GAO Report on Gold Supply Chain Reveals Little Progress in Responsible Sourcing
Aug 30, 2017
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Cooley LPP, Cydney Posner
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The GAO has issued a new report on conflict minerals focused in this instance on the supply chain for artisanal and small-scale mined (ASM) gold in the DRC region. The report also addressed efforts to encourage responsible sourcing of ASM gold and sexual violence in the region since the GAO’s last report in August 2016.
The GAO reported on companies’ disclosures regarding conflict minerals in April 2017. That report concluded that companies’ conflict minerals disclosures filed with SEC in 2016 were, in general, similar to disclosures filed in the preceding years. Just as in prior years, almost all of the companies that conducted due diligence reported in 2016 that they could not determine whether their conflict minerals financed or benefited armed groups in the covered countries.
According to this report, gold is a significant driver of the DRC’s economy. There are reportedly more than 1,000 ASM gold mine sites in the DRC, typically employing groups of 30 to 300 miners. The way the gold mining process is supposed to work is that the supply chain participants are required to obtain DRC government authorization, such as official mining cards, or register with the provincial or national government to trade or export ASM gold in or from the DRC. They are also required to pay provincial or national taxes to mine, trade or export ASM gold. In reality, however, “almost all DRC-sourced ASM gold is produced and traded unofficially and smuggled from the country…. Further, elements of the Congolese army as well as illegal armed groups, frequently exploit ASM gold, often through illegal taxes on its production and transport, according to reports and stakeholders.” Some of the factors cited in the report that facilitate smuggling include “limited government control over the remote areas where ASM gold is primarily produced, inadequate infrastructure, and corruption,” as well as weak border enforcement.