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ANALYSIS: DRC uncertainty could fuel tighter cobalt regulations

ANALYSIS: DRC uncertainty could fuel tighter cobalt regulations

The deteriorating political situation in the Democratic Republic of Congo (DRC) is likely to fuel stricter regulations on the supply chains of cobalt from the country. The precious mineral is used in the manufacturing of phones, electric cars and laptops.

The DRC is the world’s largest producer of cobalt, accounting for roughly 60% of global production, according to the United States Geological Survey (USGS). However, both international human rights groups and media organisations have in the past revealed that cobalt – which is mainly mined in the unstable eastern region of the country – is largely unregulated, leaving the workers vulnerable to exploitation and poor work conditions.

An Amnesty International report into the DRC cobalt industry revealed that 20% of cobalt production is still mined by hand. Focusing mainly on Kolwezi, the centre of artisanal cobalt mining in the former province of Katanga, researchers documented thousands of Congolese working in unsafe conditions, and serious issues with child labour, pollution of water sources and a widespread lack of basic safety equipment. 

The Cobalt produced by some of the informal miners has in the past been sold to Congolese middlemen and purchased in turn by Chinese firms for export to their home country, according to Amnesty International. Once in China the cobalt entered the global market and turned up in multiple sectors.

International regulators have recently called for further scrutiny into the supply chain of DRC-sourced cobalt, and this demand is likely to grow louder due to the worsening political situation in the country.

Political turmoil

The central African country is spiralling into a political crisis over the failure of President Joseph Kabila to step down from office in line with the constitution. The president has engineered a transitional government to give his administration the time it needs to organise fresh elections.

But after violent street protests in September, the UN Security Council has warned that civil war could be about to break out in the country, which has already seen decades of instability in the recent past. A preliminary investigation in October by the UN Joint Human Rights Office of MONUSCO, the UN mission in DR Congo, found government forces responsible for using excessive and lethal force during anti-Kabila demonstrations in the capital, a sign of increasing instability there.

Should the situation worsen, then global manufacturing firms would have to ready themselves against the inevitable regulatory changes that will come into effect. 

Growing Pressure for Change

However, there has been a concerted drive to clean up the supply chain of rare minerals mined in developing countries. One such institution is UK-headquartered RCS Global, a firm involved in mineral supply chain due diligence advisory and auditing services. 

It reported that there are major compliance risks for manufacturers in the supply chains for DRC-sourced cobalt, and the company has said that there is growing on international regulators to put cobalt in the same category as other ‘conflict minerals’ from the DRC. Currently strict regulations are in place to monitor the supply chain of gold, tin, tantalum and tungsten.

Harrison Mitchell, a Director at RCS Global who helped produce its cobalt report, warns that regulatory changes to incorporate cobalt must now be a realistic possibility for companies. It coincides with the OECD already considering a drive to expand global supply chain transparency and due diligence to other commodities beyond the conflict minerals currently covered in its official ‘Due Diligence Guidance’.

The Gold Standard

The OECD’s Guidance is endorsed by the United States Securities and Exchange Commission, the European Commission and the Chinese CCCMC, and is the template for transparency in global raw material supply chains. It represents the global gold standard for supply chain regulation.

With purchasing companies being held increasingly responsible for their actions of local trading partners or middlemen, manufacturing companies must increasingly prepare themselves for tighter regulation over a wider array of raw materials in the future.

Harrison warns: “The biggest error [RCS Global] see is companies not realising that in the eyes of the OECD Guidance, they are responsible for the conduct of their partners throughout their supply chain right down to the mine.

“Companies like Apple have acknowledged this and are pushing out their due diligence across their supply chains but many others see this as a daunting prospect.”

Neil Thompson

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Written by African Business Magazine

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