CAPITALIZING
ON CHAOS
By Casey Ketterling and Calla
Papademas
Attempting to provide a synopsis of the effect of all mining companies on the whole of Africa is both too large and broad for constructing any meaningful plans of action. We chose to focus on the dynamic situation in the Congo and on the activities of American Mineral Fields and DeBeers to serve as representative for mining companies’ exploitation of volatile African countries at war. Also, the Congo serves as an excellent example because the current wars within this vast region involve over eight surrounding countries and highlight the extreme ethnic tensions between many groups, most notably the Tutsis and the Hutus. The Congo’s volatility is typical of the large upheavals of weak governments in Africa; it’s plight is much like other situations which caused large humanitarian loss and shocked the international community yet have resulted in little actions. African countries are so overridden with problems they must liquidate their long term resources in order to simply survive in the short term. Multi-national mining companies are capitalizing on this dilemma. Before discussing the implications of the mining companies’ activities and what can be done to improve the situation though, we must provide some background on the Congo which was formerly known as Zaire and the two mining companies, American Mineral Fields and DeBeers.
Until 1960 the country of Zaire, (now referred to as the Democratic Republic of Congo) was under Belgian colonial rule dating back to the mid 1800’s. In 1960, Belgium decided it was time to pull out, and Zaire was left to self-governance, a responsibility its people were not prepared for. Lawlessness and chaos prevailed, prompting UN intervention and international rigging of elected officials. A potential ally of the Soviet Union was chosen, Patrice Lumumba, and quickly removed through underhanded US intervention.
The intervention would lead to Mobutu Sese Seko, whose name modestly translates to “the all powerful warrior who because of his endurance and inflexible will to win sweeps from conquest to conquest leaving fire in his wake”, commanding the leadership of the country. Mobutu’s reign, while reducing some of the chaos, would lead Zaire to despair. The US backed leader would turn out to be a self serving ruler mired in corruption and greed. During his thirty year reign he would amass a fortune over $5 billion while the average citizen in his country would live with a mere $210 annual income.
Revolt was consistent throughout Mobutu’s reign but it was suppressed, at least enough to allow Mobutu to remain in power. In 1997 tensions would finally rise to level necessary to overthrow the corrupt leader. Zaire’s Tutsis revolted after the government threatened to take away their land and force them into exile. This initial spark led other ethnic groups to join the revolt in hopes of unseating Mobutu. Laurent Kabila would emerge as the leader of the rebel forces. Kabila was a long time opponent of Mobutu and actually had led an unsuccessful challenge to Mobutu in the mid-1960’s. The rebels captured Kisangani, the third largest city in Zaire, in March of 1997 while facing little opposition from government forces.
At the time, Mobutu was out of the country spending time at his palatial home in France. He would return to issue a cease fire while Nelson Mandela attempted to summon Kabila and Mobutu to South Africa for peace talks. On April 29, Mobutu and Kabila held their first face to face meeting. By May 4, however, the historic peace talks fell apart. Mobutu offers to hand over power to the winner of elections in which he himself would not be a candidate. Kabila insisted that Mobutu step down immediately and hand over control to rebel forces. Both Kabila and Mobutu would agree to further meetings yet each scheduled encounter would be missed by one or the other as part of strategic maneuvers. Finally on May 14, Mobutu Sese Seko steps down, ending his 32 year rule over Zaire, and quickly leaves the country.
Subsequently, Laurent Kabila declared himself the president of Zaire and changed its name to the Democratic Republic of Congo, which had been the name before Mobutu chose “Zaire” in 1971. The death of Mobutu in September 1997, while exiled in Morocco , brought closure to the era of his overthrow.
From 1997 to the present, the Democratic Republic of the Congo under the rule of Kabila has gained little, if any, stability. During his revolt Kabila received serious attention from the UN when he issued the following ultimatum: if the UN did not repatriate more than 85,000 Hutu refugees (remnants of militias which orchestrated the extermination of Tutsis and moderate Hutus) “we will do it ourselves.” The Hutu refugees had fled Rwanda after killing over 500,000 Tutsis as part of a genocide. Kabila’s aggressive stance against the Hutus led him to receive the backing of Rwanda and Angola.
Now, the backing of Kabila appears to be very tentative and some of his original supporters now oppose him. Kabila’s aggressive stance against the Hutu’s has given way to collaboration with the Hutus. Many Hutu’s now fight on the side of Kabila against rebels who would overthrow him. The eastern area of the country near the Great Lakes Region is mired in war with factions from more than eight countries participating in the bloodbath. Complicating matters is the involvement of multinational corporations giving funds and arms to the sides which will preserve their interests in the resource-rich area.
American Mineral Fields is a mining company based out of the hometown of President Clinton. Specializing in gold, copper and diamonds, AMR stormed onto the international scene by securing a $2 billion agreement with Kabila at the height of the rebel attack on the Mobutu regime in April of 1997. The deal would provide the rebels with funds and future investment in exchange for mining rights—it would later be referred to as the Kolwezi Tailings Project.
Upon making the deal, the stock prices of AMF doubled, illustrating that investors had little reservation, as did AMF, in backing factions involved in a civil war. The decision to invest was calmly defended by AMF spokesman Earl Young in an article published in the Tribune Review: “The situation was, we were dealing with the Mobutu government for some time. It was not producing results as rapidly as we liked. Also, if in fact ,we were on the wrong side, we wanted to switch sides. We are business people not politicians. We just need to know what the rules are and it looks like President Kabila is going to be making them.” (Tribune Review)
After securing the deal, the firm moved their headquarters to Dallas, Texas. In December of 1997, though, the promising deal AMF made would begin to fall apart. Gecamines, the state-owned mining company in the Congo announced that it would not honor the contract it had signed. Chairman Bernard Vavala described the situation as the following in his 1998 report to the shareholders: “The new Democratic Republic of Congo faces many difficulties in overcoming decades of dictatorial misrule. America Mineral Fields stand ready to assist the DRC government and the Congolese people in rebuilding their nation. Despite sincere efforts on both sides to finalize the Kolwezi Tailings Contract between America Mineral Fields and Gecamines, the DRC government-owned mining company, no final agreement in the form of a signed mining convention was realized.
“When Gecamines announced in December 1997 its intention not to honor a signed contract executed in April 1997, America Mineral Fields quickly initiated a lawsuit against Anglo American Corporation of South Africa for tortuously interfering with the Kolwezi Tailings Contract. American Mineral Fields did not take this action lightly but felt this suit necessary to protect its legal rights in the DRC government in an attempt to resolve the disagreement over the Kolwezi Tailings Project in such a way that will provide maximum benefit to our shareholders.” (AMF Shareholder’s Report 1998)
Anglo-American is a large accounting and mining trade company which recently merged with DeBeers. American Mineral Fields sued the conglomerate for $3 billion
in US courts but withdrew the action in March in effort to resolve their differences with Anglo-American out of court. The has extended its focus to developing mining projects in the equally volatile Angola in addition to worldwide mining exploration.
DeBeers diamonds is the world’s largest diamond producer controlling over 70% of all the world’s diamonds. Led by the motto “ A diamond is forever”, DeBeers mines the bulk of its diamonds from Africa and is accused by many to have a monopoly over the entire industry and enough diamonds in reserve to strategically flood the market at any time. The company’s yearly earnings total over $4.5 billion annually. According to Kathi Austin, DeBeers supports resistance forces in Africa to keep the area volatile—a condition DeBeers thrives under. The lack of regulation Africa allows diamonds to be harvested at very low costs and the state of lawlessness allows DeBeers cut many corners that would lead to less profits in other economic arenas.
Concurrent with the lawsuit filed against Anglo-American by AMF, DeBeers agreed to solidify a long-standing relationship with Anglo-American in December of 1997 by merging the management of the two companies. This move provided DeBeers, the world’s leading diamond harvester and marketer, with a solid management and brokerage company in Anglo-American. At the time of the lawsuit launched by AMF, Anglo-American claimed no wrong doing in the matter. Anglo spokeswoman Glen Finnegan said that Anglo did not act improperly or mischievously in respect of AMF’s projects and if the bidding were reopened for the project, Anglo would stay out.
Recent History
DeBeers has a functional monopoly and controls the price for diamonds everywhere. DeBeers buys and sells most of the diamonds mined and picked from all over the world. They control any substantial sales of diamonds and are capable of buying any other company who begins to compete with their absolute control. Kathi Austin explained that DeBeers isn’t interested in owning and selling particular diamonds, per se. In fact, DeBeers recently cemented over diamond fields in Botswana to prevent their mining. DeBeers’ money and power derive from their control over the world market. They must be very careful not to let this control slip, in case the market should become glutted, or flooded with diamonds. If this happened, prices would crash and DeBeers would face serious trouble. So, while they are extremely powerful, DeBeers also has to be very careful to squelch efforts by others to “get into the diamond business.” There have been a few attempts by Russians (Russia also has diamond rich areas) to get around the cartel. The power of the DeBeers monopoly can be demonstrated by their ability to get a recent agreement from the Russian diamond industry stating that private Russian diamond brokers cannot sell their diamonds on the world market. DeBeers controls the Russian and the world diamond production.
Kabila is directly related to the mineral interests. DeBeers had been “in bed with Mobutu” (Kanhema 3/9). When Kabila sought power and resources to finance his rebel takeover, he went directly to DeBeers’ competitors in the mining business. These competitors weren’t really “competing”, so to speak, with DeBeers for diamond rights (because no one could really compete with DeBeers as we’ve already mentioned). Kabila approached them because DeBeers was already allied with his enemy and because these other companies also had a great deal of money and clout. Because American Mineral Fields and a few other, smaller, companies wanted concessions in eastern Congo, they made a deal with Kabila before he came to power. American Mineral Fields entered a $2 billion mining rights with Kabila well before Kabila became the leader of the Congo. Most of the money out of this deal was used in financing the war. The American Mineral Fields agreements entitles them mining rights in Katanga and their area of control is the size of Switzerland. Kabila agreed to give them concessions in exchange for hard currency and assistance for his military operation to overtake Mobutu and the capital in Kinshasa. After he came to power, he tore up several of the concessions with the smaller companies, and gave them to cronies. In turn, these companies began backing the new rebellion in eastern Congo against Kabila.
Angola and South Africa
Both Kanhema and Austin were quick to point out that the diamond and rebel interests, connections and factions were even more intricate and widespread throughout and within African nations. For example, Jonas Savimbi is the man who “controls the areas in Angola which are outside of Angolan Government control” according to Kathi Austin. The Angolan government is actively fighting to remove him and his forces from their unofficial positions of power. Savimbi agreed, as part of an earlier peace-keeping
agreement, to turn over the diamond mines in the area he has control over. However, he has reneged on this deal and continues to control the mines and to use the profit to fund his war effort. According to Newton Kanhema “He makes $300 million a year out of diamonds and in view of his status and location this is quite an achievement.”
Furthermore, although South African government is not known to be in support of Savimbi, the South African private corporations have very strong ties with Savimbi. These corporations are the conduit between Savimbi and DeBeers. At a time when the UN had imposed an embargo (which is still in effect) on the area controlled by Savimbi the UN complained of 120 illegal flights to this area by some South African chartered planes. Some of the South African prominent connections to Savimbi are former apartheid operatives like Craig Williamson who has been arrested in Angola on illegal diamond dealing. “There are definite connection between DeBeers and Savimbi but I have no evidence that there is connection between these and the Congolese rebels.” Said Newton Kanhema. But Kathi Austin says “Kabila is in opposition to Savimbi. When Mobutu was in power he was allied with Savimbi. Now, the Angolan government fights in the Congo on the side of Kabila in exchange for his support in ridding Angola of Savimbi.”
The Anglo-American chairman, Harry Oppenhiemer prompted Mandela into fostering a diplomatic solution on the Kabila/Mobutu struggle. His rationale was that South Africa would lose big time if Kabila won the battle without any significant assistance from South Africa. Anglo is, of course, the parent company of DeBeers and their main business is mining, but their interests are more diverse than are DeBeers’. DeBeers is mainly the point of collection and distribution for diamonds around the world. The American companies are more interested in other kinds of minerals and gemstones and especially gold. Anglo is also interested in other mineral and precious metal rights, and thus, in the future, there may be a more direct competition with American Mineral Fields over resources such as Gold.
Developments
Kathi Austin suggests that Kabila’s government is transitory at best, and she doesn’t expect to see him in power much longer. Perhaps this fact is a possibility in the mind of Kabila, too. Articles sent to us via email, from Newton Kanhema and cited by him simply as “South Scan January, 1999”, report that Kabila is trying to get more money out of the country’s resources by beginning to sell off rights to the timber forests, for example. This is especially salient in light of the other environmental damage done to the region by the mining practices. The process of extraction leaves the land barren and ravaged like a gaping wound. Additionally, a minimum of 2 million lethal landmines are still to be detonated or demined. They have maimed and killed thousands of people and animals. DeBeers laid thousands of mines in Angola to protect the diamond field they lay claim to. The "Bushmen" who are completely innocent to this have fallen victim to these landmines. Some villages have moved because their cattle and the villagers could not stand the extent of fatality. Of course, mining companies are in the business of extraction with very little given back either to the local communities or states. Kathi Austin states, emphatically, “The environmental impact is devastating.”
Although the rights, assets and products Kabila has been selling and trading off are lucrative, none of this money has gone back into the economy of the Congo community. While native and local persons are the laborers in these mines, the profit never goes to these people, or even stays in the region (Austin, 3/11). Instead, it goes to the management of companies like DeBeers and American Mining which is all 1st world, Western in origin. Austin suggests that, in the case of the companies backing Kabila and rebel movements in eastern Congo, “…they have contributed to widespread human rights abuses, massive killings in the tens of thousands and destabilization [of the economy]….” Further destabilization of the Congo economy, recently, has resulted from Kabila’s signing a decree banning the use of foreign currency to buy or make commercial transactions. This move was intended to force foreigners to value and circulate the Congolese dollar to avoid it’s “deterioration.” However, mining and mineral companies have been ignoring this new law. Kabila, in response, asked foreigners to leave mining areas by January 15th. DeBeers was notably frustrated, and continued, with this “embargo” of sorts in place, to make a quarter of the artisinal diamond production in the Congo, in the month of January, anyway. In the mean time, for money, Kabila has been selling shares of domestic diamond and mineral companies to it’s neighbor, Namibia, as usual without any ensuing financial/economic benefit to the Congo as a whole.
Civil War Wages On
An article in the San Francisco Chronicle from March 11, 1999 seems to promise that the US, British and UN will “step up efforts to end the Congo war.” UN Secretary-General Kofi Annan said that as soon as a cease fire emerges between Kabila and the rebels trying to overthrow him, an international peace force of up to 15, 000 would be needed and supplied to bring and maintain order to the region.
Assets and products of the Congo-owned mining giant Gecamines have been seized and are being held in South Africa. This action was taken to recover millions of dollars of debts that Kabila had run-up, but Kabila sees this seizure as a hostile, not merely financial act.
What Should Be Done?
Several possibilities present themselves from these most recent developments. DeBeers has an interest in seeing the wars continue, because this would preserve the lack of external regulation on their business dealings. No one we spoke to was sure whether Kabila had made concessions to DeBeers is exchange for capital, and if he had whether he had abandoned these promises as he had so many others. However it seemed probable to our interviewees that either Kabila or the rebel factions were receiving funding from DeBeers at some point, perhaps to the present, in exchange for diamond mining rights. Thus, DeBeers supports the wars and the wars support DeBeers. Neither has any impetus to see the other weakened, and so an outside force is required in order to protect the rights and lives of the people and land.
The first difficulty we may reach after deciding that intervention is necessary, is convincing the countries who would send troops that there is good reason to do so. We are reminded that the UN has not always had the power or desire to take on companies like Standard Oil, historically. Will DeBeers be the Standard Oil of the future? The European Common Market, according to our sources, basically ignores Africa. In a statement before a House Sub Committee about foreign relations in the Congo, Salih Booker said “Our interests are best served by promoting security, democracy and development. We have a vested self interest in preventing the creation of zones of chaos wherever they might be… Instability and chaos breed humanitarian crises, international crime, drugs and arms smuggling, environmental degradation, poverty and communicable disease. It will also reduce the costs of responding to humanitarian emergencies (The cost of three months’ conflict in Rwanda, in relief costs is estimated to be the equivalent of more than a decade’s worth of development assistance to Rwanda.)”
Next, what type of outside force? A peacekeeping force; one with actual force? Newton Kanhema’s suggestions might seem grim, but he reminds us of the background and basis for his sentiments: “The war in Angola and Mozambique are wars directed and financed by the United States and South Africa during the cold-war. Savimbi received an annual budget from the US Government approved by the Congress for some years and all this was done in the name of curbing the Soviet expansion. I suppose the US should go back to their ally, Savimbi and seek co-operation. And if they fail they should assist those in Luanda to bring the country to some order. It was not until six years ago that the US recognized the Angolan Government. The… Government in Angola has been in office since 1975.
“Kofi Annan has sent soldiers to Angola and they have achieved nothing. In Africa there is no use sending peace keeping force that has no power to fire back. It is just a waste of time and money. If there are to be soldiers sent there they must have the mandate to use force to restore order. Peace keepers are observers, remember the Rwandan UNAMIR???”
Kofi Annan suggests standard rules and responsibilities for companies in (civil) warring nations. These should be created by the UN and enforced by seizing assets and products of the companies which do not obey. “It is up to governments where the countries are based as well as the UN to set regulatory controls over what these companies can and cannot do in overseas territories. The UN is trying to address this issue with a Transnational Crime Convention, but for the most part, businesses do not have code of conduct which they should follow” said Kathi Austin. Sadly, in this area there are no exemplary companies to model these standard responsibilities after. No company that we’ve heard of has a set of rules like this that could be used to charter others. However, if anything, this further proves the necessity of such code of conduct.
Perhaps this code of conduct should include rules like: Companies should not be allowed to fund rebel groups unless the UN decides, by a majority vote, that the country would be better led by the rebel group, to such an extent that the UN is also willing to back the rebel group. While the rules shouldn’t be specific to the diamond monopoly, they should include a clause to bring in experts specific to the commodity of interest. For example, in this case, if the UN were to, say, intervene as an intermediary buyer and seller of diamonds to break up the monopoly, special care would have to be taken that DeBeers didn’t sell and flood the market from warehoused diamond reserves. Economic and diamond experts would have to flesh out the specifics after a UN framework was installed.
In any case, it seems obvious to “reasoned people” such as ourselves that action needs to be taken sooner rather than later and that this action should resonate with other reasoned people as fair and just. In the Congo, now, fairness and justice are a matter of life and death, and diamonds.
Sources:
Kathi Austin describes her expertise on the subject as follows : “Information on how the companies backed the rebellions comes from investigative research, including my field interviews with representatives of the rebels and the companies involved, diplomats, UN workers, etc.”
Booker, Salih. Statement to House Committee on International Relations Congress of the United States. http://www.foreignrelations.org/studies/fellows/booker/statement.html. November 5,1997.
CNN Interactive. “The Roots Of Zaire’s Unrest.” http://www.cnn.com/WORLD/9704/02/zaire/.
Duke, Lynne. “Hutu Extremists Making Stability Impossible.” San Francisco Chronicle. March 11, 1999. A11 Col. 3.
Newton Kanhema describes the sources of his knowledge thus: “I am a journalist, I am from Southern Africa, I work in South Africa and I have developed keen interest in the Great Lakes regional conflict and to understand the wars in that region including Angola one needs to understand the economic interests to understand what is going on. Economic interests dictate the political events and not the other way round.”
Ruddy, Christopher. “AMF seizes deal with Kabila.” Tribune Review. http://www.triblive.com/ruddy/031598.html. April 28, 1997.
Vavala, Bernard. “1998 Chairman’s Report To the Shareholders. http://www.am-min.com/profile.html. March 18, 1998.
Appendix A:Interview Questions
What, as you understand it is the connection between DeBeers and rebel factions in Central Africa especially in Angola, Zaire and Congo?
Are there connections, overlap or rivalries among American Mineral Fields, Arkansas Mining Company, and DeBeers? Do they want control over the same mines or areas as one another?
How is Kabila related to any of these mining interests?
Is the diamond industry a true monopoly? How does it compare to the copper, cobalt and gold industries/other mined-resource industries in these areas?
How did you acquire any of the knowledge for the previous questions? Do you have suggestions for sources for a project on these topics? How much accurate information do you think is published or web-posted on these topics as opposed to misinformation, intentional or unintentional by the interests involved etc.?
How do these issues affect the land and populace of these areas?
What do you think the US or UN should or should not do in this matter? Create a caretaker gov.? Sell these resources itself? Set up rules like Kofi Annan suggests for foreign companies in countries with civil wars?