Conflict gold rules ignored by DR Congo and Dubai - China Dialogue
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Conflict gold rules ignored by DR Congo and Dubai

OECD and UN rules to prevent 'blood gold' are being flouted in DR Congo and leading trading market Dubai, writes Sophia Pickles

Last year I travelled to Shabunda town in the eastern Democratic Republic of Congo. There are no passable roads into the town, no running water, and electricity only for the few who can afford a generator.

But Shabunda was bustling, caught in the grip of a gold boom along the Ulindi River. Its streets were crammed with traders, gold divers and restaurant owners drawn by the boom. On the water, artisanal miners do the dangerous work of hauling gold from the riverbed onto rickety locally-made dredgers. But it soon became clear who was really cashing in.

Eastern Congo’s artisanal gold sector employs many thousands of people, perhaps even hundreds of thousands. Yet its wealth creating potential is being lost. The Democratic Republic of Congo’s economy is in crisis. Much of the eastern region suffers continuous instability and conflict, and lacks development or investment.

Starvation

Gold worth around US$38 million (252 million yuan) was mined in one year alone in Shabunda town.

But corruption and smuggling meant the riches mostly bypassed local people: the local hospital saw over 500 cases of malnutrition at the gold rush’s peak.  

Instead, gold revenue benefited Kun Hou Mining, a privately owned Chinese company, corrupt officials, and armed groups. Even state coffers missed out: the national budget was slashed by 22% in May 2016 because of economic pressures.  

Kun Hou Mining has received backing from local mining authorities in South Kivu province to operate four semi-industrial dredgers.

Militias

The company paid Raia Mutomboki, one of eastern Congo's largest armed groups, along the Ulindi with US$4,000 and at least two AK-47s, to secure its access to gold, sources told international human rights NGO Global Witness. Kun Hou Mining was contacted for comment but has given no reply.

International guidelines on sourcing artisanal gold from conflict regions, issued by the Organisation for Economic Cooperation and Development (OECD) and the UN, have been ignored by parties in eastern Congo.  

These guidelines outlined due diligence procedures to identify risks, and methods to avoid sourcing gold from conflict regions, or – if buying it – avoid stoking conflict by working in support of artisanal miners.

Law ignored

Officials overseeing South Kivu’s artisanal gold sector have not enforced Congolese law or held the company accountable for its numerous illegal activities, which include supporting armed groups – despite the fact that Congolese law has obliged the country’s gold sector to implement the OECD guidance since 2012.

Raia Mutomboki militia members also earned up to US$25,000 per month by extorting taxes from artisanal miners. In some cases, provincial officials worked hand-in-hand with men and women from Raia Mutumboki groups to illegally tax artisanal gold miners.

Mining authorities in regional capital Bukavu falsified declarations of origin on the small quantities of officially exported artisanal gold: it entered international supply chains labelled as from low-risk mines. In reality, it may have funded conflict.

Major market

Ulindi gold was traded in Dubai, the world’s biggest market for gold ore, in violation of Congolese laws and international guidelines
supported by the United Arab Emirates, requiring companies to ensure that minerals they buy and trade are not linked to human rights abuses or conflict. These checks were not done – and the responsible authorities did nothing about that.

Shabunda’s gold rush could have played out very differently.

Recent Chinese industry due diligence guidelines for responsible mineral supply chains, based on the OECD guidance, provide direction and advice for companies like Kun Hou Mining to help ensure that their operations are not linked to abuses.

Guidelines introduced in the United Arab Emirates (UAE) in 2012 make clear that all Dubai Multi Commodities Centre members and non-members should manage their supply chains according to the OECD principles.

For these reforms to be effective, governments must hold companies and public officials to account. Companies violating Congolese law, such as Kun Hou Mining, should be investigated, and prosecuted if evidence of wrongdoing is found.

China failing, too

The Chinese Ministry of Commerce, the Chinese embassy in DR Congo and the Chinese Chamber of Commerce for Metals, Minerals and Chemicals Importers and Exporters (who published the Chinese guidelines) should ensure that Kun Hou Mining, and other Chinese companies, understand and implement the Chinese Due Diligence Guidelines for Responsible Mineral Supply Chains .   

Companies all along the supply chain – international companies, gold traders, refiners and manufacturers – that buy gold directly and indirectly from Dubai must do comprehensive due diligence on supply chains and publicly report on how risks are being addressed. The UAE should enforce checks on companies in its jurisdiction.

People must come before profit: but this is not what is happening along many gold supply chains. As a local in Shabunda told me, “the dredgers haven't brought us anything. For us locals, nothing has changed. Life is how it always was, before they came. “

This article is based on Global Witness’ report, “River of Gold”, which is available in English and French. The summary is available in Chinese and Arabic.

Sophia Pickles is Senior Advisor, DR Congo team at Global Witness.