Experts including a Rwandan minister last week briefed the US House of Representatives on how a US law meant to restrain trade in conflict minerals is defective and limits opportunities to create jobs in the African mining sector, failing to improve the living standards for local miners and failing to ensure source of minerals from African nations that are totally free of bloodshed.

This was during a hearing entitled, ‘Dodd-Frank Five Years Later: What Have We Learned from Conflict Minerals Reporting?’ that was held by the monetary policy and trade subcommittee of the United States House of Representatives (committee of financial services) in Washington D.C.

The Dodd–Frank Wall Street Reform and Consumer Protection Act (commonly referred to as Dodd-Frank) is a financial reform legislation signed into federal law by President Barack Obama on July 21, 2010.

In August 2012, the US Securities and Exchange Commission (SEC) approved a law mandated by the Dodd-Frank to require companies to publicly disclose their use of conflict minerals that originated in the DR Congo or an adjoining country. It companies to disclose whether the sourcing of conflict minerals in their products benefited armed groups. 

Its section 1502 particularly requires mining companies to disclose whether they source "conflict minerals” – tin, tungsten, tantalum and gold – from the DR Congo and nine neighbouring countries, including Rwanda. It affects the DR Congo and neighbors including Angola, Burundi, Central African Republic, Republic of Congo, Rwanda, South Sudan, Tanzania, Uganda and Zambia.

Among the key issues highlighted was that the legislation was lacking and needed reworking.

Professor Jeff Schwartz, a law don from University of Utah, stressed that Section 1502 is "not working” but "there is still hope for it” if minor changes are made to improve it.

His assertion, he said, was based on empirical evidence he obtained from disclosures made by companies during studies he conducted in 2014.

Schwartz said: "The idea of the legislation was to force companies to make disclosures that would allow concerned shareholders and consumers to identify which companies should be praised and which condemned.

Unfortunately, the legislation fails in this regard. The disclosures do not contain enough specifics for concerned stakeholders to make such determinations.”

"We cannot simply sit down and read the disclosures and tell how or which companies are committed to mineral sourcing and which are not.”

According to Schwartz, if stakeholders cannot ably sort companies in accordance to their sourcing practices, there is no incentive for companies to change them in accordance with the humanitarian interests underlined in section 1502.

Kimberly Gianopoulos, Director for International Trade, U.S. Government Accountability Office, made a presentation basing on their August 2015 report – their sixth on the topic.

In 2014, for the first time, companies were required to file disclosures on minerals from the DR Congo and adjoining countries. Even though it was estimated that about 6,000 companies could be affected by the rule, she said, only 1,321 filed disclosures. Looking at those disclosures, her office discovered several things.

"First, almost all the companies reported performing country of origin inquiries for conflict minerals that they use,” Gianopoulos said.

She said 94 percent of the companies reported exercising due diligence on the source and chain of conflict minerals used but "about two thirds of the companies were unable to determine whether the conflict minerals came from the DR Congo or the adjoining countries.”

"Finally, none of the companies could determine whether or not the minerals financed or benefited armed groups in these countries,” Gianopoulos said.

How conflict free economies suffer

Apart from arguing the case on why Rwanda must be considered as a conflict-free mineral country since it is a secure country which has also put in a lot of effort in developing a mineral traceability programme, Evode Imena, Minister of Mines, Ministry of Natural Resources, shed light on the dangers of the legislation.

Imena told lawmakers that in Rwanda, the customer base has reduced dramatically because companies fear to come and source directly "from us.”

"We have a very limited number of companies working or buying from our producers due to these regulations,” he said, noting that the country pays more to comply to section 1502 than it gains in mining taxes.

Responding to clarity-seeking questions from Congresswoman Gwen Moore, Imena said: "Our region produces around two percent of the global tungsten. And when any company willing to source from Africa sees that they will be filing different reports, undergoing different audits, they just say ‘let’s avoid Africa because it is just two percent of the [global] tungsten.”

"When it comes too tin, we have a quite considerable share but the number of companies interested to come and continue doing their business directly from our countries has reduced.”

Responding to questions from Congressman Mick Mulvaney on how things can be improved, the minister explained that normally, when a country complies with some requirements or does what it is supposed to do, it graduates "but in our case, we are just stuck.”

Imena added: "I think we need to work with the US companies, US companies, and get something that works for Rwanda but also for the US and to ensure that we are responsible, we are transparent, and we are cost effective. This is what is lacking.”

Remove de-facto boycott on African minerals

He stressed that it is paramount that a method be found to get rid of "the de-facto boycott on African minerals.”

When Congressman Robert Pittenger inquired about what helpful measures Rwanda would consider, Imena first explained that Rwanda has two types of levies and both are collected at the export point to finance the traceability mechanism.

"For a ton of tin, for instance, we collect almost 400 dollars. And that money is spent to pay auditors, and employees to make sure that the system works.  These 400 dollars is almost the same amount that the government collects as taxes. Those taxes would in turn be used to develop the industry, harmonize it and build a responsible business in the country but because we are spending a lot of money and a lot of efforts in complying with these regulations, we are not given enough resources to develop the industry.”

He told lawmakers that for example, before the Act, there was a company from Germany which owned a mine and they were extracting the minerals and shipping them immediately to Germany but since the promulgation of the law, that company just ceased its operation.

"They feared the burdens coming with the Dodd-Frank. When you have a reduced number of people coming to source from you, immediately, they put the price down which also impacts your economy.”

editorial@newtimes.co.rw