The true cost of gold

Humphrey Hawksley

The illegal export of minerals and metals from the Democratic Republic of Congo has helped fuel the ongoing war in the east of the country. The implementation of international and domestic initiatives aimed at restricting the sale and use of ‘conflict minerals’ is forcing multinational companies to clean up their supply chains.

Each year, an estimated $1 billion worth of gold is extracted from a remote and conflict ridden part of Africa and sold on the international black market. Gold has a high value and is easy to melt down and hide, so where it ends up is anyone’s guess. It is also a resilient conductor of electricity, so one of its destinations is as part of mobile phones, computers and other everyday gadgets. That place is the eastern region of the Democratic Republic of Congo, and the revenue from these illicit gold sales helps fund rival militias who have waged wars that have killed an estimated 6 million people during the past 15 years. Together with other ‘conflict minerals’ (and metals) such as tin, tantalum and coltan, the illegal trade in gold has become the focus of a global experiment on how to end the cycle of violence and poverty in certain areas of the developing world.

A lengthy UN investigation into conflict minerals has now established a link between killing and exploitation in developing countries that leads directly to appliances in our homes. The issue is not confined to eastern Congo, but this is a region that could provide a laboratory for positive change. The UN has reported details of illegal trading routes from eastern Congo to destinations outside Africa. The networks are made up of businessmen and military figures who exploit high levels of corruption and use false documentation. For example, only 15 percent of the gold passing through Uganda is properly documented, and the UN has had difficulty getting information from the government and the private sector in Dubai, where much of the gold is processed. In all, eastern Congo generates billions of dollars of wealth every year, while the region remains one of the poorest and most unstable places in the world.

If we also take into account the use of child labour, poor safety conditions and low incomes, the emerging picture verifies the long-standing allegations of Western economies exploiting poor communities in the developing world. The price of gold has gone up five times over the past ten years, whereas the miners’ wages have gone down.

“The government doesn’t care about us and there is no other way of living,” explains Vincent Djuma Bigirinama, the miners’ president at the Nyamurhale gold mine, where young men scramble down deep, narrow shafts to hack gold out of a mountain. It’s then taken down to a river where children are used to break and wash the rocks. Soldiers watch over the process and collect a percentage of the profits. “Our children, when they grow up, won’t have any other jobs. So they will have to do the same work in the same way,” says Bigirinama. “Why do we have to do this? Why can’t we train to do something else and find a career and make money in another way? We’re born into this, and I tell you many of the miners are crying at the lives they have to lead.”

But, now, through a mix of consumer group pressure and American legislation, the tide might be turning. The Dodd-Frank Wall Street Reform Act of 2010, drawn up to regulate the US financial system after the 2008 crisis, contains a section that specifically addresses conflict minerals from eastern Congo. Section 1502 requires any American company that believes it might be using these minerals to register with the US government.

The immediate result has been a questioning by many multinationals about the moral and logistical sustainability of their supply chains. “No company can give a 100 percent guarantee of the minerals’ origin,” said global mobile phone giant Nokia in a statement. “We are honest and say that. The basic problem is that after minerals are smelted together, any characteristics of the ore are gone. Currently, there are no certificates available, and supply chains are long and complex.”

Even before the Dodd-Frank Act passed into law, American companies stopped buying minerals from eastern Congo in order to avoid tarnishing their reputation. The law also prompted the fragile Congolese government to draft its own legislation aimed at creating mineral production that was internationally acceptable. The 34-member Organisation for Economic Co-operation and Development has been negotiating its own guidelines to complement Dodd-Frank, and representatives of the mineral industries are designing benchmarks. The World Gold Council plans to have a conflict-free gold standard published by the end of 2012.

Earlier this year, the campaigning group Enough Project carried out a survey in Congo’s mining areas and found that profits to militia from minerals were down 65 per cent from two years ago. There was far less harassment of miners by armed groups, and those areas certified as conflict-free were already seeing the benefits of increased wages and the building of schools and health centres.

Gold, however, is more problematic. Many, feeling squeezed by regulations on other minerals, simply switched to goldmining. It remains the black market metal of choice. As of July 2012, the Enough Project estimated that just over 20 kilograms of gold had been officially exported from eastern Congo, while up to 8 tonnes had gone out illegally. An added complication is that conflict has recently flared up again in a fresh rebellion by the M23 rebel group, led by General Bosco Ntaganda who has ended a fractious agreement to be part of the Congolese army. He is already wanted for war crimes and is accused by the UN of receiving military backing from neighbouring Rwanda – a charge that Rwanda denies.

Uncertainty riddles the experiment under way in eastern Congo and no one is anticipating unequivocal success even within a generation. But the international focus may make the present momentum irreversible.

More consumers are no longer prepared to tolerate products stained with blood and child labour. The muscle of legislation is forcing multinationals to clean up their supply chains, and if that happens, warlords will no longer have the money to buy weapons and run their militias.

About the author:

Humphrey Hawksley is BBC World Affairs Correspondent and author of Democracy Kills: What’s So Good About Having the Vote?


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