ITSCI FIELD GOVERNANCE ASSESSMENT

Transcription

1 ITSCI FIELD GOVERNANCE ASSESSMENT KATANGA KEY ISSUES & RECOMMENDATIONS FOR MITIGATION MEASURES APRIL 2011 FEBRUARY 2012

2 This field governance assessment has been prepared by Channel Research for the itsci Secretariat. The material contained herein is public. Please address all correspondence to: Tel: Fax: Acknowledgment The team would like to thank all of those who contributed to the study, for taking time to answer their questions and allow mine and processing plants visits, notably the Division des Mines, SAESSCAM, Congolese government agencies, creuseurs, negociants, exporters of the mineral supply chain, companies, local communities, civil society representatives, international organisations and itsci staff.

3 Table of Contents List of Acronyms... 4 I. INTRODUCTION... 5 II. METHODOLOGY... 7 III. BRIEF OVERVIEW OF KATANGA AND 3Ts ACTIVITIES IN THE PROVINCE... 8 IV. Summary of risks analyzed in reference to the OECD guidance Serious abuses associated with the extraction, transport or trade of minerals Direct or indirect support to non-state armed groups Public or private security forces Bribery and fraudulent misrepresentation of the origin of minerals (cf Traceability chapter) Money laundering Payment of taxes, fees and royalties due to governments V. SPECIFIC ANALYSIS OF THE TRACEABILITY IMPLEMENTATION A. Traceability, mining sector structure and institutional framework Implementation of Traceability by Congolese institutions Coverage of itsci tagging system in Katanga B. Effectiveness of the implementation of traceability in mining, processing and exporting sites Reliability of the data recorded Capacity of the different stakeholders Data registration Integrity of the staff involved in the process Several layers of control Control at the entry points of minerals and tags management Border control Control of the mineral entry points Transportation Tags management Plausibility of production levels Seized mineral VI. Good practices identified VII. Conclusion and recommendations for mitigation measures Annex 1. List of the ZEAs allocated to cooperatives Annex 2. List of the members of the Comité de Pilotage Provincial (Provincial Steering Committee)

4 ASM: BGR: CEEC: CMKK: DRC: List of Acronyms Artisanal and Small-Scale Mining Bundesanstalt für Geowissenschaften und Rohstoffe (Federal Institute for Geosciences and Natural Resources) Centre d'evaluation, d'expertise et de Certification des substances minérales précieuses et sémi-précieuses Coopérative Miniere Maadini kwa Kilimo Democratic Republic of Congo EICC GESI: Electronic Industry Citizenship Coalition (EICC) and Global e- Sustainability Initiative (GeSI) EITI: FARDC: FDLR: ICGLR: IFC: ITRI: MMR: Extractive Industry Transparency Initiative Forces Armées de la République Démocratique du Congo Forces Démocratiques de Libération du Rwanda International Conference on Great Lakes Region International Finance Corporation formerly the International Tin Research Institute, ITRI Ltd Mining Mineral Resources MONUSCO: United Nations Organization Stabilization Mission in the Democratic Republic of the Congo. OCC: OECD: RCD Goma: Office Congolais de Contrôle Organisation for Economic Co-operation and Development Rassemblement Congolais pour la Democratie SAESSCAM: Service d Assistance et d Encadrement du Small Scale Mining TFM: UNDP: USAID: ZEA: Tenke Fungurume Mining United Nations Development Programme United States Agency of International Development Zone d Exploitation Artisanale 4

5 I. INTRODUCTION A Channel Research team undertook field visits to Katanga province in September 2011 to carry out research on the mining sector in relation to the OECD due diligence guidance and supplement other information available from desk research. This also aimed to introduce concepts of risk assessment and audit to local Government, operators, industry and other stakeholders. This report forms part of the due diligence system for the itsci programme as a whole, and subsequently its members. It identifies and assesses risks in the supply chain for itsci on the circumstances of extraction, trading, handling and export of minerals from conflict-affected and high-risk areas 1 against the OECD guidance and the Dodd Frank Act. The itsci project and therefore the itsci Risk Assessments cover cassiterite (tin), columbo-tantalite (tantalum) and wolframite (tungsten) although production of wolframite in Katanga is currently very limited. This report aims also to assess risks of adverse impacts in light of the model supply chain policy of the OECD, as recognised by itsci, and proposes some recommendations for mitigation measures. Other standards of reference include the UN Due diligence guidelines 2, the EICC-GESI Conflict Free Smelter program 3, the ICGLR Certification mechanism 4, the BGR Certified Trading Chain project 5 and ISO norms and The OECD guidance mentions that the scope of the risk assessment for upstream companies should target minerals and suppliers triggered by the red flag locations of mineral origin and transit and supplier red flags. In this case, the scope of the assessment was the general Katanga context, specificity of the mineral industry structure, linkages with the conflict, and implementation of due diligence by companies as well as of itsci. The following red flags of the OECD guidance apply to Katanga, based on current analysis: Red flag locations of mineral origin and transit: - The minerals originate from or have been transported via a conflict-affected or highrisk area. Justification: As a bordering province to South Kivu, where conflict takes place, Katanga is considered a high-risk area. The level of recent violence in Mitwaba area, following Gedeon s escape, also makes it a high-risk area. 1 OECD Due Diligence Guidance for Responsible Supply Chain 2 United Nations Due Diligence Guidelines for the Responsible Supply Chain of Minerals, last accessed 20 October pdf? blob=publicationfile&v=2 6 iso_9001_for_sme.htm 5

6 - The minerals are claimed to originate from a country that has limited known reserves, likely resources or expected production levels of the mineral in question (i.e. the declared volumes of mineral from that country are out of keeping with its known reserves or expected production levels). Justification: Katanga has recently been more famous for cobalt and copper exploitation although significant quantities of tin were produced in the past and likely reserves of 3T minerals are significant. However, in recent years, 3T minerals have been exported via the Kivus and statistics of production of each province are difficult to decipher. - The minerals are claimed to originate from a country in which minerals from conflictaffected and high-risk areas are known to transit. Justification: Transportation of non-tagged minerals is still possible from the Kivus, which are the main conflict areas, through Katanga. A provincial arête disallowing transport of untagged minerals, along the lines of the similar Rwandan regulation, has not yet been finalized, although there is a national decree to enforce OECD guidance. The two supplier red flags consequently also apply to Katanga. These two red flags are mentioned here as a reminder. Supplier red flags: - The company s suppliers or other known upstream companies have shareholder or other interests in companies that supply minerals from or operate in one of the abovementioned red flag locations of mineral origin and transit. - The company s suppliers or other known upstream companies are known to have sourced minerals from a red flag location of mineral origin and transit in the last 12 months. Companies purchasing Katangan minerals should therefore apply the 5 due diligence steps of the OECD guidance. Operators in the DRC are also required to apply OECD due diligence as a result of the announcement of the Minister of Mines through Circular No. 002 / CAB.MIN/MINES/01/2011 of 06 SEPT Conflict minerals from Katanga, a province of the DRC, are subject to the provisions of the Dodd Frank Act. This risk assessment reports only on the situation after 1st April 2011, the key date defined by the EICC-GeSI Conflict Free Smelter timeframe, although earlier information was collected and taken into consideration as a background. Specific assessments of the companies are detailed in the Company Risk Assessments being separately drafted by Channel Research, which are a condition of acceptance to full membership of the itsci programme. 6

7 II. METHODOLOGY The analysis is based on interviews with Congolese government authorities (Katangan Minister of Mines office, SAESSCAM Katanga, Auditorat Militaire, Kalemie s Commissaire de District, FARDC, cooperatives (e.g. CDMC), traders (MMR, CLEPAD, COPROCO, Opera Mining ex CEMA, Ets Panju), international traders / smelters (MSC, Traxys, Trademet), international organisations (MONUSCO, EUSEC), local communities in Kisengo and Mai Baridi, Congolese civil society structures, itsci staff. International and Great Lakes based organisations, as well as Pact, which is the organization responsible for itsci field implementation provided information, and analysis of their reports has also been part of the risk assessment analysis. The team undertook field visits in September to selected mines of Mai Baridi and Kisengo, as they were the pilot sites for the implementation of the traceability system, and can represent the most developed examples in terms of mine organization in Katanga. For the other mine sites, the team gathered information through interviews with several sources, and reports of itsci implementers (baseline mine study, field report and incident reports). Some key mine sites, such as Manono and Busanga, which were not visited by the team during this risk assessment were included in the Katanga itsci Audit in November Checking on rumors Due diligence over the mineral supply chain is sensitive and rumours flourish on cases of discrepancies, smuggling or linkages with armed actors. Many of the rumours (e.g. tag duplication, fraudulent exportation of minerals, tantalum being tagged as cassiterite), can often be easily verified. Other rumours are persistent but no organization has found evidence yet, e.g. for tag trading happening in the DRC. The risk assessment team recommends to the different stakeholders to make sure that they collect evidence when possible and relay any possible issue, whether verified or not, to the Channel Research team on the following address: Sensitive information and the identity of the source will be considered as confidential. Channel Research operates under Chatham House Rule, which means that disclosed statement cannot be attributed to their authors, unless specifically authorized by the author prior disclosure. Consultants are also available for direct communication. 7

8 III. BRIEF OVERVIEW OF KATANGA AND 3Ts ACTIVITIES IN THE PROVINCE Katanga is a famous mining province in the south east of the DRC, where industrial exploitation of copper and cobalt occurs alongside artisanal activities. Large, copper crosses known as the katangan cross, weighing half to one kg were used as currency in the 19th and early 20th century. 3Ts exploitation is historically located mainly in Central and North Katanga in the Tanganyika district, around Kalemie and Manono although now seen in several other territories of Katanga. Production developed strongly during the past years, especially during the period of suspension of mineral export of the Kivus, when bashi (the South Kivu traders, from the name of a South Kivu ethnic group) became more interested in the production in Katanga province, along with experienced Kivus artisanal miners. This was also caused by a new tax introduced by the Katangan provincial government to stop minerals going out through the Kivus. Other businesses could however only develop activities at the end of summer 2011, after a period in which MMR had almost a monopoly on exports. New sites are being discovered regularly daily and are being put forward for inclusion in itsci. The SAESSCAM manager and the Katangan Minister of Mines are doing regular assessments in order to record all the sites and formalize the exploitation progressively. The Mobutu regime ( ) and notably the use of Article 15 of the constitution 7 had influence on the Katanga structures. In 1971, Katanga was renamed 7 The is a reference to an article of the constitution of the autonomous Kasaï state in 1960, mentioning that newcomers had to manage by themselves while arriving in the country as the state was too poor. 8

9 Shaba which lasted until Mobutu s exile in Under the planned decentralization process, Katanga is due to be split into 4 new provinces although this has not yet occurred. In the recent 1 st and 2 nd Congo wars (from Nov 1996 until May 1997, and from Aug 1998 until July 2003), Katanga was not at the core of the conflict, although some violence between RCD Goma (Rassemblement Congolais pour la Démocratie, Rally for Congolese Democracy), Maï Maï and FDLR (Forces Démocratiques de Libération du Rwanda, Democratic Forces for the Liberations of Rwanda) happened 8. The main internal border is with Maniema, where there are no reported security issues so far. Currently, the main security risks are at the border with South Kivu, notably around Forte Bandera where Maï Maï groups are involved in gold exploitation, and still commit violence, with occasional incursions in trade and person movements on Lake Tanganyika. The leader of one of the main Maï Maï groups, Gedeon Kyungu Mutanga, has been imprisoned in Lubumbashi since 2005 (on death sentence for mass murder, rape, human rights abuses and cannibalism) but he escaped on 7 September 2011 after what are believed to be armed attacks from his supporters on the prison, leading to the escape of 967 prisoners. The movement, or some of the criminals who escaped in the breakout, could still be involved in cases of robbery and attacks. In October, an MMR truck was attacked by 7 armed bandits and an itsci vehicle was attacked at a similar time by armed people on the road between Manono and Lubumbashi. It is though that the perpetrators may have been bandits from the prison break. Gedeon is said to be in hiding around 145 km from Manono in Kabala in the Territoire of Malemba-Nkulu (Monusco) and seems now to be somewhere in the Territory of Mitwaba. This led to a 3-day evacuation of the itsci staff, local company representatives, and government agents and temporary suspension of several days of the itsci programme in that area (Pact). Security patrols have been reinforced by FARDC and MONUSCO. He is said to have recruited new troops of young men and Under Mobutu regime, this evolved into a general concept that everybody had to manage by himself to live. 8 RCD was a Congolese rebel group constituted of former supporters of Mobutu, and at a later stage Rwandan and Ugandan. It took control of Goma in 1998 starting the Second Congolese War. It split up in two main groups: RCD Goma supported by Rwanda and RCD Kisangani, supported by Uganda. They used to fight for control over natural resources in Eastern Province and fought against each other in the battle of Kisangani, June 2000, when RDC Goma won. It became a political party after the war. FDLR are a rebel group of Hutu Rwandese origin created in 2000 in the last phase of the Second Congo War and remaining in the Kivus. Their purpose is to overthrow FPR regime in Rwanda. They use natural resources to finance themselves. Some references for details on the DRC conflict and Katanga: - Spittaels S. & Meynen N., Mapping Interests in Conflict Areas: Katanga. IPIS report, June Reports of the Group of Experts on the DRC to the UN Security Council since 2001, - Gérard Prunier, Africa s World War, Congo, The Rwandan Genocide And The Making of a Continental Catastrophe. Oxford University Press, Filip Reyntjens, The Great African War: Congo and Regional Geopolitics, Cambridge University Press,

10 to have conducted attacks in the so called triangle of death 9 (Mitwaba - Kilwa Kasenga), more precisely in the villages of Kwiyongo, Kwisinga, Kapanda, Kamakumbi, Tombwe and Kabola 10. This caused more than Internally Displaced Persons (IDPs) in that area according to local civil society 11. However, comptoirs mentioned that overall security situation is good in Katanga, and that minerals can be transported by night without any problems. Infrastructure is developed to a limited extent, although rather better maintained compared to other DRC areas. Communication and transportation difficulties still very much complicate monitoring of most mineral activities. Roads to South Kivu are usually controlled by FARDC. Minerals from Mai Baridi and Kisengo have to pass by two barriers, one at 75km and one at 25km from Kalemie. The 25km barrier is on the main road out of Kalemie. After that barrier, the road splits, heading west to Nyunzu (Mai Baridi and Kisengo) or north towards South Kivu. The South Kivu road passes through Bendera, 120 km north of Kalemie, where there is still a FDLR presence for gold exploitation, and Maï Maï groups, who sometimes attack boats on Lake Tanganyika. The team did not gather evidence or mention of illegal taxation at these barriers at this stage, but the risk cannot be excluded and would require more investigation. 9 Triangle of death was were Gedeon operated before his arrest and committed numerous atrocities. 10 ASADHO press release, 21 st January, Caritas, call for support of Monseigneur Fulgence Muteba, 3 rd January 2012, 11 UNHCR, January 2012, and UN OCHA DRC weekly humanitarian briefing 10

11 The provincial government is strong and has the ability to enforce its policies. There are numerous initiatives from provincial authorities to reinforce the governance over the 3Ts sector and to benefit from the taxes it generates. This includes the following strategies 12, although no text could be obtained by the team: - implementation of the national arête forbidding security services to be involved in mineral exploitation or to erect spontaneous barriers on the roads. - long term national strategy to forbid the export of cassiterite unless reaching a minimum grade in order to ensure that transformation and processing takes place in the DRC. An arrêté provincial is requiring from all exporters to have an usine de traitement / processing facility and this will be a condition to authorization of export as of 1 st of January 2012 (some exporters are even considering building smelting plants). - forbid the transport of minerals by plane and the imposition of a provincial tax of 5 USD per kg in case of transfer to another province, in order to promote transportation and export through Lubumbashi or Kalemie - more formal structuring of the sector through the following provincial process: some cooperatives are mandated to supervise the work of artisanal miners in mine sites, and hold agreements with a trader. This is the case for instance with CDMC and MMR on Mai Baridi and Kisengo sites. Other cooperatives include COMMIR, COMIDEK, CMDC, CMKK, CMM who may also work with other exporters, although because their authorizations for export are rather recent, most partnerships are not formalized yet. In some cases, these cooperatives have been allocated specifically some ZEAs, Zone d Exploitation Artisanale, where they carry responsibility (cf Annex, list of the ZEAs). In other cases, they work as the intermediate buyer between the company and the artisanal miners on their concession. itsci has been implemented due to guaranteed up-front financing by MMR. Funds from supply chain levies are not normally available until 4-5 months after mining when metal is sold, while cash flow is required at the start of the itsci activities in any area. MMR provided upfront funds to avoid this cash flow problem but their contributions are balanced against the normal supply chain levy in order to ensure no exporter contributes more, or less, in the longer term. The levy is proportional to the volume of export 13. Clauses in the financing agreement confirm that Although benefiting from pre-financing of the Scheme in Katanga, ITRI will remain neutral in the operation of the system and will provide no specific commercial or competitive advantage to MMR and MMR should not solicit or expect to receive any specific commercial or competitive advantage through association with ITRI aside from enhanced marketability of mineral produced through a joint industry due diligence process. 12 It is not clear to what extent these strategies are formalized and institutionalized as no official text could be obtained from the provincial authorities at this stage USD / tonne exported Sn in Katanga, which will be reduced to 380 USD in

12 MMR now exports an estimated 80% of the total since other comptoirs have been able to make some exports from this summer. There are both comptoirs from the Kivus, as well as new actors rapidly entering the market such as COPROCO, CLEPAD, Global Mining Company, Ets Panju. Some comptoirs created by individuals based in Katanga are currently being established, and there are an increasing number of companies planning to begin industrial exploitation of minerals. Most exporters activities have been limited up to now, mainly because they faced difficulties in getting different authorizations in spring 2011, notably for transportation from the mine area to Lubumbashi, signed by the Ministry of Interior. After obtaining these authorizations, they were then requested in June to pay a social contribution of 500,000 USD in order to get all official documents from the province required for export. Notably, MMR, which has been active for several years (operations started in 2008) and has carried out a number of social projects already, was exempted from this payment. There is no analysis so far however that the social projects undertaken by MMR were proportional to the exports they carried out. The DRC was accepted as an EITI Candidate Country in 2008, and was considered in December 2010 as close to compliant. Some corrective measures were due to be implemented but the DRC failed to implement them by the 12 June 2011 deadline Some reports are published on the payment of taxes generated by the mineral industry. The last report on the DRC dates back 2007, and does not concern 3Ts minerals. Some cassiterite exporters signed an agreement to be part of the initiative and are mentioned on the EITI DRC website as having supplied information for the report 14. This report is however not available. IV. Summary of risks analyzed in reference to the OECD guidance This assessment focuses on mines where itsci is implemented. The tagging system is not implemented automatically once a mine site is discovered, but under a certain number of conditions related to the compliance of the site with the OECD due diligence guidance and requirements of EICC-GeSI CFS programme. These conditions include: absence of involvement of state and non-state armed groups in the mine production and at the mine site and respect of minimum human rights standards, as well as the presence of legitimate state mining agents with the capacity to perform the tasks required for the implementation of itsci. Local transport routes are also evaluated. Hence, each assessment does not aim to provide an exhaustive analysis of the general situation at all 3Ts Katanga mine sites, but only where minerals are tagged, and then where the above-mentioned conditions are expected to be met

13 Serious abuses associated with the extraction, transport or trade of minerals i. forms of torture, cruel, inhuman and degrading treatment; There is no evidence of such issues in Katanga province, notably due to the absence of direct conflict and illegal armed groups, and the fact that security services are not directly and systematically involved in mineral extraction, in itsci sites, nor in the transportation and trade, except in the frame of official contracts with some companies. ii. forms of forced or compulsory labour, which means work or service which is exacted from any person under the menace of penalty and for which said person has not offered himself voluntarily; There is no evidence of these kinds of issues in Katanga in mines where the itsci programme is implemented or during transport or trading activities. There is an expectation of participation in community labour, such as path cleaning, on a regular basis but this cannot be related to forced labour. This is a normal practice in most Sub-Saharan African countries. iii. the worst forms of child labour; Working in mine sites can include activities considered as the worst forms of child labour; work which, by its nature or the circumstances in which it is carried out, is likely to harm the health, safety or morals of children (ILO Convention 182:1999). There are cases of child labour in Katanga mines, although SAESSCAM and the cooperatives in charge of artisanal miners supervision are carrying out sensitization and control of the mine sites. This is a particular issue during the school holidays. 13

14 Child labour can consist of occasional assistance to relatives/close family members working in the mine sites, or of the work of persons who are at the limit to be legally considered as children, (between 15 and 18 years of age), and who already have a family and need subsistence 15. Direct work in the mine seems to concern primarily boys however washing of minerals in the laveries is carried out by both boys and girls. This issue is, according to itsci implementers, particularly high in the Manono/Mitwaba/Malemba Nkulu areas 16 although it seems that it has been less observed during the past several months, which is typical of the school months (as mentioned above, children work more in the mines during the holidays). Obviously, this is also more of a concern in mine sites rarely visited by external stakeholders and with a low level of formalization, such as pits isolated from mine sites or hardly accessible mine sites, as well as mines where there is no access to school. In those cases, younger children both boys and girls - can be found. The issues are recognized by itsci and the international community has been requested to assist in finding a solution. iv. other gross human rights violations and abuses such as widespread sexual violence; There have been no recent incidents of widespread or gross violence in Katanga in relations to mineral activities 17. Hence there is no reference to gross human rights violations and abuses in the assessment period. Some traditional practices take place in neighbouring communities, such as early marriage and sexual mutilation. They can be considered as human rights abuses, depending on the cultural perspective 18 but are not specific or limited to mineral exploitation or trade; nor are these practices limited to Central Africa. 15 A pit manager mentioned for instance that he was allowing a 17 years old boy to work in his pit as the boy had already a family and needed to have regular cash. 16 Karen Hayes, Note on Child Labor in DRC Mines from Pact for OECD meeting participants, November 2011, Article 26 of the DRC Mining Code prohibits any person under the age of 18 from engaging in artisanal mining activity. Article 6 of the DRC Labor Code sets the minimum age for employment at 15 years. Children between the ages of 15 and 18 may work with the consent of a parent or guardian. Children under 16 may work up to 4 hours per day. Children under the age of 18 are prohibited from working at night. The Worst Forms of Child Labor are defined by the ILO as all persons under the age of 18 involved in: (a) all forms of slavery or practices similar to slavery, such as the sale and trafficking of children, debt bondage and serfdom and forced or compulsory labor, including forced or compulsory recruitment of children for use in armed conflict; (b) the use, procuring or offering of a child for prostitution, for the production of pornography or for pornographic performances; (c) the use, procuring or offering of a child for illicit activities, in particular for the production and trafficking of drugs as defined in the relevant international treaties; (d) work which, by its nature or the circumstances in which it is carried out, is likely to harm the health, safety or morals of children. (ILO Convention 182; 1999). itsci Katanga November Monthly report. 17 As mentioned above, Gedeon Mai Mai group committed violence in November in Mitwaba area. Corps were found in mine site, however the group activity does not seem to be related to mining activity. 18 In Congolese law, age for marriage used to be 14 years and this changed to 18 in 2006; along with the ratification by the DRC of the International Convention on Child Rights and the creation of the Child protection code. 14

15 v. war crimes or other serious violations of international humanitarian law, crimes against humanity or genocide. The risk assessment team constituted a database of individuals and structures accused of such issues; the list was compiled of people who are legally implicated or mentioned in public reports from the UN group of experts, NGOs and public organizations. The database was used to inform the company risk assessments (currently being finalised). There has been no evidence up to now of individuals who operate in the mineral supply chain in Katanga being accused or involved in such issues 19. However, some negociants and comptoirs can be/have been affiliated to some political party, which (used to) have a military wing such as the CNDP, including at the time of the Goma attacks in These issues are under investigation. At the miner level, there is no control or accurate registration of the workers by mine site, and it cannot be excluded that there are amongst them demobilized militia members or soldiers, or ex-members of these state or non-state armed groups, who committed war crimes or violations of international humanitarian law in the past. Direct or indirect support to non-state armed groups Procuring minerals from, making payments to or otherwise providing logistical assistance or equipment to, non-state armed groups or their affiliates who: i. illegally control mine sites or otherwise control transportation routes, points where minerals are traded and upstream actors in the supply chain; and/or ii. illegally tax or extort money or minerals at points of access to mine sites, along transportation routes or at points where minerals are traded; and/or iii. illegally tax or extort intermediaries, export companies or international traders. There is so far no evidence of support to non-state armed groups from stakeholders of the Katanga supply chain in As mentioned above, as there is limited registration and recording of the persons working in mine sites, it cannot be excluded that some of the diggers have linkages with armed groups currently involved in violence but this would not be in any organized way. Workers in these mine sites indeed come from various origins, and a significant number of them are from Maniema or South Kivu, where they have families. It is also still possible that some militia members are requested by their chief to work in mine sites in order to finance military operations but there is no evidence of this. There can be mention of Maï Mai involvement, although this does not refer to South Kivu Maï Maï who act as a rather organized armed group but for different cultural reasons. 19 The team verified allegations of war crimes in NGO and UN reports, notably List of Individuals and Entities Subject to the Measures Imposed by Paragraphs 13 and 15 of Security Council Resolution 1596 (2005), as renewed by paragraph 3 of resolution 1952 (2010). Last updated 8 July Nowadays, as long as the party is not involved in military actions, supporting a political party financially or in another way is not illegal in the DRC. 15

16 There have been some conflicts between the miners and the cooperatives/negociants regarding prices at Kisengo particularly. Indeed, current buyers pay a lower rate than the South Kivu traders or Bashi who (as mobile buyers rather than sedentary concession owners) and can pay higher prices as they have fewer outgoing costs for site management. Conflict in North Katanga sites recently reached such a level that the police had to intervene and use weapons to disperse the miners. In order to protect themselves from the bullets, some miners did Maï Maï rituals, and were consequently referred to as Maï Maï (itsci carried out incident investigations on all such episodes). Public or private security forces One of the conditions for itsci to be implemented is the absence of involvement of state or non-state armed groups in the mineral extraction/transportation process, except for the mine police, who are mandated to maintain security at mine sites and whom the DRC Government would like to see at every site. There are itsci agents visiting every mine site (mobile, not permanent), who are responsible for supporting the tagging system implementation and reporting on the general situation, as well as specific incident reporting (cf Annex 1) in case of breach of the OECD guidance.. The number of barriers of security forces has considerably decreased during the last year, according to several stakeholders, essentially due to efforts in due diligence over the supply chain and in keeping the military out of the mineral trade. Miners mention that having tagged minerals limits the risk of them being harassed while they transport their minerals as bags cannot be opened and they don t carry money. There is no point in stealing an entire sack of minerals as it is tagged and can only be sold with the tag, and the owner would be registered in the logbook at the mine level and at the next stage of the process (therefore it is easy to identify inconsistencies and trace directly back to the thief). Despite, the efforts put in place to limit involvement of state armed groups in the mineral supply chain, it cannot be excluded that some military actors could benefit from it at different levels, but the risk is limited and reducing due to sensitization and efforts of due diligence. The auditorat militaire (legal service of the army, in charge of control of the militaries) is playing a key role in that respect despite the fact that this is a difficult task touching on long-term socio-economic dynamics but there have been successes. For example, they were called by MMR, who identified a case of around - 4 militaries working in mine sites, at Katonge, 180 km from Manono. These militaries left the mine, escaped and have not yet been found. There are a few isolated rumours of involvement of the military in the mineral supply chain and this could also theoretically arise through affiliation/interest/protection in mining or trading companies, which they could support indirectly. The team did not obtain evidence of this yet. There are cases where companies, cooperatives or negociants can legitimately ask for the support of military logistics and infrastructure components when special or heavy equipment has to be transported or used. This has been the case of MMR at Kalemie for instance. Companies using explosives are also legally obliged to use a 16

17 military escort for the transport of the explosives. The mine police is the only public security force allowed at mine sites as per the mining code. Their means are limited in terms of personnel, finance and transportation. Some companies have contracts with them at the provincial level for provision of special services, such as security at their facilities and escort of minerals. Private security companies are used by a few rare mining companies in mines, typically as a Garde Industriel or Garde Site. (It should be noted that it is illegal for private security of any type to be armed in the DRC.) They are also widely used by comptoirs and exporters at their processing plants and it does not seem so far that this is causing any issue. Main security companies used by 3Ts exporters are Mamba and Kat Security. Bribery and fraudulent misrepresentation of the origin of minerals (cf Traceability chapter) The tagging system aims to ascertain the origin of minerals. Because of the higher prices paid by traders, notably Bashi/Mushi from South Kivu, it seems unlikely that minerals from conflict affected areas are infiltrated into the traceability system. Smuggling is more likely to take place the other way. Indeed, as tagging is not included in the law, although this is promoted and expected, there can still be transportation of untagged 3T minerals in Katanga. These types of minerals would be more likely to go from Katanga to South Kivu, or illegally to Rwanda through Lake Tanganyika or Uvira. According to some interviewees, this would be transportation of small quantities but in a very regular manner, either to a small extent minerals stolen in concession where there is itsci tagging and then sold without tags, or from less formalized concession where there is no tagging. One coltan mine which is outside the itsci system and therefore does not have tagging, and which is located very near the South Kivu border, has been exporting untagged Katangan minerals to the North and/or East. A major comptoir has also been proven buying minerals from untagged mine site to infiltrate them in their mine production, using 15 motorcycle transporting each 100 kg a day. itsci is directly engaged with the local authorities to bring this mine into the traceability system as soon as possible and it was incorporated into itsci in December. Money laundering There has been no detailed financial analysis at this stage of the companies finances compared to their production, and hence no firm conclusion can be drawn regarding money laundering. However, based on the checks already undertaken on the company management staff and shareholders, it does not seem likely so far that companies are related to criminal activities whose benefits would be laundered in the mining industry. A strict control is done by itsci to ensure that activities with tagged minerals do not include minerals from unknown areas, which could have legal consequences in respect to Dodd Frank Act in the US, but not in the DRC if the minerals actually come from conflict areas. 17

18 Payment of taxes, fees and royalties due to governments Because cooperatives mandated to supervise artisanal miners are in their early stages, their operationalization is still hardly formalized yet but their status and role is defined in the DRC Mining Regulations. The cartes de creuseurs, which cost 25 USD a year, are not paid either by the miners or systematically by the cooperatives, although CDMC recently reported beginning paying them for some sites. The cooperatives argue that the miner population is very variable and fluctuant, because miners often migrate depending on production or price rumours from one site to another. Hence, if the cooperative pays their carte, they cannot control whether the miner will stay on the cooperative mine site, and new cartes will constantly need to be paid, with limited certainty on the return on investment. The level of formalization of the cooperatives is under development in many cases, even if they have staff on the ground in some areas. The itsci mine and transport route baseline studies carried out before a mine is accepted for tagging records a significant amount of data on taxes paid at the mine and at the local level. This will be analysed separately. The request for payment of 500,000 USD for local development projects in order to be authorized to export is specific to Katanga, decided at provincial level, and has not yet been included apparently in an Arrêté, or any form of official document 21. In view of the significant amount this represents for the comptoirs, they requested to offer a payment plan for these 500,000 USD, and attach to it the receipt for the first transfer, 21 The team requested the document from SAESSCAM and the mine authority and could not obtain them yet. 18

19 after which they were notified officially that they were authorized to export. Payments had to be done on the bank account of the entrepreneur selected by the authorities to do the development project, in September, this was an international company with headquarters in Belgium named Baron Levesque international, which is part of the Forrest Group 22, a large industrial group of 9400 employees in Katanga, involved in agriculture, infrastructure, cements. No further documents on the planned development projects are available but the Ministry of Mine mentioned that the funds would be used for the Katanga development plan. The rationale was to ensure that mineral extraction would benefit the Katanga population, whereas there used to be a number of promises in the past for this but no achievement. MMR was exempted because of the amount of social projects they already contributed (health centres, schools, health campaign against cholera, roads rehabilitation and so on). Some of these projects could be observed in Mai Baridi and Kisengo. There seems to be a rather good level of control on the payment of taxes for mineral exports, as this involves several services cross-checking the validity of the shipment. However, it was mentioned that in some services and in some areas, taxes for minerals export were paid at another level (national instead of local for instance) than planned in the procedures. If there are not taxes paid to services directly, this can limit their access to resources for functioning. There may then be some cases where procedures, or where authority and competences of the different hierarchical levels for the state services overlap, which can cause confusion. V. SPECIFIC ANALYSIS OF THE TRACEABILITY IMPLEMENTATION The launch of the traceability system in Katanga was facilitated as a result of a feasibility study funded by T.I.C. and due to upfront payments on expected itsci levies paid by MMR, which facilitated the programme cash flows. Because of the challenges related to the DRC context, notably in terms of infrastructure and deployment constraints, and in particular the challenge of the 1 st April EICC-GeSI CFS deadline, itsci implementers had to use MMR support for logistics, transportation, communication for an initial period, because of procurement delays. All such assistance was rigorously documented and all expenses paid by MMR during this time were reconciled and repaid from the project budget. Field work began within 2 weeks after agreement on funding, at the end of March 2011 when comptoirs had already stopped buying all 3T minerals. Starting up the system was challenging as not all mines could commence simultaneously therefore there were perturbations to the normal dynamics of the mines as miners moved away from suspended mines towards mines which had

20 tagging and therefore had licence to trade. In order to minimize this, the project was started up in several nodes stretching across the entire area of 3Ts mines to try to anchor artisanal mining communities in their own areas. The roll-out had to be as fast as possible in order to prevent massive migrations and potential related conflicts. A. Traceability, mining sector structure and institutional framework Implementation of Traceability by Congolese institutions A Memorandum of Understanding was signed between ITRI and the DRC Ministry of Mines in 2010 for the implementation of itsci in the country, starting with the South Kivu pilot project subsequently halted under the general mining suspension A specific document was published in November 2010 by the DRC authorities for the procedures for minerals traceability, Manuel des Procédures de Traçabilité des Produits Miniers, de l Extraction à l Exportation. This provides a general guide on the framework of the procedures for mineral s traceability by the different State departments. There is also a Manuel de Certification des Minerais de la Filiere Stannifere en RD Congo, published in February 2011, which details the application of the BGR CTC, Certified Trading Chain to the DRC, the centres de negoce, and tagging at the centres. The Ministry of Mines published on 6 Sept a Note Circulaire, which makes the application of the directive and recommendations of the OECD Guidance and the 1952 resolution of the UN Security Council 23 mandatory. The OECD Guidance includes the ability to prove the minerals origin and so far itsci is the only programme aiming to ascertain the minerals origin from the mine sites. The itsci programme is currently being implemented by relevant Congolese departments, i.e. by SAESSCAM at the mine level, the Division des Mines at the negociant level and CEEC at the exporter level. There is collaboration between itsci and the security services in order to prevent and solve possible involvement of some of their staff in the mineral supply chain, out of their mandate. There is a provincial arête, drafted but not yet signed, to institutionalize the creation of a Provincial Comite de Pilotage, which is in charge of supervising the implementation of the traceability system. The president is the Katanga Minister of Mines and the Comite includes the heads of the different state security services at the provincial levels, the heads and representatives of the different services in charge of mineral industry, all the comptoirs and some cooperatives, NGOs, representatives of the civil society and MONUSCO (see Annex 2). The Comite meets monthly, and on 23 Ministère des Mines, Note Circulaire n 002/CAB.MIN/01/2011 du 6 sept relative à l Application obligatoire des directives et recommandations du Guide du Devoir de diligence de l OCDE et de la résolution 1952 (2010) du Conseil de Sécurité de l ONU dans le secteur minier congolais. 20

21 an ad-hoc basis depending on the issues to be monitored. The Comite is replicated at Territorial level with a number of Local Comites de Suivi (CLS), where the President is the Territorial Administrator and which include the same departments. The CLS provide a first layer of local monitoring and response. As mentioned in the context section, there are a number of other initiatives which contribute to increased governance over the 3Ts supply chain in the Katanga province. However, these initiatives are rarely formalized and there is limited communication by the different government agencies on measures taken to secure the supply chain and contribute to due diligence and compliance with OECD and UN guidance. There are no formal centres de negoce (as per the MONUSCO- Government buildings project in the Kivus) planned or expected in Katanga however informal centres de negoce operate in most mining areas, though no sustainable buildings have been built for these, in contrary to the Kivus. Coverage of itsci tagging system in Katanga Tagging is implemented in the main 3T mine sites of Katanga, in the most formalized structure of the province. In most of the cases, there is a recognized cooperative in charge of the site supervision in partnership with some comptoirs 24. itsci covers 22 mine sectors to date, within which there are 111 sub-sectors. Each sub-sector may have just one, or dozens, of carrieres. New mine sites are being discovered daily. SAESSCAM and the Ministry of Mines are doing a census of all the production sites. Key areas where tagging is taking place include: Mai Baridi, Kisengo, Lunga, Luba, Manono, Malemba Nkulu, Mitwaba, Busanga, and Luena. Tagging is not occurring in all mine sites in Katanga. For instance, the recent rush site of Kahendwa was known to have involvement of the military and problems with the installation of legitimate government agents therefore, until these conditions can be fulfilled, the site is not suitable for itsci. In other sites, the mine is in development but not yet in production therefore tagging is not yet relevant, or sites may be dormant during the dry season therefore tagging will only occur when there is rain. Different assessments are necessary either for the mine site, or the comptoirs to become involved in the tagging process. The mines are first assessed by the baseline study procedure that also looks for nearby transportation route barriers etc, and any company applying to join itsci has to submit to a range of information and licence documents to itsci, for company risk assessment, which would mean acceptance in itsci programme as a full member. These company assessments remain underway. 24 Manomin recently got the mine titles of the ex Zaire Etain / Congo Etain, whose mining activities and plants stopped functioning in the early 2000 because of the war (RCD was present in Katanga at that time, fighting with army and Maï Maï. 21

22 B. Effectiveness of the implementation of traceability in mining, processing and exporting sites Implementation of traceability is being finalized and reached a satisfactory level in a short timeframe, covering the key mine sites and the vast proportion of the exports volumes. The programme has achieved its original objective of ascertaining origin of the minerals extracted in Katanga and it is unlikely that minerals from the Kivus enter the system. There is a need for constant and strict monitoring of the programme implementation at the different companies sites, as well as to demonstrate that punitive action are taken in case of breach in the itsci agreement. In Katanga, as elsewhere, there are two levels of tags, and three levels of logbooks. Mine tags are typically provided at the point d achat at the mine site. This is a centralized point within the mine where the diggers come with their minerals to sell them to a petit negociant or a cooperative member who accumulates a sufficient quantity for tagging. Tagging is done by SAESSCAM agents before the minerals leave the mine. SAESSCAM agents are also in charge of filling in the mine logbook. The point d achat is a basic shelter built by SAESSCAM with support from the local mineral industry in order to set up the weighing scales, keep the agents and log books dry, etc. Minerals are removed from the mine by the petit negociant or cooperative and are typically processed to upgrade their metal grade or separate coltan from cassiterite. This upgraded material is sold by the négociants or cooperatives to the comptoirs at the comptoirs centre de negoce. In this context, centre de negoce do not correspond to the standards of the official centre de negoce like those being built in the Kivus. The processed minerals are presented in new larger, generally 50kg at the mining town deport level, bags accompanied by the original mine tags. The minerals are traded, tagged with negociant tags and entered into negociants logbook by the Division des Mines. Bags are then transported to their point of exports, Lubumbashi in most cases, or Kalemie in a few cases. There, minerals are processed and batched, and prepared for export, accompanied by all of their original tags. itsci exporters code for each shipment is put on CEEC documents, and CEEC is in charge of filling in the logbooks. Success in implementation of traceability, and achieving avoidance of minerals from unknown origin entering the system, lies in several complementary factors: - Reliability of the data recorded; first the pit of origin or mineral supplier, and then the tag numbers, weight, concentration grade, and other required information through respect of the procedures in filling in the logbooks. This is essentially the responsibility of State agents trained by itsci staff, but also the responsibility of the operators of the mineral industry as they countersign the logbooks and can, and should, report issues and missing information. - Integrity of the people in charge of the tagging; essentially SAESSCAM, Division des Mines, the mine, negociant and comptoirs staff, while they control and operate at the different steps of the supply chain. This also includes CEEC at the point of export, and the influence of actors such as the Mine Police, and itsci implementers. This is the responsibility of the hierarchy of each State 22

23 department, as well as of itsci and company staff as observers/facilitators who would have to refer possible misconduct of any personal to their hierarchy to take corrective/punitive measures. - Control at the entry point of minerals and tags, essentially in the mine site, transportation, processing and export of minerals. This includes closure of each site and monitoring of the entrance ways for human passage and mineral transportation. For each of these issues and to ensure impermeability of the system, several layers of control and triangulation are necessary. itsci implementers agents are tasked to report on inconsistencies in the traceability and other issues related to the OECD due diligence requirements. For this, itsci implementers designed an incident report protocol, which has been put in place very efficiently. It aims to record the different issues identified, classify them by level of severity according to a grid, which has been drafted in consultation with the itsci Steering Committee and Channel Research. The purpose is to record all problems by location and stakeholder involved, ensured that there are dealt with and solved and that mitigation measures can be put in place. Incidents concern at this stage, for example, problems in the tagging system, involvement of militaries on site, child labour, accidents and illegal taxation. Reliability of the data recorded Capacity of the different stakeholders The traceability system has been implemented rapidly and efficiently, and after a phase of development, is falling into place. As mentioned above, it can be reasonably expected that it enables the origin of the locally produced minerals to be established. The short timeframe for implementation of the programme means that there is a continuing need for close follow-up and to build the capacity of the different stakeholders, in order to tighten the overall procedures and system. The implementation of the system was made easier by the fact that there is already a State agency, SAESSCAM, deployed all over the province to monitor the work of artisanal miners. There are (as of November 2011) 32 staff working for itsci implementation in Katanga. The main office is in Kalemie and there are sub offices in Nyunzu, Manono, Mitwaba, Malemba Nkulu and Luena as well as one focal point in Lubumbashi. Staff spends varying amounts of time in each mine, in some they have an almost permanent presence, in others they are more mobile. They work to support the government agents in the traceability process. One of the issues for the implementation of the programme is the limited resources of the State agents. This appears at several levels. First, this is a new system which needs to be introduced and the level of education of state agents can in some cases limit their success in filling in the logbooks. However, there have been several 23

24 training sessions by itsci implementers for the state agent, and this is a continuous process. Second, the state agents and other actors lack equipment, even of the most basic kind, such as plastic bags to transport the logbooks, which led to destruction of some logbooks at the start of the rainy season. Reliable weighing machines are also lacking in some cases, which can lead to variation in bag weights that need to be allowed for in consideration of the data. Data registration Registration of issued tags and logbooks, and checks on the consistency of the system takes place in the field. Completed logbook records are transferred to ITRI and registered in an online database, accessible from anywhere and hosted on a secured server. This database is managed at ITRI s headquarters in St Albans. Some delays in data collection were experienced during the first few months of the project due to delay in the finalization and transmission of logbooks by the authority, limited presence at the beginning of itsci staff in the field, and little communication infrastructure available, most notably the restricted transportation options for the first few months. In some cases, the records of data were insufficient and poor and the logbook needed to be rewritten with assistance of itsci staff. There are now around 150,000 tag transactions in the data system and errors and possible inconsistencies are being reported and followed up. There were also basic initial problems such as numbers printed out of expected sequence, missing zero s, poor quality of the printing, and delays in delivery of the logbooks. These issues seem to be now corrected notably due to a close support from itsci staff, who are key in this process. All exporter logbooks were allocated to MMR at the start of the project because MMR was the sole exporter authorized by the provincial government although many other comptoirs are now participating. Logbooks are often filled in partially, and price and concentration, if recorded, are not precise. Many companies consider it as commercially sensitive information as there are several comptoirs purchasing from a mine site, prices are not fixed and there are sales/marketing strategies to attract negociants. Suggestions regarding collection of the required information in a separate way are being considered. Weighing along the supply chain is also an issue. It can only be recorded with limited accurately, as at the mine sites, SAESSCAM agents may not have the required reliable equipment (it has been reported that they even use tomato cans, like miners do while trading with negociants). MMR gave some weighing scales in some cases. At the depot of the comptoirs in the trading areas, where negociants tags are put, electricity is limited and there cannot be very accurate weighing. Some mineral concentrates contain a mix of tantalite and cassiterite, and the two 24

25 types are separated, not at the mine site, but at the processing plants using a magnetic separator. The mine tags cannot be duplicated for each mineral and so the requirement that mine tags follow the minerals all along the supply chain cannot be implemented. In this case a special procedure has been introduced so that each mineral has separate sets of processor tags. Mine tags stay with the cassiterite portion as this is generally the higher weight percent in such minerals (60-70%). Centre de négoce / Trading centre in a mine site Integrity of the staff involved in the process Several layers of control Corruption and illegal taxation are closely linked and in some cases difficult to differentiate. Those risks are high, and there have been some proven cases, however, these are not related to conflict financing, and do not lead to infiltration of smuggled minerals. DRC State authorities requests for financial contribution or support from companies, and the level of the requests, is often linked to the hierarchical position of the persons, but there are several different bodies involved in the process who can report inconsistencies as they appear. There is usually very limited rotation of state agents at the field level. This represents a risk that some practices of illegal taxation and corruption, and of networks of traceability smuggling get created. Hence, in order to ensure impartiality and objectivity in the completion of their tasks, it would be advisable to have a random rotation essentially of SAESSCAM agents, Division des Mines and itsci staff taking place, taking into account logistical and resource issues. 25

26 Control at the entry points of minerals and tags management Border control There is almost no border control between Katanga and Kivu s or Maniema, or at Kalemie (on Lake Tanganyika, bordering Tanzania). Roads are however very bad to the Kivus and it is hardly feasible for trucks to circulate on them. As mentioned above, the Governor Moïse Katumbi Chapwe said in public speeches broadcasted on media that he was forbidding transportation of minerals by plane. The aim is to avoid smuggling of minerals and ensure that the province if getting the tax revenues for the mineral extraction really taking place. This pre-dates the impacts of the Dodd Frank Act. Control of the mineral entry points In terms of logistics, transportation means are scarce and mobility of agents is limited. SAESSCAM and Division des Mines agents are usually allocated to specific mine sites or operator plants. Mine police resources are also very limited which does not allow them to monitor the mineral extraction effectively. There are numerous mine site cases where no mine police agent is present although other stakeholders may report concerns. Some stocks of minerals have not been tagged and could not be exported before the 1 st April deadline of the EICC-GeSI CFS programme. Tailings and waste of past production such as Congo Etain, whose tailings are present as hills around Manono cities, are exploited, and minerals are tagged as normal from that source. There is some debate regarding the legality of mining of the tailings since the AT considers the sites to be unsafe but this requires further clarification. Since Congo Etain was only exploiting tin, and the tantalite was rejected, the tailings are particularly valuable and provide a high incentive for mining. Transportation Transportation of minerals between the pits and the processing plant, and between the processing plant and the point of exportation is usually done by negociants or traders named preneurs on bicycles, motorbikes, or sometimes a jeep belonging to the comptoirs depending on the quantity. Transportation from the depot to the export point, Lubumbashi in most cases, is done with trucks belonging to business men, who transport other types of goods on the way back, or for MMR with a transport company. There is an escort from the mine police when the company pays for it (as mentioned, some companies have contracts with the mine police for provision of security services). Tags management Tags and logbooks are usually stored at itsci offices and given to state agents 26

27 regularly depending on the needs. So far no case of tags stolen has been registered. However, there may be some tags misuse, for instance tags put on minerals coming from another site or tags sold. According to interviewees, several tags a month were getting broken during bag handling. This is unlikely to represent more than 0.05% but can occur if tags are put below the knots, links or ropes used to close the bags, and therefore taking all the stress of the bag weight. However, agents must also not put tags too far above the closing link where they could be removed more easily. In some areas, SAESSCAM services and Division des Mines are asking for a special tax to implement the traceability system, which is of course not in the code minier. This means that they tag minerals only if negociants and export companies pay for it. In one case, a state agency refused to assist in the process without a payment however this problem was speedily resolved by the head of the agency and the local authorities with full cooperation since then. ITSCi is currently addressing this issue. Also the provincial authorities are to put in place a new 1% tax at the mine level, which will contribute to their costs of implementation. There has been a case of a negociant who used broken tags to bring a few new bags of minerals into the system, and he was put in jail for three days. This indicates also that serious attention is paid to the system. On very rare occasions, negociants come with untagged bags, holding tags separately, not attached to those bags. This is notably the case when they try to mix iron or titanium ore with the cassiterite that they buy at the mine site. This is also the case when negociants come to sell untagged bags to the comptoirs, since the comptoirs reject untagged minerals, and negociants appear to come back with the same bags and new tags close by. Providing the tag corresponds to the weight in the log book, this situation can usually be resolved quickly. However, overall the itsci system is actually quite difficult to de-fraud. The tags are allocated to specific mine sites therefore they can only be used at that site. If they turn up from another site, it means that they were sent there, sold, or otherwise fraudulently used. When the tags are used, all the details of the actors involved are recorded in the book and each sheet has to be signed by a representative of the company, of the state agent and of the security. Therefore it is easy to determine who has been involved in fraud. There could be cases of use of fraudulent identity but then this would mean that all signatories of the logbooks are involved in the fraud. Broken, lost, or stolen tags are all cancelled in the system so they simply cannot be used (and if they are, the perpetrator can be traced). Plausibility of production levels Production levels are not very accurate indicators of true activity since the structure of the 3Ts supply chain is changing. Indeed, as new exporters start their activities, new mines are being created and some efforts are made to supervise the extraction, through cooperatives notably, which should lead to increased production. 27

28 Investment in semi-industrial and/or industrial mining is also being carried out. The number of workers by site is also very fluctuant, depending on the rumours of profitability of the sites, and this has an impact on the production levels of the different sites, as does weather and other local conditions. Seized mineral Some untagged minerals have been seized on the orders of the District Commissioner as they were coming from Kahendwa mine which is not suitable for inclusion in the itsci system, to the Kisengo mine. There are also minerals seized when they are tagged with the wrong tag and there is no possibility to know where they actually come from. So far, no procedure has been agreed at international level to deal with those minerals. VI. Good practices identified The project started in Katanga only a few months ago, and in particular, the newer comptoirs are still in the process of setting up. Consequently efforts so far essentially consist of starting to implement the tagging system and comply with the OECD regulations by formalizing agreement with the suppliers and customers, however, other positive developments have already been noted; - Implementation by companies of an incident reporting and risk management procedure based on the template and using the classification of risks of the itsci incident reports. - Control of the carte de negociants of suppliers to the comptoirs, and having copies of them, as well as of the ID card. - Checks over the origin and background of the suppliers to ensure that they don t have linkages with state and non-state armed groups or criminal networks. - Reports to the authorities of possible involvement of militaries in the mines. - Creation of board in Swahili to explain the traceability process (this is done in Manono for instance), and explaining traceability in pictures / comics (under preparation). The following good practices do not refer directly to the issue of conflict mineral and to itsci roles but are mentioned here as they relate to corporate social responsibility of the mining industry and increased monitoring of the risks related to mineral extraction. - Distribution of helmets and boots to the mine workers (although so far this concerns only a few cases and a follow up procedure for the use of the equipment is required). - Supply of mills to women to transform maize, produce flour and sell it as an income generating activity. Daily distribution of a ration of this flour production to the diggers on mine site. - Mineral comptoirs also acting as agriculture producers (although not in the 28

29 same place so far). Agricultural production is low in mining areas, and promoting agriculture activities in mining areas shows a great sign of corporate social responsibility. VII. Conclusion and recommendations for mitigation measures Risks of mineral extraction, transport or trade being associated with conflict are minimal while buying from Katanga mines through the itsci system because there is no serious political conflict in Katanga and instances of military presence are relatively easily identified and dealt with. The itsci system in Katanga covers areas only where there is no direct and known involvement of the security forces, in particular the military, in the extraction process, and several layers of authorities and project management are in charge of monitoring the system. This incident reporting process has been shown to work effectively. Follow up of the system implementation and grievance mechanism in relation to the system could be developed further, by ensuring that all stakeholders have the possibility to contact and report to different itsci agents, to itsci Secretariat or Channel Research, and that regular visits are paid to each interested stakeholder. For every stakeholder, this would be useful to have a rotation of the staff deployed in particular areas, and reinforce control procedures over the possible illegal taxation and bribery, as well as on the possible misuse of tags. Some efforts, which should be supported further, have been undertaken by the various stakeholders to structure the mineral industry and increase control over the supply chain. Implementation of the itsci programme is ensured by the different Congolese State departments but there is limited communication on the various measures implemented by the government and how each of these services contribute to compliance of the supply chain with OECD and UN recommendations. However, mineral industry actors have started to take their own due diligence initiatives in addition to those promoted by itsci, and sensitize their supply chain to the requirements of these guidance. There has been significant effort to implement the OECD guidance. This is only of course possible once they were able to operate, so in some cases these companies are at initial stages although some good practices identified could be replicated by others. There are a number of structural issues, which create limitations in the implementation of the guidance at all levels of the supply chain. This includes notably poor governance of the national DRC state, which can contribute to existence of illegal taxation and corrupt practices. Poverty of the population and limited access to school allow also for child labour, however, these are not conflict related issues. The following chart is a summary of key issues, related risks, estimated level of severity (3 being the lowest), mitigation measures recommended and by whom. 29

30 Issues Risks Level Recommendation Responsible Institutions Irregular payments and limited resources of the state agents to perform their duties Payment of taxes by the companies and detailed revenue generated by the mineral industry are not disclosed Illegal taxation and corruption 1 Ensure closer monitoring of the payment to State agents. Implement corrective measures and sanctions on agents involved in illegal taxation and corruption starting by the higher levels of the hierarchy. Increase salaries of the state agents in charge of tagging and ensure monitoring of their financial revenue at all levels, based on the increase of taxes collected thanks to the system Lack of ownership and transparency on the mineral supply chain 1 Support further the implementation of EITI process DRC government, provincial authorities, donors, international organisations, Local and Provincial Comite de Pilotage DRC government, provincial authorities, donors, international organisations Seized minerals Structural changes in the mining sector No procedure to deal with seized minerals Increase of mining in Katanga adds new risks such as land issues and local price inflation of basic commodities 2 Agree on a recommended procedure as a way to deal with the stocks of seized minerals. 3 Ensure that social and economic changes related to increased mining are assessed and monitored Great Lakes government, industry, international organisations, Local and Provincial Comite de Pilotage State authorities, international organisations and NGOs

31 Capacity of the industry Limited formalization of some mines Child labour, especially in the least controlled mine sites Accident, child labour, entry of illegal minerals 1 Continue capacity building of the artisanal mine sites and cooperatives and structuration of the sector Worst forms of child labour, 2 Ensure that there are regular visit to the suppliers mine sites, especially remote mine sites and sensitization against child labour Child labour Worst forms of child labour, 2 Coordination and awareness raising to NGOs and international organizations for programme implementation. Dissemination of tools already created by child protection organization through the supply chain Knowledge of suppliers Security Motivation gift to security services. Payment of unrecorded taxes. Entry of conflict minerals, abuses, conflict financing Illegal taxation, corruption and bribery 2 Ensure that there are reliable records of suppliers and that regularly visit and reports are done in respect with due diligence requirements (abuses, linkages with armed groups, smuggling) Ensure that there is proper registration of the negociants (background information, ID card and carte de negociants), and that details on the mine sites they supply from are requested 2 Ensure that possible requests from security forces for payment are recorded and possibly cross-checked with the relevant state authorities, and that abuses are referred to Donors, Katanga government Mineral industry, itsci implementers, Local and Provincial Comite de Pilotage Division des Mines, Civil Society, International Organisations Comptoirs, itsci implementers Company, state services 31

32 Limited capacities of the mine police Some companies have contracts with the mine police Irregular control over mineral transportation and extraction within the country Indirect support to armed forces, conflict of interest of state security services third parties, including itsci agents and itsci risk assessor 2 Ensure that some controls are done on a regular basis, including on illegal taxation paid Provide police forces with minimal equipment for transportation 3 Prefer use of private security forces and ensure that contracts are undertaken in accordance with DRC law and that the contracts make specific reference to the unacceptability of human rights abuse, illegal taxation, and involvement in mining activities Ministry of interior, police forces, provincial authorities, donors Company Traceability system Timeliness of the logbook registration in the database Logbook filled in incorrectly because of the need for capacity building of the state agents Discrepancies in the weighing machines Delays in sending logbooks 2 Ensure that logbooks are sent to itsci main office on a weekly basis (bi-weekly for isolated sites) and record of causes of delay Limited reliability of the data 2 Ensure that there is a daily support and control by itsci staff of how logbooks are filled in and that agents are allocated to task according to their competence Infiltration of illegal minerals 2 Improve calibration of the weighing machines and record and report weight differences between machines if feasible itsci implementers, companies itsci, SAESSCAM, Division des Mines, CEEC Companies, itsci, Division des Mines / SAESSCAM Questions about the guidance Incorrect implementation of the 2 Ensure that all itsci members / applicants itsci 32

33 and implementation of the programme Coverage of the system Dealing with mixed minerals tagging and non compliance with due diligence requirements All miners cannot get their mineral tagged and are then excluded from this kind of livelihoods Multiple / lack of way to deal with tagging mixed minerals through the supply chain have contact details of the itsci agents, that they are visited on a regular basis to check tagging process (monthly possibly). Have public meeting to explain itsci and due diligence requirements. 3 Ensure that coverage of the system respect actual structure of the mining industry in Katanga, based on results of baseline studies, and that artisanal miners are not excluded from the system 3 Ensure that the specified procedure to deal with mixed minerals is properly understood and respected Control over the storage of tags Tags are sold or transferred 3 Ensure that tags are stored in boxes with a locker / control system. Refer to third parties, Division des Mines / SAESSCAM and itsci agents / itsci risk assessor if payments are requested for tagging Inaccurate or incomplete logbooks for concentration grade column Untagged minerals enter the supply chain 3 Create a database of the concentration grade by mine site, and possibly by pits, mentioning composition of the minerals as well as of the prices paid to the miners Div of Mines, itsci implementers, donors itsci implementers, SAESSCAM, Division des Mines, CEEC itsci implementers, State services, industry, including negociant and diggers, civil society, itsci, BGR 33

34 Annex 1. List of the ZEAs allocated to cooperatives

35 35

36 36

37 Annex 2. List of the members of the Comité de Pilotage Provincial (Provincial Steering Committee) - Un délégué de la MONUSCO - Deux délégués de ITRI/PACT