Conflict Minerals in the Democratic Republic of Congo. Dylan Scudder
build trust with each other ←10 | 11→through regular communication. SD must also avoid buying any coltan that provides funding for the local conflict. However, even if all this is done, there remains a major risk that SD’s image could be damaged by a media focus on child abuse.
The DRC and Conflict Minerals
With these two options on your desk, you make sure that everyone on the advisory team and the SD management team has read a recent report from Rapid Response Inc. (RRI), one of the world’s leading risk management specialists.
COUNTRY PROFILE:
THE DEMOCRATIC REPUBLIC OF THE CONGO (DRC)
by Connie Bernstein
RAPID RESPONSE INC.
In terms of natural resources, the DRC is probably the richest country in the world. However, the country has a long history of war, corruption and poverty. It will be a long time before the DRC has a normal business environment.
Many companies believe the country is too risky for doing business, but other companies do have operations there.
RRI risk rating: SEVERE
DRC Summary
| GDP | $17.7 billion |
| Unemployment | Labor force 35.9 million—unemployment rate not known—population below poverty line: 71% |
| Currency | Congolese Franc |
| Ethnicity | Over 200 ethnic groups Bantu people (Mongo, Luba, Congo) and Hamitic Mangbetu-Azande 45%, others 54%, Pigmy (aboriginal people) 1% |
| Religion | Christian 85% (50% Catholic, 20% Protestant, 10% Kimbanguist, 5% other Christian), Muslim 10% and Animist 5% |
| Population | 75.5 million estimated |
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Politics and Government
The president is head of state, but there is almost no functioning government in many parts of the country. In the areas under government control, there is a democratic system.
A problem in some areas is that foreign businesses must cooperate with rebel groups. This can be expensive, dangerous and illegal. The Dodd-Frank Act is designed to prevent companies from purchasing minerals directly from guerrilla groups. Although the situation is complicated, some companies have proven that it is possible to do business in the DRC.
Economy and Business
The DRC was once a vibrant, industrialized nation. Today, after years of conflict, it still has enormous potential but suffers from poverty and violence. 90% of the DRC’s income comes from selling minerals. There is very little long-term planning. There is almost no manufacturing. Education levels are low, and unemployment levels are high. The DRC is an essential and potentially profitable part of the world, because of its vast mineral riches. However, infrastructure is weak. In most parts of the country, international companies have to provide their own communications systems. The same is often true for electricity and water.
Natural Resources
This part of Africa has the largest deposits of many rare minerals that modern industry requires, including coltan, cobalt and tungsten. The electronics industry cannot operate without these minerals. There are also huge deposits of oil, iron, copper and gold. Water is another resource. The Congo River system has the potential to provide half of Africa’s electricity. Agriculture is another major industry. If there is peace, a new ecotourism industry could be developed.
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Security
Companies should know that the DRC is a difficult place to work and live because of the hot climate and many health risks. More important, there is frequent fighting between local tribes and guerrilla groups. There are currently 14,000 UN soldiers in the country to keep the peace. The threat of new fighting in the DRC is the main security risk for business.
Conflict Minerals in the DRC
A special update by RAPID RESPONSE INC.
Introduction
The DRC government cannot always control access to rare minerals. Coltan, for example, is often supplied by groups that use the income to buy weapons for conflict or criminal activities. That is the reason why such minerals are called “conflict minerals.” The Dodd-Frank Act was passed into US law to discourage trade in conflict minerals. It applies to US companies and companies trading in the USA.
Also, many of the local mining and processing operations have been using child labor. Accordingly, the DRC government has passed laws aimed at ensuring that only “clean” minerals (those not related to war funding, child labor, slavery or other criminal activities) are traded.
There are practical ways of doing clean business, but companies buying rare minerals from the DRC will face ethical, political and legal issues.
It is very difficult to be sure if a mineral comes from a “clean” source, so many MNCs have stopped buying DRC minerals or are considering such a retreat.
Media Coverage
During your SD assignment, it is essential to keep track of media attention on the company and the environment in which it operates. You ←13 | 14→can’t help but notice a newspaper story under the title “MNCs Plan to Pull Out.” The article continues:
Several of the largest electronics companies are thinking about leaving South Kivu province in the Democratic Republic of the Congo. They say that the main reason is the safety risk. South Kivu is a center for trading in coltan. Critics say that there is child slavery in the coltan mines. There are also reports of environmental destruction. If the MNCs stop buying coltan, will the children and the wildlife of South Kivu province have a brighter future?
When this story is brought to the attention of SD headquarters in California, the CEO is angry.
“If nobody invests in that region,” he says, “the children have no future at all! Unemployment and poverty will only increase.” He calls Option B the “business as usual” approach that really ignores the child labor problem. He immediately asks you to help build a more creative range of options.
Brainstorming
Several intense meetings follow, first involving your Pentalemma colleagues, then including SD managers. Detailed discussions cover possible strategies to satisfy SD’s interests, improve the situation for children and protect the environment. Who are SD’s stakeholders? Does SD have positive relations with them? What are the ethical and legal issues?
Your team develops three new options for SD to consider.
Option C—Review
We have a complicated and risky situation, so we should start with a careful study. Coltan is an important mineral for the economy, but the child labor issue is a problem. It is always difficult to know what is really happening at the mines.
Everybody—NGOs, the local authorities and global companies—wants to cooperate on these problems. But they need objective and ←14 | 15→reliable information. A comprehensive study, with information from all parties, is the only way to address this. This should be our first step. A study may not eliminate child slavery, but the world will see that we are trying to do the right thing.
Option D—Preserve and Protect
Ending child labor and protecting the environment should be long-term goals. The situation can be improved by doing the following:
1. Provide primary school education, using resources from NGOs and MNCs operating in the area;
2. Improve health and safety at coltan mines and
3. Establish wildlife reserves in South Kivu.