SOUTH AFRICAN DIAMOND AND PRECIOUS METALS REGULATOR (SADPMR)

PRESENTATION TO THE PORTFOLIO COMMITTEE ON SADPMR’s ANNUAL REPORT FOR THE 2011/ 2012 FINANCIAL YEAR

PRESENTATION OUTLINE 1.Introduction 2.Outstanding Audit matters from 2010/2011 financial year 3. Annual Financial Statements 4. Achievements 5.Challenges 6. Closure 3

INTRODUCTION The audit report for the year under review was for the period 2011/2012, policies have been reviewed and aligned to the PFMA requirements and relevant financial systems and controls have been established and are correctly implemented 4

AUDIT MATTERS RAISED FROM 2010/2011 FINANCIAL YEAR FINDING 1:Procurement and contract management - Sufficient appropriate audit evidence could not be obtained that goods and services with transaction value between R and R were procured by inviting at least three written price quotation from prospective suppliers as per the requirements of TR 16A6.1 and National Treasury Practice note 8 of 2007/8. OUTCOME: Addressed FINDING 2: Procurement and contract management– Goods and services with a transaction value of over R were not procured by means of a competitive bidding process as per the requirements of TR16A6.1, TR16A6.4 and National Treasury Practice Note 8 of 2007/2008. OUTCOME: Addressed 5

AUDIT MATTERS RAISED FROM 2010/2011 FINANCIAL YEAR FINDING 1: 2:Expenditure management - The accounting authority did not take effective and appropriate steps to prevent irregular expenditure as per the requirements of TR16A6.1, TR16A6.4 and National Treasury Practice Note 8 of 2007/2008. OUTCOME: Addressed 6

 ANNUAL REPORT FOR THE 2011/12 FINANCIAL YEAR 7

AUDIT OPINION UNQUALIFIED AUDIT OPINION ISSUED FINANCIAL PERFORMANCE- AUDIT REPORT 8

Emphasis of matters Matters reported 1. Restatement of corresponding figures – As disclosed in note 24 to the financial statement, the corresponding figures for 31 March 2011 were restated as a result of an error discovered during 31 March 2012 in the financial statements of the SADPMR for the year ended 31 March Action taken The financial statements were revised accordingly. Internal controls to prevent recurrence of similar error are in place. FINANCIAL PERFORMANCE- AUDIT REPORT 9

 Report on other legal and regulatory requirements None Predetermined objectives No material findings concerning the usefulness and reliability of the information FINANCIAL PERFORMANCE- AUDIT REPORT 10

ANNUAL FINANCIAL STATEMENTS OVERVIEW. The Regulator submitted the budget of R 68.6 million to National Treasury via the Department of Mineral Resources. The final allocation was R39.4 million which left the Regulator with a shortfall of R29.2 million. The budget and the classification of funds were adjusted in accordance with the final allocation. In order to enable the Regulator to respond to its mandate, National Treasury was requested to grant permission to the Regulator to retain accumulated surplus of R23.1 million in order to address the shortfall and other capital projects. National Treasury’s approval was obtained. 11

ANNUAL FINANCIAL STATEMENTS Revenue The actual revenue was R 47.4 million (incl. Transfer Payment of R39.4 million). The in-house generated revenue decreased by 0.1% to R7.978 million from R million. 12

ANNUAL FINANCIAL STATEMENTS Expenditure The actual expenditure for the year under review was R60.3 million. The major contributing expenditures were as follows: Compensation of employees: R40.9 million Other operating expenditure: R15.6 million Various expenditure in delivering the mandate was kept within the budgeted expenditure. 13

ANNUAL FINANCIAL STATEMENTS Transfer payment has been capped at R million for the last three years. Grant received from DMR versus budget approved by the Board has been as follows: 2011/ / /10 R’000 R’000 R’000 Approved budget Grant received Add: Actual in house revenue less: Expenditure Surplus/ (deficit) * (12 928) * (3 428) (* excluding accumulated funds retained as per National Treasury’s approval) 14

ANNUAL FINANCIAL STATEMENTS Trend on utilization of funds Major cost items 2011/ / /10 R’000R’000 R’000 Compensation of employees Other operating expenses Payment for Capex The employees head count has increased as a result of the committed expansion, 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. 15

REPORT AS AT 30 SEPTEBMER 2012 EXPENDITURE: R’000 Projected Actual Variance (3 643) Reasons for Variance: Variance on actual versus projected was as a result of non- cash transactions such as depreciation and provision for leave. 16

REPORT AS AT 30 SEPTEBMER 2012 REVENUE: R’000 Projected Actual Variance 897 There is no significant variance between projected and actual Revenue. 17

ACHIEVEMENTS SADPMR new building The new building has increased the space, the number of viewing rooms increased from 10 to 30; Facilitation of tenders can now be conducted for all producers simultaneously. Generation of Revenue Service charges were reintroduced with effect from 01 May 2012; Revenue generated (R10.4 million:2012 September) which will assist in augmenting budget deficit for the Regulator. Introduction of marketing of polished diamonds Consultation with industry was conducted; Interest from industry was encouraging; Planned tenders for polished diamonds will be held during the 4 th quarter 18

ACHIEVEMENTS Strengthened stakeholder relations Engagements with the diamond and precious metals clients have improved; Industries have access to the Regulator and CEO Improved organizational performance The performance of the Regulator has improved during the 2011/2012 financial year; By end of March 2011, 78% of the SADPMR strategic objectives were achieved Appointment of Chief Financial Officer The post of the Chief Financial Officer was filled. Improved inspections for diamonds and precious metal Inspections within the diamonds and precious metals industries has improved significantly 19

CHALLENGES Over the past three years the grant has been capped at R39.8 million per annum whilst the cost of operations have been increasing in order to meet the service delivery demands. Funding from DMR has not increased to cover operational costs Access to funding for emerging businesses is still a problem Access to rough diamonds is dominated by financially strong buyers Access to markets for polished diamonds by small beneficiators is limited 20

THANK YOU & DISCUSSIONS 21