1. The State Diamond Trader
Presentation of AR for 2013/14
to the PPC on
Mineral Resources
22 October 2014

2. The Auditor General report
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 in relation to Performance against predetermined objectives

3. The Auditor General report
The report of the Auditor General for the year ended 31 March 2014 is however unqualified with findings.

4. The Auditor General report
This was as a result of the following:
Compliance with legislation – Although the SDT complied with applicable legislation in all other material respects, the AG had findings in respect of procurement processes and internal controls

5. The Auditor General report
Both findings relate to one another in respect of contracts entered into for a period of one year and were extended without sourcing new quotations.

6. The Auditor General report
The SDT had taken a view of signing 1 year contracts with a clause that gives option for extension thereof as this can assist in ensuring that the entity exercised caution in relation to longer contracts.
SDT acknowledged the finding and implemented the corrective measures proposed by AG:
obtaining approval for deviation from the procurement processes.

7. The Auditor General report
Further to that, an advise was sought from AG on treatment of subsequent expenditure relating to these contracts.
The entity has since followed the procurement processes on the contracts that have come to an end.

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

9. 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

10. SDT Performance 2013/14

11. Inspections 2013/14
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

12. Inspections cont.
In 2013/14 there was an increase of 17% in the quantity (carats) of rough diamonds presented to SDT by producers

13. Inspections Cont. If measured by value, the increase was 9%.
The difference in the increases resulted in a 7% reduction in the average price of rough diamonds to US$154 per carat

14. Inspections Cont.
An increase in production does not necessarily benefit the SDT in terms of rough diamonds it can access to support local beneficiation, however; a falling average price is an indication of a reduction in the quality of rough diamonds produced.

15. Inspections Cont.
The State Diamond Trader inspects about 95% of diamonds produced in the country.
This was affirmed by the Kimberly Process Certification Scheme statistics

16. Rough Diamonds Purchases 2013/14

17. Rough Diamond Purchases
The SDT purchased rough diamonds from 9 out of 12registered producers in the country during the year under review

18. Rough Diamond Purchases
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.
The State Diamond Trader follows up with the producers directly when its apparent that production is on-going

19. Sales 2013/14

20. Summary of Sales Compared to Budget

21. Sales by Client Segment 2013/14
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

22. Rough Diamond Sales
The total number of clients sold to during the year under review was 46
The total value of sales to the Mandate client segment rose from R6.8 million to R35.9 million. An increase of over 400%
Mandate clients increased from 16 to 18 during the year.

23. Rough Diamond Sales
The State Diamond Trader did not make profits from sales to its HDSA clients. This is indicative of the Trader’s ability to fulfill its developmental mandate while operating as a commercial entity.

24. Rough Diamond Sales
Constraints placed on the SDT by the requirement to purchase Run of Mine production necessitates sales to larger, more established companies that have the ability to cut and polish a wider range of rough diamonds.

25. Rough Diamond Sales
Alternatively, these larger companies market the diamonds not required for local beneficiation in accordance with legislation

26. Rough Diamond Sales
The Trader continues in its efforts to identify efficient means to market rough diamonds not suitable for local beneficiation.

27. Rough Diamond Sales
By engaging in Pilot agreements with major suppliers, the Trader is able to unlock value that will benefit the local industry

28. Trading Margins

29. Trading Margins Cont.
The State Diamond Trader achieved a gross margin of R 16 million in 2013/14 which equates to 3 %.
In percentage terms, the GM is in line with the budget and is similar to the previous year.

30. Strategic Goals – performance summary
To contribute to the growth of the local diamond beneficiation industry

31. Strategic Goals Performance Summary
The following, inter alia was achieved for this strategic objective
Approval of Marketing Strategy & Implementation Plan
Participation at various platforms i.e. Hong Kong Show, Jewellex, Information stand at the Mining Indaba.

32. Strategic Goals – performance summary
To develop efficient means to market diamonds not suitable for local beneficiation

33. Strategic Goals – performance summary
The following, inter alia was achieved for the strategic objective:
Approved Pilot project with two major producers to select rough diamonds suitable for local beneficiation from ROM

34. Strategic Goals – performance summary
To be an efficient, innovative and development orientated organisation

35. Strategic Goals – Performance Summary
The following, inter alia, was achieved during the year:
Skills gap analysis conducted
Dashboard for HR capacity finalised and approved by the Board.
On the job training for diamond trainees continued
Retention Strategy Approved by the Board

36. Staff complement in total was 19:
Human Capital
Staff complement in total was 19:
SDT permanent officials : 9 (of that 5 were black females)
The total cost to company was R5,215,782 (including the trainees).
Secondments from industry:4
3 officials are placed in the operations section
Trainees : 6 (from EC, Limpopo, Gauteng and Northern Cape and of that 2 were females).
Resignations : 2 officials (1 filled and 1 was still vacant at year end but since filled)

37. Challenges and Solutions
(Proposed) Solutions
Legislation –RoM rough diamonds
Inability to purchase 10%
Market forces/ SDT being a price taker
Agreement with large producers to purchase goods suitable for local beneficiation (Pilot projects)
Change in legislation

38. Challenges and Solutions
Proposed Solutions
Inadequate funding
HDSA
Lack of business skills
Access to finance by client
Access to markets
Increase the revolving credit
Enterprise development
Exposure to local and international exhibitions

39. Thank you

40. The State Diamond Trader