The State Diamond Trader Annual Report

2 State Diamond Trader - Vision A leading catalyst for the transformation of a sustainable diamond beneficiation industry

3 State Diamond Trader - Mission Ensure acquisition of and equitable access to rough diamonds with particular focus on HDSAs. Support the growth of the industry through relevant interventions Establish and maintain a client base of local diamond beneficiators

4 State Diamond Trader – Strategic Goals To ensure continued sustainability of the State Diamond Trader To be an efficient and professionally managed organization To promote and uphold efficient governance To strive for a constant and suitable supply and access to rough diamonds

5 SDT Performance

6 Rough Diamonds Inspected Totals Carats = 7,117,642 Value = US$ 1.2 BN

7 State Diamond Trader Inspections The State Diamond Trader noted a 3% increase in the quantity (carats) presented However, this was accompanied by a 10% reduction in value This reflects the current market volatility and falling prices of rough diamonds due to global economic instability and uncertain consumer demand

8 Rough Diamonds Purchased

9 Rough Diamond Purchases Purchase levels, in terms of carats and value were similar to the previous year This resulted in the State Diamond Trader purchasing only 4% of the value of rough diamonds inspected – This was due to:

10 Rough Diamond Purchases The global economic climate and demand for diamonds generally The constraints placed on the State Diamond Trader in terms of purchasing Run of Mine selections The quantity of goods not preferred for beneficiation within South African Run of Mine productions The sales and pricing methodologies of the producers, placing selections outside of the State Diamond Trader’s capability to operate commercially The availability of finance to purchase the larger selections

11 Sales Figures in brackets refer to number of clients sold to

12 Rough Diamond Sales Although the fourth quarter of saw a significant increase in trading, the fundamental macro-economic and diamond specific issues affecting the industry remain; Economic crisis in Europe Uncertain situation in the US Slowing Asian markets Indian diamond market liquidity fears and exchange rate issues Polished prices falling Volatile rough demand

13 Sales by Client Segment L/M = Large and medium sized beneficiators. SDT clients with established factories employing more than 10 people Mandate = clients from HDSA backgrounds and companies with greater 50% HDSA ownership. Employing less than 5 people, these clients are supplied in terms of giving equitable access to rough diamonds Niche = other beneficiators, clients from non HDSA backgrounds, employing less than 10 people

14 Rough Diamond Sales The total number of clients sold fell from 58 in the previous year to 42 The total value of sales to the Mandate client segment fell from R10.6 million to R6.8 million Sales to companies with greater than 50% HDSA ownership only made up 2% of the annual sales value

15 Strategic Goals – performance summary To ensure continued sustainability of the State Diamond Trader The State Diamond Trader continues to prove itself as a viable commercial operation during the most volatile period the industry has seen in living memory. With no recourse to public funding, the State Diamond Trader has had to find innovative methods to ensure its sustainability The revenues achieved to date indicate achievement of the target

16 Strategic Goals – performance summary To be an efficient and professionally managed organization The State Diamond Trader has spent its formative years creating capacity, developing skills and instigating procedures that enable it to establish itself in the diamond industry; To this end, 13 young people have been, and are being, trained by the State Diamond Trader to date; In addition, 3 of them have to date been employed permanently by the State diamond Trader

17 Strategic Goals – performance summary To promote and uphold efficient governance All trading practices are controlled by relevant internal policies and procedures that have been both internally and externally audited The State Diamond Trader has received Unqualified Audits in five consecutive years since its inception

18 Strategic Goals – performance summary To strive for a constant and suitable supply and access to rough diamonds The State Diamond Trader has ensured that it has fulfilled its mandate by inspecting over 90% of the diamonds produced in the country Its ability to purchase the 10% envisaged has been affected by global economic uncertainty and the question of the suitability of rough diamonds produced in South Africa for beneficiation

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20 The Auditor General The Auditor General confirmed that, in accordance with the PAA and the General Notice 1111 of 2010 issued in Government Gazette of 15 December 2010, there were no findings against the State Diamond Trader. This relates to: Financial performance, position and cash flow management Performance against predetermined objectives Strategic planning and performance management Compliance with laws and regulations Internal controls

The Auditor General The Auditor-General has, in January 2014, informed the State Diamond Trader that: Due to consistently getting clean audit reports; Getting a clean audit report in the prior year; An acknowledgement and reward for its efforts will be made during the year; The State Diamond Trader will be awarded a trophy. 21

The State Diamond Trader