04/19/2012 02:47 pm ET Updated Jun 19, 2012

SEC Delays Risk Undermining Efforts to Curb Congolese Conflict Minerals

Local traders are finally sounding a positive note about their role in cleaning up eastern Congo's minerals trade: 'We have an interest in making due diligence work, for our own community. If we want to sell our minerals on international markets, it has to be done. We're confident. I'm an optimist'. This upbeat comment from a Goma-based exporter on efforts to break the links between Congo's minerals and the region's protracted conflict is at odds with the gloomy prognosis of many international commentators. But it is in line with many remarks we heard during our recent visit to Democratic Republic of Congo (DRC).

International efforts to tackle the trade in conflict minerals have focused on getting companies sourcing from DRC to do checks on their supply chains -- due diligence -- to make sure they are not supporting abusive armed groups through their purchases. In July 2010, the U.S. Congress passed the Dodd Frank Act, which includes a section requiring U.S.-registered companies using minerals from DRC and neighboring countries to show that they have done due diligence along their supply chains. A few months later, the Organisation for Economic Cooperation and Development (OECD) and the UN Security Council published detailed guidelines setting out what due diligence of this kind should look like.

Are the comments we've heard from Congo-based traders simply a case of local businesses talking a good game in response to increased international pressure to clean up the minerals trade? In part, perhaps. But the significance of local businesses recognizing their role in this, and committing to the due diligence standards that will allow them to buy minerals responsibly, is not to be underestimated. These shifts in attitude are a critical step in establishing a trade in conflict-free minerals from the region.

The coordinator of Save Act Mine, a new private sector initiative in North Kivu province aiming to raise awareness locally about due diligence, told us, "We're planning workshops that will explain to mineral traders and diggers, in local languages, how the OECD guidance works." This initiative and other projects supporting responsible supply chains, are now bolstered by a law passed by the DRC government in March 2012 that requires all mining and mineral trading companies in Congo to carry out due diligence in line with OECD standards.

Efforts to set up conflict-free supply chains from eastern DRC risk being undermined, however, by the Securities and Exchange Commission's (SEC) refusal to issue the rules that are meant to accompany the Dodd Frank conflict minerals provision. The law affects a significant proportion of firms globally that use minerals -- tin, tantalum, tungsten and gold -- that are exported from eastern Congo. The statute gave the SEC a deadline of April 15, 2011 by which to issue the final rules. The regulator is now over a year late and appears either unwilling or unable to disclose exactly when it will publish the regulations.

There is broad international consensus around supply chain due diligence standards and ample guidance available to industry. Companies can and should do due diligence now -- some already have started buying minerals from DRC. Clarification of companies' responsibilities by the SEC will strengthen the hand of firms that want to establish a clean minerals trade from eastern Congo.

Sadly, the need for such rigorous checks on minerals purchases remains as acute as ever. Local observers confirmed during our visit to eastern DRC that a number of mine sites remain under the control of rebel groups and militias. The most significant risk to companies buying minerals from the Kivus today, however, is the involvement of certain members of the DRC's own army. The culprits are often drawn from the former CNDP, a rebel group integrated into the Congolese army in a secret peace deal in 2009, and in particular from among those close to General Bosco Ntaganda. Ntaganda, whose "Terminator" nickname derives from a well-documented history of rape and murder has, in recent years, held a senior position in the Congolese national army and has enjoyed de facto control over all military operations in eastern DRC. He is also wanted by the International Criminal Court for war crimes.

Our investigations in March 2012 showed that General Ntaganda's extensive involvement in the minerals trade includes running smuggling networks across the DRC-Rwanda border as well as direct control of mineral-rich areas through the deployment of regiments headed by former CNDP commanders. As one trader told us, "Bosco is never visible but he controls all the networks. You can't get anything across without [his] facilitation." In the words of another, "we don't want the military involved in our trade. We know that Bosco is involved in smuggling. But no one can speak out against him; to do so would be to risk losing your head."

Recent developments in the Kivus may present an unexpected opportunity for change. The last few weeks have seen General Ntaganda and ex-CNDP troops loyal to him defect from the army -- possibly to create a new rebel group -- speculation about Ntaganda's arrest, and negotiations in Goma led by President Kabila himself. The outcome of the talks is not yet clear, but the events highlight two important points. The threat of an armed rebellion led by Ntaganda underscores the urgent need for the Congolese government to end military profiteering from a minerals trade that gives former rebels a source of off-budget funds, and deal with parallel chains of command in the army. The authorities must also hold to account FARDC troops that have committed abuses. Crucially, these developments also prove that opportunities do exist for the Congolese government to tackle the military's involvement in the minerals trade and put an end to impunity.

In passing the Dodd Frank Act's conflict minerals provision Congress signaled a strong commitment to address the emergency humanitarian situation in eastern DRC. The SEC's failure to issue the accompanying regulations is thwarting the intent of the law. The SEC should publish the final rules immediately and send a strong message to companies that they must engage in transparent and responsible sourcing practices. By doing due diligence and refusing to buy minerals that have benefited abusive armed groups and the army in eastern DRC, companies can help generate much needed political will on the part of the Congolese authorities -- and among donor governments -- to finally end the military's harmful involvement in Congo's minerals sector.