Cobalt blues

The battery in your cellphone could be powered by cobalt derived from copper that exploited “artisanal miners” — often children — hand dug from open-pit mines in the Democratic Republic of Congo. But a new DRC government could crack down on the illegal awarding of mine licenses, permits and contracts. And blockchain could make supply chains more transparent.

Eleven-year-old Ziki Swandi was working as an “artisanal miner” (hand-tool excavator) in the Kolwezi/Katanga region of the Democratic Republic of Congo (DRC). He earned about one U.S. dollar per day digging for copper in the abandoned open-pit mines. Ziki’s dream was to quit mining and go to school where he could learn to read and write. At the end of each day, he gave his earnings to his elderly grandmother, who was raising him and three siblings, according to a CBS News report.

UNICEF estimates 40,000 children like Ziki — some as young as seven years old — work with shovels, pickaxes and sacks before and after school at mostly illegal DRC open-pit copper mines. (See As incremental efforts to end child labour by 2025 persist, Congo’s child miners – exhausted and exploited – ask the world to ‘pray for us,’ by Bernadette Vivuya, Equal Times, Oct. 16, 2020).

Many of them toil up to 12 hours per day alongside their parents and nearly 150,000 other men and women as they eke out a bare existence in the Katanga region of the DRC. (See Artisanal cobalt mining in the Democratic Republic of Congo, Esri.)

The DRC is the source of 62% of the world’s cobalt supply. Kolwezi, the capital city of Lualaba Province in the south of the DRC, has the world’s richest supply of the ore. Copper is a source of cobalt — an important element of lithium-ion batteries used in smartphones (five to 10 grams of cobalt per phone), computers (one ounce per computer) and electric vehicles (10 to 20 pounds per vehicle). Forty-two percent of the cobalt supply is earmarked for batteries.

(See Rising cobalt demand from Congo infographic by Hyejin Ahn, Behance. Sources for infographic: The Cobalt Pipeline, by Todd C. Frankel, The Washington Post, Sept. 30, 2016; Is your cell phone powered by child labor? by Hope King, CNN Business, Jan. 18, 2016; and Cobalt ‘moving into a global deficit,’ by Edward Spencer, Resource Stock Digest, June 8, 2017.)

Cobalt boosts energy density and battery life by chemically stabilizing layered battery structures.

Trillions in mineral wealth beneath abject poverty

The DRC is the world’s poorest country with a 2019 per-capita GDP of about $475. (See Poorest countries in the world, Focus Economics.) However, it sits on a mineral wealth of nearly $24 trillion, including three million tons of lithium reserves. (See Lithium, U.S. Geological Survey.)

“Conflict” minerals, such as tin, tungsten and tantalum (extracted from cassiterite, coltan and wolframite) are mined in the eastern portion of the DRC where more than 100 various armed factions operate. (See Global Conflict Tracker, Council of Foreign Relations.) However, cobalt is mined in the south near the Zambian border (away from armed militia groups) and isn’t categorized as a conflict mineral, though a variety of humanitarian, ethical and legal issues complicate any clear-cut classification. (See Cobalt is not a conflict mineral, by Janie Davies, April 26, 2011, Fast Market Metal Bulletin.)

Prevailing conditions for ongoing corruption, fraud and abuse in the DRC

The DRC has a history of rampant government fraud, supply-chain corruption, bribery, human-rights abuses, child-labor violations, political favors and sectarian violence, all of which contribute to the nation’s label as the seventh most unreliable country to conduct business with. (See the World Bank’s Doing Business 2020: Comparing Business Regulation in 190 Economies, page 4.)

A former DRC cabinet anti-corruption czar estimated back in 2015 that the country was losing up to $15 billion a year because of fraud while the annual state budget at the time was about $5 billion. (See Outgoing Congo government defends lifetime salaries for ex-ministers, France 24, Reuters, May 2, 2019.)

José Ugaz, former chair of Transparency International (TI), said in 2015 that, “Corruption creates and increases poverty and exclusion. While corrupt individuals with political power enjoy a lavish life, millions of Africans are deprived of their basic needs like food, health, education, housing, access to clean water and sanitation.” (See Corruption in Africa: 75 million pay bribes, TI, Nov. 30, 2015.)

Financial misappropriation and massive tax evasion in the DRC have been one of many obstacles to the country’s efforts to raise the standard of living for its citizens. Between 2008 and 2014, the DRC government estimated that mining companies owed it $3.7 billion in unpaid customs duties and fines. Also, the government found 11 mining companies liable for $741 million in unpaid taxes and fines. (See Dem. Rep. of Congo: Leaked govt. report says mining firms in Katanga province owe $3.7 billion in unpaid taxes & fees, Business & Human Rights Resource Center, March 7, 2014.)

As little as 6% of the DRC’s mining exports (as much as $10 billion in 2017) ever reach the national budget, according to an investigation by Global Witness. (See Two investigations into corruption in resource-rich DR Congo show why it stays so poor, by Yomi Kazeem, in Quartz Africa, July 26, 2017.) Unfortunately, the shrinking middle class is left to shoulder the tax burden.

The country, like the rest of the world, has been hit hard by the pandemic. Mines have closed. (See Democratic Republic of Congo (DRC): Initial Assessment of the Impact of the Coronavirus Pandemic on the Extractive Sector and Resource Governance, National Resource Governance Institute, June 3, 2020.) And many mining operations have discussed mergers and acquisitions (heavily financed by Standard Bank DRC partnering with Industrial and Commercial Bank of China) among the dozens of foreign companies extracting the mineral wealth of the DRC. (See Congo’s Chamber of Mines head sees more M&A due to COVID-19, Reuters, May 20, 2020.)

To further exacerbate the DRC’s plight, the country recently suffered through its eleventh Ebola outbreak in 40 years in the eastern portion of the country. (See Eleventh outbreak declared in Équateur province, Medecins Sans Frontieres, Nov. 3, 2020.)

Other parasites destroying lives in the DRC

The most popular circulating narrative focuses on corrupt public office holders lavishly spending public funds and living the luxury life while their countrymen are deprived of basic, essential needs and amenities. The U.S. Department of the Treasury cited an independent investigation that found the DRC had lost more than $1.36 billion in potential revenues by underpricing mining assets sold to firms when then-President Joseph Kabila served as the middleman for such dealings. (See Democratic Republic of Congo: Background and U.S. Relations, Congressional Research Service, April 30, 2019.)

The outgoing Kabila government in 2019 unveiled “golden parachutes” for former prime ministers who were to receive a monthly salary equivalent to 30% of the current prime minister’s, a monthly housing stipend of $5,000 and health care overseas. Former cabinet ministers were to receive monthly salaries equal to 30% of a current minister’s, a $1,000 monthly housing stipend and one international flight per year in business class. (See the Reuters article in France 24.)

The 2015 TI report, Corruption in Africa: 75 million pay bribes, estimated that nearly 75 million people in Sub-Saharan Africa paid a bribe that year — some to avoid punishment by the police or court-mandated jail time, but most others were coerced into bribing officials just to get access to desperately needed basic services.

See "TI publishes tool to identify corruption in awarding of mining-sector permission" at the end of this article.

Graft, corruption, fraud and abuse in DRC mining sector

Not surprisingly, the root cause of corruption in the mining sector is the absence of transparency and accountability in the awarding of mining sector licenses, permits and contracts, which is the first stage in the mining value chain. (See Mining awards corruption risk assessment tool, TI, and the sidebar at left.)

In the DRC, such systemized top-to-bottom corruption and fraud in the private sector and in government has a French name: débrouillez-vous or “fend for yourself.” (See Why do DRC citizens report such high levels of corruption? TI, July 10, 2019.)

The March 2018 DRC Mining Code increased taxes on profits, doubled the government’s stake in new mining projects; increased royalty rates for the newly classified strategic minerals cobalt, lithium, germanium and coltan; and paved the way for cancellation of stabilization clauses introduced under the previous 2002 Mining Code that heavily favored mining companies. (See the ITIERDC Democratic Republic of Congo report, February 15, 2021.)

Dominating presence of China in DRC mining and global supply chain

China is a major player in the commercial extraction and refining of cobalt, but it also holds a firm grip on the global supply because nearly all roads to battery-powered consumer products must first go through China. From extraction through electronic consumer products, China is present in every step of the value chain. (See the figure below.) Ninety percent of China’s cobalt supply comes from Kolwezi, which is known in environmental circles rather sadly as “the lungs of Congo.” (See the Rising cobalt demand from Congo infographic.)

Source: Child Labor in the DRC: Big Teach and the Automotive Industry’s Cobalt Supply Chain Problem, by Wali Miller, Sayri, Aug. 25, 2020

Several factors contribute to China’s dominance as a partner in extracting DRC cobalt. Former DRC President Joseph Kabila promoted a modernization initiative, called La Modernité that involved making natural resource extraction available to foreign companies to obtain the necessary financing for the country’s industrialization. Kabila saw that China’s unparalleled rapid modernization embodied what he’d envisioned for the DRC. (See The Chinese Power Grab in the DRC, by Carl-Johan Karlsson, Global Business Reports, June 28, 2019.)

Another influential factor was the absence of the ideological motivation that often accompanied demands by Western countries in exchange for mineral extraction rights. Congress has shaped U.S. policy toward DRC, often focusing on human rights and democracy. China, which has been in the DRC since the late 1960s, negotiated mining contracts with no such socio-political strings attached. (See the Global Business Reports article.)

Death in Kolwezi

In June 2019, 43 artisanal miners died when an open-pit copper mine collapsed. The mine was operated by Kamoto Copper Company (KCC), a subsidiary of Swiss-based mining giant, Glencore. (See DR Congo mine collapse death toll rises to 43, Aljazeera, June 28, 2019.)

Artisanal miners use unsafe, outdated practices that can compromise the safety of the mines. Accidents are common. Earlier that year, a truck carrying acid to Glencore’s Mutanda Mine in DRC collided with two other vehicles and killed 20. (See the Aljazeera article.)

In June 2020, the Swiss government initiated a criminal inquiry into Glencore over its failure to implement organizational measures to prevent alleged corruption in the DRC where it has copper and cobalt mines. In July 2018, the U.S. Justice Department subpoenaed Glencore over potential Foreign Corrupt Practices Act violations for its operations in Nigeria, Venezuela and the DRC. (See Swiss AG latest investigating Glencore for corruption, by Jaclyn Jaeger, Compliance Week, June 23, 2020.)

Major tech companies named in DRC child miner deaths

The human rights group, International Rights Advocates, filed a lawsuit in Washington, D.C., on behalf of 14 families against Alphabet, Apple, Dell, Microsoft and Tesla in December 2019. The lawsuit alleges the technology firms knowingly aided and abetted — and subsequently benefited from — forced labor practices in the DRC. (See Major companies respond to lawsuit over mining deaths, by Sebastian Klovig Skelton, ComputerWeekly.com, Oct. 9, 2020.)

However, in a motion to dismiss the lawsuit filed in August 2020, the companies contend that, under definitions contained in the Trafficking Victims Protection Reauthorization Act (TVPRA), “An entire global supply chain is not a ‘venture.’ ” Furthermore, the five tech companies each claim they’ve established robust due-diligence practices in accordance with guidance from the Organization for Economic Co-operation and Development. They also assert they require their supply-chain associates to comply with codes of conduct as a condition of doing business with them. (See Major tech companies respond to lawsuit over child labour in cobalt mines … , Business & Human Rights Resource Centre, Oct. 9, 2020.)

The motion added, “Defendants’ policies prohibit certain unlawful labor practices, including the use of child labor, at any tier of the supply chain and require regular supplier audits to evaluate compliance.”

Lawyers for International Rights Advocates have contested the motion to dismiss. (See Victims contest technology firms’ attempt to dismiss cobalt mining deaths case, by Sebastian Klovig Skelton, ComputerWeekly.com, Oct. 29, 2020, in.)

Unregulated artisanal mining continues

As long as financial incentives exist, illegal miners probably will continue to poach on industrial mining concessions as the cobalt ore they dig up enters supply chains with no records. As with most things in Africa, the problems are multi-faceted; there’s no easy solution.

Industry and multi-stakeholder initiatives have suggested that mining companies officially assimilate artisanal miners into industrial supply chains. (See Responsible Supply Chains in Artisanal and Small-Scale Gold Mining, Organisation for Economic Co-operation and Development.) That approach would give companies greater control over work conditions and safety practices plus diminish the use of child labor. However, most mining companies aren’t likely to favor this option primarily because of the monitoring expense for nearly 60,000 artisanal miners.

But foreign mining companies operating in Africa must address the imbalances and inequalities with which they operate. They need to weigh the costs of monitoring artisanal miners for their safety versus the status quo, which could result in more accidental deaths, forced labor accusations and possible military violence against illegal artisanal miners operating on licensed commercial concessions.

The military chased away artisanal miners from the Kamoto mining concession in June 2019. However, they returned shortly thereafter. The miners had bribed the soldiers guarding the site to let them continue operations. (See Industrial and artisanal miners in the Congo need a new cobalt compact, by Anouk Rigerink and Nelleke Van De Walle, the Financial Times, July 9, 2020.)

New battery alternatives might mean lower cobalt demand

Lithium-ion battery use has become widespread over the last three decades. However, they’re not always the most efficient solution. For example, these batteries help electric vehicles travel farther but aren’t always long-lived or fully stable. The metal fragments in the batteries can short circuit and possibly cause fires or explosions. (See BU-304a: Safety Concerns with Li-ion, Battery University.)

Alternatives to lithium-ion using materials such as zinc, vanadium or sodium work well for many types of large “capture-now-distribute-later” stationary electricity storage. Utility companies can use these alternative batteries to seize renewable energy from wind and solar arrays and deliver electricity to consumers hours later. These battery alternatives could also power telecommunications towers and remote industrial sites such as mines. (See The Secret to a Greener, Longer-Lasting Battery Is Blue by David Stringer, Bloomberg, Sept. 22, 2020.)

Low-cost sodium-ion batteries are cheaper over the long term than lithium-ion but, unfortunately, they aren’t suitable for electric vehicles or consumer electronics. However, they can recharge within minutes, and can deliver short bursts of instant power when needed.

Sodium is the sixth-most-abundant element while cobalt is the 32nd. (See Cobalt Institute.) It’s not mined but harvested, which makes it a far more sustainable battery element than cobalt.

Tesla announced in September 2020 that it wouldn’t be using cobalt for battery cathodes. That technology shift would drop the price of the lowest-cost Tesla model by $10,000 to a sticker price of about $25,000, which would be comparable to gas-powered cars. (See Here are Tesla’s biggest announcements from Battery Day, by Kim Lyons, The Verge, Sept. 22, 2020.)

However, removing cobalt from the battery mix might put pressure on nickel ore, which is mined in more places than cobalt. If that’s the case, would mining companies have the conscientious compulsion to avoid replicating the DRC tragedy in economically depressed countries or regions that might be unfortunate enough to have huge nickel mineral reserves, such as Indonesia and Brazil?

Only time will tell.

Hope for DRC’s future

The expected adoption of the DRC government’s 2019–2023 Strategic Development Plan will give national priorities more visibility. The country’s low debt (13.7% of GDP for external debt and 6.5% for domestic debt in 2018) helps make available new external concessional loans. President Félix Tshisekedi has enacted considerable political and economic reforms in his first two years in office. Anti-corruption campaigns and political realignments are expanding in part to help attract a significant loan from the International Monetary Fund that will help stabilize the economy and finance ongoing corruption reforms. (See Democracy, corruption, and U.S. policy in the Democratic Republic of Congo, Brookings, December 18, 2020.) Average inflation in 2020 and 2021 is expected to hover around 5%, which is down from 29.3% in 2018. (See Democratic Republic of Congo Economic Outlook, African Development Bank Group.)

Blockchain helping with cobalt provenance, transparency in DRC

The modern strategic-mineral supply chain has become increasingly complex — involving multiple visible and invisible international stakeholders. Improved transparency across the chain is imperative for tracing point-to-point mineral provenance, building trust with suppliers and establishing transparency.

In 2019, Eurasian Resources Group (ERG) piloted a blockchain-based solution at the Group’s Metalkol RTR operation in the DRC. The hydrometallurgical plant has an annual target capacity of 26,455 tons of cobalt. ERG used IBM’s Blockchain Platform to record provenance and movement of cobalt throughout the supply chain. (See Using blockchain to clean up the cobalt supply chain, by Scarlett Evans, MiningTechnology, April 8, 2019.) Such cobalt traceability will help ensure secure transactions along the mine-to-manufacturer value chain.

Update on Ziki Swandi

After CBS News aired the story on Ziki Swandi, concerned viewers contacted the network to see how they could help him attend school. Fifty CBS viewers helped make Ziki’s dream of going to school — and those of his three siblings — a reality. Each received school uniforms, book bags and textbooks as students at the Good Shepherd School. The Swandi children had escaped the artisanal mines of Kolwezi. (See CBS This Morning, April 5, 2018.)

Donn LeVie Jr., CFE, is a Fraud Magazine staff writer, and a presenter and leadership positioning/influence strategist at ACFE Global Fraud Conferences since 2010. He’s president of Donn LeVie Jr. STRATEGIES, LLC, and the creator of several virtual strategic coaching and mentoring programs for high-performing professionals. His website is donnleviejrstrategies.com. Contact him at donn@donnleviejrstrategies.com.

TI publishes tool to identify corruption in awarding of mining-sector permission

Transparency International (TI) has published the 120-page, “Mining Awards Corruption Risk Assessment Tool,” to help identify and assess the underlying causes of corrupt awarding of mining sector licenses, permits and contracts.

This flowchart is an overview of the three phases and nine steps involved in the assessment. [Source of illustration: Mining Awards Corruption Risk Assessment Tool (2nd edition), Transparency International. Licensed under CC-BY-ND 4.0.]