Stopping the Resource Wars in Africa

Two upcoming Senate bills could have a big impact on the Democratic Republic of Congo, by exposing how its 10-year conflict is being funded.

Since 1998, fighting in eastern Democratic Republic of Congo (DRC) has killed an estimated 5.4 million people and resulted in some of the most horrific sexual violence the world has ever seen. Almost a million internally-displaced people are still unable to return safely to their areas of origin. Despite the nine-year presence of the world’s largest United Nations peacekeeping operation, the Mission de l'Organisation des Nations-Unies au Congo (MONUC)---18,422 personnel in 2008 at an annual cost of $1.2 billion---rebel forces continue to terrorize innocent citizens in this large central African nation, creating a dire humanitarian crisis that rivals the tragedies in Darfur and Myanmar.

The armed groups in eastern DRC are funded by the region’s abundant natural resources, especially from the extraction of tin, tantalum, and tungsten used to make laptops, cell phones, digital cameras, iPods, and video recorders. As a result, U.S. and international electronic companies---and the consumers who purchase their products---are funding this war.

Two-thirds of the people living below the poverty line reside in nations rich with extractive resources. Yet they rarely receive any meaningful benefits from their country’s resource wealth.

Two bills are now in Congress---the Congo Conflict Minerals Act and the Extractive Industries Transparency Disclosure Act. These two bills would require companies listed on the Securities and Exchange Commission (SEC) to disclose new information in their financial reporting and help ensure that such minerals do not support the conflict.

The Congo Conflict Minerals Act, introduced by Senators Sam Brownback (R-KS), Richard Durbin (D-IL) and Russ Feingold (D-WI), would require SEC-listed electronic companies, such as Apple, Nokia, and Nintendo, to disclose the exact location of the mines from which they receive their tin, tantalum, and tungsten in their regular reporting. By noting the source of their minerals, consumers will know whether the electronics they are buying are funding illegal armed groups in the DRC. As evident from the effective embargo on conflict timber from Liberia and blood diamonds from Sierra Leone, many U.S. and European consumers are sensitive to breaking the link between natural resources and conflict. Many U.S. and international companies are also concerned about their reputation and the financial risks associated with not being listed on the SEC (the SEC is a principal source of company information to potential investors).

Ending the conflict in DRC---often called “Africa’s World War” because the armies of nearly a dozen other African states have been drawn into the fighting---is a long-standing and high-priority U.S. policy objective. In October 2006, then-President George Bush argued that the conflict constitutes “an unusual and extraordinary threat” to our foreign policy and declared a national emergency. He issued an executive order to block the property of people and institutions contributing to the conflict in the DRC, including those who “have materially assisted, sponsored, or provided financial, material, or technological support.” President Barack Obama’s administration has also made it clear that stopping the war in Congo a top priority of U.S. policy on Africa.

In addition to advancing U.S. interests, the Congo Conflict Minerals Act would contribute to the effective implementation of U.N. Resolution 1856. In December 2008, the U.N. Security Council passed Resolution 1856—the latest in a series of resolutions on the DRC conflict—which links the “illicit trade in natural resources” with the “proliferation and trafficking of arms,” and places an embargo on illegally-exploited natural resources. It calls for the U.N. to heighten security around the mines and authorizes the peacekeeping forces to “seize or collect, as appropriate, the arms and any related material whose presence in the territory of the DRC” contributes to the conflict, including illegally-mined natural resources. Resolution 1856 also urged all countries to take appropriate steps to end the illicit trade in natural resources in the region.

The Congo Conflict Minerals Act is the most recent initiative out of Congress to break the link between natural resources and conflict. While the Act focuses on sourcing three minerals extracted from eastern DRC, another bill awaits action in Congress—the Extractive Industries Transparency Disclosure Act—which would have broader implications for the effective use of natural resource revenues around the world.

The Extractive Industries Transparency Disclosure Act was introduced by Representative Barney Frank (D-MA), Chairman of the House Financial Services Committee, and Senator Charles Schumer (D-NY) in the summer of 2008. It was co-sponsored by Senators Maria Cantwell (D-WA), Richard Durbin (D-IL), Russ Feingold (D-WI), Patrick Leahy (D-VT), Tom Harkin (D-IA)and Joe Lieberman (I-CT). The bill was referred to the Committee on Urban, Banking, and Housing Affairs, but never discussed on the floor. It is, however, expected to be reintroduced shortly by the same sponsors.

The Extractive Industries Transparency Disclosure Act would require all SEC-listed companies to fully disclose the amount of money paid to foreign governments for oil, gas, and minerals---collectively called extractive resources---in their required financial statements. Around two-thirds of the people living below the poverty line reside in nations rich with extractive resources yet they rarely receive any meaningful benefits from their country’s resource wealth. This Act is an important step in ensuring sound revenue management, promoting effective reinvestments and fighting the corruption that contributes to the disjuncture between resource wealth and economic growth.

In July, President Obama traveled to Ghana for his first presidential visit to sub-Saharan Africa because the country is an outpost of democracy---a model for good governance. Ghana, a bipartisan American favorite, is also one of our most trusted partners in Africa. In a speech to the parliament, President Obama highlighted the critical role that sound governance and civil society plays in promoting lasting development. While Ghana is well-known for its gold (the country is Africa’s second largest gold producer), significant quantities of oil have recently been found offshore. Tullow Oil, an Irish company list on the SEC, holds several of the most promising deep water blocks (Tullow also holds several proven blocks in Uganda, another major U.S. ally in Africa). The Extractive Industries Transparency Disclosure Act would help ensure that some of our close allies in the continent—Africa’s new petro-states—use their oil riches in ways that promote development, not civil unrest and conflict.

The Extractive Industries Transparency Disclosure Act enjoys broad support from U.S. development professionals. Critics, however, point out that full disclosure of payments made by extractive industries to foreign governments alone will not ensure extractive resource revenues are invested in ways that support poverty reduction. Other pundits argue that the most corrupt and non-democratic regimes—those which the Extractive Industries Transparency Disclosure Act is targeting—will simply partner with companies from China, India and elsewhere and would not be affected by the Act. In fact, nearly all internationally-competitive oil, gas and mining companies are registered with the SEC and subject to the same regulations as U.S. companies.

The Act would provide a powerful platform for U.S. development assistance to work with governments around the world to ensure revenues from natural resources contribute to economic growth and poverty reduction. Indeed, the passing of these two bills should be complemented by targeted investments by the Agency for International Development, Millennium Challenge Corporation and other agencies delivering U.S. government development assistance. Based on recent research by WRI and our local partner organizations in Africa, such support should emphasize investments in two areas:

• Help Governments Establish Fair Distribution Policies. The distribution of environmental benefits (and costs) is determined largely by public policies and government practices. U.S. development assistance can work with governments to develop extractive resource revenue management and distribution policies that create economic, political and other incentives in support of poverty reduction, a priority national policy objective in most developing countries. Too often, public policies favor affluent people and regions, enriching a few powerful political and economic elites while passing disproportionately large social and environmental costs on to the poor disenfranchised majority. Poverty reduction—especially for the poorest—can be greatly enhanced through policies that promote fair distribution of natural resource benefits. In high-inequity, high-poverty countries, equitable access and fair distribution can be more effective than economic growth alone in reducing poverty. Such reforms are most effective in poor countries, where natural resources dominate local economies and natural capital is particularly significant in determining the overall distribution of wealth. Even small changes in these policies can have a large effect on building the assets of the poor and reducing poverty.

• Strengthen Democratic Institutions and Support Good Governance. While it is important to work with governments, especially government reformers, to establish fair environmental distribution policies, U.S. development assistance must also strengthen other centers of power which can press for such reforms and check the authority of the executive branch. Among these other power centers are the legislature, civil society organizations and citizens. In many countries, even in those that have embraced multi-party politics and hold regular elections, policy reform processes remain closed and tightly controlled by a small circle of political elites. Small wonder that many public policies do not reflect the interest of the electoral majority—the rural poor. Strengthening the legislature and civil society organizations supports the democratic principal of separation of power, and promotes oversight and accountability. Working with the popular media to educate the public on policy processes can engage citizens in government matters. Accountability requires information on institutional performance, and the power to sanction poor decisions and discipline behavior. U.S. assistance can support performance monitoring and help these actors exercise their constitutional authorities and informal powers to press government on matters regarding the management of extractive resource revenues.

It is time for the U.S. to advance its national interests and support development around the world by passing both the Congo Conflict Minerals Act and the Extractive Industries Transparency Disclosure Act.