Dodd-Frank in the DRC: Regulation, Aid, and the “Resource Curse”

As a member of USAID’s Higher Education Solutions Network (HESN), the AidData Center for Development Policy (ACDP) at the College of William and Mary is engaging students to use geospatial analysis and targeted research to best approach answering key questions in international development. Putting the students’ skills to the test, ACDP began its inaugural #MapOff Competition. Each student developed their own research question pertaining to a specific challenge in international development, and then leveraged AidData’s geocoded datasets to create a map that illustrated their research findings. The following blog post is from one of AidData’s finalists, William and Mary Senior Lauren E. Harrison.

It is no great secret that there is a close link between mineral resources and conflict in the DRC. The region’s vast resources of copper, coltan, tungsten, gold, and other lucrative natural endowments have played a central and tragic role in the strategic and financial maneuvers of warring factions. As such, the DRC remains one of the most powerful illustrations of the so-called “resource curse.”

In 2009 alone, the DRC and nearby Rwanda produced 28% of the global supply of coltan, a highly sought-after component of cellular technology. In an age characterized by the need for greater responsibility and transparency in business activities, a major push to hold firms more accountable for their mineral sources led to the adoption of Section 1502 of the Dodd-Frank Act, a conflict minerals provision that was signed into law by President Barack Obama on July 21, 2010. Though much of the legislation (H/T @texasinafrica) has yet to be implemented by US firms, the impacts of Section 1502 on the global minerals market may already be influencing resource-rich areas of the DRC and its neighbors. Some have asked whether, despite good intentions, the legislation has stimulated the black market for these resources, incentivizing violent exploitation while suppressing peaceful, legitimate market actors.

To explore the merits of such a theory, I generated visualizations of the region (Rwanda, Uganda, Burundi and the DRC) for the years 2007 and 2011 to examine the regional response to the Dodd-Frank conflict resource provision through “before-and-after” snapshots.

The maps below show a spatial mash-up of geocoded World Bank mining and energy projects with armed conflict events (ACLED), and mineral extraction operations (US Geological Survey). The relative size of each armed conflict event (shown by red bubbles) represents the number of fatalities that occurred. It appears that conflict in mining areas has increased both in concentration and in magnitude since the regulation, radiating out into what were previously more peaceful areas.  Reducing these conflicts to a resource endowment issue would be an oversimplification, but the apparent increase in instances of violence should give Africa-watchers pause.
projects in central africa
Central Africa Project Map

The visualizations also point to a transition in the aid community, as observed in the decline in approval for new World Bank energy and mining projects (illustrated by blue points in the project locations) following the passage of the Dodd-Frank conflict resource provision. Comparing the 2007 and 2011 maps, we observe fewer approved energy and mining World Bank projects in conflict-afflicted areas and in the region as a whole. In fact, we also see an apparent shift in the type of natural resource sector projects funded by the World Bank towards governance and transparency-focused initiatives, echoing the concerns of the policy-making community captured in Dodd-Frank Section 1502.

Though there are many factors that contribute both to the incidence of conflict and the allocation of aid, overall these two maps suggest a narrative of increasing violence and diminishing productivity in the DRC's natural resource sector, hinting at a possible correlation between the two. While these data visualizations certainly do not prove that Dodd-Frank 1502 instigated these adverse effects, they do serve as a reminder that transparency initiatives often have significant "gestation periods" and yield results over longer time horizons.  In the meantime, the “resource curse” continues to affect DRC, posing a significant challenge for the development of the region as a whole.

This blog post was written by Lauren E. Harrison, an AidData Research Assistant at the College of William and Mary. 
Tags: aid effectivenessMapOffresource curseHESNgeo-referencing