BRIEFING SESSION TO THE PORTFOLIO COMMITTEE ON MINERALS AND ENERGY 1.HIGHLIGHTS OF THE 2003/2004 FINANCIAL YEAR END,(WITH EMPHASIS ON THE AUDITOR GENERAL’S REPORT) 2.KIMBERLEY PROCESS CERTIFICATION SCHEME 3.FUTURE PLANS

DIAMOND PRODUCTION – LARGE SCALE MINES

ESTIMATED DIAMOND PRODUCTION FROM SMALL SCALE PRODUCERS

TOTAL ROUGH DIAMOND EXPORT

TOTAL ROUGH DIAMOND IMPORTS

TOTAL POLISHED DIAMOND IMPORTS

TOTAL POLISHED DIAMOND EXPORTS

EXPORT OF ROUGH DIAMONDS BY VARIOUS LICENSE HOLDERS

US DOLLAR VALUE OF UNPOLISHED DIAMONDS EXPORTED BY LICENSE HOLDERS

ESTIMATED TOTAL DIAMOND PRODUCTION FROM SA

FINANCIAL PERFORMANCE

LICENSES APPROVED

LICENCE APPLICATIONS PERIOD UNDER REVIEW : O1 APRIL 2004 TO CURRENT APPROVED NOT TAKEN UP Dealers license12862 Cutting license2512 Research license41 TOTAL APPLICANTS BLACK APPLICANTS 33%41%

EMPLOYEE DEMOGRAPHICS

2003/2004 AG’S REPORT 4.1 Internal Control Shortcomings Inadequate control on fixed assets –All assets accounted for and loaded on the new Greater Plains system N(i) Forms selected did not have invoice numbers – –Response? 4.2 The South African Diamond Board did not have an Audit Committee for the period under review –Audit committee has been established as per the PFMA requirements, and an Audit Committee charter has been adopted. Five members constitute the Audit committee

Continued…. 4.3 Internal audit function, A rolling three year strategic internal audit plan, an internal audit plan for the first year and plans indicating the scope of each audit in the annual audit plan –Internal audit functions defined,Internal risk assessments conducted and the three year strategic internal audit plan finalized

Continued…. 4.4 Financial Lease on motor vehicle –Terminated 4.8 Policy for the provision of bad debt Draft policy with Audit Committee

CONTINUED… Validity of exemptions under Sect. 63 and 59 of the Diamond Act : –Meeting held at the AG’s office on 20 July 2004, agreed that DME and National Treasury would obtain a final legal opinion from the Chief State Law Advisor

KPCS- LEADERRSHIP SYNOPSIS LAUNCHED IN SWITZERLAND SEPT IMPLEMENTATION DATE JAN –THE LEADERSHIP SINCE INCEPTION OF THE SCHEME Mr. A CHIKANE ( SADB CHAIRMAN) FOR THE YEAR 2002 AND CANADA 2005 RUSSIA 2006 BOTSWANA ?

KIMBERLEY PROCESS SADB PARTICIPATED ON THE FOLLOWING –REVIEW VISITS – SADB AS TEAM MEMBER –DUBAI (UAE) –DEMOCRATIC REPUBLIC OF CONGO –REVIEWS (SA - LEADER) –MISSION TO CONGO BRAZAVILLE –VISIT SIERRA LEONE –FACT FINDING MISSION TO LIBERIA –VISIT GUINEA

COMMITTEES ESTABLISHED WORKING GROUP ON MONITORING AND CONTROL DIAMOND EXPERTS WORK GROUP STATISTIC WORKING GROUP PARTICIPATING WORKING GROUP

NUMBER OF KIMBERLEY CERTIFICATES ISSUED FOR THE CALENDER YEAR 2003

KIMBERLEY PROCESS REVIEW VISIT (19/10/2004 – 21/10/2004) FINDINGS: SOUTH AFRICA FULFILLS IN A SATISFACTORY MANNER ITS UNDERTAKING UNDER THE KPCS AND THEREFORE MEET THE REQUIREMENTS OF THE KPCS. THROUGH THE PROPOSED NEW LEGISLATION, INTERNAL CONTROLS WILL BE CONSIDERABLY ENHANCED.

BEST PRACTICES: - FOUR PARTS LAYOUT OF THE CERTIFICATE ENABLES A MORE COMPLETE AUDIT TRAIL OF THE EXPORT. -INTERGRATED DATABASE SYSTEM -TENDERS AFFORDTHE SMALL SCALE MINERS TO REALISE FAIR MARKET VALUE ON THEIR GOODS.

RECOMMENDATIONS To take an inventory of all stocks held by all agencies in S A. i.e privately owned mines included. Ensure that all Small mining operations are registered. Apply tracking from mine to point of export for Rough diamonds production. Institute a sign-off procedure to provide a cross- check by more than one person on each KPC.

RECOMMENDATIONS CONTINUED Enhance informatics system to provide verification with an up-to-date KP participants List. Centralize the filing system in a coherent manner to permit an audit of the paper trail. Introduce an audit process to identify leakage in the rough diamond market.

Department of Minerals and Energy Board of Directors representing: Chairman (non-executive) SOUTH AFRICAN DIAMOND BOARD (As per Diamond Act, Act 56 of 1986) Producers Section 59 Committee Technical Committee Licensing Committee CEO Finance Committee Executive Committee FinanceLicensing Board committees Inspectorate BEE Committee Audit Committee Industry Assoc. DTC Jewellery Council Civil Society DMEDTI Dept. Finance SAPS DataAdministration

FUTURE PLANS BASED ON THE CHANGES ANTICIPATED AFTER THE AMENDMENT TO THE DIAMOND ACT, ACT 56 OF 1986 Restructuring of the Board Collection of the 5% duty on rough diamonds exports Establishment of a section 21 company to focus on the Diamond Exchange and Diamond trade Section 59 agreements Deferments

HUMAN RESOURCES PLAN WITH THE ESTABLISHMENT OF THE SECTION 21 COMPANY, WHICH WILL BE TASKED WITH CREATING A DIAMOND EXCHANGE /EXPORT CENTRE AND A TRADING CENTRE : A TOTAL OF 21 NEW JOBS WILL BE CREATED Care will be taken to ensure that there is equitable representation in all occupational categories and levels as per the Employment Equity Act

HUMAN RESOURCES NEEDS AS A RESULT OF THE RESTRUCTURING Additional Diamond Inspectors Additional Export Administrators Additional License Officers Debtors Clerks

FUTURE PLANS ON BENEFICIATION FEASIBILITY STUDIES ON THE ESTABLISHMENT OF AFRICAN JEWEL CITIES –Kimberley –Cape Town - –Polokwane –Johannesburg International Airport