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New Congo Report: Congo’s Conflict Gold Rush and How to Counter it

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New Congo Report: Congo’s Conflict Gold Rush and How to Counter it

Posted by Enough Team on April 30, 2015

New Congo Report: Congo’s Conflict Gold Rush and How to Counter it

A trade in illegally mined and smuggled “conflict gold” is fueling both high-level military corruption and violent rebel groups in eastern Democratic Republic of the Congo (DRC), according to a new report by the Enough Project. “Congo’s Conflict Gold Rush: Bringing gold into the legal trade in the Democratic Republic of Congo,” by the Enough Project’s Fidel Bafilemba and Sasha Lezhnev, offers an in-depth portrait of the conflict gold supply chain, from muddy artisanal mines where gold is dug out with shovels and pick-axes, through illicit transport routes in Uganda, Burundi, and Dubai. Based on seven months of field research at mines and in regional capitals, the report provides an in-depth discussion of solutions to the conflict gold supply chain. The U.S. government, European Union, jewelers, socially responsible investors, the World Bank, and activists all have important roles to play.

Congo’s mineral wealth has long been abused by armed actors, from Rwandan-backed armed groups such as the M23 to the Democratic Forces for the Liberation of Rwanda (FDLR) rebel group and Mai Mai Sheka factions to Congolese army commanders, whose troops have killed, pillaged, and sexually abused civilians. While significant progress has been made in reducing armed groups’ profits from the 3T (tin, tungsten, and tantalum) mineral trade, the conflict gold trade continues to facilitate the criminal activities carried out by these groups. According to the International Peace Information Service (IPIS), 70 percent of 3T mines in eastern Congo are conflict-free, while only 35 percent of gold mines are conflict-free. Recognizing that conflict gold is a direct obstacle to achieving peace in Congo, this report highlights ways to address the problem.

According to U.N. experts, an estimated 98 percent of gold produced by artisanal miners in Congo—8 to 12 tons worth roughly $400 million—is smuggled out of the country annually. The illicit conflict gold supply chain moves mainly through Uganda and Burundi, where military officers allegedly also profit, and then much of the gold arrives in Dubai, a major global gold trading and refining hub that has its own smuggling loopholes.

Artisanal mining in Congo is sadly forced underground by government officials and army commanders who benefit from the illegal nature of these activities. By maintaining a system whereby the vast majority of artisanal miners work illegally and cannot even apply for mining permits on their own, corrupt officials and commanders are able to use an established system of loopholes to take sizeable cuts from the trade.

Policy reform to address the conflict gold problem must be driven by a wider vision that the Congolese state and its people can benefit from an increased legal gold trade in the formal economy, while corrupt actors in the current illicit system must face consequences for their actions.

Recent positive developments offer some encouragement for altering the conflict gold trade. For example, as a result of the Dodd-Frank 1502 legislation, gold refiners across the world are now undergoing third-party audits by the London Bullion Market Association and associated programs focusing on conflict issues. Seventy refiners have passed the audits so far, including all of the world’s nine largest, and one major refiner was recently de-listed from the Dubai Good Delivery list for allegedly not following responsible sourcing practices. In addition, gold mines in Congo are beginning to be inspected by multi-stakeholder teams of government, civil society, and business representatives. While these are steps in the right direction, building a clean gold trade requires a much more concerted effort that engages with a range of actors involved.

The report makes seven key recommendations to address the conflict gold trade from several different angles:

  1. Suspend gold certification until it is credible. Congo’s current loophole-filled implementation of the gold component of the International Conference on the Great Lakes Region (ICGLR) regional minerals certification process is stifling the legal gold trade and creating more incentives for smuggling. The U.S. State Department should urge Congo’s Mining Ministry to halt the issuance of ICGLR certificates for gold exports from Congo until key steps are taken that would make the process compliant with ICGLR standards. Those steps include the validation of a sizeable number of gold mines and the adoption of a viable traceability scheme for gold.
  2. Inspect gold mines. Mine inspections and validation processes help identify commanders in the conflict trade which puts pressure on the government to remove armed commanders from mines. These multi-stakeholder processes provide critical information needed to combat the trade, however, they need much more robust support. The European Union, as it moves forward on conflict minerals regulation, should provide funding to mine inspection missions to assess mines on conflict issues in Congo. Relatedly, the Congolese Mining Ministry should designate more mines as Artisanal Mining Zones and allow mining cooperatives to apply for mining licenses.
  3. Set up a responsible gold investment fund. As more mines undergo inspection and validation there must be a legal market ready to buy the gold that is certified as responsibly sourced. Socially responsible investors should set up a responsible gold fund for Congolese gold by partnering with jewelry retailers, fair-trade mining groups, civil society, refiners, local gold buyers, venture capital managers, and donor governments. Investors would provide the startup capital to pilot conflict-free projects and would earn revenues from increased productivity at artisanal and other mines.
  4. Enforce effective anti-corruption measures and reduce red tape. The U.S. State Department, USAID, the German government, the European Union, and U.N. envoys Said Djinnit and Martin Kobler should urge Congo’s Mining Ministry to begin a comprehensive anti-corruption initiative. Additionally the envoys should urge ministry officials and provincial governors in eastern Congo to significantly lower the overall gold tax rate. Finally, donor governments should urge Congo’s Centre d’Évaluation d’Expertise et de Certification (CEEC) agency to make its traceability program financially sustainable
  5. Set up sustainable miners livelihood programs. Efforts to formalize the gold trade must also accommodate shifts in the job market to ensure the sustained livelihood of the many Congolese miners that depend on the trade. The U.S. Congress and the European Union should authorize funding for livelihood programs for artisanal mining communities. Jewelry retailers and electronics companies, and other metals companies should also contribute to these initiatives.
  6. Conduct geological mapping. The World Bank should fund geological exploration of mining areas in the Kivu provinces of eastern Congo through a new mining support project and expanded support to the Cadastre Minier (CAMI) mining registry of the Congolese government. This would help open up other mines for responsible investment.
  7. Sanction and prosecute for gold smuggling and other criminal activities. U.S. Ambassador to the United Nations Samantha Power should work with the U.N. Security Council to designate well-documented conflict gold smugglers in Congo, Uganda, and Burundi for targeted sanctions, as well as urging the International Criminal Court to prosecute illegal gold smugglers. Additionally, the U.S. State Department and U.N. Special Envoy Said Djinnit should pressure Uganda to cut its links to the gold smugglers and tighten airport checks on gold smuggling.

 

Read the full report: Congo’s Conflict Gold Rush: Bringing gold into the legal trade in the Democratic Republic of the Congo.

Read the report brief.

Photo credit: Congolese miners in a gold mine in the town of Pluto, in eastern Congo. The pit mine, which has taken over a year to excavate, is called Sufferance. (Marcus Bleasdale)