US Congo minerals law could cut investment, livelihoods: study

KINSHASA (Reuters) - A U.S. law aimed at tackling the trade in "conflict minerals" in Democratic Republic of Congo could cut U.S. investments in the country and harm the livelihood of millions of people, a research paper from think tank Chatham House said.

Eastern Congo has suffered nearly two decades of unrest as rebels, rogue Congolese soldiers and criminal gangs have prolonged violence to profit from its rich mineral resources, including the rare metal tantulum that is widely used in making cell phones, laptops and other electronics.

U.S. efforts to crack down on the trade have culminated in the Dodd Frank legislation, which was finalised last month and will require all companies buying minerals from the region to prove that they are not helping to fuel bloodshed.

The regulations have drawn a mixed response. Supporters say the measure is squeezing the profits of armed groups, while critics warn it is prohibitively expensive for investors and risks the livelihoods of millions of people.

"Section 1502 of the Dodd Frank Act (which specifically deals with conflict minerals in the Congo) has come under attack by its critics for simply being bad law," the paper issued on Friday by two researchers from London-based Chatham House said.

"Even its supporters have raised a number of concerns... (including) whether the standards demanded are even achievable, because they are not practicable," the paper said in reference to the part of the law covering conflict minerals.

"The additional costs that will be incurred by U.S. businesses as a direct result of the Dodd Frank disclosure rules raises the prospect that U.S. businesses will simply opt to source from other jurisdictions rather than from the DRC," it said.

The U.S. Securities and Exchange Commission estimated that the initial cost of compliance - required within the next two to four years - could be as much as $4 billion.

MILLIONS DEPEND ON MINING

An estimated 10 million people in Congo, one of the poorest countries, are directly or indirectly dependent on mining, according to the Chatham House study.

Last month Congolese officials told Reuters that the legal mineral trade from eastern Congo's most troubled provinces of North and South Kivu had been reduced virtually to zero, with a "catastrophic" impact on the local population.

Congo also believes profits from minerals smuggled into neighbouring Rwanda may be funding a new rebellion in Congo's east, and Kinshasa has called on Washington to ban U.S. companies from buying minerals from Rwanda.

The Chatham House study said some progress has been made in establishing new standards to govern the mineral trade but warned that enforcing rules might present more serious problems.

"Developing a normative framework to govern conflict minerals may have proved difficult, but for the states in the region, implementation and enforcement will be even more challenging," it concluded

Initiatives like the Dodd Frank act have seen a 65 percent drop in profits for armed groups from tin, tungsten and tantalum this year according to Sasha Lezhnev, senior policy advisor for the U.S. based advocacy group, Enough.

Although companies need to launch more projects to support the livelihoods of mining communities, the legislation remains necessary to break the link between human rights abuses and minerals, Lezhnev said.

"Make no mistake - without the backbone of Dodd-Frank and stringent supply chain traceability requirements, the most heinous armed groups would still be selling minerals and exploiting miners," he said.

Source: http://news.yahoo.com/us-congo-minerals-law-could-cut-investment-livelihoods-084522932.html

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