How minerals fuel conflicts in Africa

By N. Berman, M.Couttenier, D.Rohner and M. Thoenig - 17 March 2017 at 3:58 pm
How minerals fuel conflicts in Africa

Fighting groups have long understood how important it is to secure a stable stream of financial resources in order to sustain the fighting effort over a prolonged time. Fighters need to be fed and remunerated. In other words, no cash, no conflict.

In July 2010, the United States passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Included in the Act was a specific provision – Section 1502 – intended to try to stop the national army and rebel groups in the DRC from illegally using profits from the minerals trade to fund their fighters by requiring companies to disclose whether their products contain conflict minerals.

The response from Congolese groups to the law has been positive, with some 89 different civil society groups signing various letters supporting it over recent weeks.

Writing last month on the U.S. Congressional Website, The Hill, the Congolese activist Janvier Murairi Bakihanaye, who works in the mining areas of North Kivu, was unequivocal about the beneficial effect of Section 1502 on stability in the region. “The Dodd-Frank Act is truly worth its weight in gold,” he said, pointing out that:

Until recently, groups such as the Mai-Mai and Nyatura rebels and the Lafontaine group in the North Kivu province controlled a number of conflict mineral (tin, tungsten, tantalum and gold) mines. Rubaya is a case in point. The area was still under Nyatura rebel control as recently as 2013. Yet since mineral tracking systems were introduced in March 2014 as a result of the Dodd-Frank 1502 reforms, Rubaya has become an island of stability where communities live side-by-side.

But the Trump administration appears to disagree. Amid suggestions last month that it was intending to suspend Section 1502, Michael Piwowar, appointed as acting SEC chairman, expressed doubts about whether the law has reduced militia conflicts or “eased the human suffering of many innocent men, women, and children in the Congo and surrounding areas.”

However the evidence that mineral extraction fuels conflict is substantial. We undertook an empirical analysis of how and to what extent minerals fuel conflict for our paper, This mine is mine! How minerals fuel conflicts in Africa (Nicolas Berman, Mathieu Couttenier, Dominic Rohner and Mathias Thoenig), which will be published later this year in the American Economic Review. We used geo‐localized information on the exact location of mining sites, and the main minerals produced for every mine to study whether mining activities fuel violent conflict and how capturing a mine makes a fighting group stronger and leads to a spread of combat operations.

To do this, we divided Africa up in a fine-grained grid, each square roughly 50 x 50km, which allowed us to control for a variety of local conditions, as well as country-level economic and political shocks. In order to estimate the effect of mining exploitation on violence in its immediate surroundings, we then analysed the impact of price shocks over the 1997-2010 period, the idea being that more valuable resources result in larger incentives for grabbing their production rents. During our sample period occurred the historic rise of mineral prices between 2000-2009, known as the 2000s commodity boom or commodity super cycle. This price spike, fuelled largely by the thirst for primary commodities by the BRIC states, mostly China and India, resulted in more than a doubling of most mineral prices. But is also affected different commodities to a different extent and at different periods over the course of the decade. This allowed us to show that indeed violence rose right at the moment of price increases of particular minerals and this mostly in the areas producing these minerals. For example, in a year experiencing a particularly steep increase of the world gold price, violence rose mostly in gold-producing areas, and stayed put in other places.

Our estimates suggest that this historical rise in prices contributed to up to a fourth of the average country-level violence in our sample of African countries. We found that the appropriation of mines is a key driver of violence. To trace the link between mineral extraction and rebels groups, simply follow the money. Such groups find it easy to sell minerals illicitly on the black market thanks to the tacit and / or active support of various sections of society and that black market is perpetuated by an absence of controls. The cash from illicit sells of minerals or extorting producer companies provides the funding that armed groups need to thrive. Put differently, less illegal blood diamonds means less blood.

Our statistical results show that, on average, the appropriation of one mine by an armed group leads to a tripling in its fighting activities elsewhere in the following years. The cash appropriated when gaining control of a mine makes a fighting group stronger and leads to a spread of its combat operations over both space and time. But crucially, winning a battle outside a mining area does not have such a conflict diffusion effect. In other words, the political instability induced by mining extraction is not confined to the local surroundings, but can escalate into more widespread conflict.

Our empirical results suggest that one way for domestic governments to dampen rebellion would be to put in place more stringent anti-corruption policies and to support transparency / traceability initiatives in the mining industry. Foreign firms can also play an important role in this because our research found that mines operated by companies complying with socially responsible practices are less likely to fuel violence.

Whilst this is a complex area, it is clear that the Dodd-Frank Act is an important part of the international community working together to ensure that minerals cannot be used to fund conflict in Africa or in any other part of the world for that matter.

Nicolas Berman, is Associate Professor, International Economics at the Graduate Institute of International and Development Studies, Geneva.

Mathieu Couttenier is Assistant Professor of Economics, University of Geneva.

Dominic Rohner and Mathias Thoenig are Professors of Economics at HEC Lausanne, the business school at the University of Lausanne.

This mine is mine! How minerals fuel conflicts in Africa (Nicolas Berman, Mathieu Couttenier, Dominic Rohner and Mathias Thoenig), will be published later this year in the American Economic Review, contains a comprehensive empirical analysis of how and to what extent minerals fuel conflict.

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