A system mandated by Dodd-Frank seems to move rather than eliminate areas of conflict.
Violence has been a fact of life for decades in the eastern Democratic Republic of the Congo. A war that erupted in the late 1990s killed more than 5 million Africans in the following decade. Although the war officially ended in 2003, the fighting has never fully stopped. For years, more than 100 armed factions have operated in the eastern DRC and many of them have tapped the region’s mineral wealth to help fund their activities.
US policymakers hoping to reduce violence in the DRC included in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act a requirement that companies disclose whether their products use minerals whose proceeds are used to finance armed groups in the DRC. But more than a decade after the law went into effect, it’s not clear whether the rule has meaningfully improved the situation, according to research by Chicago Booth PhD student Samuel Chang and Booth’s Hans B. Christensen.
The Congo Basin is rich in gold and metals such as tin, tungsten, and tantalum, which are used in electronics including mobile phones and laptop computers. Extracting these minerals is a big part of the DRC’s economy, with some 2 million people working at artisanal and small-scale mines, the researchers explain.
The Dodd-Frank requirement relating to the DRC was inspired by the Kimberley Process, a UN-mandated system for certifying diamonds as conflict-free. The Dodd-Frank rule requires that companies—specifically those registered with the Securities and Exchange Commission and that purchase certain minerals from the DRC and its neighbors—audit their supply chains and confirm they’re using metals from mines certified as conflict-free. The companies rely on a certification process that developed to distinguish between mines that are or aren’t being used to fund illicit fighting.
The rule doesn’t prohibit companies from buying conflict minerals. However, the idea is that forcing corporations to disclose whether they use conflict minerals will inspire companies to develop clean supply chains because they won’t want to be seen as funding violence.
Trouble moved farther away
After a mine was certified as conflict free, the probability of a conflict initiated by armed groups or civilians decreased within a 25 km proximity, the research finds. But this reduction was offset by an increase in such conflicts 25–75 km away.
To determine whether the US law improved the situation at all, Chang and Christensen studied the location of conflicts in the DRC and correlated them to the location of gold mines that were certified to be conflict-free. They catalogued instances of conflict at 10 km increments surrounding certified mines. Conflict decreased in areas immediately surrounding these mines, but that doesn’t tell the whole story, they say.
“Imagine it like doughnuts surrounding a certified mine, with rings of 0–10 km, 10–25 km, 25–50 km, and 75–100 km,” Chang says. “After a mine was certified, the nearest conflict was significantly farther away. The effect is quite local. Conflict did go down within 10 km of certified mines, but this decrease was offset by an equal increase in the ring 25 km to 75 km farther away.”
But when they looked at noncertified mines that were 25 to 75 km away from a certified mine, conflict intensified. In aggregate, the level of conflict didn’t decrease at all, it just moved farther away from certified mines.
The findings suggest that supply-chain certification programs can influence behavior, the researchers write. But they note several reasons to be skeptical that the certification process will resolve the problem. Some mines are illegal and unknown to authorities. And because gold can be melted down, it can be transported out of the country and resold, leaving no way for international buyers to know precisely where it came from.
Above all, mines and minerals are not the cause of the conflict, Christensen says. “A lot of displaced people came from Rwanda after the genocide in the 1990s. That created problems with those who had citizenship and land rights, and there was an inability to share power. This kind of solution is unlikely to solve the conflict because it does not solve the underlying problem.”
By Ty Burke/Courtesy Chicago Booth Review
