Dodd-Frank 1502 and the Congo Crisis

Over the past two decades, U.S. engagement in the Democratic Republic of Congo (DRC) has been a bipartisan affair. From Representative Karen Bass (D-CA) to Senator Lindsey Graham (R-SC), and from Representative Chris Smith (R-NJ) to Senator Chris Coons (D-DE), influential lawmakers on both sides of the aisle in the two chambers of Congress have supported the Congolese people in their struggle for peace and democratic change. This support typically has come in the form of humanitarian assistance, economic support fund assistance, or bipartisan letters and resolutions urging increased U.S. commitment to the democratic transition.

The bipartisanship, however, has been tested as lawmakers have continued to debate the merits of Dodd-Frank 1502, a section of the 2010 Dodd-Frank Act. Enforced by the U.S. Securities and Exchange Commission (SEC), Section 1502 is a disclosure measure that requires companies trading on U.S. securities exchanges to determine through supply-chain due diligence whether or not their products contain conflict minerals from DRC or neighboring countries, and report their findings annually to the SEC.

These conflict minerals, which include cassiterite, gold, wolframite, coltan, tin, and their derivatives, are critical to the electronics, aerospace, automotive, and jewelry industries. Some armed groups controlled mines and tapped into the mineral trade—estimated to generate between $300 million and $1.4 billion per year—to replenish their war chests.

Proponents of the legislation sought to bring peace to Congo’s eastern provinces of North and South Kivu by regulating mineral trade through U.S. law, cleaning up the supply chain, and reducing armed groups’ access to financial means. These proponents contend that regulation would de facto curb the violence and human rights abuses.

For the Republicans, who identify with business operators, Dodd-Frank 1502 overreaches into industry and stifles commerce with no significant impact on the conflict in DRC. Analysts disagreed on the cost of implementing the legislation, estimated by some to run as high as $7.9 billion, which will be incurred mostly by the industry—and the local populations.

On June 8, 2017, the majority in the House of Representatives voted 233 to 186 to repeal the legislation. The Senate will decide at a later date, in the face of stiff Democratic opposition, whether or not Dodd-Frank 1502 survives.

Often aligned with the nongovernmental and humanitarian communities, Democrats see the legislation as asine qua non of peace in Congo.

It is no surprise, then, that this debate has been passionate. Today, emotions aside, nearly seven years since the Act became law, there is a clear horizon over which we can analyze the impact of Section 1502.

What are the merits of this law?

1. Section 1502 supporters mobilized media and social networks in an unprecedented manner to raise American consumers’ awareness of the links between the conflict in Congo and their electronics. By and large, consumers now expect technology firms to mind the supply chain.


2.  The law had an immediate psychological effect on Congolese authorities and business operators, regional political and economic actors, and international firms. For instance, Congo’s President Joseph Kabila sought to preempt the impact of the law before it went into effect and temporarily suspended mineral exploitation in the Kivus.


3. The law attempted to clean the mineral supply chain to curtail the illicit and illegal mineral exploitation and trade.


4. The law also contributed to Congo’s acceleration of the delimitation and registration of mining sites and quarries; the training of the mine police; and increased capacity-building for mining agents and inspectors. These initiatives encouraged consultations between concerned parties.


5.  Armed groups found it difficult to export minerals and raise revenue from mines in areas they controlled.

Where did the law fail?

1.  From its inception, Section 1502 cast a negative shadow on otherwise legal and legitimate businesses and immediately led to a de facto boycott of mining products from Congo’s eastern provinces.


2. The boycott caused closures of trading posts, known locally as comptoirs.


3. This law treated the mineral trade as a standalone process, divorced from local, national, and regional politics, and its proponents presented the regulation as a silver bullet to a much more complex problem.


4.  The implementation of Section of 1502 led to increased unemployment, loss of revenue for artisanal miners, and increased fraud. Artisanal mining has sustained hundreds of thousands of families since the collapse of the agriculture sector in the Kivus in the early 1980s and the collapse of state-owned mining giant Gécamines in the former Katanga Province.


5. The increased unemployment has caused a resurgence of banditry, including kidnappings for ransom.


6.  The law did not account for other sources of revenue at the disposal of armed groups, that is, taxation of commercial activities and racketeering in the areas they controlled.


7.  With a better-organized state administrative infrastructure, Rwanda has taken advantage of Section 1502 to launder and certify mineral resources from the illicit and illegal trade in Congo and export them as Rwandan products. Despite insignificant mineral deposits, Rwanda has become the world’s largest exporter of coltan. In other words, Section 1502 legalized the looting of Congolese mineral resources.


8. Section 1502 only concerns SEC issuers, which places an unfair burden on U.S. companies.

Unintended Consequences

Whether the Congolese embrace civil disobedience or armed struggle, their grievances are rooted in the blatant violation of democratic principles by the Kabila regime, bad governance, mismanagement of resources, and incompetence. Popular discontent in DRC has nothing to do with minerals.

Focused on the so-called conflict minerals in the Kivus and their certification, Section 1502 provided a false sense of progress on the security front. Captains of the high-technology industry and policymakers in the United States and Europe expended a disproportionate amount of energy and political capital to solve the mineral trade problem at the expense of the larger governance crisis that fuels insecurity and instability in DRC.

In the seven years that the Dodd-Frank Act has regulated this mineral trade, Congo is no closer to peace than it was in 2010. On the contrary, the situation is arguably at its most explosive level in two decades, as violence has spread both geographically from the east to the south and the west, and has intensified.

Beyond the mobilization of armed militias in the eastern provinces, the years 2015 and 2016 were particularly violent as new centers of instability emerged in other parts of Congo, including western Kongo Central, southern Tanganyika, and southern Kasaï Central.

In Kongo Central, Bundu dia Mayala partisans have regularly met violent death by gunfire from security forces. In North Kivu, residents of Butembo, Beni, Erengeti, and other localities are massacred on a daily basisin their sleep by elusive death squads that the UN peacekeepers and the Congolese Army have failed to either apprehend or vanquish.

The populations of Kasaï Central have witnessed never-before-seen violence reminiscent of ISIS. Beheading is now a common practice in a region that had not experienced armed conflict since the 1960s.

As of this writing, 80 mass graves have been found in the conflict area. The United Nations Office for the Coordination of Humanitarian Affairs estimates that more than 1.4 million Congolese have been displaced internally and across the border into Angola as a result of the fighting, including 850,000 children. It is uncertain at this point who is most to blame for this violence: the Congolese Army or the militia. The conflict resulted from the government’s mismanagement of a royal succession dispute in the Bajila-Kasanga’s Kamwina Nsapu chieftaincy.

Michael Sharp, the American who coordinated the United Nations Group of Experts in Congo, was killed in this conflict along with his Swedish and Congolese colleagues.

Over the past two years, pro-democracy protests brought thousands of young people and political opposition partisans to the streets in several cities to demand the respect of the Constitution and better governance. The ensuing police and military repression in the capital city of Kinshasa resulted in dozens of youths being either killed by gunfire or arrested.

Political opposition leaders, civil society leaders, youth activists, and other proponents of respect for the Constitution remain the primary targets of this campaign of repression. President Kabila and his supporters’ determination to remain in power no matter the cost will continue to fuel tensions and violence.

Due to its myopic approach, Section 1502 misdiagnosed the mineral trade as the root of the conflict, not as a symptom, and offered inadequate prescriptions and no reprieve from the aforementioned incidents.

Proponents of the law ignored the multidimensional nature of conflict and failed to adjust their narrative as it became clear to independent analysts that Section 1502 would not and could not bring peace.

What should be done?

1. This legislation might have worked better had it been part of a comprehensive political process. As it now stands, Dodd-Frank Section 1502 launders, legalizes, and certifies the looting of Congolese resources—a net loss for DRC. This law should be discontinued.


2. The United States should pursue what Ambassador Nikki Haley has started at the United Nations Security Council: demand greater accountability of the UN peacekeeping mission along with a credible exit plan to be implemented over the next five years. The United Nations Organization Stabilization Mission in the Democratic of the Congo (MONUSCO) has long been part of the problem, serving as an extension of and a broken crutch to the Kabila regime, and stifling the emergence of a functional state and an adequate professional army in Congo. MONUSCO’s mandate is too ambitious and assumes several attributes and responsibilities of the Congolese state, which the mission cannot achieve without a robust political will. Consequently, the UN Security Council shares, shoulders, and enables the failure of the Congolese leadership at the expense of the Congolese people.


3.  The United States should continue to exert pressure on the Kabila regime to open the political space, protect citizens’ rights and liberties, respect the Constitution, and engage in a credible political process that will culminate in the election of a new president. Specifically, the United States should continue to engage President Kabila, wielding “sticks” and “carrots,” and insist that he respects the interim power-sharing agreement the Catholic Church brokered on December 31, 2016. Equally important is the appointment of an ambassador to Kinshasa to lead U.S. engagement.

 

Dodd-Frank 1502 is an inadequate solution to a crisis that has nothing do with mineral wealth but everything to do with failed leadership, lack of political will, and mismanagement of public resources. Any meaningful evaluation of the impact of this legislation must first acknowledge this reality.

This analysis is adapted from the testimony the author delivered before the United States Senate Foreign Relations Subcommittee on Africa and Global Health on April 5, 2017.