In the fight against pollution and climate change, many countries are pushing for cleaner vehicles by banning cars with internal combustion engines that run on petrol or diesel in favour of electric vehicles (EVs). For example, China requires car manufacturers to increase EV sales to 12% of total by 2020 whereas several Western European countries want to phase out diesel and petrol vehicles altogether by 2040. The pick-up in EV sales is dependent on large-scale battery production. Current technology is based on lithium-ion batteries (also used in smartphones and notebooks), which are lightweight and have high energy density. These batteries use cobalt to increase charge-discharge cycles, giving the battery a longer lifetime. The problem is that cobalt is in short supply. The price of cobalt increased by 64% over the last year but this does not immediately translate into new supply as cobalt often is mined as a byproduct of copper and nickel. More important, the stuff is mainly mined in the not so Democratic Republic of Congo (DRC or Congo).
DRC accounts for more than 50% of global supply and (known) reserves of cobalt. These resources should enable the country to build a resilient economy. Unfortunately, the country has a sad history of violence and abuse since it was created (as Congo Free State) in the 1880s by a group of investors headed by King Leopold II of Belgium, who ran it as his personal fiefdom. Leopold’s private army chopped off hands of Congolese to force them into submission (the collected body parts also served as a “handy” reconciliation tool to pay officers for crushing rebels). Leopold’s brutal regime shocked other colonial powers, including the British, who in 1908 forced transfer of authority to the Belgian state. The Congolese generally are not mutilated anymore (barring some atrocities committed by fighting factions in the east of the country) and these days use their hands to dig cobalt. This is called “artisanal” mining. It sounds pleasant, like making artisanal cheese or craft beer, but working conditions for the estimated 100,000 to 150,000 miners in the cobalt belt, many of them children, are extremely harsh and unsafe.
We prefer mining Bitcoins…
Apart from artisanal miners, there are large companies that mine for cobalt and other metals in DRC. Gécamines, a state-owned mining company, acts as Congo’s gatekeeper and has entered into shady deals with the likes of Eurasian Resources and Glencore by selling them mining permits without publicly explaining where the proceeds went. According to The Carter Center, between 2011 and 2014 an amount of USD 750 million cannot be traced back to Gécamines’ accounts (Global Witness, a NGO, came up with similar numbers). Gécamines also used middlemen, like Israeli “businessman” Dan Gertler, to divert money. Mr. Gertler, through his Fleurette group, could purchase stakes in mining permits on the cheap, including large mines like Mutanda Mining and Katanga Mining, of course in the understanding that he would share the spills with his good friend president Joseph Kabila and his cronies (as reluctantly confirmed by Och-Ziff, a hedge fund that made ill-advised margin loans to Mr. Gertler on Katanga Mining stocks). Both Katanga Mining and Mutanda Mining ended up being majority-owned by Glencore, a global commodities firm better known for trading savvy than business ethics.
Mr. Kabila should have left his plush office in 2016 but is hanging on to the job, like his father (killed in 2001) and the notorious looter Mobutu (expelled from Congo in 1997, effectively by Rwandan and Ugandan forces, after offering a sanctuary to Rwandan Hutus that carried out a genocide in 1994) before him. He is using the mineral wealth to enrich himself and pay off the army, ensuring they remain loyal to him. Kabila recently signed a new mining code which will double royalties on all minerals. Royalties on cobalt could rise even more (to 10%) if the government labels it as a “strategic substance”, which is highly likely. In itself a higher tax could be acceptable if it benefits the Congolese population at large, but it is more plausible that much of these additional revenues will be swindled by Kabila’s cronies.
Of course, companies like Apple, Samsung and Tesla commit to monitor the supply chain to avoid buying cobalt from mines with illicit labour practices, like child labour, or those that are situated in conflict areas, like North and South Kivu (less of an issue for cobalt which is mainly delved in the southern part of Katanga province). Generally, these companies prefer to buy cobalt from large miners instead of artisanal miners. Unfortunately, this is not necessarily the best course of action. Despite its huge mineral resources, Congo ranks among the poorest countries in the world (176th out of 187 countries). Disengaging from artisanal mining has severe consequences for a significant number of households who depend on income from mining (an estimated 1.5 to 2 million people work as artisanal miners in Congo). Children simply would be moved elsewhere to supplement household income. In our view, it may be better to improve working conditions and to eliminate child labour in artisanal mining by offering income support (possibly tied to requiring those children to go to school). The income support could be funded by the increased royalties.
Seeing light at the end of the tunnel…?
After decades of neglect, the international community should start to care for Congo, both in the interest of its tormented people (about 4.5 million are displaced) and to safeguard climate change initiatives (by securing long-term supplies of cobalt, coltan, etc.). The existing UN mission expires by the end of this month. This mission should be renewed and expanded to bring stability in the country, specifically addressing the horrific violence in eastern Congo, and to foster credible elections. Mr. Kabila should be forced to step down immediately and be replaced by a (technocratic) caretaker until elections can be held. UN troops should be increased to reduce dependency on the local army, which too frequently infringes upon human rights. In the meantime, trustworthy institutions (e.g. judiciary, central bank) should be built and the collection of mining royalties as well as the sale of mining concessions should be entrusted to a new entity, possibly overseen by an international organization like the World Bank, that is fully transparent on how the money subsequently is applied. Gécamines should be closed down. To get a cleaner environment, we should clean up Congo as well…