Gold traders in the eastern district of Ituri in the Democratic Republic of the Congo (DR Congo) have heard of the Dodd-Frank act, or “Obama’s law” as it is known here, but don’t see why it has got anything to do with them.
“I struggle to understand this Obama’s law,” says George Lobho, one of hundreds of traders operating out of tiny wooden shacks in the muddy streets of Mongbwalu. “What does it mean?”
Ituri is one of many areas of the country to have experienced bitter ethnic conflict between rival tribes in recent years. Massacres have left tens of thousands dead.
It is this fighting that led US authorities to take the unprecedented step of naming the DR Congo in Section 1502 of the Dodd-Frank financial regulation act, which says US-listed companies that source gold, tungsten, tantalum and tin from the DR Congo or its neighbors must assure the US stock exchange regulator that their business is not helping fund conflict.
The legislation, signed by US President Barack Obama in 2010, puts the onus of proof on end-users. While it has sent shockwaves through the global gold industry, the fractured and opaque nature of the gold supply chain means it has yet to have an impact where it counts — on the ground.
Gold, which hit record highs near US$2,000 an ounce last year and remains above US$1,500, is a big earner here. People like Lobho who find it hard to feed their families ask few questions about the origins of the metal on offer.
Lobho buys about 50g of metal a week, which he sends on to an exporter in the district capital, Bunia, about 85km away. He says he doesn’t need to provide any documentation and says trading gold from areas where conflict continues, such as the Kivu provinces, is easy.
“If someone comes from North Kivu, they can sell here, of course,” he said. “No problem.”
Members of the US Congress are lobbying the US Securities and Exchange Commission (SEC) to pass the long-delayed guidelines necessary to fully enforce the section — but US companies are not wasting any time getting ready.
Electronics companies such as Dell and Intel have signed up to codes of conduct excluding conflict minerals from their supply chains, and jewelry retailers are pressuring manufacturers to do the same.
Some European gold refineries say they are no longer sourcing any material from Africa’s artisanal miners, who can’t provide the tracking paperwork their clients demand.
However, in the DR Congo, exporters are still finding routes to get gold from remote regions to market.
Research into the impact of Dodd-Frank by a UN Group of Experts last year found that while it had cut the sums earned from tungsten, tin and tantalum mining used to support warlords and buy guns, it had not had the same effect on the gold industry.
“Gold is just less tractable as a mineral in terms of being responsive to this kind of regulation, because it’s so easily smuggled,” Fred Robarts, coordinator of the Group of Experts’ report, said by telephone from Kinshasa. “The total volume of gold moving is still quite high.”
Aside from output from Canadian miner Banro, the DR Congo’s only large-scale producer at present, the country officially exported about 112kg of gold last year. However, one mining official in Kinshasa estimated that figure is probably less than 10 percent of the actual amount.