The Democratic Republic of Congo is undertaking a huge, and potentially significant, experiment, Reuters reported recently.
The effort aims to clean up the DRC’s appalling reputational image as a supplier tainted with all manner of human rights abuses and lack of supply chain transparency. Reuters reports the state, in the guise of a new enterprise called the Enterprise Generale du Cobalt (EGC), aims to assume total control of the artisanal cobalt mining sector. That includes monopoly rights to buy all production.
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Congo and the artisanal cobalt mining sector
The government is working with PACT, a non-governmental organization that works globally to improve the lot of artisanal miners (among other underrepresented communities and minorities).
The model has been piloted at the Mutoshi mine. With PACT’s assistance, some 5,000 artisanal miners have been integrated into a formal structure.
Creating a sustainable and transparent supply chain would certainly remove a barrier to the DRC’s acceptability as a long-term supply source for the world’s major corporations. Ethics of supply chain sustainability is becoming an increasingly critical issue.
There are reputable cobalt suppliers from the DRC, of course.
firms like Glencore are major players in the field. However, Reuters estimates yearly artisanal output in the DRC has ranged from 15,000-30,000 metric tons, depending on price, in recent years. That makes that sector the world’s second-largest producer, after Congo’s official cobalt sector.
That is substantial when you consider something like 70% of the world’s cobalt comes from the DRC, by some estimates.
Motivations to act
No one should kid themselves that the government’s motivation to clean up the artisanal supply chain is purely altruistic. Nor it is solely for the well-being, fair treatment and safety of the miners.
Tax take is a probably the biggest factor.
Last year, the artisanal mining sector is estimated by the state to have produced about 18,000 metric tons, worth a notional $800 million at current prices.
On that, the government’s tax take amounted to exactly zero.
Bringing this under state control and handling the sale onto world markets would see a major contribution to state coffers. Furthermore, it would allow a degree of state control over the price paid to miners, their health and safety. In addition, the move would counter the illegal gangs that operate many of these operations that keep miners in a state of relative poverty.
The DRC is not alone in having large numbers of unregulated, often illegal miners working natural resources. That is a problem that results in often appalling working conditions for the miners. In addition, it leads to a huge loss of revenue for the state and the facilitation of organized criminal activity.
So, if the DRC’s experiment works, it could be a model NGOs like PACT could take to other countries. Furthermore, Multinationals could encourage that development with recognition and support.
It would be a feel-good story for the mining sector.