The Congo's poverty will not end with mining

Gold miners pass mud along a human chain in an open pit mine
North-eastern Congo. (REUTERS/Finbarr O'Reilly)

The Congo is one of the most impoverished nations in Africa, with more than 70% of its population living below the poverty line.  Yet this troubled nation sits on more than $24 trillion worth of minerals. Such mineral worth is greater than the annual economic output of both the US and entire European area combined. But accessing and distributing such wealth has not only been unsuccessful in reducing poverty within the Congo, but it has directly attributed to increased violence with militia rebel groups, slavery and social instability.

President Joseph Kabila, who is seeking re-election in the coming months, has had a change of heart and is now seeking to tap into the Congo's troubled mines to bring economic prosperity to all if its people. In the past, foreign firms have been wary of investing in Congolese mines because of its bad reputation for human rights abuse, but also because of the instability of the country which regularly dips into localised, violent civil war. There is a critical need for foreign investment to reinvigorate the Congolese mineral sector and ensure efficient production. Local companies don't have the expertise, technology or skills to excavate minerals on a scale that rakes in exuberant profits. Though in neighbouring nations where this foreign direct investment does occur, typically, these profits mostly go back to the foreign companies, not the country itself. However in the Congo, where localised mining in the east is increasing, it is often decentralised and unaccountable to government officials, which causes other significant problems.

The history of civil war and militia violence that has plagued many African nations, including the Congo, means that local development of industry is hampered by systemic corruption. It is estimated that 98% of the mines operating in the east of the Congo is controlled, or have strong ties to militia groups. Because of this, local militia groups tax those who work within the mines, restrict which ethnic groups the profits go to, but most often just funnel the profits into munitions and war campaigns. Sadly, due to government ineptitude and corruption, whatever control government agencies do get over these mines leads to very similar outcomes.

What is most shocking about Congolese mining though is the way in which its operations seem only to be entrenching the poverty cycle. As most Congolese citizens live below the poverty line and have an income of less than $2 a day, or live on subsistent farms and have no income at all, the existence of mines should have very little affect upon them. However, as mines pay money, the notion of working in a mine for cash can become an attractive option for at least one member of a family. Such money, if received, can be used for buying more farm equipment, or much needed medicine. Though when most mines only pay their workers between 50c and $1 a day, the likelihood of them becoming indebted to the mine for other costs incurred (such as food, shelter or 'protection') leaves them in a position of virtual slavery. And as militia groups are the ones who benefit most from the mines, their campaigns of looting and disrupting local villages drives more people off farms and into mines, creating a vicious cycle of poverty and slavery.

As violence around mines becomes worse, and the profits from these minerals fund new conflicts, the international communities (though mainly the US') response through the 2010 Dodd-Frank banking act to restrict the importation of 'conflict minerals' has only plunged more citizens into poverty. For some mining operations, output has slowed by more than 95% as the only way to export these minerals is to do so illegally; which in and of itself results in less profits going to the impoverished workers, and less no security for working standards. The intentions of such a policy is commendable, as it attempts to stop multinational corporations purchasing cheap minerals which cause conflict within a post colonial nation. Yet the ban and reduction in purchasing of these minerals is already hurting tens of thousands of Congolese citizens who have moved to a life in the mines.

Even in a perfect world, whereby local governments weren't corrupt, where there are no militias and all the profits went back to the people; a mining boom in the Congo would still hurt many citizens. When a country finds a new export that brings in unprecedented financial capital from overseas markets, it drives more people to move into that industry because it is highly profitable. The consequence of this occurring rapidly is called the "Dutch disease". Simply put, the exportation of this new wonder good drastically increases the price of the dollar. This kills off any other industries which export goods, (such as textiles in the Congo) because international buyers can no longer afford the good due to the inflated dollar. It also rapidly increases the amount of imports into that nation. Because of the high dollar, it becomes cheaper to buy goods from overseas (such as food) than at the local market, which then kills off domestic industries. Then if at any point the export market crashes, such as if there is another global recession or minerals are found cheaper elsewhere, an economy that has completely re-geared itself for one industry is left with nothing to produce for domestic consumption or export. This effectively kills the economy, and damages it for decades to come. Though if magically, because of better governance and more responsible foreign investment, the mining sector in the Congo could be revolutionised, the Dutch disease would only hit the east of the Congo were most of the mining occurs.

The sad fact being is that we don't live in a perfect world. So there is little chance that the "Dutch disease" will reach the Congolese economy at all. Instead, the continuation of corrupt and militia driven mining will still occur, even while an international ban is in place. Though even if removed, it would cause just as much harm by increasing militias' ability to buy arms. It appears as though there is no solution to this most unfortunate circumstance. While it is depressing to end a post on such a dreary note, many economists, international institutions and trade experts advocate for varied solutions to help end poverty and instability in Africa (with varied and questionable degrees of success). What is clear though, is that mining in the Congo is not one of them.




Links:
Congo rape victims face slavery in gold and mineral mines - Guardian.co.uk
Digging for victory - The Economist
Still smuggling - The Economist
Mr Copper - The Economist