“Powering Down Corruption”: New Report Highlights High-Level Corruption and Human Rights Abuses in Cobalt Supply Chain, as Global Demand Surges

Enough Project report focuses on opportunity for auto, electronics companies to address transparency issues while making electric vehicles, green products

Washington, D.C. – Bribery, extortion, and shadowy contracting deals have corrupted the lucrative cobalt mining sector in the Democratic Republic of Congo, benefiting the regime of President Joseph Kabila and his Congolese and international commercial collaborators, according to a report published today by the Enough Project. The in-depth report “Powering Down Corruption: Tackling Transparency and Human Rights Risks from Congo’s Cobalt Mines to Global Supply Chains,” is a result of a two-year study and hundreds of interviews across the spectrum of the trade within and outside Congo.

Cobalt extracted in Congo is used to power renewable technology such as electric vehicles and smart phone and computer batteries. Meanwhile, both artisanal and industrial cobalt mining in Congo are linked to corrupt activities and human rights abuses. In a recent case highlighted in the report that illustrates this phenomenon, billionaire businessman Dan Gertler has been placed under U.S. sanctions for involvement in corruption relating to cobalt and other minerals deals in Congo. Companies that conducted deals with Gertler and that are under investigation for possible corruption in the United States, United Kingdom, and Canada, continue to mine and export cobalt to the supply chains of automotive, electronics, and other companies around the world.

Interviews and focus groups by Enough Project researchers included Congolese artisanal miners, cobalt traders, government officials, corporate officers, industry associations, community leaders, civil society activists, and independent experts both inside and outside Congo. Based on the input of those directly affected and involved in the cobalt mining sector, the report presents concrete recommendations for companies in the automotive, consumer electronics, and other industries, as well as to governments and the United Nations, to address the underlying issues of corruption, human rights abuses, and the transparency of contracts and subcontracts.

Annie Callaway, report author and Deputy Director of Advocacy for Corporate Engagement at the Enough Project, said: “Congo’s cobalt wealth can and should reap corresponding economic and development benefits for its citizens. With global demand for cobalt exploding, electric vehicle, consumer electronics, and other end-user companies have a critical opportunity to develop and implement robust supply chain practices that actively promote transparency and human rights.”

The report exposes how key parts of the cobalt sector benefit and motivate some of the largest corruption networks in Congo.  Some of the corruption in the cobalt trade, combined with abuses at and around certain cobalt mine sites and links to state-sanctioned violence and grand corruption, forms a crucial pillar in Congo’s violent kleptocratic system.

John Prendergast, Founding Director of the Enough Project and Co-Founder of The Sentry, said: “Congo has suffered five centuries of unparalleled natural resource exploitation at the hands of corrupt and violent actors from both within and outside its borders, and cobalt has proven no exception. But the script can be altered.  Through the actions of responsible companies, Congolese reformers, and conscientious consumers and investors internationally, this kleptocratic system can be dismantled and reformed into one that favors transparent business and peaceful trade in Congo.”

Congo produced an estimated 58 percent of the world’s cobalt in 2017, according to the U.S. Geological Survey. With demand increasing and electric vehicle manufacturers and consumer electronics companies scrambling to secure their access to this critical material, the report notes that there is a nearly unprecedented opportunity for companies to engage proactively and continuously in dedicated supply chain due diligence—or for corrupt networks to make millions in a climate of scarce regulation and oversight. According to the report’s findings, if managed transparently and responsibly, cobalt revenues could help alleviate endemic poverty in Congo and be a major catalyst for development.

Sasha Lezhnev, Deputy Director of Policy at the Enough Project, said: “While electronics and auto companies are beginning to address child labor in cobalt supply chains, they also need to be actively addressing corruption issues. Mining companies that have done business with people under sanctions for corruption continue to export cobalt to major Fortune 500 companies. Tech and auto companies should start demanding that mining contracts and subcontractors in their supply chains be published, which would begin to address this thorny problem. Furthermore, the U.S. Treasury Department should fully enforce its existing sanctions in this area.”

Click here to read the full report and recommendations. 

Cliquez ici pour le résumé en français.

Key excerpts:

• “No reform is likely to work for Congo cobalt and other key minerals unless Congo is no longer ruled by a predatory government.” – Congolese expert in the extractives industry.
• “Following the dirty money and making sure it’s frozen must be part of the strategy to help clean up the sector.” – excerpt from an interview with miners with a mining cooperative in Lualaba.
• Connections back to President Kabila and his regime emerge in both artisanal and industrial mining.
• Communities in cobalt mining areas can face negative impacts: an increase in human rights abuses, unsafe work environments, environmental degradation, theft, and corruption—all while corporations and consumers at the retail end of the supply chain benefit disproportionately from the boons of greener technology.
• Automotive, consumer electronics, and other end-user companies that drive global demand for cobalt have an important opportunity to implement and help enforce transparency and anticorruption measures in order to ensure that their supply chains are responsible and that Congolese citizens are able to benefit from their country’s natural resources.
• Cobalt extracted in Congo is used to power more electric vehicles and increasingly efficient electronics, while mining communities are left using rudimentary tools in dangerous work environments and struggling to access consistent power sources and fair wages in order to sustain their livelihoods and families.
• Cobalt is mined on both large-scale and artisanal concessions in Congo, each presenting its own set of challenges. Industrial or large-scale mining (LSM) lacks transparency in several key areas of contracting, subcontracting, and joint venture disclosure practices.
• Artisanal or small-scale mining (ASM) in some cobalt mining areas has links to illegal and corrupt involvement of armed military actors, nontransparent documentation of production and export data, and human rights abuses such as child labor and hazardous working conditions.
• Corruption in the cobalt sector is sophisticated and fits discreetly within the business practices of many multinational companies scrambling for a cut of Congo’s cobalt. Through opaque contracting and subcontracting practices and unreliable documentation of how much material is produced and exported from artisanal sources in comparison to industrial, the Kabila regime, by way of state-owned mining companies, is able to favor contracting arrangements that suit its financial needs and divert profits away from state funds.
• In order to ensure that human rights abuses are not used as a means to an end for corrupt actors looking to access massive profit illicitly, companies must actively incorporate transparency initiatives into their sourcing protocols.

Report recommendations:

The report’s recommendations aim to bridge the gap between the calls for change that emerged from the Enough Project’s research in Congo and the pre-existing tools available to companies looking to create and maintain supply chain reform, as well as to international policymakers and regulatory authorities seeking to disrupt kleptocratic networks. The recommendations are aimed mostly at end-user companies, especially in the electric vehicle and consumer electronics industries, with additional recommendations included for consumers, activists, governments, and financial institutions.

End-user companies, especially in the electric vehicle and consumer electronics industries, should:

1. Conduct thorough and consistent due diligence and public reporting, with attention to corruption-related risks.
2. Collectively, through relevant industry associations, visit cobalt mine sites to ensure compliance and reinforce their prioritization of transparency and anticorruption initiatives.
3. Use supply chain leverage to increase contract and subcontract transparency.
4. Contribute to benefits-sharing and livelihoods programs and comply with internationally recognized frameworks for obtaining and maintaining consent to operate from host communities.
5. Require producers and suppliers to fully report on which minerals are artisanally mined on their concession or in their possession, as the case may be.

Consumers and activists should:

1. Contact companies that use cobalt and request information about their supply chain due diligence.
2. Begin conversations and build networks with environmental groups to incorporate human rights and anticorruption considerations into public and private campaigning on renewable energy technology priorities.

The United Nations, United States, European Union, and other governments should work in coordination with banks, international financial institutions, and end-user companies to:

1. Recommend the EITI multistakeholder group and the Congolese mining ministry integrate ASM reporting into EITI reporting in Congo.
2. Urge the Congolese prime minister to sign a comprehensive decree requiring the publication of the beneficial owners of LSM and ASM companies—as well as subcontractors—operating in Congo, following recommendations from the EITI multistakeholder group.
3. Ensure that resources are devoted to protecting whistleblowers in Congo’s cobalt mining areas, including human rights activists, criminal investigators, and transparency activists exposing abuses and corruption in the sector.
4. Increase efforts to target illicit financial networks, including investigations into illicit mining activities.
5. Investigate potential law violations.
6. Enforce sanctions and apply anti-money laundering measures.
7. Prosecute domestic economic crimes.

Click here to read the full report and recommendations. 

Cliquez ici pour le résumé en français.

For media inquiries or interview requests, please contact: Greg Hittelman, Director of Communications, +1 310 717 0606, [email protected].

About THE ENOUGH PROJECT

The Enough Project supports peace and an end to mass atrocities in Africa’s deadliest conflict zones. Together with its investigative initiative The Sentry, Enough counters armed groups, violent kleptocratic regimes, and their commercial partners that are sustained and enriched by corruption, criminal activity, and the trafficking of natural resources. By helping to create consequences for the major perpetrators and facilitators of atrocities and corruption, Enough seeks to build leverage in support of peace and good governance. Enough conducts research in conflict zones, engages governments and the private sector on potential policy solutions, and mobilizes public campaigns focused on peace, human rights, and breaking the links between war and illicit profit. Learn more – and join us – at www.EnoughProject.org.