SOUTH AFRICAN DIAMOND AND PRECIOUS METALS REGULATOR (SADPMR)

PRESENTATION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE SADPMR ANNUAL REPORT FOR THE 2014/ 2015 FINANCIAL YEAR

PRESENTATION OUTLINE Introduction Audit Outcome from 2014/2015 financial year. matters from 2014/2015 financial year Financial Performance Audit Report Developments within the SADPMR Achievements on Predetermined objectives Human Resources Annual Financial Statements Challenges Closure

INTRODUCTION The audit report for the year under review was for the period 2014/2015, 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 2014/2015 FINANCIAL YEAR The South African Diamond and Precious Metals Regulator received an unqualified audit outcome and; The Regulator therefore had a few audit issues that needed to be addressed.

ANNUAL REPORT FOR THE 2014/15 FINANCIAL YEAR

FINANCIAL PERFORMANCE- AUDIT REPORT AUDIT OPINION UNQUALIFIED AUDIT OPINION ISSUED – WITH EMPHASIS OF MATTER.

FINANCIAL PERFORMANCE- AUDIT REPORT Emphasis of matter Matter reported Restatement of corresponding figures As disclosed in note 22 to the financial statements, the corresponding figures for 31 March 2014 have been restated as a result of an error discovered during 31 March 2015 in the financial statements of the SADPMR at, and for the year ended, 31 March 2015. 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 Objectives are aligned to the DMR Strategic Objectives and the National Development Plan, 2030. Ensure equitable access to resources for local beneficiation For the period under review, 3522 clients visited the DEEC and placed and bid for diamond parcels against the set target of 1400 anticipated clients During the same period, 176 diamond beneficiators visited the DEEC where they were given priority. The DEEC was able to facilitate one (1) polished tender for the small diamond beneficiators. Ensure compliance with legislative requirements During the period under review, 521 diamonds valuations (s59, import and exports) were conducted for determination of fair market value. The Regulator was able to conduct 1444 inspections within the diamond and precious metals industries against the set target of 1300 inspections.

ACHIEVEMENTS ON PREDETERMINED OBJECTIVES Ensure competitiveness, sustainable development and job creation in the diamond and precious metals industries During the 2014/2015 financial year, 63 beneficiation licenses were issued against the target of 50; The Regulator assisted seven (7) prospective entrepreneurs in the diamond and precious metals industries; and Also, the Regulator managed to facilitate five (5)skills development initiatives in the diamond and precious metals industries.

DEVELOPMENTS WITHIN THE SADPMR ESTABLISHMENT OF THE BOURSE The SADPMR was mandated to draft a Concept Document on the establishment of a State Bourse, by the Minister of Mineral Resources. The Board of the SADPMR approved the document, which recommends the establishment of the Bourse and the proposed framework of a State Bourse. After Board approval, it was sent to the Department in August 2015. PARTNERSHIP WITH THE GGDA IN ESTABLISHMENT OF THE GIDZ The Gauteng Growth Development Agency (GGDA) is building a Gauteng Industrial Development Zone (GIDZ) near OR Tambo, airport. The SADPMR was requested to collaborate with the GGDA, to establishment of a Jewellery Manufacturing Precinct within the GIDZ, where the State Bourse is envisaged to be situated as well. The sod-turning ceremony was in September 2015. SADPMR WOMEN IN MINING STRATEGY The SADPMR will be formulating a Women strategy. It will be in line with the DMR Woman-In-Mining strategy. The strategy will addresses challenges of women both inside and outside the industry.

HUMAN RESOURCES Organogram Total: The SADPMR has a total of 115 employees by the end of March 2015. Gender: Male – 47 , Female - 68. Race: Coloured – 4, Indian – 4, white – 2 , black – 105.

Employment Equity statistics NUMBER OF MALES NUMBER OF FEMALES NUMBER OF PEOPLE WITH DISABILITIES TOTAL Executives: 4 Senior Managers: 4 Executives: 2 Senior Managers: 2 Executive: 0 Senior Managers: 0 Executives: 6 Senior Managers: 6 Professionals and skilled employees: 29 Professionals and skilled employees: 48 Professionals and skilled employees: 0 Professionals and Skilled employees: 77 deputy managers and senior officials) Semi-skilled employees:8 Semi-skilled employees:11 Semi-skilled employees:0 Semi- skilled employees: 19 (below senior officials) Unskilled employees: 2 Unskilled employees: 5 Unskilled employees: 0 Unskilled employees 7 (junior officials) Total : 47 male employees Total: 68 female employees Total: None (one person with a dis-ability has been appointed during the current financial year 2015/2016, as a receptionist). He is semi-skilled employee.

HUMAN RESOURCES 6 new appointments 7 termination of services NUMBER OF APPOINTMENTS MADE NUMBER OF TERMINATION OF SERVICE NUMBER OF INTERNAL PROMOTIONS 6 new appointments 7 termination of services 6 resignations 1 retirement 2 employees were promoted

HUMAN RESOURCES Labour relations- misconduct and disciplinary action Nature of disciplinary action Number Verbal warning 3 Written warning 1 Final written warning Dismissal Total 5

Human Resources Development INTERNSHIP PROGRAMME FEMALES MALES 5 2 3 TOTAL NUMBER OF INTERNAL STAFF ON BURSARIES MALES FEMALES 24 9 15

ANNUAL FINANCIAL STATEMENTS OVERVIEW. The Regulator submitted the budget of R 80,3 million to National Treasury via the Department of Mineral Resources. The final allocation was R 45,9 million which left the Regulator with a shortfall of R 34,4 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. The allocation shortfall is augmented by the in-house generated revenue ( Levy, fees ,licences and penalties)

ANNUAL FINANCIAL STATEMENTS Revenue The actual revenue was R 87,7 million (incl. Transfer Payment of R 47,8 million). The in-house generated revenue increase to R 39,9 million from R 34,4 million The increase in the in-house generated revenue is due to the implementation of revised fees which was implemented on the 1st of October 2014.

ANNUAL FINANCIAL STATEMENTS Expenditure The actual expenditure for the year under review was R 92,6 million. The major contributing expenditures were as follows: Compensation of employees: R 59,8 million Other operating expenditure: R 32,1 million Non-cash expenditure: R 1,6 million Various expenditure in delivering the mandate was kept within the budgeted expenditure.

ANNUAL FINANCIAL STATEMENTS Transfer payment has been capped at an average of R 44,101 million for the last three years. Grant received from DMR versus budget approved by the Board has been as follows:   2014/15 2013/14 2012/13 R’000 R’000 R’000 Approved budget 80 318 67 848 62 521 Grant received 45 878 44 824 41 601   Add: Actual in house revenue 39 867 36 451 28 653 less: Expenditure 87 761 85 898 72 314 Deficit *(5 084) * (4 825) *(2 098)   (* excluding accumulated funds retained as per National Treasury’s approval  

ANNUAL FINANCIAL STATEMENTS Trend on utilization of funds Major cost items 2014/15 2013/14 2012/13 R’000 R’000 R’000 Compensation of employees 59 819 54 859 48 706 Other operating expenses 32 123 26 599 19 174 Payment for Capex 1 793 3 891 3 059 The employees head count has increased as a result of the 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

CHANGES IN NET ASSETS The accumulated surplus as at 31 March 2015 was R43,8 million, As per National Treasury approval, the accumulated surplus is used to fund capital assets.

REPORT AS AT 30 SEPTEMBER 2015 EXPENDITURE: Budgeted 22 551 Actual 22 146 Variance 405 Reasons for Variance: There is no significant variance between projected and actual expenditure.

REPORT AS AT 30 SEPTEMBER 2015 REVENUE: R’000 Budgeted 20 079 Actual 22 516 Variance 2 437 The variance is attributable to the increase in levy income, licenses and service fees handled during the quarter. Favourable cash flow based on the rate of exchange.

CHALLENGES & INTERVENTIONS There has been decline in the diamond and precious metals industry, due to the economic global downturn. 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.

THANK YOU & DISCUSSIONS