The Myth of Opaque Cobalt Supply Chains

The Democratic Republic of the Congo (DRC) cobalt supply chain is fed by two streams: a formal and an informal channel. The formal supply chain, characterized by huge industrial concessions,  contributes the major share of the output. The informal source, widely known as artisanal mining, contributes a significant proportion despite attempts by some supply chain participants to downplay its contribution. Artisanal mining is characterized by use of crude tools, inhumane working conditions as well as fatalities. In recent years, the significance of artisanal mining’s contribution to the cobalt supply chain has become accepted. However, the issue of how the output of artisanal miners (locally known as Creusers) end up in the formal supply chain remains contested. In fact, the midstream and downstream participants of the cobalt supply chain tend to claim that the artisanal cobalt mining sector is too complex to trace, that is, to tell which mineral came out of which mine. How much water does this claim hold?

Let’s explore the fundamental question: how does cobalt ore (heterogenite) move from the hands of Creusers to the machines of major mining and manufacturing companies and ultimately to our pockets and garages? Siddarth Kara’s masterpiece, ‘Cobalt Red: How the Blood of the Congo Powers Our Lives’,  provides great insights into this matter.

Who is involved?

Creusers: the source of the informal supply chain

Negociants: middlemen / women who transport Creusers’ output to the Depots and claim a share of the transaction amount - ranging from ¼ to ½ - for the service.

FARDC: the Armed Forces of the Democratic Republic of the Congo. Some of the soldiers force rural populations into mining villages where they are made to live and dig for extremely low wages.

Cooperatives: the main cooperatives are CMOK, CMMK and COMAKAT. These are local organizations that employ artisanal miners with an aim to provide better wages and working conditions. In reality, there is minimal improvement in wages and working conditions in cooperative mining areas.

Depots: usually located either close to artisanal mining sites or in a dedicated cobalt marketplace such as Musompo. There are likely thousands of cobalt depots across the DRC. Depots serve as the main gateway between the formal and informal cobalt supply chains.

Industrial mining companies / Concessions: CDM, COMMUS, SICOMINES, CHEMAF and KCC. These are the big earners that sit at the opposite end of the tunnel as Creusers.

Who sells to whom?

Green denotes parts of the supply chain dominated by DRC nationals. Red denotes parts of the chain dominated by foreign nationals - mainly Chinese, Lebanese, Indians and Western Europeans.

Economics has it that demand drives supply and vice versa. As such, Creusers would not dig for heterogenite if they had no one to sell to. Creusers introduce their output to the market in 4 main ways:

1. Self-employed Creusers can sell their output directly to Depots especially if the depots are located in close proximity to the mines

2. Self-employed Creusers can sell their output to Negociants if the depots are located farther away from the mines

3. Some Creusers are employed by mining cooperatives

4. Another category of Creusers are coerced into servitude either by the national Congolese army (the FARDC) or the violent militias that control large areas of Eastern DRC.

The main competitive advantage of Negociants is the ownership of means of transport - either bicycles or motorbikes. Negociants tend to offload heterogenite onto Depots. The militia also sell to depots. The Cooperatives, FARDC and Depots tend to have offtake arrangements with some industrial mining companies. FARDC mainly sells to Chinese mining companies. Some of the leading industrial companies leverage artisanal miners to boost production by allowing Creusers to dig inside or around mining concessions. Additionally, some industrial mining companies dump heaps of mining debris outside their fences as a way to get Creusers to hand pick the valuable ore from the debris. This handpicked ore is sold to depots which then sell back to the industrial mining company.

Verdict

Artisanal mining takes significant effort to trace and monitor because its beneficiaries have designed it to be so. The question of whether artisanal mining is traceable is moot. A more valuable question is: are the beneficiaries of artisanal mining doing what is required of them to render the supply chain more transparent?

I am sure Creusers and Negociants would welcome a more transparent inclusion of their output into the formal supply chain with open arms. FARDC soldiers and violent militia would oppose the move as lack of transparency is inherent to their operations. In this new age of greater emphasis on corporate responsibility, industrial mining companies, battery manufacturers, consumer electronics and electric vehicle producers risk great reputational and financial damages if the status quo is maintained. Basically, no one can afford to do nothing.

Reference

1. Siddarth, K. (2023). Cobalt Red, How the Blood of the Congo Powers Our Lives. St. Martin’s Press.