Why the Dodd-Frank Act Doesn’t Work

The United States SEC’s Dodd Frank Act (Provision 1502) was well-intentioned. The provision requires United States companies to disclose if their products used coltan from the Congo, and to prove that they did not come from militia groups and criminals. However well-meaning, the Dodd Frank Act did more harm to the Congo than good; it frightened manufacturers away from the Congo completely. This devastated the already bleak Congo economy and the approximate 10 million Congolese that make their living from honest, legal mining of the Congo’s vast, rich mineral resources. Congolese went from poor to starving.

Provision 1502 burnt down the barn to kill the rat – and the rat didn’t even die. Instead, militia groups turned to smugglers who allow the coltan to change many hands as its shipped to China, where human rights abuses aren’t an issue and where manufacturers are happy to get their hands on cheap coltan, rather than from other countries or legal Congolese mines.

Dodd Frank called for transparency in manufacturing that never existed before, but good intentions served only to hurt the Congolese people even more than the militia groups and criminals who murder, enslave, and rape them. The United Nations is just beginning to realize this.

UPDATE (December 6, 2012): Israeli investor Dan Gertler, a personal friend of Congo President Joseph Kabila, earns billions by secretly buying mining assets at bargain prices from the poorest country on earth. Bloomberg’s Michael Kavanagh, Franz Wild and Jonathan Ferziger report. This story is featured in the January issue of Bloomberg Markets magazine. (Source: Bloomberg)