SOUTH AFRICAN DIAMOND AND PRECIOUS METALS REGULATOR REGULATOR STRATEGIC PLAN, ANNUAL PERFORMANCE PLAN AND ESTIMATE OF NATIONAL EXPENDITURE 2017/18 – 2019/20

BACKGROUND ON SADPMR The Diamonds Industry (pre 2007) The diamonds industry in South Africa was administered in terms of the Diamond Act,(Act No 56 of 1986), which established, South African Diamond Board, an authority to regulate the diamond Industry. Objectives: Ensure diamonds in South Africa are exploited in the best interest of the country. To promote sound development of diamond undertakings in the Republic. To regulate the trade of diamonds in the country Unpolished diamonds attracted 15% export levy : the SADB was funded through the imposition of levies that members of the diamond industry paid for services rendered by the Board The Diamonds Industry (post 2007) Establishment of the South African Diamond and Precious Metals Regulator (SADPMR), through section 3 (1) of the Diamond Act, (Act No 29 of 2005), also governed by the PFMA, as amended. Ensure the diamond resources are exploited in the best interest of people of South Africa Promote equitable access to and local beneficiation of the Republics diamonds. To ensure compliance with the Kimberley Process Certification Scheme (KPCS). Adhere to the objectives of the broad based socio-economic empowerment as prescribed. Establishment of the Diamond Exchange and Export Centre (DEEC), a state-owned diamond exchange centre, accessible to all diamond licence holders to facilitate the trade of diamonds. The SADPMR is funded by monies appropriated by Parliament.

BACKGROUND ON SADPMR Precious Metals (pre 2007) The precious metals industry, was administered in terms of the Mining Rights Act, 1967 (Act No 20 of 1967). The South African Police (SAPS) in conjunction with the South African Revenue Services (SARS) and the Reserve Bank, issued and processed all licences/ permits applications from the precious metals industry. Precious Metals industry (Post 2007) The Precious Metals Act, 2005 (Act No 37 of 2005), repealed the Mining Rights Act, (Act No 20 of 1967). The South African Diamond and Precious Metals Regulator was established as a “One-Stop Shop” for the issuing of precious metals licences/permits and certificates entitling holders to process, manufacture and export and import of precious metals. Objectives: Ensure that precious metal resources of the Republic are exploited and developed in the best interest of the people of South Africa. Promote equitable access to, and local beneficiation of the Republic’s precious metals Promote the sound development of precious metals enterprises in the Republic, and Advance the objectives of the broad-based socio-economic empowerment as prescribed.

MANDATE OF THE SOUTH AFRICAN DIAMOND AND PRECIOUS METALS REGULATOR SADPMR is a schedule 3A public entity in terms of Public Finance Management Act, 1999 (as amended) The mandate of the South African Diamond and Precious Metals Regulator is to implement and enforce the provisions of the following legislation: The Diamond Act, 1986 (Act No 56 of 1986) Diamond Export Levy (Administration) Act, 2007 Diamond Export Levy Act, 2007 Precious Metals Act, 2005 (Act No. 32 of 2005) Mining Charter in terms of section 100 of the Mineral Petroleum Resources Development Act, 2002 (Act no 28 of 2002).

ORGANIZATIONAL STRUCTURE BOARD   COMPANY SECRETARY CHIEF EXECUTIVE OFFICER INTERNAL AUDIT GENERAL MANAGER: REGULATORY COMPLIANCE GENERAL MANAGER: SECURITY RISK MANAGEMENT GENERAL MANAGER: LEGAL SERVICE CHIEF FINANCIAL OFFICER GENERAL MANAGER CORPORATE SERVICE FINANCE MANAGEMENT LICENSING SECURITY RISK MANAGEMENT LEGAL SERVICES HUMAN RESOURCES MANAGEMENT SUPPLY CHAIN MANAGEMENT INFORMATION COMMUNICATION TECHNOLOGY DIAMOND INSPECTORATE AUXILIARY SERVICES COMMUNICATION PRECIOUS METALS AND BENEFICIATIONS DIAMOND EXPORT EXCHANGE CENTRE GOVERNMENT DIAMOND VALUATION TRANSFORMATION

HUMAN RESOURCES Organogram as by end of March 2017 Total: The SADPMR has a total of 121 employees by the end of February 2017. Gender: Male : 50 Female: : 71 Race: African : 111 Coloured : 4 Indian : 4 white : 2

HUMAN RESOURCES Employment Equity statistics NUMBER OF MALES NUMBER OF FEMALES NUMBER OF PEOPLE WITH DISABILITIES Senior Managers and Executive: 7 Senior Managers and Executive: 5 Senior Managers and Executive: 0 Professionals and skilled employees: 30 Professionals and skilled employees: 47 Professionals and skilled employees: 0 Semi-skilled employees: 10 Semi-skilled employees:14 Semi-skilled employees:1(Male) Unskilled employees: 2 Unskilled employees: 5 Unskilled employees: 0 Total : 49 male employees Total: 71 female employees Total: 1

ANNUAL PERFORMANCE PLAN FOR THE 2017/18 FINANCIAL YEAR The Annual Performance plan is informed and aligned to: National Development Plan Nine (9) Point Plan of Government State of the Nation Address of the President of South Africa Minister of Mineral Resources Budget Vote Speech

SADPMR: Strategic Objectives To improve competitiveness, sustainable development and job creation in the diamond and precious metals industry; To transform the diamond and precious metals sectors; To promote equitable access to resources for local beneficiation; To enforce compliance with the legislative requirements; and To improve organizational capacity for maximum execution for excellence.

SADPMR STRATEGIC OBJECTIVES LINKED TO THE NATIONAL DEVELOPMENT PLAN NDP priorities NDP focus areas To improve competitiveness, sustainable growth and job creation in the diamond and precious metals industries Raising employment through faster economic growth Support for small businesses through better coordination of relevant agencies, development finance institutions and private incubators To promote equitable access to resources for local beneficiation Provide a more efficient and competitive infrastructure to facilitate economic activity that is conducive to growth and job creation To transform the diamond and precious metals sectors Improving the quality of education, skills development Expand skills base through better education and vocation training To enforce compliance with the legislative requirements Building capacity of the State to play a development and transformation role Reduce cost of regulatory compliance especially for small and medium sized firms To improve organizational capacity for maximum execution of excellence Building the capacity of the State to play a development and transformation role

ALIGNMENT OF GOVERNMENT’S NINE (9) POINT PLAN TO THE SADPMR Government 9 point plan SADPMR Strategic objectives Advancing beneficiation or adding value to our mineral wealth To improve competitiveness, sustainable growth and job creation in the diamond and precious metals industries Unlocking the potential of SMMEs, cooperatives, township and rural enterprises To transform the diamond and precious metals sectors Operation Phakisa aimed at growing the ocean economy and other sector To transform the diamond and precious metals sectors; To promote equitable access to resources for local beneficiation; and To enforce compliance with the legislative requirements. In his 2015 SONA, His Excellency Pres. JG Zuma announced 9 point to boost economic growth and fast track the creation of much-needed jobs in RSA.

SADPMR Strategic Objectives (1) KEY ACTIVITIES BASELINE 2017/2018 TARGETS Improve competitiveness, sustainable development and job creation in the diamond and precious metals industry Issue licenses to enable diamond and precious metals trade 195 196 Assist new entrepreneurs in the diamond and precious metals industries 9 Facilitate skills development initiatives for the industries 5 Oversee the provision for issuing of beneficiation licenses 66 67

SADPMR Strategic Objectives (2) KEY ACTIVITIES BASELINE 2017/2018 TARGETS Transform the diamond and precious metals sectors Promote participation of HDSAs in the diamond and precious metals industries through conducting workshops/information sessions 4 Verification of transformation commitments by licence holders as per BBSEEC (Mining Charter) 70 Engage inactive licensees to ascertain challenges and propose solutions 31 32

SADPMR Strategic Objectives (3) KEY ACTIVITIES BASELINE 2017/2018 TARGETS Improve equitable access to resources for local beneficiation Increase the number of clients that access Diamond Exchange Export Centre (DEEC) 2860 3550 Increase the number of local beneficiators access Diamond Exchange Export Centre (DEEC) tenders 135 136

SADPMR Strategic Objectives (4) KEY ACTIVITIES BASELINE 2017/2018 TARGETS Enforce compliance with the legislative requirements 100% of diamond valuation services conducted 100% 2% reduction in disputes regarding fair market value on diamond valuation services conducted 2% Conduct inspection services within the diamond and precious metals sectors 1478 1479 Conduct BBSEEC compliance audits on licensees 408 409 100% administration of Kimberley Process Certification Scheme requirements Comply with legislation, policies and procedures to reduce audit findings < 5 repeat audit findings

SADPMR Strategic Objectives (5) KEY ACTIVITIES BASELINE 2017/2018 TARGETS Improve organizational capacity for maximum execution for excellence Implement the approved Human Resources plan (HRP) pillars 5 pillars Implement the approved SADPMR communication policy through engagements with external and internal stakeholders 12 Implement risk mitigation measures relating to physical security 3 Implement the Master System Plan (MSP) programmes Provide legal support to the Regulator 100% 100% of Contracts and SLA’s vetted

Transformation Agenda Implementation of Mining Charter in terms of section 100 of the Mineral Petroleum Resources Development Act, 2002 (Act No 28 of 2002). The board approved the transformation plan which is implemented by Transformation team to monitor progress on the following: (a) Ownership (b) Human Resource Development (c) Procurement (d) Employment Equity Current Status The Transformation Team is ensuring compliance to the commitments and undertakings companies made while applying for their respective licences/permits. Licence/Permit holders commitments are monitored to ensure adherence to their undertakings and correct any infringements. HDSA’s are now being considered and included in the management, operations and decision making processes of the diamond and precious metal companies.

ESTIMATES OF NATIONAL EXPENDITURE 2017

Revenue by economic classification SOURCE 2017/18 R’000 2018/19 2019/20 TRANSFER PAYMENT (ENE ALLOCATION) 55,865 59,105 62,415 REVENUE - EXCHANGE TRANSACTIONS (Projections) 46,068 48,786 51,518 TOTAL REVENUE BUDGET 101,933 107, 891 113,933 TOTAL EXPENDITURE 98,768 104,595 110,453 SURPLUS 3,165 3, 296 3, 480

Allocation v/s expenditure

Estimate of National Expenditure: Expenditure Trends Will focus on improving regulation and transformation in the diamond and precious metals industry. Expenditure Item 2017/18 R’000 2018/19 2019/20 Staff Remuneration 75,918 80,398 84,900 Office Lease 3,700 3,919 4,138 Audit Fees 2,500 2,648 2,796 Telecommunication 1,808 1,915 2,022 Insurance 1,557 1,649 1,741 Board 1,614 1,342 1,417 Kimberley Process 1,126 1,192 1,259 Other Expenses 10,545 11,532 12,180 Total 98,768 104,595 110,453

Estimate of National Expenditure: Expenditure Trends Details of the other expenses Expenditure Item 2017/18 R’000 2018/19 2019/20 Administration 114 120 Advertising 757 802 847 Domestic and international travel 1 121 1 543 1 640 Inventory 766 811 856 Inspection cost 576 610 644 Software licences 900 953 1 006 Repairs and maintenance 516 547 578 Security 878 930 982 Training and development 600 635 671 CSR programmes 15 16

Estimate of National Expenditure: Expenditure Trends Details of the other expenses cont… Expenditure Item 2017/18 R’000 2018/19 2019/20 Hiring 34 36 38 Hospitality 12 13 14 Medical- Retired staff 135 143 151 Postage and courier 23 25 26 Recruitment and selection 101 107 113 Staff recognition and wellness 440 466 492 Subscription and membership fees 60 64 67 System support 200 212 224 Venue, facilities and warehousing 206 218 230 Non-cash 3091 3282 3465 Total Other Expenses 10 545 11 532 12 180

Legislative challenges that impede implementation of transformation; Conclusion The global economic downturn has up to now continued to have an adverse impact on the industry and it is yet to recover; Legislative challenges that impede implementation of transformation; Less revenue compared to the spending on core expenditures, and Declining manufacturing of diamonds and precious metals.

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