Amid the guerrilla violence that continues to ravage areas of central Africa, the major Western powers are taking steps to ensure that their operations are free of "conflict metals."
A large portion of the conflict metal trade is concentrated in the Democratic Republic of the Congo, the oft-unstable, resource-rich nation situated almost directly in the center of the African continent.
Generally, conflict metals are those whose sale helps fund the militarism, violence, and human rights violations in one of Africa's—and the world's—most war-torn regions. Specifically, conflict metals refer to "3TG": tin, tungsten, tantalum, and gold. While this narrow definition leaves off some valuable commodities (such as diamonds, i.e. "blood diamonds") that are tied to funding such conflicts, the 3TG group is of particular concern because these resources are used so heavily in industrial applications and new technologies. (Meanwhile, diamonds and precious stones like jade, though desirable, are hardly central to global productivity.)
Complying With Conflict Metals Regulation
The European Commission is near the end of the drafting process for new rules governing the responsibilities of companies that use conflict metals to disclose their supply chains and make all efforts to ensure that their metals are not sourced from nefarious groups. Maintaining such supply-chain integrity is seen as the surest means to combat the continued flow of funds to illicit activities in exchange for the prized conflict minerals. It is estimated that some 880,000 SMEs (small- and medium-sized enterprises, as defined by the EC) could be affected by the new measure, not to mention their business partners around the globe.
In the U.S., these requirements were already built into the Dodd-Frank legislation following the financial crisis, though these stipulations will become mandatory beginning next year, and will include an audit from a third party.
Thus far in the effort to crack down on the trade of conflict metals, U.S. firms have expressed frustration with the difficulty—and cost—of complying with the rules laid out in Dodd-Frank. Among more than 1,000 companies that have participated in the voluntary phase of the new law, 90% reported that they simply can't verify beyond a reasonable doubt that their products contain zero conflict minerals. With so many small-scale producers across the region, it can become incredibly cumbersome (seemingly impossible) to prove that all 3TG resources are conflict-free.
These dicey logistics aside, regulators on both sides of the Atlantic are struggling to hold understandably begrudging firms to task on where their minerals come from. Last year, the final year where reporting on conflict metals was voluntary, some 2/3 of the responding companies couldn't even place the country of origin of their metals.
The 3TG metals are prevalently used in electronics and new technology, with gold being an obvious requirement for microchips and other electronic components. The oddball in the group is proving to be tantalum, a little-known blue-gray metal that is used in the manufacture of lighter electronic devices that are still sturdy. With a less mature and robust supply chain for tantalum, it can be more difficult to track and require greater attention on the part of industrial firms that use tantalum in their products.
In an attempt to remove all doubt about where its conflict metals originate from, Kemet, the world's largest maker of tantalum capacitors, resolved to simply purchase its own tantalum mines located in the DRC in 2011. This allows Kemet to control its own supply chain, cutting the potentially conflict-embroiled sources out of their operations altogether.
While Kemet's move is commendable, not all firms purchasing 3TG metals are created equal; many smaller companies cannot afford to take direct ownership of their suppliers. While ramping up efforts to combat the sale of conflict metals is undeniably a good cause, at what cost of economic efficacy will such regulations come?