Studies show that heavy taxes and complex administrative burdens encourage extortion, smuggling, and debt bondage
March 21, 2023 / Kolwezi, Democratic Republic of Congo
IMPACT is launching a new project tackling corruption in Democratic Republic of Congo’s (DRC) artisanal cobalt sector with an effort to map all the taxes and fees supply chain actors are legally required to pay.
The Mapping Payments project, which is implemented in collaboration with the Congolese non-profit Action pour la Défense des droits humains (ADDH), kicked off today with a workshop in Kolwezi, Lualaba Province—the town at the heart of DRC’s artisanal cobalt mining sector. The workshop is the first in a series that brings together policymakers, mining and financial management experts, artisanal miners, traders, processors, exporters, and civil society to examine the various taxes, fees, and administrative steps currently in place for the artisanal cobalt sector and to document what is required by law.
“High taxes and the complexity of each administrative step in the supply chain is a major barrier to responsible sourcing. We’ve seen significant corruption and extortion by supply chain actors in the artisanal gold sector. Through this project, IMPACT can compare the experiences of the artisanal gold sector with the reality of the cobalt supply chain. By mapping and publishing all the steps and required payments using a multistakeholder consultative process—we hope to remove ambiguity around the taxation for artisanal cobalt and provide artisanal miners and traders with a reference guide they can turn to, to ensure they aren’t being extorted,” said Joanne Lebert, IMPACT’s Executive Director.
The project will allow for stakeholders to understand the artisanal cobalt sector and how it compares to DRC’s artisanal gold supply chain, building off IMPACT’s work in Ituri Province. Four technical notes were developed in 2022 which outlined taxes, fees, and steps to transfer artisanal gold between provinces, export artisanal gold, purchase and sell artisanal gold in Ituri Province, and extract artisanal gold in Ituri Province.
DRC’s fiscal regime for the artisanal mining sector is burdensome, complex, and ambiguous. High taxes and complex administrative burdens are driving smuggling of its natural resources. According to an OECD report, up to 20 percent of the total value of production is being extorted from artisanal cobalt miners through unofficial payments by cooperatives or state agents.
The technical notes for artisanal gold have proven to be helpful reference guides for stakeholders, as they’ve demonstrated the legal steps in the supply chain. IMPACT had previously documented 26 steps to export artisanal gold in Ituri Province, costing the exporter 12 percent of the value of the gold. Now the steps at export have been reduced to nine and overall costs have similarly decreased.
Since their distribution, supply chain actors in Ituri Province are using them to successfully deter demands for illegal payments.
Workshops will also address possible tax reforms needed to improve fiscal governance of the artisanal cobalt sector at the national and provincial levels. Stakeholders will work to create proposals that encourage transparency and efficiency in DRC’s artisanal cobalt supply chain.
Since 2011, IMPACT has supported the Ministry of Mines in the implementation of the six tools required by the ICGLR Regional Initiative against the Illegal Exploitation of Natural Resources, which includes the harmonization of legislation in all Member States. IMPACT has also supported human rights within DRC’s mining communities as well as supply chain due diligence through its Just Gold project bringing the first conflict-free, traceable, and legal gold from DRC to the international market.
In the artisanal cobalt mining sector, IMPACT is also implementing the Her Security project which investigates how to decrease child labour by increasing women’s livelihoods in artisanal cobalt mining communities. IMPACT has also supported efforts to develop the Artisanal and Small-Scale Mining Cobalt ESG Management Framework, now known as the ASM Cobalt Criteria, a progressive set of expectations for the responsible sourcing of artisanal cobalt in DRC. IMPACT carried out national consultations and has facilitated restitution workshops on the updated criteria.
The Mapping Payments project is undertaken with funding provided by the European Union. Funding for complimentary activities is provided by Microsoft.
Learn more about the project here: https://impacttransform.org/en/mapping-payments/
Photo by Paul Alain Hunt/ Unsplash
In DRC: Felicien Mbikayi, Governance Advisor, IMPACT
+243-815-071-370 / +243-993-732-004 / email@example.com
In Canada: Zuzia Danielski, Communications Director, IMPACT
IMPACT transforms how natural resources are managed in areas where security and human rights are at risk. We investigate and develop approaches for natural resources to improve security, development, and equality. We are an independent non-profit collaborating with local partners for lasting change. www.impacttransform.org
Action pour la Défense des droits humains (ADDH) is a Congolese non-profit organization based in Kolwezi. ADDH focuses on supporting transparency in the natural resource sector in Kolwezi and surrounding communities.