State Diamond Trader AR 2014/15 Presentation Portfolio Committee Mineral Resources 16 October 2015

Report of the Auditor General The Auditor General confirmed that the Annual Financial Statements for the year ended 31 March 2015 presented fairly and in all material respects, the financial position of the SDT and its financial performance and cash flows in accordance with GAAP and the requirements of the PFMA.

Report of the Auditor General No material findings in respect of the usefulness and reliability of predetermined objectives were identified during the audit No instances of material non-compliance with key legislation were identified or deficiencies in respect of internal controls.

Report of the Auditor General The AG drew attention to the following: Non- achievement of planned targets Relating mainly to inability to achieve budgeted sales targets, delays in negotiations with stakeholders for a cutting and polishing hub, and inability to increase financial reserves due to lower demand and prices.

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

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

SDT Performance 2014/15

Trading Margins & Expenditure The State Diamond Trader achieved a gross margin of R13 million in 2014/15 which equates to 3 %. In percentage terms, the GM is in line with the budget and is the same as the previous year. Total expenditure amounted to R19 million

Summary of Sales Compared to Budget

Trading Report The industry was affected by slowing consumer demand 2014/15. This trend continued up to now and with minimal glimmers of hope for next year Despite this, producers continued to demand high prices for rough diamonds with the SDT negotiating aggressively for the correct fair market values each time The SDT was continuously challenged in trading during the course of the year as a result of the down turn in the market, run on mine model and unfair market value declared

Trading Report - Inspections 2014/15 Inspections are guided by the amount of rough diamonds produced in the country. Quantities that can be purchased by the SDT are determined by legislation. The SDT inspects about 95% of the diamonds produced in the country as compared with number issued by the Kimberley Process Certification Scheme.

Trading Report - Inspections 2014/15

Rough Diamond Purchases 2014/15

Rough Diamond Purchases The SDT purchased rough diamonds from 9 producers in the country during the year under review. Producers who are non-compliant with the provisions of the Diamond Amendment Act, 2005 are reported to the SADPMR in its capacity as the regulatory body with a number having begun to register but yet to declare productions. The State Diamond Trader follows up with the producers directly when its apparent that production is on-going.

Sales 2014/15

Sales by Client Segment 2014/15 Growth and Transformation: HDSA owned companies given preferential allocation in order to support business growth. Equitable access: Small HDSA owned beneficiation companies that have yet to develop business models that will lead to growth. Niche and Large/ medium Beneficiators: as larger, non HDSA owned beneficiating companies that can purchase larger opportunities and rand of rough diamonds.

Rough Diamond Sales The total number of clients sold to during the year under review was 50. The total value of sales to the Mandate (G & T and Equitable Access) client segment rose from R35.9 million to R41,3 million. An increase of 15%. Mandate clients increased from 18 to 24 during the year.

Rough Diamond Sales The State Diamond Trader made less profit from sales to its HDSA clients. This, once again is indicative of the Trader’s ability to fulfill its developmental mandate while operating as a commercial entity. Constraints placed on the SDT by the requirement to purchase Run of Mine production necessitates larger sales to larger clients that include smalls and bottom ends as they have the ability to cut and polish a wider range of rough diamonds.

Rough Diamond Sales Alternatively, these larger companies market the diamonds not required for local beneficiation in accordance with legislation. The State Diamond Trader continued in its efforts to identify efficient means to market rough diamonds not suitable for local beneficiation and these efforts are ongoing.

Strategic Objectives – performance summary 1. To contribute to the growth of the local diamond beneficiation industry

Strategic Goals Performance Summary The following, inter alia was achieved for this strategic objective: An approved marketing and promotion implementation plan, including conducting of market research with recommendations to form basis of Diamond Indaba, stakeholder engagement and implementation of work streams. Implementation of marketing strategy according to implementation plan. Facilitated training for HDSA clients on marketing and on RTOP. Participation at various platforms i.e. Hong Kong Show (March 2015), Jewellex 2014 and Japan (Jan 2015).

Strategic Goals Performance Summary The following activities are ongoing: Implementation of sales strategy Development and establishment of incubation facility to create platform for SMME’s to beneficiate diamonds in a controlled and structured environment Preparation for hosting the SA inaugural Diamond Indaba

Strategic Objectives – performance summary 2. Develop efficient means to market diamonds not suitable for local beneficiation

Strategic Goals – performance summary The following, inter alia was chieved for this strategic objective: Engaged stakeholders on special purchasing model, and Through some special pilot, attempted to unlock and increase rough diamonds suitable for local beneficiators.

Strategic Goals – performance summary 3. Develop and acquire appropriate financial and human resource capacity.

Strategic Goals – performance summary The following, inter alia was achieved for this strategic objective: Development and implementation of funding strategy Review and Implementation of HR Plan Identification of skills gaps and capacity building requirements Implementation of HR capacity building

Thank you

The State Diamond Trader