Rwanda is counting on US President Donald Trump coming good on his intention to suspend a law that bars companies from handling conflict minerals to save the country more than $4 million spent annually on compliance.
President Trump had throughout his campaign threatened to do away with the law, known as the Dodd Frank Act, which he argued restricted the growth of manufacturing in the US.
The Dodd Frank Act was signed into law by his predecessor Barack Obama in 2010. The legislation was intended to safeguard stability in mineral-rich conflict- prone countries like those in the Great Lakes region, by ensuring that natural resources were not used to fund conflicts.
Last week, a leaked memorandum from the White House showed that President Trump had drafted an executive order suspending the Dodd Frank Act for two years.
In the order, he requested his administration to find an alternative law that does not infringe on the US manufacturing sector while also curbing the conflict mineral trade in the Democratic Republic of Congo and its neighbours.
Critics say that a suspension of the law will increase the possibility of instability in countries like DR Congo.
For Rwanda, however, it would mark the lifting of an unwanted legislation that has led to a sharp increase in the cost of mining and worsened the plight of rural artisanal miners.
Boon for Rwanda?
Sources said the suspension would eliminate discrimination against minerals from Central and East Africa, a major consequence of the Dodd Frank Act.
“The law has forced Rwanda into spending more money on complying with the conflict mineral requirements than money paid in government taxes. Despite all these efforts and the costly investments in due diligence, we continue to suffer a negative international market bias against Rwandan minerals,” said a strategist working with the government on the implications of a suspension.
Minister for Natural Resources, Vincent Biruta, said the government would give its official position after the law is repealed.
Information on the ministry’s website indicates that Rwanda has been suffering high due diligence fees for complying with the Dodd Frank Act that are directly paid either by large-scale mining companies or by Rwandan mineral exporters — who in turn pass on the levies to small-scale and artisanal miners.
“In October 2015, Rwanda tungsten miners paid $12,000 for each container in due diligence costs in comparison with $8,330 paid for royalty tax. Between January and August 2015, $3.2 million was spent on due diligence — 4 per cent of the value of minerals produced,” the ministry states.
The Dodd Frank Act requires US companies to publicly disclose their use of particular minerals originating from DR Congo or its 10 neighbouring countries.
The minerals mentioned are tin (cassiterite), tungsten (wolfram), tantalum and gold ore, which are happen to be Rwanda’s principal mineral export.
According to the Act, the illicit flow of these minerals, particularly from eastern DR Congo fuels violent conflict and finance armed rebel groups that disrupt peace in the region.
However, government sources complain that this law is discriminatory and does not recognise the efforts undertaken by individual countries to fight illegal mining practices.
“The Dodd Frank Act is tantamount to a blanket ban on minerals from the region and take not put into consideration the different levels of measures that the countries have put in place to ensure mineral traceability,” the source said.
“For us, knowing where minerals originate from or to ascertain whether they were smuggled is very important — and we always do it for ourselves as the government. But such international mechanisms that do not consider individual countries impact negatively on our mining sector.”
Opposed to repeal
Still experts warn that Rwanda may not reap the expected benefits from the proposed repeal because it could instead lead to an international bias against minerals from Rwanda.
“Repealing this law will not favour Rwanda. You have seen reports that falsely claim that Rwanda’s mineral exports are stolen from DR Congo, but with this law, all minerals are traced to have originated from Rwanda,” Digne Rwabuhungu, Dean of the School of Mining and Geology at the University of Rwanda, said.
“Dodd Frank Act offered a boost to the mineral sector and removed suspicion. If they remove that, it will open the door for all sorts of rumours and suspicion on the traceability of Rwandan minerals.”
International watchdogs have also warned the US against repealing the law, with Human Rights Watch arguing that this would undermine positive efforts to eliminate conflict minerals from the supply chain of major companies, especially giant telecom like Intel, Microsoft and Apple.
Suspension of the law would also be a “gift to warlords and corrupt businesses,” according to Global Witness — a watchdog dealing with natural resources exploitation.
“This law helps stop US companies funding conflict and human-rights abuses in the DR Congo and surrounding countries. Suspending it will benefit secretive and corrupt business practices.