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Economic Briefing for DFID
Mapping Initiatives on Conflict Minerals in Eastern DRC
and Opportunities for Engagement
by Lau...
2
Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affa...
Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affair...
Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affair...
Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affair...
Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affair...
Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affair...
Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affair...
Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affair...
Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affair...
Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affair...
Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affair...
Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affair...
Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affair...
Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affair...
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Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement

Economic Breifing for DFID in Kinshasa, The DR Congo, 28 November 2015

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Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement

  1. 1. Economic Briefing for DFID Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affairs Officer (gnassou@un.org) Political Affairs Division 28 November 2014 Kinshasa, The DRC MONUSCO
  2. 2. 2 Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affairs Officer (gnassou@un.org) MONUSCO, Political Affairs Division, 28 November 2014 OUTLINE INTRODUCTION: The DRC at Glance 1. Overview of the Artisanal Mining Sector in the DRC (2002-2014) 2. Attempts at Addressing Conflict Minerals Issue in Eastern DRC (from the Six-Month Mining Ban of 2010-2011 to the Impact of the Section 1502 of Dodd-Frank Act of 21st July 2010) 3.Mapping Conflict Free-Minerals Initiatives in Eastern DRC 4. Beyond Conflict Free-Minerals Initiatives: Attempts at Addressing Business Models of Armed Groups CONCLUSION: Transition from Militarized Economy to Peace Economy: Where does Stand Eastern DRC?
  3. 3. Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affairs Officer (gnassou@un.org) MONUSCO, Political Affairs Division , 28 November 2014 INTRODUCTION: The DR Congo at a Glance 1. Total Population (in 2013 (e)): 80.46 million 2. Key Macroeconomic Indicators * Real Gross Domestic Product (GDP) Growth (in 2014): 8.6% * Annual Inflation Rate (23/11/2014): 1.27% * Exchange Rate (25/11/2014): USD 1 = CDF 926.023 3. Private Sector Foreign Direct Investment (FDI) Inflows to the DR Congo (in 2013): USD 2,098,000,000 Graph 1. Geography of the DRC 4. Socio-Economic Indicator In 2014, DR Congo ranks 186 out of 187 countries in terms of Human Development Index (HDI)- UNDP Non Inclusive Economic Growth Source: IMF, The World Economic Outlook (October 2014), Central Bank of Congo (http://www.bcc.cd), UNDP, The 2014 Human Development Report: Sustaining Human Progress: Reducing Vulnerabilities and Building Resilience, UNCTAD, and The 2014 World Investment Report: Investing in the SDGs: An Action Plan. 3
  4. 4. Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affairs Officer (gnassou@un.org) MONUSCO, Political Affairs Division, 28 November 2014 1. Overview of the Artisanal Mining Sector in the DRC (2002-2014) 4 2001 2003 2005 2007 2009 2011 2013 20102002 2008 Mining Code (11 July 2002) Mining Regulation (26 March 2003) ARTISANAL MINING The US Legislation on Conflict-Free Minerals (Section 1502 of Dodd-Franck Act of 21 July 2010) ARTISANAL MINING Mining Ban in Kivus and Maniema (9 September 2009- 10 March 2010) 2012 Ongoing Review of Mining code ( as of March 2012) 2014 2015 ARTISANAL MINING Conflict-Free Smelters (CFS) Program (as of 1 April 2011) ARTISANAL MINING ICGLR – Regional Initiative against the Illegal Exploitation of Natural Resources (RINR) - (2008) & Lusaka summit of December 2010 (6 tools ) 2004 2006 ARTISANAL MINING OECD Due Diligence Guidance (as of December 2009)
  5. 5. Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affairs Officer (gnassou@un.org) MONUSCO, Political Affairs Division , 28 November 2014 5 2. Attempts at Addressing Conflict Minerals Issue in Eastern DRC * President Kabila declaration of 9 September 2010 & “Arrêté” of Minister of Mines of 20 September 2010 * Lift of the Mining Ban in Maniema, North Kivu, and South Kivu of 10 March 2011 Rise in raw materials prices, notably tin Negative impact on the economies of 3 provinces and the national economy 2.1. Mining Ban in North Kivu, South Kivu, and Maniema (from 9 September 2010 to 10 March 2011) Legal Framework Mining Ban Application Effects Suspension of Mining activities: the holders of mining rights, the “comptoirs”, the “negociants”, and the artisanal diggers, except Banro (South Kivu), Somikivu (North Kivu) Several cases of violation of mining ban in Kivus, and ManiemaIn practice Disruption of supply chains of minerals Source: London Metal Exchange (LME), 1 August to 31 March 2011. Graph 2. Tin Price (cash buyer) from 1 August 2010 to 31 March 2011 In aftermath of the international financial crisis of 2008-2009.
  6. 6. Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affairs Officer (gnassou@un.org) MONUSCO, Political Affairs Division , 28 November 2014 6 2.2. Addressing Conflict Minerals: Dodd-Frank Act of 21st July 2010 (Artisanal Mining) Raw Materials : Coltan, Cassiterite, Wolframite (tungsten), gold, and any other minerals or its derivatives determined by the US Secretary of State Modalities: Reporting companies using the 3T & gold originating in the DRC or adjoining countries for the functionality or production of their products will have to submit an annual report to the Security Exchange Commission (SEC) disclosing whether their products contain the above mentioned minerals. Independent audits will be carried out for the companies concerned . Impact on Business Strategies of Economic Operators The DRC The Rest of the World Graph 3. Map of The DRC Countries: The DRC and " adjoining countries"
  7. 7. Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affairs Officer (gnassou@un.org) MONUSCO, Political Affairs Division , 28 November 2014 7 Key minerals Coltan , Cassiterite (Sn) (LME), Au (NYMEX), Wolframite (tungsten) Mining sites Mining companies “Unités de traitements” formely known as Comptoirs” International trading companies of raw materials End-user Industries Insecurity Supply chain free of conflict minerals ? Metal Smelters Other economic operators Commodities Markets Banks Transport companies Customs Electronics, Automative, Jewelry Traceability & certification of raw materials? (Towards a better regulation of the artisanal mining activities) Eastern DRC International Note: - (*) companies operate under Congolese law (--- sprl), Parent company listed or not on TSX or JSE or AIM,… 2.3. Impact of the US legislation on Conflict-Free Minerals “Négociants” or Traders Certificatio n of mining sites 1502 of Dodd-Frank Act of 21st July 2010 Implementation of an international Conflict Free Smelter (CFS) audit for smelters on 1 April 2011 - Focus on Business Strategies of Economic Operators
  8. 8. Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affairs Officer (gnassou@un.org) MONUSCO, Political Affairs Division , 28 November 2014 Shift in Artisanal Mining Activities (Cassiterite) in Eastern DRC as of 2011: North-East Katanga & Maniama vs. North Kivu & South Kivu Graph 4. Official Exports of Cassiterite in USD and Volume from 2003-2013 Graph 5. Official Exports of Cassiterite in Volume from 2009-2013 Source: Laure Gnassou on the basis of “Centre d’Evaluation, d’Expertise et de Certification (CEEC), 26 November 2014. Source: Laure Gnassou on the basis “Centre d’Evaluation, d’Expertise et de Certification (CEEC), 26 November 2014. - Artisanal Mining Activities in Eastern DRC: Focus on Data Artisanal Mining Drop in official exports of cassiterite over a decade. 7
  9. 9. Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affairs Officer (gnassou@un.org) MONUSCO, Political Affairs Division , 28 November 2014 Graph 6. Official Exports of Coltan in USD and Volume from 2003-2013 Graph 7. Official Exports of Coltan in Volume from 2009-2013 Source: Laure Gnassou on the basis “Centre d’Evaluation, d’Expertise et de Certification (CEEC), 26 November 2014. Source: Laure Gnassou on the basis “Centre d’Evaluation, d’Expertise et de Certification (CEEC), 26 November 2014. Shift in Artisanal Mining Activities (Coltan) in Eastern DRC as of 2011: North-East Katanga & North Kivu (leading provinces). Artisanal Mining Rise in official exports of coltan over a decade. 8
  10. 10. Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affairs Officer (gnassou@un.org) MONUSCO, Political Affairs Division , 28 November 2014 Graph 8. Official Exports of Wolfram in USD and Volume from 2003-2013 USD Source: Laure Gnassou on the basis “Centre d’Evaluation, d’Expertise et de Certification (CEEC), 26 November 2014. North-East Katanga still a leading Province: Export of wolfram (in 2011): 40,500 kg (in 2012): 67,000 kg (in 2013): 60,231 kg Artisanal Mining 9
  11. 11. Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affairs Officer (gnassou@un.org) MONUSCO, Political Affairs Division , 28 November 2014 Graph 9. Official Exports of Gold in Volume from 2003-2012 Graph 10. Official Exports of Gold in USD from 2003-2012 Source: Laure Gnassou on the basis “Centre d’Evaluation, d’Expertise et de Certification (CEEC), 26 November 2014. Source: Laure Gnassou on the basis “Centre d’Evaluation, d’Expertise et de Certification (CEEC), 26 November 2014. Increase of industrial gold due to Kibali Gold Mine (Province Orientale (Ituri)) and Banro (South Kivu & Maniema) since 2011 No traceability system for artisanal gold & Rare Earth Elements (REE) 11
  12. 12. Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affairs Officer (gnassou@un.org) MONUSCO, Political Affairs Division, 28 November 2014 3.1. Conflict Minerals & Risk Mitigations: Donors and Private Sector Support 3. Mapping Conflict Free-Minerals Initiatives in Eastern DRC Process Starting Date Location Funding Remarks Donors Private Sector Artisanal Mining Production Qualification & Validation of artisanal mining sites 2012 Eastern DRC BGR USAID MONUSCO (1) n.a. “Arrêté” n°58 of 29 February 2012 on qualification & validation of mining sites Traceability (2) ITRI Tin Supply Chain Initiative(ITSCI) by ITRI for 3T 2011 North-East Katanga n.a. Minerals Exporters Official Minerals Exportation (CEEC) ICGLR Regional Certificate 30 June 2013 (2 bis) Kinshasa Promines/ The world Bank (3) Minerals Exporters (4) Independent Audit of Supply Chain Internal Process Eastern DRC n.a. Minerals Exporters Annual report ICGLR Requirement Eastern DRC USAID n.a. upcoming Source: Laure Gnassou. Note: (1): Upcoming system by Better Sourcing Program (BPS) for 3T; (2) Upcoming traceability system for gold – CEEC Initiative; (2 bis): The ICGLR regional certificate was launched on 30 June 2013. In practice, the CEEC issued the first ICGLR regional certificate on 20 January 2014; (3) Promines/The World Bank funded ICGLR certificates printing; & (4) Minerals exporters must pay USD 350 per ICGLR regional certificate. 12
  13. 13. Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affairs Officer (gnassou@un.org) MONUSCO, Political Affairs Division , 28 November 2014 4. Beyond Conflict Free-Minerals Initiatives: Attempts at Addressing Business Models of Armed Groups 14 Armed Groups 4.1. Volatile Security Situation in Eastern DRC - Increase in Human Rights Violations and IDPs - Disruption of Economic Activities * Dynamic of Conflict Minerals, illegal taxation system * Negative Impact on Macroeconomic Developments (increase in budgetary expenditures, mainly due to sovereignty-related spending) Graph 11. Main Eastern Provinces Source: MONUSCO Map, 14 May 2012.
  14. 14. Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affairs Officer (gnassou@un.org) MONUSCO, Political Affairs Division , 28 November 2014 * Military Operations (FARDC & MONUSCO assistance) * Mediation (Armed groups/Government & the international community support) Attempts at Addressing Security Crisis and Dismantling Business Models of Armed Groups in Eastern DRC Tools “Cartel” Armed Groups (critical salaries issue) “Acting as Economic Operators” Agriculture + Forestry Mining Sector Illegal Taxation Tax Collection at Borders Harassment of Population (limited production cost) Militarized Economy or War Economy in Eastern DRC East African Community: Burundi Kenya Rwanda Tanzania Uganda (in 2014: 143.5 million of population) 4.2. Business Models of Armed Groups in Eastern DRC * DDR Process (Better economic incentives for returning to economic activities, including agri-mining activities) Political & Diplomatic Issues Security Issue Economic Issue * Demilitarization of mining artisanal sites/concessions 15
  15. 15. Mapping Initiatives on Conflict Minerals in Eastern DRC and Opportunities for Engagement by Laure Gnassou, Economic Affairs Officer (gnassou@un.org) MONUSCO, Political Affairs Division, 28 November 2014 15 Governance of Mining Sector (Artisanal & Industrial) (Optimal situation) Security in the Rift Graben (Optimal situation) Macroeconomic Stability including Conducive Business Climate (Optimal situation) Infrastructure & Energy (Optimal situation) CONCLUSION: Transition from Militarized Economy to Peace Economy: Where does Stand Eastern DRC? The DRC Addressing infrastructure and energy deficit throughout the country, notably Eastern DRC (Ongoing) Addressing insecurity in the Rift Graben (Ongoing) Improving macroeconomic stability including private sector development (Foreign Direct Investment (FDI) inflows to the DRC (in 2013): USD 2,098,000,000) & pro-poor spending (Ongoing) Thank You Addressing conflict minerals spiral in Eastern DRC Creation of growth poles around industrial projects including Kibali Gold Mine (Ituri) and Banro (South Kivu) (Ongoing)

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