Baseline Study Two: Mukungwe Artisanal Mine, South Kivu, Democratic Republic of Congo

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Baseline Study Two: Mukungwe Artisanal Mine, South Kivu, Democratic Republic of Congo Baseline study two: Mukungwe artisanal mine, South Kivu, Democratic Republic of Congo Gregory Mthembu-Salter, Phuzumoya Consulting November 2014 1 About the OECD The OECD is a forum in which governments compare and exchange policy experiences, identify good practices in light of emerging challenges, and promote decisions and recommendations to produce better policies for better lives. The OECD’s mission is to promote policies that improve economic and social well-being of people around the world. About the OECD Due Diligence Guidance The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict- Affected and High-Risk Areas (OECD Due Diligence Guidance) provides detailed recommendations to help companies respect human rights and avoid contributing to conflict through their mineral purchasing decisions and practices. The OECD Due Diligence Guidance is for use by any company potentially sourcing minerals or metals from conflict-affected and high-risk areas. It is one of the only international frameworks available to help companies meet their due diligence reporting requirements. About this study This baseline study is the second of five studies intended to identify and assess potential traceable “conflict-free” supply chains of artisanally-mined gold and to identify the challenges to implementation of supply chain due diligence. The study was carried out in Mukungwe, South Kivu, Democratic Republic of Congo. This study serves as background material for the 8th ICGLR-OECD-UN GoE Forum on Responsible Mineral Supply Chains taking place in Kinshasa on 3-5 November 2014. It was prepared by Gregory Mthembu-Salter of Phuzumoya Consulting, working as a consultant for the OECD Secretariat, with research assistance from Nadine Lusi. For more information visit: mneguidelines.oecd.org/mining.htm © OECD 2014 This study should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the authors. It describes preliminary results or research in progress by the author(s) and is published to stimulate discussion on a broad range of issues on which the OECD works. Comments are welcomed, and may be sent to the Directorate of Financial and Enterprise Affairs, OECD, 2 rue André-Pascal, 75775 Paris Cedex 16, France. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Baseline study two: Mukungwe artisanal gold mine, South Kivu, Democratic Republic of Congo Table of contents Acronyms ........................................................................................................................ 6 I. Introduction and key findings .................................................................................... 7 II. Overview of gold mining in South Kivu Province ...................................................... 10 Companies active in South Kivu Province ........................................................................ 11 Types of mining, production volumes and formalisation levels ...................................... 13 The gold supply chain in South Kivu: from mine to export ............................................. 14 III. Mukungwe case study ............................................................................................ 17 Type of mining, production volume and formalisation levels ......................................... 18 History of the mine .......................................................................................................... 20 IV. Conflict links and other Annex II risks ...................................................................... 22 Direct or indirect support to the FARDC and non-state armed groups ........................... 22 Serious abuses associated with extraction, transport, and trade of minerals ................ 24 Bribery and fraudulent misrepresentation of the origins of minerals ............................ 25 Money laundering, payment of taxes, fees and royalties ............................................... 26 V. Awareness and levels of implementation of the OECD Due Diligence Guidance ........ 27 Initiatives to mitigate Annex II risks ................................................................................. 27 VI. Conclusion and recommendations: Industrial and artisanal gold mining in eastern DRC – conflict, co-habitation or cooperation? .......................................................... 31 Recommendations ........................................................................................................... 32 Annex: Recent conflict and conflict resolution at Mukungwe .......................................... 33 Bibliography .................................................................................................................. 36 5 Acronyms ANR Agence Nationale des Renseignements CAMI Cadastre Minier CEEC Centre d’Evaluation, d’Expertise et de Certification des substances minérales précieuses et semi-précieuses CPS Comité Provincial de Suivi CTCPM Cellule Technique de Coordination et de Planification Minière DGDA Direction Générale des Douanes et Accises DGM Direction Générale de Migration DGRAD Direction Générale des Recettes Administratives FARDC Forces Armées de la République du Congo FAZ Forces Armées Zaïrois FDLR Forces Démocratiques de Libération du Rwanda ICGLR International Conference on the Great Lakes Region IOM International Organisation for Migration MONUSCO Mission de l’Organisation des Nations Unies pour la Stabilisation en RD Congo OCC Office Congolais de Contrôle OGP Observatoire Gouvernance et Paix PNC Police Nationale Congolaise RCD Rassemblement Congolais pour la Démocratie RCM Regional Certification Mechanism SAESSCAM Service d’Assistance et Encadrement du Small Scale Mining SAKIMA Société Aurifère et Industrielle du Kivu et du Maniema SOFEDI Solidarité des Femmes pour le Développement Intégral SOMICO Société Minière du Congo SOMINKI Société Minière et Industrielle du Kivu ZEA Zones d’Exploitation Artisanale 6 I. Introduction and key findings 1. The contribution of gold to official tax revenues is far lower than it should be. South Kivu Province has some of the Democratic Republic of Congo (DRC)’s richest mineral deposits and the gold mined there makes a vital contribution to the province’s economy. Provincial and national tax revenues from mining have risen since industrial gold output started in 2011 from Toronto-listed Banro Corporation, the only active large-scale mining operation in the Province, and because of an increase in recorded gold exports from Bukavu- based unités de traitement1. However, the contribution of gold to the government’s tax take in South Kivu is limited, for two reasons. The first is that though artisanal gold production and trade in the province is subject to numerous semi-legal and illegal levies by state employees, almost none of this ends up in state coffers. The second is that so much artisanally mined gold from the province is still smuggled from the country, usually to Uganda, but also to Kenya, Rwanda and Burundi, and from there allegedly to Dubai. 2. Unités de traitement lack sufficient legitimate sources of gold supply and suffer from unfair competition from smugglers. Reduced export taxes on gold have encouraged the establishment of officially registered gold unités de traitement in South Kivu and other provinces. But the unités de traitement in Bukavu have complained of a huge shortage of gold mines validated2 – let alone validated ‘green’ - by a multi-stakeholder evaluation team from which they could therefore legally buy. The unités de traitement have also alleged unfair competition from gold traders who neither declare their gold purchases nor their exports. 3. There is little awareness or knowledge of the OECD Due Diligence Guidance among gold traders in Bukavu. Industrial miners are better informed and are changing their approach to artisanal miners. Knowledge or even awareness of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas3 among gold traders in Bukavu ranges between minimal and non-existent, in contrast to the city’s tin and tantalum trading houses, which have received numerous trainings on the subject. Banro representatives are well versed in the OECD Due Diligence Guidance, and the company has a range of checks and balances in place intended to maintain the integrity of its chain-of- custody. Banro’s approach to artisanal miners has evolved over the years, from a starting position of the full enforcement of the company’s rights to permits to one that tries to accommodate 1 These are still often called comptoirs, but their official name has changed to unités de traitement since the introduction by the government of a requirement that all minerals be processed to some degree within the DRC prior to export. 2 Validation is the process by which teams comprised of representatives of a range of natural resource governance stakeholders audit mine sites to evaluate, inter alia, whether they generate conflict financing. 3 Hereafter referred to as the OECD Due Diligence Guidance. For the second edition of the OECD Due Diligence Guidance, see www.oecd.org/investment/mne/GuidanceEdition2.pdf. 7 the desire of artisanal miners to continue digging for a living. Casa Minerals, operating in the south of the
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