come a reputational issue. In Tanzania, foreign com-
is an explicit request that it should continue thereaf-
panies have entered into agreement with small-scale
ter and it is a platform through which collaborative
miners after re-licensing agreements. For example, at
action on ASM could be progressed.110
the Tembo Mine in the Geita district, an LSM com-
Further to the successes of the SMMRP in Uganda,
pany entered into an agreement with a small-scale
the World Bank has granted an International Devel-
miner to participate fully in mining, ore processing
opment Association credit of $50m to the Govern-
and marketing of products.113 These arrangements
ment of Tanzania to have them implement an SMMRP
are laudable development initiatives, but can also
there. The project’s objective is “to strengthen the
be easily targeted by gold laundering activities. It is
government’s capacity to manage the mineral sec-
therefore in Tanzania’s best interest that the milita-
tor to improve the socio-economic impacts of large
rization of the gold mines in South Kivu is ended, so
and small-scale mining and enhance private local and
that it can continue its good work with the domestic
foreign investment” through initiatives in supporting
ASM sector without fears of international reputation
transparency and promoting international good prac-
damaging advocacy.
tice in ensuring mining sector development.
111
There are examples of effective associations in the
small-scale mining sector, which represent the col-
.
lective business interests of their members to gov-
109 Nicholas Garrett, interview with Tanzanian gold trader, Mwanza, January 2009;
Estelle Levin, interview with Tanzanian gold trader, December 2007.
110 Hayes, K. (2008), Artisanal and Small-Scale Mining and Livelihoods in Africa,
Common Fund For Commodities, p. 26
111 World Bank (2009) Tanzania: World Bank Approves US$50 million for Sustainable Management of Mineral Resources Project (SMMRP), press release no.
2009/387/AFR, 9th July 2009. At http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:22207963~pagePK:64257043~piPK:437376~theSit
ePK:4607,00.html?cid=3001.
112 Hayes, K. (2008), Artisanal and Small-Scale Mining and Livelihoods in Africa,
Common Fund For Commodities, p. 36
113 Dreschler, Bernd (2002) Small-scale Mining and Sustainable Development
within the SADC Region. Santren/ITDG. Commissioned by MMSD project of
IIED, as quoted in Hayes, K. (2008), Artisanal and Small-Scale Mining and Livelihoods in Africa, Common Fund For Commodities, p. 24
Resource Consulting Services
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6. Regional Economic
Integration
ASM
Communities and
Small-Scale Mining
ASM
Communities and
Small-Scale Mining
The researchers have not seen recent evidence that
run companies operating in the DRC as long as they,
would support oft-voiced rumors that regional gov-
along with all other companies, conduct their opera-
ernments are actively backing or pursuing mining
tions in accordance with the law.
interests in Eastern DRC. The researchers make no
claim to second guess the internal policy of any re-
As complicated as the relationship between the DRC
gional government, but it is worth noting that a pat-
and its neighbors may be, their development trajec-
tern of heedless exploitation of DRC’s minerals would
tories are mutually dependent. While Uganda and
appear to be inconsistent with dynamics of regional
Tanzania have reasonably diversified economies,
integration (discussed below) and particularly Rwan-
Rwanda’s economic progress depends largely on de-
da’s stated vision to develop its service oriented
veloping a highly diversified service sector to match
economy, which includes improving relations with its
the raw potential of its much larger neighbor. There-
neighbors, and has been demonstrated by the recent
fore, for reasons of development as well as security,
military cooperation between Rwanda and DRC.
the neighboring countries have a significant interest
in ensuring that eastern DRC becomes a stable and
From a development perspective, neighboring countries
prosperous country.
have an inherent interest in a stable Eastern DRC as:
• They would have a larger export market for their
export products.
• They would be able to source imports from DRC
more easily, widely and cheaply.
Regional Integration Framing
Reform
• Their service sectors would be able to expand fi-
The DRC’s economic potential, its natural resource
nancial, insurance, and logistical, as well as exten-
wealth and its geopolitical significance make it an
sion services to economic operators in DRC.
important player in the centre of the African continent and it provides an important focal point for its
In the context of the 3T minerals, the real challenge is
direct neighbors. The relationships between the DRC
to align value addition activities in neighboring coun-
and most of the sub-Saharan states are character-
tries with a sector development strategy for Eastern
ized by a mix of resistance and attraction, so that it
DRC. Presently producers in Eastern DRC are unable
is not surprising that the DRC is a member of four
to add value to their products for lack of affordable
regional economic commissions (RECs) and a mul-
and reliable energy, inadequate infrastructure, and
titude of regional intergovernmental bodies.114While
insecurity, providing neighboring countries with a sig-
analysts rightly suggest the “DRC has not been able
nificant head start to fill this gap in the regional mar-
to strengthen its regional position despite efforts to
ket. So long as the correct payments have been made
promote peace that have eased tensions and cre-
to the DRC, value addition processes in any other re-
ated new opportunities for regional integration”115, it
gional country are not in contravention of the law and
is nevertheless important to frame trade reform in
mirror common practices in other commodity trading
minerals from eastern DRC in the context of ongo-
chains around the world.
ing initiatives in regional integration. This is not only
the case because the trade has significant regional
There are also a number of companies currently op-
development implications, but because regional inte-
erating in Eastern DRC that have ties to neighboring
countries, whether owned or run by their nationals
or based in or trading through the neighboring countries. There is nothing wrong per se with any foreign
114
T Stevens, H Hoebeke, K Vlassenroot (2008), Political economy of regionalisation in Central Africa, iss.co.za, accessed 24/7/2009
115
T Stevens, H Hoebeke, K Vlassenroot (2008), Political economy of regionalisation in Central Africa, iss.co.za, accessed 24/7/2009, p. 166
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
gration in Eastern and Southern Africa is accelerating
networks and involved a multitude of state and non-
and strengthening.
state actors, all aimed at illegally exploiting and profiting from the Congolese natural resources (MacLean
Since the 1990s regional integration in Africa has
2003; Taylor 2003). The stabilization of other parts of the
placed emphasis on the development of thematic in-
DRC, such as Katanga, has seen foreign investors devel-
tegration and open market enlargement as a means of
oping formal and official trade and economic activities
consolidating national economic policy shifts towards
and formal regional integration has been identified as a
greater liberalization, market orientation, competitive-
suitable tool for facilitating the import of raw materials
ness and efficiency. To this effect the African Economic
and reaching the DRC’s market.117 The principal RECs of
Community (AEC) was established as an organization
relevance to the regional trade in minerals from eastern
of the African Union. The AEC’s stated goals include
DRC are the East African Community (EAC), the Com-
the creation of free trade areas, customs unions, a
mon Market for Eastern and Southern Africa (COME-
single market, a central bank, and a common cur-
SA), and the Southern African Development Commu-
rency thus establishing an economic and monetary
nity (SADC). The DRC is a member of both SADC and
union. These ambitious goals were first attempted
COMESA, while the trade routes from Eastern DRC lead
at the regional and sub-regional level through the es-
through EAC territory. The EAC, COMESA and SADC cur-
tablishment and strengthening of multiple regional
rently have a combined population of 527 million and
economic blocs, also known as Regional Economic
combined GDP of US$625 billion.118
Commissions (RECs).Most of these RECs form the “pillars” of the AEC, many of which also have an overlap
At a first EAC-SADC-COMESA Tripartite Summit held
in some of their member states. The DRC simultane-
in 2008 the RECsagreed on a program of harmoniza-
ously belongs to four (RECs), namely CEEAC (Commu-
tion of trading arrangements amongst the three re-
nauté Economique des Etats de l’AfriqueCentrale, or
gional economic communities (RECs), free movement
Economic Community of Central African States), SADC
of business persons, joint implementation of inter-re-
(South African Development Community), COMESA
gional infrastructure programs as well as institutional
(Common Market for Eastern and Southern Africa)
arrangements on the basis of which the three RECs
and CEPGL (CommunautéEconomique des Pays des
would foster cooperation. In addition, the Tripartite
GrandsLacs or Economic Community of the Great
Summit resolved that the three RECs should imme-
Lakes Countries). Stevens, Hoebeke and Vlassenroot
diately start working towards a merger into a single
suggest that it appears that the DRC’s political deci-
REC with the objective of fast tracking the attainment
sion to join different regional bodies has been mainly
of the AEC as outlined by the Abuja Treaty, which
driven by short-term and incidental political logic and
may significantly some of the trading obstacles out-
alliances, and not by taking into account long-term in-
lined in the trade section above, and improve eastern
terests, which is indicative of the problematic nature
DRC’s producers access to export markets, while it
of governance in the DRC.116
would also facilitate imports, eastern DRC currently
depends upon.119
Congolese natural resources remain at the heart of regional politics, as was illustrated during the past conflicts, when these resources were mainly exploited by
regionalized, informal and illicit networks. This regionalism ‘from below’ included trans-border and clandestine
116
T Stevens, H Hoebeke, K Vlassenroot (2008), Political economy of regionalisation in Central Africa, iss.co.za, accessed 24/7/2009, p. 168
117
T Stevens, H Hoebeke, K Vlassenroot (2008), Political economy of regionalisation in Central Africa, iss.co.za, accessed 24/7/2009, p. 174
118
http://knowledge.uneca.org/member-states/observatory-on-regional-integration/regional-economic-commissions-in-africa/eac-comesa-sadc/historic-eaccomesa-sadc-tripartite-summit, accessed 18/7/2009
119
http://knowledge.uneca.org/member-states/observatory-on-regional-integration/regional-economic-commissions-in-africa/eac-comesa-sadc/historic-eaccomesa-sadc-tripartite-summit, accessed 18/7/2009
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ASM
Communities and
Small-Scale Mining
Table 9: Regional Economic Commissions
East African Community
COMESA
SADC
EAC
Founding
Members
Angola
Founding
States
Angola
1980
Founding
States
Kenya
2001
Burundi
Botswana
Tanzania
Comoros
Lesotho
Uganda
Congo-Kinshasa
Malawi
Joined Later
Burundi
2007
Djibouti
Mozambique
Rwanda
2007
Eritrea
Swaziland
Ethiopia
Tanzania
Kenya
Zambia
Madagascar
Zimbabwe
Malawi
Joined later
Namibia
1990
Mauritius
South Africa
1990
Rwanda
Mauritius
1995
Sudan
Congo-Kinshasa
1997
Swaziland
Seychelles
1997
Uganda
Madagascar
2005
Applicant
Countries
Rwanda
2000
Zambia
Zimbabwe
Joined Later
Egypt
1999
Seychelles
2001
Libya
2006
Former
Members
Lesotho
1994-1997
Mozambique
1994-1997
Tanzania
1994-2000
Namibia
1994-2004
Communauté Économique des
Étatsd’AfriqueCentrale
CEPGL
Members
Burundi
Members
Burundi
Cameroon
Democratic Republic of the Congo
Central African Republic
Rwanda
Chad
CEEAC
Democratic Republic of the Congo
Equatorial Guinea
Gabon
Republic of Congo
Rwanda
Sao Tome and Prin
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Economic Community of the Great Lakes
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
Yet, instead of capitalizing on this economic opportunity
lomatic relations between the DRC and Rwanda.124The
Kinshasa is still emphasizing integration within the Cen-
RECs have identified the trade in minerals as an en-
tral Africa Region, regardless of the integration process
gagement area. COMESA has taken the lead through
amongst the Central African countries being hindered
the Trading for Peace project (also supported by DFID
by serious political leadership. COMESA, SADC and par-
and USAID). The project has the objective of enhancing
ticularly the EAC are presently being perceived as more
sustainable and equitable use of natural resources in
dynamic, which is mirrored in COMESA’s successful or-
the DRC, in the interest of regional stability and poverty
ganization of an investment conference in Brussels in
eradication.125 Trading for Peace has evolved from an
November 2008.120 It is therefore important for the DRC
initial research phase to holding cross-border forums
to revisit its regional integration priorities and establish
on capacity building and cross-border trade facilitation
a strategy towards regional integration that makes eco-
at various border posts between the DRC and Zambia,
nomic sense. Current CAMEC intra-trade level is limited
Burundi, Rwanda and Uganda. In addition the project
and cannot match the economic opportunities of SADC,
hosted two parliamentarian forums to enhance their
This has been confirmed by
role, particularly in advocating for the implementation
a recent survey on regional economic potential, which
of the decisions that are made pertaining to the ob-
was carried out at the request of the GoDRC, which
jectives of the project.126 Training seminars for DRC’s
concludes that COMESA integration represents the
customs officials and cross-border traders were held to
COMESA and the EAC.
121
The
create greater understanding and awareness of good
present multi-membership of the DRC in a number of
governance at the border. These opportunities for in-
regional bodies places serious constraints on the DRC
teraction at the various levels between countries of the
and has several drawbacks, among them high costs,
Great Lakes region have helped to enhance relation-
membership arrears, division of meager diplomatic,
ships between the different countries, as noted by sev-
economic, human capacities and energies, conflicting
eral participants at the various cross border forums.127
best option in terms of economic development.
122
With the
The project will now focus on trade reform and support
SADC, COMESA, EAC tripartite summit, it may well be
measures to improve access to finance, reconstructing
that dynamic East African regional integration may
agriculture, making timber trade sustainable, and ad-
prove a powerful force that will provide strong eco-
dressing the regional energy deficit.128
interests and a lack of external credibility.
123
nomic incentives, which may serve to overcome some
of the political legacies, which have so far proven an ob-
The positive experiences of the Trading for Peace
stacle to more direct economic cooperation between
project show that the RECs could maximize symbiotic
the DRC and its eastern neighbors. In light of this there
growth across their constituency by aligning their do-
have been diplomatic moves to overcome some of the
mestic resource mobilization strategies with a view
political tensions that have previously marred the re-
to establishing an integrated regional resource mobi-
lationship between the DRC and its eastern neighbors,
lization strategy. This is an ambitious task that would
such as the real possibility of reestablishment of dip-
have to build on an understanding of the sector development priorities of the regional countries.129 Each
120 Comesa News Vol. 5, January 2009, p. 19
121 The exports and imports within the community represent 0,8 per cent and 1,4
per cent respectively of the total trade (Fontagne et al 2008), quoted in T Stevens, H Hoebeke, K Vlassenroot (2008), Political economy of regionalisation in
Central Africa, iss.co.za, accessed 24/7/2009, p. 184
124 http://www.msnbc.msn.com/id/29454497/, accessed 27/7/2009
122 Interview with a government offi cial in April 2008, quoted in T Stevens, H
Hoebeke, K Vlassenroot (2008), Political economy of regionalisation in Central
Africa, is s.co.za, accessed 24/7/2009, p. 184
127 http://eastafrica.usaid.gov/en/Article.1201.aspx
123 T Stevens, H Hoebeke, K Vlassenroot (2008), Political economy of regionalisation in Central Africa, iss.co.za, accessed 24/7/2009, p. 180
129 After WWII, France and Germany integrated their coal and steel industries
through the European Coal and Steel Community, partly as a peace building exer-
125 http://eastafrica.usaid.gov/en/Article.1201.aspx, accessed 18/7/2009
126 http://eastafrica.usaid.gov/en/Article.1201.aspx
128 Johnson, D., Sunman, H., Bates, N. and Banfield, J. (2009), Trading for Peace –
An agenda of reform, DFID
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ASM
Communities and
Small-Scale Mining
Graph 8: Perceived Geogrpahical Coverage of the EAC - COMESA - SADC Free Trade Area (FTA). Source: UNECA, 2008
government involved will have to begin to work with
This push towards regional trade liberalization again
groups of its own private sector actors. It is in the do-
supports the argument that neighboring countries
mestic domain where governments can incentivize
have an interest in a stable DRC, which is a competent
members of the shadow economy to become formal.
and stable trading partner. Of course liberalization in
itself will not lead to economic development in DRC
Among other decisions, the SADC, COMESA, EAC tri-
and will have to be cushioned in a way that allows the
partite summit approved the expeditious establish-
country to benefit from its natural resource wealth.
ment of a Free Trade Area (FTA) encompassing the
However, the liberalization drive is further evidence
Member/Partner States of the 3 RECs with the ultimate
that suggestions that neighboring countries have an
goal of establishing a single Customs Union (see map
interest in instability in Eastern DRC so to facilitate the
of the geographical distribution of the FTA/Customs
looting of natural wealth as has occurred during the
Union below). The three RECs will undertake a study
two recent DRC wars is an outdated analytical lens,
incorporating, among other things, the development of
which critically fails to take into consideration the sig-
the roadmap, within 6 months, for the establishment
nificant political processes on the regional level. Insist-
of the FTA which would take into account the principle
ing on the looting analysis thus presents a direct ob-
of variable geometry; the legal and institutional frame-
stacle to political progress and inhibits the search for a
work to underpin the FTA; and measures to facilitate
lasting solution to the conflict in Eastern DRC.
the movement of business persons across the RECs.130
cise and partly in order to help interlink their economies further for mutual benefit.
130 http://knowledge.uneca.org/member-states/observatory-on-regional-integra-
tion/regional-economic-commissions-in-africa/eac-comesa-sadc/historic-eaccomesa-sadc-tripartite-summit, accessed 18/7/2009
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7. The Way Ahead:
Strategic thinking on
trade-led development
in the Great Lakes
region
ASM
Communities and
Small-Scale Mining
ASM
Communities and
Small-Scale Mining
Trade is a necessary catalyst for development in the
tions and produced a particular individualistic logic
Great Lakes Region. Investing in the creation of an
to economic and political relations. At the same time,
economic and political environment that enables le-
most of the region’s infrastructure has at one time or
gitimate cross-border trade to flourish pays dividends
another been destroyed by war; and in Eastern DRC
not just for the traders, but also for governments and
even today, basic needs of reconstruction remain un-
communities throughout the region. The immediate
met, even though the steps needed to meet them are
dividend is economic, but the long-term reward may
clear to see.
well be peaceful co-existence.
The previous sections of this report have already
Many people suggest that an absence of political will
raised the need to address governance fragility and
and the existence of insecurity are too big an obsta-
the contested monopoly of violence that results in
cle to overcome for the trade in natural resources
insecurity particularly in the mining areas. Further
to contribute to regional development. On the other
steps go far beyond governance and security sector
hand others have suggested that taking this view
reform and will have to focus on the following key ar-
provides an easy excuse to look towards others to
eas to increase the trade’s developmental benefit133:
solve the problem and all too convenient justification for inactivity in promoting trade and economic
• Lack of sector development strategy in the DRC
What is therefore needed is the develop-
(prevents investment/reduces development op-
activity.
131
ment of a vision that will generate the necessary political will; a vision that is based on pragmatism, given
portunities)
• Insufficient, costly and unreliable energy (pre-
the weakness of the prevalent institutions and the
vents value addition)
budget constraints faced by the GoDRC, its neighbors,
• Dilapidated infrastructure (prevents cost and time
the RECs, donors and the private sector. It is particu-
efficient transport, allows for military beneficia-
larly the budget constraints facing all actors involved,
tion, and causes monopolistic/oligopolistic rural
which have led us to focus the vast majority of this
minerals market that work to the detriment of ar-
report on how to conflict-sensitively formalize and
tisanal miners and communities)
make manageable the minerals trade so that it can
• Operational difficulties of the export regimes (cor-
contribute to a resource base that can be utilized to
ruption/inefficient export institutions provide in-
fund some of the more profound necessary invest-
centives to informalise)
ments supporting economic recovery and restoring
• Severely damaged agricultural infrastructure (pre-
basic infrastructure and services, which this section
alludes to.
vents livelihood alternatives)
• Very limited access to finance (Prevents equitable
production)
The development of a vision can be started quickly,
while its implementation will involve the long-term
As with trade reform discussed in the previous chap-
commitment of all stakeholders. In some cases it will
ters, the private sector has a central role to play also
not just be a question of reforming systems, but of
in helping to address the above issues. Public-private
Generations of mismanagement
partnerships could be one way of engaging the pri-
changing cultures.
132
and of arbitrary use of state power for personal or
vate sector constructively.
communal gain have left deep scars on social rela-
131
International Alert (2008), Report of Great Lakes Cross-Border Trade Forum,
held in Goma, DRC (July 8-11 2008), International Alert
132
Johnson, D. (2009), Trading for Peace – Phase 3 Report, DFID
133
Readers may also want to refer to the DFID, COMESA, USAID Trading for Peace
Phase three report published in March 2009
Resource Consulting Services
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
Mineral Sector Development
Strategy
• Set Objectives
◦◦ Reach agreement on aggressive but re-
The GoDRC has currently no clear mineral sector de-
alistic growth targets
◦◦ Review potential economic impact of
velopment strategy for Eastern DRC’s deposits; this
inhibits the development of the sector. We suggest
sector objectives
that a strategy built around strategic imperatives
would be the most appropriate means of defining the
• Understand Customer & Investor Needs
future path of Eastern DRC’s mineral deposits. We re◦◦ Conduct research to identify and priori-
gard political and social stability not as prerequisites
to a strategy development process, but as elements
tize attractive customer segments
that could be supported by strategy implementation.
◦◦ Collect and synthesize relevant informa-
The PROMINES program is an ideal forum for the es-
tion to develop profile and needs of tar-
tablishment of such a strategy.
get customers (i.e., surveys and secondary sources)
Need to develop a mineral sector
development strategy for Eastern DRC
• Include strategies for developing vulnerable
stakeholders
In the short-term:
◦◦ Identify vulnerable stakeholders in the
• Relevant, high ranking members in the DRC government should be approached to champion the
mining sector
development and implementation of the strat-
◦◦ Research and include strategies for in-
egy. The strategic unit COPIREP in the Ministry of
cluding these groups in the development
Mines could take this forward with the help of the
of the sector
World Bank in the framework of the PROMINES
mining sector reform program.
• Articulate Competitive Positioning
• The strategy should be developed through a mul◦◦ Articulate the unique way forward for
ti-stakeholder consultation process and led by a
multi-stakeholder working group
the sector vis-à-vis other mineral pro-
• Essential steps include:
ducing countries
◦◦ Map stakeholders
• Develop Action Guidelines and Implement and
◦◦ Analyze Current Situation and devel-
Continually Evaluate them
op the vision
◦◦ Appraise local & international mineral
◦◦ Identify investment, regulatory and institu-
markets and supply chains
tional priorities required to achieve goals
◦◦ Appraise the sector’s service economy,
◦◦ Develop priority guidelines for each tar-
including a needs assessment
get customer segments
◦◦ Analyse the competitive landscape
◦◦ Develop preliminary vision for strategy
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ASM
Communities and
Small-Scale Mining
◦◦ Given the importance of artisanal min-
In the medium term:
ing to the livelihoods of thousands in
• Investment in local production
the DRC, and the suitability of resources
for this mode of extraction, the coun-
◦◦ Given the relatively informal and un-
try could in the longer run seek to en-
structured nature of the sector, empha-
courage the establishment of efforts to
sis on the production platform is nec-
produce ‘ethical’ or ‘fair trade’ minerals
essary both to build the bottom of the
pending demonstrable improvements
pyramid and to enable private sector in-
in the professionalization of the sector
vestors to effectively receive support for
and the general security situation. This
regular mining and export efforts.
should be an inherent feature of building
◦◦ Many of these activities will require
the national DRC minerals brand.
strengthened public-private sector cooperation and collaboration, which will, in turn,
• Add value
increase the efficiency of investments.
◦◦ The definition of value addition within a
• Attract investors
minerals sector context does not necessarily imply the transformation of a
◦◦ The development of a conducive invest-
product into a finished article. The con-
ment environment would help Eastern
cept additionally encompasses process-
DRC to attract ever more responsible
es that increase the value per weight of
private sector operators – both local and
materials through treating or processing
foreign, who have a vital role to play in
materials to remove impurities.135 The
the country’s reform process and con-
strategy should thus include key value
struction. It will be important to support
creation components such as programs
and encourage the consolidation and co-
to increase the average value of exports,
operation of these private actors through
and investment in community-based val-
private sector associations and chambers,
ue-creation centers, such as a network
and to engage these structures in PPAs.
of a number of community- or coopera-
◦◦ One strategy that has worked elsewhere
tive-owned minerals treatment stations,
is a centralized Investment and Export
as they are operational in Rwanda’s coffee sector.
Promotion Agency that would have to
be established in Kinshasa with de-
◦◦ Through these and other efforts, the
centralized arms in the provinces. This
metals sector should aim to increase the
agency should facilitate and support the
mineral content of its exports.
strengthening of the supporting institu-
◦◦ Another essential component of value
tions of the mining sector by solidifying
creation is through service enhancement
the legal and regulatory framework, im-
and the fulfillment of buyer and investor
proving distribution channels, developing
needs, which can be achieved through a
the DRC’s national brand and promoting
combination of improved data provision,
DRC’s minerals sector opportunities.134
134
This would include the development of targeted promotional materials; investor targeting and outreach; trade shows and conferences; development and
strengthening of key international market linkages; and development of investor support services.
135
Rwanda minerals sector strategy, cabinet paper
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
increased formalization and ongoing
ning and commitment in order to de-
customer and investor research.
velop a sustainable minerals sector that
meets the needs of the present genera-
• Take advantage of neighboring countries tertiary
tion without compromising future gen-
and quaternary sectors
erations’ ability to meet their needs.136
◦◦ The strategy will therefore have to take
◦◦ Ongoing development of tertiary and
into account all mining sector stakehold-
quaternary sectors in neighboring coun-
ers and affected communities in particu-
tries – administrative, logistical, retail,
lar, as being integral to the mining proc-
training, financial and other services –
ess and decisions on how the mineral
should be taken advantage of by East-
resources should be exploited and man-
ern DRC’s economic operators until such
aged. The strategy should be developed
time as these services are available lo-
in partnership with these stakeholders
cally in DRC.
and not on their behalf.
◦◦ Formalizing and supporting this process
◦◦ Possible components might be: capac-
would increase the short-term global
ity-building for organizing miners and
competitiveness of the sector and in-
improving their business performance;
crease the convenience, reliability and
developing
confidence in the sector as a whole.
programs for minerals sector revenues
community
reinvestment
(e.g. as per the Diamond Area Commu• Regulate the sector
nity Development Fund pioneered in
Sierra Leone137); training minerals indus-
◦◦ Strong regulatory structures support lo-
try workers and their families on safety,
cal players in increasing the profession-
health and environmental issues; sup-
alism and formality of their operations,
porting the development of ancillary and
which are key elements required for the
service industries in mining communi-
development of an efficient and compet-
ties; establishing and imposing environ-
itive minerals sector
mental standards and increasing the
◦◦ Regulating the sector will increase cred-
productive participation of women in
core minerals industry activities.
ibility, decrease informal activity, and increase participation. It will also facilitate
access to financing for stakeholders and
increase the ability to track and enforce
social and environmental performance.
• Make the sector sustainable
◦◦ The often negative historical impacts of
minerals industries on the environment
and the safety, health and welfare of
mine-workers and surrounding commu-
136
APASA Industry paper on Sustainable Development and CSMI (Center for Sustainability in Mining and Industry) brochure
137
Temple, P. 2007. Leaving a Legacy: Recommendations for Sustainability. Integrated Diamond Management Program, December 2007. Washington, D.C.:
USAID
nities must be addressed and reversed
through knowledge, consultation, plan-
Resource Consulting Services
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ASM
Communities and
Small-Scale Mining
Value Addition and Energy
Generation
able MPA to become an officially licensed producer of
LME grade Tin.141
The lack of reliable and accessible energy supplies in
Value addition requires the reliable and sustainable
the entire Great Lakes Region is one of the foremost
generation of energy that will allow the Great Lakes
impediments to trade and value addition activities.
Region to compete with the likes of Malaysia, where
Currently electricity coverage in Eastern DRC is 2%;
electricity costs around 0.07US$/kwh142, compared
in Rwanda it is 10%; in Burundi it is 2% . At the same
with Rwanda’s current state subsidized price of
time the Great Lakes Region only uses 2.5% of its
0.21US$/kwh.143 There is currently no reliable energy
potential energy resources, with significant sources
transmission and no reliable price data for Eastern
untapped and existing installations running below
DRC, which is related to a limited operational grid,
capacity . Value addition translates into higher rev-
insufficient peak loads, and dilapidated transmission
enues and further employment. The globalization of
lines, which render impossible even smaller value ad-
trade has seen the development of service industries
dition processes. There is however immediate poten-
to add value to raw materials in non-producer coun-
tial, particularly in energy generation from mini-hydro
tries, which is a strategy also pursued by the DRC’s
plants and methane gas generation.
138
139
neighbors that will continue to capitalize on their
competitive advantage so long as the DRC cannot
Straddling an active volcanic fault system, Lake Kivu
place the preconditions for effective domestic value
has a methane gas content of around 55bn cubic me-
addition processes in place.
ters with an annual generation capacity of 100MW.
Experts see the methane as critical to serve Rwan-
European and Asian mineral import markets are
da’s future energy needs but also DRC’s as the lake
unwilling to accept material below a certain purity,
is an international body of water (around 2,650 km2)
60-65% in the case of cassiterite for example. In the
between the two countries. The company Contour
DRC and in Rwanda this grade is currently achieved
Global has in February 2009 signed an agreement
though manual or semi-automatic pre-processing. In
with Rwanda’s government to build up an extrac-
the longer term the export of tin ingots, as opposed
tion plant for $US325 Million. There is thus a possi-
to tin ore presents potential for growth. Tin ingot pro-
bility that Eastern DRC could in the short-term ben-
duction requires competitive processing facilities.
efit from energy imports from Rwanda. The private
While Rwanda is actively encouraging operators to
sector should consider looking into the feasibility of
upgrade, and a smelter in Uganda is currently in the
erecting similar plants on the DRC side. This new en-
process of rehabilitation, similar moves are absent
ergy source would provide a foundation for growth in
in the Kivu provinces. In Rwanda the former REDEMI
eastern DRC’s mining sector, while also significantly
smelter in Karuruma/Kigali is now owned by Phoe-
benefiting the population and reducing pressure on
nix Metals SARL, but is not in operation due to un-
local ecosystems.
competitive electricity costs.
140
Kivu Resource’s sub-
sidiary Metals Processing Association (MPA) has prepared plans and has secured land in Gisenyi to house
a new tin smelter to produce in excess of 2,500 tons
per year of LME grade refined tin. This volume will en141
Interview with Kivu Resources, December 2008
138
Johnson, D. (2009), Trading for Peace – Phase 3 Report, DFID
142
http://www.st.gov.my/eest/Malaysian_tariff_SESCO.htm
139
Johnson, D. (2009), Trading for Peace – Phase 3 Report, DFID
143
140
Interview with Phoenix Metals, Karuruma, December 2008
http://mininfra.gov.rw/index.php?option=com_content&task=view&id=114&It
emid=142
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
Transport Infrastructure
The state of infrastructure is appalling in most of
BOX 10: Eastern DRC: Infrastruc-
Eastern DRC – the legacy of many years of economic
ture preferences as voiced by trad-
decline and conflict. Not only does this impose direct
ers1
costs on exporters (and importers) in terms of delays
and damage to produce, but it means that there are
Of particular interest to traders would
many bottlenecks in trading, forcing small traders
be all weather roads connecting:
into dependency even just for getting through the
(1) Shabunda with Bukavu, (2) Bu-
physical and institutional barriers. These bottlenecks
kavu with Uvira (without having to
also provide a context for road blocks and ‘informal
go through Rwanda), (3) Bukavu with
check points’ – each of which offers an opportunity
Goma, (4) Bukavu with Kisangani, (5)
for rent seeking behavior. The lack of infrastructure
Goma with Beni and (6) Goma with
also means export costs are very high . Box 10 lists
Kisangani.
144
the main priority infrastructure improvements highlighted by traders in North and South Kivu.
Along the main transport corridor
(the northern corridor) traders have
Regionally infrastructure development is progressing
particularly identified: (1) the Kasese
with significant road rehabilitation programs under-
– Kampala stretch and (2) the Jinja-Bu-
way in Rwanda, Uganda and Tanzania. A major cause
giri stretch of road. Other severe prob-
of concern in the longer-term are the capacity con-
lems are the malfunctioning of the Rift
straints in the port of Dar es Salaam, which put Tan-
Valley Railroad which brings freight to
zania at a competitive disadvantage vis-à-vis Mom-
and from Mombasa to Kampala and of
basa, where clearing processes take less time. Dar
the Mombasa-Eldoret oil pipeline (out-
es Salaam port was originally designed with a 6,000
dated and running well below capac-
container capacity, whereas it now processes 12,000
ity).
containers. This results in delays and increased shipment costs, with vessels having to wait at anchor-
Source: INICA 2007 “natural resources
age for around 15 days prior to berthing and it taking
and trade flows in the great lakes re-
15 more days for containers to clear the port at the
gion”, Addis Ababa: UNECA.
point of import. There is not much room for expansion of the port, given that it is situated in the city
and despite 5 new container terminals being put in
place around the city, the port will struggle to serve
increased capacity needs in the near future.145
1
144
H. Sunman and N. Bates (2007), Trading for Peace, DFID
145
Interview with SDV Transami in Dar es Salaam, 9/1/2009
Resource Consulting Services
INICA (2007), Trading for Peace Project Report, available
from the authors
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75
ASM
Communities and
Small-Scale Mining
Access to Finance146
than to save and accumulate. Offering improved financial services and infrastructure in these areas
If natural resource exploitation is to help to lift peo-
would help to reduce poverty and strengthen the pri-
ple out of poverty, then all workers at the extractive
mary sectors. Financial deepening mitigates risk. Sav-
end of the value chain need to have a fair share of
ing, insurance and loan facilities allow individuals to
the proceeds. Analysis of the returns to individual
smooth consumption needs and can protect house-
workers for different value chains has shown that
holds and individuals from drastic action when faced
earnings are extremely low, but in comparison with
with shocks and variable incomes. Financial deepen-
other options, they appear to offer a good cash re-
ing also makes it easier for low-income individuals
turn – up to $10 or more per day for the actual min-
and small businesses to participate in markets, to
ers. But still only a relatively small percentage of the
save and to take out loans to buy equipment, and to
financial benefits of natural resource exploitation re-
acquire trade financing where needed. For example,
turns to the communities living and working at the
if miners were able to use small loans collectively or
resource-extraction sites. In addition to legitimate
accumulated savings to purchase equipment such as
costs which are present in any value chain – trans-
pumps and tools or to rent a pit, they could choose
port, processing, handling and legitimate taxes and
to sell their extracted goods to the highest bidder,
charges – unofficial charges and taxes illegitimately
assuming that there is competition at the point of
siphon off much of the remaining value, reducing
sale. They could also pay for a trusted intermediary,
further the financial benefits that reach the lowest
perhaps the nominated leader of a miners’ associa-
end of the chain. Financial infrastructure in much of
tion, to travel to a trading firm to sell their goods for
the DRC in general is undeveloped and this exacer-
a higher price. Both options would change the value
bates the problem. Few people have personal bank
chain’s power structure and help to channel more of
accounts, there is very little finance available for trad-
the final price to its poorest stakeholders. Access to a
ers, and throughout the extractive industries traders
transactional account could also help miners smooth
and miners tend to be dependent on pre-financing
their variable incomes and safeguard themselves
provided by DRC-based domestic and foreign-owned
from theft.
comptoirs (trading houses).
Providing traders with access to credit would provide
The effect is that miners are tied to single purchasers,
scope for altering the power relationships within vari-
who provide equipment but often purchase product
ous value chains, allowing more traders to enter the
at below-market prices. These monopolies may be
market without pre-financing, thus introducing com-
enforced militarily. Miners wholly dependent on daily
petition, and enabling them to sell their products to
cash income may find themselves deeply in debt as
the individual in the market willing to pay the high-
they struggle to repay loans or buy out the pre-fi-
est price. Most importantly, credit could facilitate
nanced goods. They pay very high prices for food and
the development of processing facilities for a variety
other subsistence goods in the mining areas which
of products that are now exported with little value
tend to be supplied by the same traders who buy the
added. Opportunities for backward and forward link-
natural resources and who therefore set prices for
ages both in the extraction/production and process-
both in ways which maximize their own earnings.
ing of export products could be harnessed by local
This creates a strong tendency to spend cash as it
businesses. The weak financial structures in the DRC
comes in – on relaxation and consumption, rather
demand a creative approach. Formal banking institutions see the Eastern DRC as fundamentally risky and
146
Adapted from Johnson, D. (2009), An agenda for reform – Trading for Peace phase three, DFID
well down their list of priorities. There are branches of
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
formal banks in Eastern DRC, but they are not easily
er and culminating in the looting of most large-scale
accessible to small traders or business people, their
agricultural enterprises and the dispersion of their in-
use is prohibitively expensive and for cross-border
habitants. Collapsing agricultural incomes drove large
purposes, many people prefer those of neighboring
sections of the rural population into cities, which in
countries. There is a large microfinance sector, but it
turn were increasingly unable to meet the food de-
has problems. In this specific context, it seems that
mand of their inhabitants. The situation was made
the practical options are two-fold: the development of
worse by the destruction of the rural road system,
innovative financial structures; and improvement and
which fell apart through lack of maintenance, and by
changes in the structures of pre-financing. There is
the proliferation of armed groups extorting food and
no doubt that beneficial pre-financing arrangements
money. Food production fell and prices rose, further
are facilitated by supportive regulatory environments
deepening poverty and increasing displacement.
where policies are enforced and where producers
acquire bargaining power by taking control of value-
The decline in agricultural production has also been
adding processes and acquiring access to price infor-
a key driver for rural populations to choose artisanal
mation, e.g. through a structure of cooperatives.
mining as a livelihood option. Reviving agricultural
production in key mining areas would serve to miti-
Regenerating the Agricultural
Sector147
gate local food price inflation and translate into a
higher earning potential for individual artisanal miners, who sometimes spend up to 90% of their disposable income on food sold at hyper inflated prices. It
Eastern DRC used to be one of the most important
is therefore a key stepping stone for increasing the
food-producing areas of the Congo, but decades of in-
poverty reduction benefits the artisanal mining sec-
security have to a large extent destroyed the region’s
tor can generate.148
agricultural economy. However, agricultural products
still contribute up to 50% of recorded exports of North
Where minimal security is re-established, farmers
Kivu, and the majority of the population is engaged in
tend to return to work fairly quickly in order to sur-
farming. Providing the right framework for a revitali-
vive and food production can increase very fast. How-
zation of agriculture would not just help to alleviate
ever, agricultural inputs, training and better market
poverty and hunger. It would stabilize areas charac-
conditions are needed to convert this into sustain-
terized by mass displacement and armed attacks and
able poverty reduction. Reinvesting the often large
strengthen the economy through the expansion of
profits of traders in rural reconstruction instead of
small-scale and cross-border trade. Until the 1990s
houses and cars in cities as at resent would ensure
much of the Kivus’ economy was dominated by a
that rural communities see more of the benefits of
highly productive plantation economy consisting of
agriculture. Even within a context of prolonged insta-
coffee, pyrethrum, quinquina, other cash crops and
bility, “islands of stability” have survived where ag-
cattle. This was sustained by extremely unequal ac-
riculture continues to function. Finding out whether
cess to land and economic power, but it also kept in
the particular conditions of these isolated examples
place what in retrospect appears as a high level of
are transferable elsewhere is a key challenge.
food and job security and agricultural incomes. This
system was destroyed through land conflicts that
turned violent, pitting ethnic militia against each oth-
147
Adapted from Johnson, D. (2009), An agenda for reform – Trading for Peace phase three, DFID
148
Garrett, N. (2008), Artisanal Mining and Trade in North Kivu –
Implications for Poverty Reduction and Security, CASM
Resource Consulting Services
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8. Conclusion
ASM
Communities and
Small-Scale Mining
Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
The conflict dynamics in Eastern DRC are more com-
• Operational difficulties of the export regimes (cor-
plex than a simple cause and effect connection be-
ruption/inefficient export institutions provide in-
tween military groups and the trade in minerals. It is
centives to informalize)
not so much the trade in minerals that causes insecu-
• Lack of sector development strategy in the DRC
rity per se, but a lack of security rooted in a dysfunc-
(prevents investment/reduces development op-
tional army and failing institutions. This lack of security enables military groups to co-opt and prey on
the trade. Solving this issue requires a well-informed
policy response that truly comprehends the implications of economic interventions to the general popu-
portunities)
• Severely damaged agricultural infrastructure (prevents economic alternatives)
• Very limited access to finance (prevents equitable
production)
lation of Eastern DRC. The authors hope this report
has brought some clarity to the confusion of view-
The points of entry for engagement in this report
points generated by recent reporting and advocacy
have been premised on the understanding that the
on violence in Eastern DRC, and offers a considered
main challenge in Eastern DRC is the Congolese
direction for those now keen to act. We also hope
state’s inability to bring order to its territory. This is
it filled a gap in understanding the way in which the
rooted in historical legacies, but also in the fact that
mineral trade from Eastern DRC contributes or can
the state has an insufficient revenue base to build
contribute to domestic and regional poverty reduc-
a functioning army and to strengthen its institutions
tion and development.
with its budget currently split between debt servicing, the payment of salaries, and war financing. The
We have raised the need to address the contested
approach set out in this report thus seeks to gener-
monopoly of violence and governance weakness that
ate extra revenue for the state by placing emphasis
results in insecurity that also affects many of the
on the need to consolidate the security sector, for-
mining areas in this report. To realize the trade’s full
malization of the minerals trade, and improving gov-
development potential policy makers will have to en-
ernance by strengthening state institutions.
gage beyond governance and security sector reform
to address149:
Engaging with the mineral trade in Eastern DRC
should be less about stopping or disrupting it, and
• The informal and sometimes exploitative nature
more about figuring out how to separate the inse-
of the artisanal mining sector (makes interven-
curity problems from the trade and then working to
tions challenging)
formalize the trade. As lawmakers express a willing-
• Insufficient, costly and unreliable energy (prevents value addition)
ness to engage with the trade, with the United States
(US) discussing the introduction of a bill aimed at
• Dilapidated infrastructure (prevents cost and time
companies to conduct due diligence on the supply
efficient transport, allows for military beneficia-
chains of companies trading in the US, the recom-
tion, and generates monopolistic/oligopolistic ru-
mendations of this report suggest that there are a
ral minerals markets that work to the detriment of
number of ways to positively engage with the trade
artisanal miners and communities)
in a conflict sensitive and developmentally beneficial
manner that will minimize negative impacts on the
local population.
149
The DFID, COMESA, USAID report Johnson, D., Trading for Peace – Phase 3
Report, DFID, 2009 focusses on reconstructing agriculture, improving access to
finance, making timber trade sustainable, and addressing the regional energy
deficit. A later report for the Communities and Small-Scale Mining Secretariat
at the World Bank focuses on the above key areas, which have to be addressed.
Despite the conflict, a number of relatively secure
spaces exist where engaging with various stakehold-
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ASM
Communities and
Small-Scale Mining
ers could prove beneficial. There also exists some
expertise within some of the existing administrative
structures, which presents opportunities to partner
with these institutions to mutual benefit. In addition, it is apparent from numerous conversations
with stakeholders across the Great Lakes region that
much of what is called an ‘illegal’ or ‘illicit’ trade is in
fact a trade operating as a shadow economy by actors working informally, who can be incentivized to
formalize through a process of engagement, which
would further increase the revenues this trade already brings to the state.
Many stakeholders in the DRC and around the world
are eager for positive change in the country. There
is real opportunity to constructively engage with the
trade in minerals to assist with positive reform. The
cost of failure or the wrong approach cannot be underestimated; with up to one million people in the
region dependent on the trade for their livelihood,
the minerals trade represents the single biggest opportunity for poverty reduction and development in
the region.
Nevertheless, reform will not be easy, and there
should be no naivety about the potential for vested
interests to attempt to derail progress. Policy and
decision makers and other stakeholders must thus
work together to identify potential spoilers as early
as possible, engage those that are willing, and isolate and marginalize the most recalcitrant. This process may have to go beyond trade reform and involve
changing the culture of impunity and short-termism
that transcends both communities and the state in
Eastern DRC. This is a long reform process that requires above all political will; all importantly it is a
reform process that can be achieved, albeit incrementally.
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Beyond Conflict
Reconfiguring approaches to the regional trade in minerals from Eastern DRC
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FOR MORE INFORMATION CONTACT:
Gotthard Walser
E-Mail: [email protected]
Phone: +1 202 473 4234
Fax: +1 202 522 0396
Veronika Kohler
E-Mail:[email protected]
Phone: +1 202.458.9597
Fax: +1 202.522.0396
www.resourceglobal.co.uk
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