Saturday, April 11, 2009

Under Fire: The Enough Project

Earlier this week the London School of Economics issued a report entitled “Trading Conflict for Development’ ( which analysed the mineral trade in the Eastern Democratic Republic of Congo and how that trade supports the continuing insecurity in the region.

The London School of Economics, in its thorough and thoughtful analysis, came to the conclusion that the conflict in the Congo is a political issue. The involvement in the mineral trade by the various rebel groups is merely a symptom of the conflict, but not a driver of the conflict.

Additionally, LSE concluded that any boycott or ban of minerals from the Congo would not have any substantive impact on the conflict itself and would only further impoverish the million plus Congolese who are engaged in and supported by the artisanal mining sector.

The report, funded in part by the British Department for International Development, is at odds with the policy recommendations of the Enough Project. The Enough Project has just launched its cleverly titled (for Americans anyway) “Can You Hear Me Now?” campaign against what it described as “conflict” minerals in the Congo. (“Can You Hear Me Now?” is the catchphrase for Verizon, an American mobile phone operator.) Despite the trademark infringement the Enough Project’s campaign had other significant failings (see “Enough! Stupidity” below;) primarily that 99.8% of the global tin market is free of “conflict” tin, and any boycott or ban on minerals out of the Congo would further impoverish a large segment of the population.

Now, in a clarification of its campaign objectives, Enough has backtracked from its original goals of a complete boycott and now claims that the purpose of its campaign is to ensure electronics manufacturers are not sourcing raw materials from rebel groups in the Congo.

The Enough Project wants to pressure the big electronics manufacturers; Apple, Hewlett Packard, Nokia and Nintendo to exercise proper due diligence to ensure their raw materials are not sourced from conflict areas of the Congo.

The problem with the Enough Project, led by career activist John Prendergast, is that they have a fundamental misconception about the global marketplace, and economics in general.
For the big electronics manufacturers, the costs associated with ensuring that the 0.2% of conflict tin that exists in the global tin supply does not come from conflict areas of the Congo is prohibitive at best, if possible at all. By the time Apple or Hewlett Packard receive an electronic component for an item the tin has passed from mine site to trader, to exporter, to tin smelter, to trader, to London Metal Exchange warehouse, to tin solder manufacturer, to several component manufacturers and onto finished product.

The Enough Project would require these companies, in the middle of the greatest economic crisis in our lifetimes, to trace every quantity of tin back through numerous jurisdictions and companies and back to remote parts of sub-Saharan Africa.

Idealistic – yes. Realistic – no.

While Enough has now clearly stated that they don’t want a boycott on minerals from the Congo this is exactly what they are asking for. The end result of Enough’s campaign, if it could possibly be successful, is a de facto ban on minerals from the Congo. No multinational corporation is going to expend such resources on a due diligence program for such a small quantity of conflict tin in the supply chain – instead they will simply require their component suppliers to ensure the tin they are using is not from the Congo, regardless of its legality. This will result in no company willing to buy minerals from the Congo – thus creating the de facto boycott.

One has to wonder about the motives behind the Enough Project’s campaign. One would hope that as the “Can You Hear Me Now?” campaign was planned and formulated, this line of logic and reasoning was pursued. Perhaps John Prendergast and the Enough Project staff should put as much effort into doing something positive for Africa as they do on self – promotion. The livelihoods of millions of Africans depends on it.

Friday, April 3, 2009

Enough! Stupidity

The Enough Project has recently announced its cleverly titled campaign “Can you hear me now?” against “conflict” minerals in the Democratic Republic of Congo. The Enough Project, founded by career activist John Prendergast and supported by the Washington based Center for American Progress is focused on ending genocide and crimes against humanity.

Its new campaign is focused on pressuring electronics manufacturers to ensure the materials in their products are not sourced from the Democratic Republic of Congo. The DRC exports a wide array of metals and minerals – copper, cobalt, tin, tantalite, wolframite and gold. The Enough Project is focused on those minerals exported from the eastern portion of the DRC – tin, tantalite and wolframite. Tin is used in solders for electronic components, tantalite in the manufacture of electronic capacitors, and wolframite is used to make tungsten, also widely used in the electronics industry.

Enough claims that the cause of the instability in Eastern Congo is these minerals themselves, and that various rebel groups use the minerals to fund their violence. According to Enough, the violence results in mass rapes and large numbers of deaths.

The claims of the Enough Project are at odds with the latest UN report on the financing of rebel groups in the Eastern Congo. In the report, the UN states that the majority of funding for the various rebel groups comes from sources in Rwanda, gold smuggling and illegal taxation. To a much lesser extent the rebels are engaged in tin, tantalite and wolframite mining. The majority of tin, tantalite and wolframite exporters in the Congo do so legally – and the trade supports a vast amount of the population. The real victims of the recent collapse in commodity prices have been the artisanal miners who independently mine the ores – while the work is dirty and hard, the pay far surpasses the alternative – unemployment.

The Enough Project’s campaign also demonstrates a basic misunderstanding of the global tin market. A quick Google search illuminates the scale of the issue – the global tin market is in excess of 360,000 metric tons per annum. The Congo exports about 14,000 metric tons of ore per year, but this figure is in ore – the actually quantity of tin in the ore is around 8000 metric tons. Assuming that 90% of the tin exported from the Congo is legal and legitimate – which it most certainly is – then 800 metric tons of ‘conflict’ ore actually enters the marketplace – an astounding 0.2% of the global tin market. Thus, there is a 99.8% chance that your iPhone, or any other electronic device you own doesn’t contain tin from ‘conflict’ areas of the Congo.

To further poke holes in Enough’s reasoning – Prendergast states in his paper that the rebels earn $85 million from the trade – this would equate to $105,000 per metric ton of tin they export – currently ten times the world tin price. A highly unlikely scenario.

Besides the factual inaccuracies of the Enough Project’s campaign and John Prendergast’s paper, the real damage they are doing is to the economic development of the Congo. By stigmatizing the mineral trade in the Congo the Enough Project, as well as a multitude of other NGOs, are potentially threatening real harm to the local populace, hundreds of thousands of people, who rely on artisanal mining to feed their families.

Worse, the Enough Project’s campaign threatens the potential for foreign direct investment – one of the key drivers to economic growth and development. As long as investment in the DRC and other parts of Africa is targeted by well-meaning but ultimately misguided NGOs and self-promoting activists (see "The Economics of Chaos" below,) then self sustaining growth will never take place. Africa’s poor and impoverished will continue to be harmed by the unintended consequences of those who think they are helping and continue to be reliant on handouts from the West.

Thursday, April 2, 2009

Global Economic Crisis – Africa’s Opportunity

The scale of the global economic crisis is unprecedented in our times – the G-20 today issued a statement committing member states to spending yet another trillion dollars to stem the problem. To date, the United States alone has commitments of over $13 trillion – the equivalent of one year’s GDP or enough money to have paid off every single outstanding mortgage in America. It seems every time one turns around the US Congress has another spending bill measuring in the hundreds of billions of dollars. China’s relatively modest $500 billion of economic spending seems almost modest by comparison.

Amongst all this the IMF, the World Bank and the NGO industry are crying out for help for the developing world. The World Bank claims it needs billions of dollars more in order to alleviate suffering and foster economic growth. Yet no one asks the question – why? In its 60 plus year experience the World Bank's policies, work and programs have yet to launch a single country into self-sustaining economic growth.

Could the global economic mayhem actually be beneficial to Africa and the rest of the aid dependent nations? The answer is it depends.

In a country that is creative and resourceful and committed to good governance and sound economic policy the sudden disappearance of aid money gives them a chance to develop the way the rest of the world has developed – on their own. Nations develop by competing in the global marketplace and creating environments that are business friendly, have sound judicial institutions and respect for the rule of law.

This process is not a complicated formula – it has been done time and time again, and yet it has been an elusive elixir lost on the well-meaning staff at the World Bank, the countless legions of NGO personnel who trek to Africa in order to help, and the suburban families who collect used clothing to send to Africa.

In order to understand the process of obtaining economic growth one has to envision Europe and the America two hundred years ago. In the early 19th century Europe and America looked politically and economically similar to present day Africa. Business and politics were intermingled, politicians were utterly and hopelessly corrupt and things didn’t get done at the front office but rather in back rooms with greased palms.

Only once the populace became fed up with the situation did things begin to change. Politicians were held accountable, corruption was curtailed (albeit never eliminated,) the institutions of the judiciary were strengthened and stifling bureaucracy and government interventionism, most often manifested in the form of government seizure of business, was eliminated. An entrepreneur in America can register a company in hours, in Africa it can take months.

If a more recent example is required look to the following places; China, Chile, Singapore, Thailand, Malaysia, or Slovenia. Neither China nor Chile received any significant amounts of aid – and Chile reformed an economy suffering from hyperinflation and an incredibly onerous business environment to achieve the highest economic growth rate in Latin America.

The opportunity is there for Africa to take – whether or not it does so is up to the leaders in question. If history is a guide they won’t because people, both inside and outside Africa, don’t demand it of them. Instead they will continue to beg, and bleeding hearts in the Western world will continue to fund their regimes, their cronyism, and their poor economic policies. Think about that the next time you donate to an NGO.