African conflict minerals ban to get stronger despite corporate protests
Globally renowned chipmaker Intel announced this Monday at the Consumer Electronics Show (CES) that its microprocessors would no longer use “conflict minerals”. (Image: ITP)
Though blessed with abundant minerals, Central Africa has always been struggling under the bloody shadow of a resource curse, but this cloud may be about to lift soon on the back of stronger enforcement of the conflict minerals ban.
A new US regulation that requires businesses to ensure that their global supply chains are free of minerals used to fund violence in the Great Lakes region of Central Africa will kick in from June.
And, the United States is ploughing ahead with the implementation of this legislation even as major manufacturing and business groups go up in arms against it.
The process for putting this legislation in place stared as far back as 2009, when the UN Security Council formally recognised that revenues from minerals extraction were strengthening multiple armed groups operating in eastern DRC (Democratic Republic of Congo).
Incidentally, the electronics industry has been one of the most significant users of the minerals that have been singled out for scrutiny, which include tin, gold, tungsten and others.
On Tuesday, many such companies got together to urge a court in Washington to roll back the ‘Section 1502’ that would require them to start disclosing their minerals source markets by end of May.
This corporate short-sightedness stands in sad contrast to Intel’s announcement this Monday that its microprocessors would no longer use “conflict minerals”.
The globally renowned chipmaker put its money where its mouth is by unveiling the world’s first product completely free of such materials at the Consumer Electronics Show 2014 at Las Vegas.
Intel called the achievement a “critical milestone”, while CEO Brian Krzanich said it was “just a start” adding that the company would continue its audits and resolve any issues. He also urged the rest of the electronics industry to follow suit.
But, the industry looks reluctant to follow Intel’s shining example. Major business lobby groups such as the US Chamber of Commerce, the National Association of Manufacturers (NAM) and the Business Roundtable say they are protesting the legislation as the new rules impose an undue financial burden on companies and infringe on constitutional guarantees of free speech.
The groups say they are supportive, in-principle, of the aims of the regulation but demand significant changes as also the inclusion of certain exemptions.
Supporters, however, claim that the Securities and Exchange Committee (SEC), which is the lead regulator of publicly listed companies in the US, has already thoroughly weighed these issues, and only then decided in favor of the legislation.
The appeal by the lobby groups follows a detailed and strongly worded legal decision last July that finally upheld Section 1502. Mandated by Congress in 2010 but only finalised last year, the legislation has seen much debate and discussion before seeing the light of day.
The current terms of the legislation mandate that, by June, large companies will need to certify the sourcing of a handful of minerals taken up from central Africa. Smaller companies though, are being granted a longer timeframe.
However, all does not appear well for the legislation, which indeed looks poised to impose a large financial burden on companies, currently estimated at upwards of $4 billion in initial compliance costs followed by annual costs of $200-600 million.
On Tuesday, two of the three judges hearing the appeal of protesting companies seemed skeptical of several aspects of Section 1502, raising concerns about the precedent that the regulation would set, the SEC’s capacity to create such a rule, and even the scope of the underlying law.