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 60 Resource Consulting Services - 2 Beyond Conflict 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 Resource Consulting Services - 3 ASM Communities and Small-Scale Mining 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 Resource Consulting Services - 4 Beyond Conflict 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 Resource Consulting Services - 5 Executive Summary ASM Communities and Small-Scale Mining 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, Resource Consulting Services - 7 ASM Communities and Small-Scale Mining 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- Resource Consulting Services - 8 Recommendations ASM Communities and Small-Scale Mining ASM Communities and Small-Scale Mining 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 Resource Consulting Services - 10 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: Resource Consulting Services - 11 ASM Communities and Small-Scale Mining 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. Resource Consulting Services - 12 Beyond Conflict 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. Resource Consulting Services - 13 ASM Communities and Small-Scale Mining 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 Resource Consulting Services - 14 Beyond Conflict 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. Resource Consulting Services - 15 ASM Communities and Small-Scale Mining • 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, Resource Consulting Services - 16 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 Resource Consulting Services - 17 ASM Communities and Small-Scale Mining 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. Resource Consulting Services - 18 Beyond Conflict Reconfiguring approaches to the regional trade in minerals from Eastern DRC 1.Introduction ASM Communities and Small-Scale Mining 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. Resource Consulting Services - 21 ASM Communities and Small-Scale Mining 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 Resource Consulting Services - 22 2. Situation analysis ASM Communities and Small-Scale Mining ASM Communities and Small-Scale Mining 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 Resource Consulting Services - 24 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 Resource Consulting Services - 25 ASM Communities and Small-Scale Mining 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) Resource Consulting Services - 26 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 Resource Consulting Services - 27 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 - 28 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 - 29 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 Resource Consulting Services - 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 Resource Consulting Services - 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 Resource Consulting Services - 33 ASM 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. Resource Consulting Services - 35 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 Resource Consulting Services - 36 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 - 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 Resource Consulting Services - 38 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 - 39 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 - 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 Resource Consulting Services - 42 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 Resource Consulting Services - 43 ASM 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 Resource Consulting Services - 44 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. Resource Consulting Services - 45 ASM Communities and Small-Scale Mining 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 Resource Consulting Services - 46 Beyond Conflict 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 Resource Consulting Services - 47 ASM Communities and Small-Scale Mining 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 Resource Consulting Services - 48 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 Resource Consulting Services - 49 ASM Communities and 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. Resource Consulting Services - 50 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 Resource Consulting Services - 52 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). Resource Consulting Services - 53 ASM Communities and Small-Scale Mining 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 Resource Consulting Services - 54 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. Resource Consulting Services - 55 ASM Communities and Small-Scale Mining 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. Resource Consulting Services - 56 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 Resource Consulting Services - 57 ASM Communities and Small-Scale Mining 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 Resource Consulting Services - 58 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) Resource Consulting Services - 59 ASM Communities and Small-Scale Mining 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. Resource Consulting Services - 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 Resource Consulting Services - 61 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 - 62 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 Resource Consulting Services - 64 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 Resource Consulting Services - 65 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 Resource Consulting Services Economic Community of the Great Lakes - 66 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 Resource Consulting Services - 67 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 Resource Consulting Services - 68 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 - 70 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 Resource Consulting Services - 71 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 Resource Consulting Services - 72 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 - 73 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 Resource Consulting Services - 74 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 - 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 Resource Consulting Services - 76 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 - 77 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- Resource Consulting Services - 79 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. 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