SOUTH AFRICAN DIAMOND AND PRECIOUS METALS REGULATOR (SADPMR)

PRESENTATION TO THE PORTFOLIO COMMITTEE ON SADPMR’s ANNUAL REPORT FOR THE 2013/ 2014 FINANCIAL YEAR

PRESENTATION OUTLINE Introduction Outstanding Audit matters from 2012/2013 financial year Achievements on Predetermined objectives Human Resources Annual Financial Statements 4. Challenges 6. Closure

INTRODUCTION The audit report for the year under review was for the period 2013/2014, policies have been reviewed and aligned to the PFMA requirements and relevant financial systems and controls have been established and are correctly implemented

AUDIT OUTCOME FROM 2012/2013 FINANCIAL YEAR The South African Diamond and Precious Metals Regulator received a clean audit outcome and; The Regulator therefore, did not have any audit issues that needed to be addressed.

ANNUAL REPORT FOR THE 2013/14 FINANCIAL YEAR

FINANCIAL PERFORMANCE- AUDIT REPORT AUDIT OPINION UNQUALIFIED AUDIT OPINION ISSUED – with matter of emphasis; SADPMR acknowledges that the audit opinion have shown performance challenges as compared 2012/13 financial year; The Regulator is addressing the findings and AG attends all the Audit & Risk Committee meetings where the Internal Auditor reports on the progress of the addressing this finding.

FINANCIAL PERFORMANCE- AUDIT REPORT Emphasis of matter Matters reported Restatement of corresponding figures – As disclosed in note 27 to the financial statements, the corresponding figures for 31 March 2013 have been restated as a result of an error discovered during 31 March 2014 in the financial statements of the SADPMR at, and for the year ended, 31 March 2013. Action taken The financial statements were revised accordingly. Internal controls to prevent recurrence of similar error are in place.

FINANCIAL PERFORMANCE- AUDIT REPORT Report on other legal and regulatory requirements None Predetermined objectives No material findings concerning the usefulness and reliability of the information

ACHIEVEMENTS ON PREDETERMINED OBJECTIVES Ensure equitable access to resources for local beneficiation Due to the new facilities, over 3546 clients visited the DEEC and placed and bid for diamond parcels against the set target of 1250 anticipated clients During the same period, 287 diamond beneficiators visited the DEEC where they were given priority The DEEC was able to facilitate five (5) polished tenders for the small diamond beneficiators. Ensure compliance with legislative requirements During the period under review, 572 diamonds were offered/ presented for valuation and 100% of these diamonds were valuated for fair market value. There was only one dispute raised and it was resolved through the intervention of an Independent Diamond Valuator; and The Regulator was able to conduct 1400 inspections within the diamond and precious metals industries against the set target of 1150 inspections.

ACHIEVEMENTS ON PREDETERMINED OBJECTIVES Ensure competitiveness, sustainable development and job creation in the diamond and precious metals industries During the 2013/2014 financial year, 112 beneficiation licenses were issued against the target of 50; The Regulator assisted six (6) prospective entrepreneurs in the diamond and precious metals industries; and Also, the Regulator managed to facilitate 5 skills development initiatives in the diamond and precious metals industries.

DEVELOPMENTS WITHIN THE SADPMR ESTABLISHMENT OF THE BOURSE Subsequent to the budget vote speech by the Minister of Mineral Resources (Honourable Ngoako Ramatlhodi) wherein the issue of the establishment of the Bourse was mentioned, the Regulator commenced with the research process; However, it should be noted that prior to the Minister’s budget vote speech, a decision was already taken by the Board and mandate was given to the CEO to conduct research on the possibility of establishing a Bourse To date, a concept document was developed and it is currently going through a consultative process with the Board of Directors; The subsequent processes will include the following; (a) Ministerial and cabinet approval; (b) Legislative amendments; The above subsequent processes will take longer than 18 months prior to the formal establishment of the Bourse

HUMAN RESOURCES Organogram The South African Diamond and Precious Metals Regulator had a total of 119 employees by the end of March 2014.

Employment Equity statistics HUMAN RESOURCES Employment Equity statistics NUMBER OF MALES NUMBER OF FEMALES NUMBER OF PEOPLE WITH DISABILITIES Senior Managers and Executive: 9 Senior Managers and Executive: 4 Senior Managers and Executive: 0 Professionals and skilled employees: 32 Professionals and skilled employees: 46 Professionals and skilled employees: 0 Semi-skilled employees: 9 Semi-skilled employees:11 Semi-skilled employees:0 Unskilled employees: 3 Unskilled employees: 5 Unskilled employees: 0 Total : 53 male employees Total: 66 female employees Total: None

HUMAN RESOURCES 12 new appointments 9 termination of services NUMBER OF APPOINTMENTS MADE NUMBER OF TERMINATION OF SERVICE NUMBER OF INTERNAL PROMOTIONS 12 new appointments 9 termination of services 4 resignations 2 deaths 1 retirement 2 Ill Health 1 employee was promoted

Human Resources Development INTERNSHIP PROGRAMME FEMALES MALES 5 4 1 TOTAL NUMBER OF INTERNAL STAFF ON BURSARIES MALES FEMALES 8 5 3

ANNUAL FINANCIAL STATEMENTS OVERVIEW. The Regulator submitted the budget of R 67,8 million to National Treasury via the Department of Mineral Resources. The final allocation was R 44,8 million which left the Regulator with a shortfall of R 23,0 million. The budget and the classification of funds were adjusted in accordance with the final allocation. The Regulator obtained the National Treasury’s approval to utilise accumulated surplus for capital projects and other contractual obligations. Further in-house revenue were introduced to augments allocation shortfall.

ANNUAL FINANCIAL STATEMENTS Revenue The actual revenue was R 81,3 million (incl. Transfer Payment of R 44,8 million). The in-house generated revenue increase to R 36,5 million from R 28,7 million. The increase in the in house generated revenue is due to the fact that 2013 was the renewal period for the licences and the effectiveness of the collection of service fees

ANNUAL FINANCIAL STATEMENTS Expenditure The actual expenditure for the year under review was R 85,9 million. The major contributing expenditures were as follows: Compensation of employees: R 54,9 million; Other operating expenditure: R 26,6 million; Non-cash expenditure: R 3,9 million; Various expenditure in delivering the mandate was kept within the budgeted expenditure.

ANNUAL FINANCIAL STATEMENTS Transfer payment has been capped at R 41,9 million for the last three years. Grant received from DMR versus budget approved by the Board has been as follows:   2013/14 2012/13 2011/12 R’000 R’000 R’000 Approved budget 67 848 62 521 68 607 Grant received 44 824 41 601 39 374   Add: Actual in house revenue 36 451 28 653 7 978 less: Expenditure 85 898 72 314 60 280 Surplus/ (deficit) * (4 825) * (2 098) 13 774    (* excluding accumulated funds retained as per National Treasury’s approval)

ANNUAL FINANCIAL STATEMENTS Trend on utilization of funds Major cost items 2013/14 2012/13 2011/12 R’000 R’000 R’000 Compensation of employees 54 859 48 706 40 912 Other operating expenses 26 599 19 174 15 559 Payment for Capex 3 891 3 059 7 495 The employees head count has increased as a result of the committed expansion, review of the organizational structure and cost of living adjustment. The operating expense has increased to ensure delivery of predetermined objectives enshrined on the annual performance plan.

REPORT AS AT 30 SEPTEMBER 2014 EXPENDITURE: Budgeted 22 336 Actual 28 253 Variance (7 360) Reasons for Variance: Variance on actual versus projected was as a result of non- cash transactions such as depreciation and provision for leave.

REPORT AS AT 30 SEPTEMBER 2014 REVENUE: R’000 Budgeted 20 015 Actual 20 893 Variance 877 There is no significant variance between projected and actual Revenue.

CHALLENGES & INTERVENTIONS Over the past three years the grant has been capped at R 41, 9 million per annum whilst the cost of operations have been increasing in order to meet the service delivery demands. Funding from DMR has not increased to cover operational costs, the Regulator has put in place revenue generation mechanisms/ systems that augment the shortfall. Access to funding for emerging businesses is still a problem, however, the Regulator is engaging the Department of Trade and Industry regarding this matter. Access to rough diamonds is dominated by financially strong buyers; the Regulator is engaging diamond producers to arrange special tenders for diamond beneficiators. Access to markets for polished diamonds by small beneficiators is limited; the Regulator is facilitating polished diamond tenders as well as access to markets to promote small beneficiators. Transformation within the diamond and precious metals is still a challenge – The Regulator has established a Transformation Unit to look into matter.

THANK YOU & DISCUSSIONS