Plummeting commodity prices increase risk of ‘conflict minerals’ in consumer electronic devices

A steep fall in worldwide mineral prices is jeopardizing the operational traceability system designed to both stem ‘conflict minerals’ and protect vulnerable artisanal miners in Africa’s Great Lakes region.

At risk are rollbacks, suspensions and even closure of the iTSCi traceability and due diligence system that Pact has helped governments to implement in more than 800 mines, ensuring the livelihoods of more than 60,000 artisanal miners in Democratic Republic of Congo, Rwanda, and Burundi.

Prices for tin, tungsten, and tantalum – 3T minerals that are used in all smartphones, computers, and airliners – have plummeted over the past year. While miners all over the world face the same price squeeze, the impact is magnified in central Africa where producers have to meet exceptionally strict requirements for due diligence if they are to trade on the international market. Central African miners and traders are at a commercial disadvantage and have to cut their own cost, including levies that self-fund the system during normal market conditions.

Since the advent of the Dodd-Frank Act five years ago, which mandated all U.S. publicly traded companies eliminate conflict minerals from their supply chain, Pact has worked urgently and diligently with the tin and tantalum industries and other partners to reconnect communities to the international minerals market. In large part, we’ve succeeded. But while market drop-offs may be short-term, the investment in – and benefits from – implementing traceability and due diligence is not.

“If the system is forced to reduce, suspend, or close operations, tens of thousands of miners will no longer have access to a legal market to sell their minerals. They’ll be forced to trade on informal, unregulated markets or to find other, not necessarily legal, means of supporting their families,” said Yves Bawa, Pact’s regional director for Congo, Rwanda, and Burundi. “Standing by and allowing the system to collapse, risking a return to unsafe conditions and conflict due to a lack of support for the internationally demanded system, is indefensible.”

At present, the vast majority of costs of the program are covered by ‘upstream’ businesses in the Great Lakes region. These local operators fund more than 85 percent of the costs of the system. Key support also comes from the Dutch Ministry of Foreign Affairs. However, only 1 percent of costs are covered by the end-user companies in the IT, telecommunications, automotive, aerospace, and other sectors. Even with substantial cuts that have already been taken to cope with the financial crisis, the system requires about $60,000 a month during the downturn to continue to operate.

“We are at a crisis point,” Bawa said. “We’ll have to begin withdrawing from mines imminently.”

Artisanal miners and their families are not the only ones under threat. Governments are losing tax revenue and businesses in mining communities are at risk of closing.

“We have made incredible progress in the past five years,” said Karen Hayes, Pact’s senior director for Mines to Markets. “Meeting the requirements of Dodd Frank was a huge challenge, but we have proved it is possible and, progressively, 90 percent of the 3Ts trade in the region has achieved international standards. We have worked on the basis of continuous improvement and inclusivity. Losing ground and seeing this progress lapse would be a tragedy for each and every miner, as well as for the national governments who have tried hard to respond to international requirements, and for the responsible companies and concerned individuals committed to making ‘conflict-free’ a reality.”

With the trade in the 3Ts vulnerable to interference by armed groups and others, consumers worldwide may soon no longer know whether their gadgets helped drive conflict and poverty in the heart of Africa.

We need your help now to make sure we do not lose ground. Conflict-free is a reality – let’s keep it that way.

Contact Karen Hayes, Pact’s Mines to Markets director, to learn how to help: khayes@pactworld.org or 202.466.5666.