ANNUAL REPORT - National Government · Report of the Auditor-General ... Kimberley Process KPCS: Kimberley Process Certiﬁcation Scheme KPC: Kimberley Process Certiﬁcate ... (APP)

ANNUAL REPORT2018/2019

TABLE OF CONTENTS PART A: GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Contact details. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Abbreviations and acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Foreword of the Chairperson of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Overview of the Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Statement of Responsibility for the Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Strategic Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Legislative Mandate of SADPMR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Organisational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

PART B: PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Auditor-General’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Situational Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Service Delivery Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Organisational Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Key Policy Developments and Legislative Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Strategic Outcome-Oriented Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Performance Information by Programmes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Programme 1: Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Programme 2: Diamond Trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Programme 3: Regulatory Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

PART C: CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Portfolio Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Executive Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Accounting Authority/The Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Fraud and Corruption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Health, Safety and Environmental Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Company Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

PART D: HUMAN RESOURCES MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

PART E: FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Report of the Auditor-General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

PART F: ANNUAL FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Annual Financial Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Annexure A: Statement of Responsibility and Confirmation of Accuracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Annexure B: Report of the Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

GENERALINFORMATION

PART A

SADPMR ANNUAL REPORT 2018/2019 1

SADPMR ANNUAL REPORT 2018/20192

Johannesburg Kimberley Office Durban Office Cape Town Office

(Head Office) 66 Jones Street 333 Smith Street 9 Riebeeck Street

251 Fox Street 3rd Floor, Trust Centre Department of Mineral Resources Atterbury House, 10th Floor

Doornfontein Kimberley 3rd Floor, Durban Bay House Cape Town

Johannesburg Northern Cape Durban Western Cape

2028 8301 KwaZulu-Natal 8001

4000

PO Box 16001 PO Box 2990

Doornfontein, Kimberley Northern Cape

Johannesburg Gauteng 8301

2028

Tel: +27 11 223 7000 Fax: +27 23831 3184 Tel: +27 31 335 9677 Tel: +27 21 427 1070

Fax: +27 11 334 8898 Tel: +27 53 831 3121 Fax: +27 31 301 6950 Fax: +27 086 612 4907

[email protected] [email protected] [email protected] [email protected]

www.sadpmr.co.za www.sadpmr.co.za www.sadpmr.co.za www.sadpmr.co.za

Bankers information Nedbank Ltd

Siemert Road

Johannesburg

2001

Company secretary Ms Karabo Sibanyoni

Contact Details


AGSA: Auditor-General of South Africa

APP: Annual Performance Plan

B-BBEE: Broad-Based Black Economic Empowerment

B-BSEEC: Broad-Based Socio-Economic Empowerment Charter

CEO: Chief Executive Officer

CFO: Chief Financial Officer

DEEC: Diamond Exchange and Export Centre

DMR: Department of Mineral Resources

EU: European Union

FY: Financial Year

GDV: Government Diamond Valuator

GIDZ: Gauteng Industrial Development Zone

HDP Historically Disadvantaged Persons

HR: Human Resources

ICT: Information and Communication Technology

KP: Kimberley Process

KPCS: Kimberley Process Certification Scheme

KPC: Kimberley Process Certificate

MISS: Minimum Information Security Standards

MPSS: Minimum Physical Security Standards

MSP: Master Systems Plan

NACH National Anti-Corruption Hotline

NVS: National Vetting Strategy

OHSA: Occupational Health and Safety Act

PFMA: Public Finance Management Act

PMDS: Performance Management and Development System

PPC: Parliamentary Portfolio Committee

PPPFA: Preferential Procurement Policy Framework Act

SADPMR: South African Diamond and Precious Metals Regulator

SDT: State Diamond Trader

UAE: United Arab Emirates

USA: United States of America

WSP: Workplace Skills Plan

ZAR: South African Rand

$: US Dollar unless otherwise specified

Abbreviations and Acronyms


The 2018/2019 fi nancial year was the period wherein the fruits of the past two years of strategic development and review within the SADPMR were harvested. In its fi rst year of appointment, the Board formulated the SADPMR Benefi ciation and Marketing and Communication Strategies. The purpose of these strategies is to address the overall decline in diamonds and precious metals benefi ciation sectors and the lack of awareness of the SADPMR.

The simultaneous implementation of the above strategies has resulted in signifi cant improvement in the number of benefi ciation licenses issued in the period under review compared to previous years. There has also been an increase in the number of license holders that participate in diamond tenders held at the Diamond Exchange and Export Centre. Credit for these successes is attributed to the implementation of the SADPMR Benefi ciation Strategy.

By implementing government’s transformation agenda in the industry through the enforcement of the provisions in the Mining Charter, the SADPMR exceeded its targets to ensure an increase in compliance and enforcement. The Board increased capacity in the Transformation Unit and has been fully briefed on the provisions of the 2018 Mining Charter. The Board will continue overseeing and monitoring the implementation of the charter through the Licensing Committee.

CHAIRPERSONFOREWORD BY THE

Additional areas of improvement worth mentioning is the increased participation in roadshows and workshops to promote the SADPMR and improve its visibility through the initiatives embodied in the SADPMR Marketing and Communication Strategy. As a result, the SADPMR has exceeded eight of the annual targets contained in the Annual Performance Plan of the 2018/2019 fi nancial year. This is a record-breaking performance as compared to previous fi nancial years.

The SADPMR will relocate to the Gauteng Industrial Development Zone (GIDZ) near OR Tambo International Airport in Kempton Park. It is anticipated that the relocation will facilitate in implementing the SADPMR’s legislative and strategic objectives of ensuring and promoting local benefi ciation of diamonds and precious metals in South Africa. Included within the GIDZ is a jewellery manufacturing hub where training in jewellery manufacturing and trade will be conducted. We will be within proximity of the diamond benefi ciation and jewellery manufacturing industries to provide effi cient and effective support services.

The Board welcomes the re-appointment of Minister Gwede Mantashe (MP) as the Minister of Mineral Resources and Energy (MRE). The Board has had an effective assiduous working relationship with the minister and will continue to stay on the same course. I have had the pleasure of attending the department’s strategic planning session, which took part in August 2018. The imperatives and goals discussed assisted the Board in aligning the imperatives of the Department of Mineral Resources and Energy (DMRE) to that of the SADPMR, in the Annual Performance Plan (APP) and Mid-term Expenditure Framework (MTEF) for the 2019/2020 fi nancial year.

In promoting benefi ciation and transformation within the industry, it is important for the Board to preserve the market and demand for natural diamonds in South Africa. Through the request of the Ministry, the Board embarked on formulating a Synthetic Diamonds Strategy, which will be put in accession for countenance in the 2019/2020 fi nancial year for implementation.

Furthermore, the Board has fi nalised the recruitment processes of fi lling two strategic positions of CFO and CEO, which were vacant for over three years. The Board wishes to thank the honourable minister for his swift approval of the recommended candidates. Notwithstanding the afore-mentioned vacancies,


the SADPMR has managed to obtain an Unqualified Audit Opinion for the 2018/2019 financial year.

As I near my conclusion, I would like to thank the management of the SADPMR for assisting the Board in carrying out its legislative functions towards the entity.

Finally, a further thank you and appreciation goes to the chairpersons of the board committees and members of the Board for their unwavering dedication towards their functions as board members. Through its committees, the Board has met all the legislative timeframes for reporting to the executive authority.

The financial year of 2018/2019 was the year wherein the fruits of the past two years of strategic development

and review within the SADPMR were harvested.

With the Board’s intervention, the SADPMR finalised all legal matters which had been ongoing since 2016 and there was no labour unrest. The relationship with the union’s members has been extremely cordial and fruitful.

As we near the sunset of our term in office we are confident that we have applied ourselves diligently and are proud to leave an organisation well poised to take the diamond and precious metals industry to greater heights.

Dr Sipho Manese Chairperson


CHIEF EXECUTIVE OFFICEROVERVIEW BY THE

It is a great pleasure to present the Annual Report of the South African Diamond and Precious Metals Regulator (SADPMR) for the 2018/2019 fi nancial year.

During the period under review, management of the SADPMR has been implementing the newly formulated SADPMR Benefi ciation and Marketing and Communication Strategies, which were approved by the Board of the SADPMR. The purpose of the strategies was to address the decline of benefi ciation of diamonds and precious metals in South Africa. As a result of the implementation, the SADPMR was able to attract new entrants into the diamond and precious metals industries and stimulate participation of diamond license holders within the Diamond Exchange and Export Centre. The SADPMR has therefore surpassed the targets it has set in the 2018/2019 fi nancial year.

The critical priority of government on transformation in the mineral industry still requires more effort from the entity. It is for this reason that capacity within Transformation Unit of the SADPMR has been increased. The unit currently has four dedicated offi cials, who are have the sole responsibility of conducting verifi cation inspections of current license holders to ensure that they meet the Mining Charter’s requirements. The unit has made great strides in terms of enforcing compliance

in the diamonds and precious metals industries. The SADPMR continues to work closely with the DMRE in implementing the newly adopted Mining Charter.

The South Africa’s chairmanship of the Working Group on Monitoring (WGM) of the Kimberley Process Certifi cation Scheme (KPCS) comes to an end in December 2019. As one of the founding members of the KPCS, South Africa’s chairmanship of the WGM was a natural progression for the country. South Africa will complete is term as chair of the WGM, having changed the landscape of reporting within the Kimberley Process (KP) in the following ways:• stricter reporting measures of annual statistics of diamond

trading and production for participating countries were introduced.

• long-standing, incomplete review visit reports were fi nalised and submitted.

• long-standing compliance challenges in countries such as Central African Republic, Liberia, Ivory Coast and Sierra Leone were alleviated.

With the KPCS reform process still in progress, it is our view that South Africa’s contribution as the Chair of the WGM will have a signifi cant impact on the outcome.

The SADPMR was able to end the year with a surplus of R10.9 million, which was largely attributable to the revenue generation of R113. 8 million. During the period under review, the expenditure of the SADPMR was R99.2 million, which excludes non-cash items. A detailed report thereof is contained herein.

I would like to thank Minister Mantashe for his support in guiding the SADPMR in chairing the WGM on behalf of South Africa. Also, thank you to the esteemed Minister for his overall support of the SADPMR’s strategic objectives and fi nancial goals as outlined in our MTEF. The SADPMR pledges to work in conjunction with the strategic objectives and plans of the DMRE in ensuring a cohesive and aligned approach in regulating the minerals sector.

Furthermore, I would like to extend my gratitude to the Board of the SADPMR for their guidance during the strategic planning and budget processes and for always making sure that management is adhering to set targets and plans as outlined in our strategic documents.


To the management and staff of the SADPMR, thank you for supporting me during my tenure as Acting CEO of the SADPMR. My vision was carried out with the support and commitment of management. As incoming CEO of the SADPMR, I will ensure that I steer the entity to its full potential, as intended by its enabling legislation. There will be transformation in the industry, there will be promotion of the beneficiation in the diamonds

There will be transformation in the industry, there will be promotion of the beneficiation in the diamonds and precious metals industry and there will be stability within downstream diamonds and precious metals industries.

and precious metals industry and there will be stability within downstream diamonds and precious metals industries.

Mr Cecil Khosa Chief Executive Officer

Statement of Responsibility for the Performance Information for the year ended 31 March 2019To the best of my knowledge and belief, I confirm the following:• all information and amounts disclosed throughout the annual report are consistent• the annual report is complete, accurate and free from any omissions• the annual report has been prepared in accordance with the guidelines on the annual report as issued by National Treasury• the Annual Financial Statements (Part E) have been prepared in accordance with the Modified Cash Standard and the relevant

frameworks and guidelines issued by National Treasury.

The CEO is responsible for the preparation of the public entity’s performance information and for the judgements made in this information.

The CEO is responsible for establishing and implementing a system of internal control designed to provide reasonable assurance as to the integrity and reliability of performance information.

In my opinion, the performance information fairly reflects the operations of the public entity for the financial year ended 31 March 2019.

Ms Clarinda Simpson Mr Cecil Khosa Dr Sipho ManeseChief Financial Officer Acting Chief Executive Officer Chairperson of the Board


VISIONTo be a leading regulator for business excellence, transformation and economic empowerment in the diamond and precious metals sectors.

MISSIONTo render regulatory services by ensuring and promoting: • compliance with legislation• skills development and knowledge sharing• business development support and growth• equitable access to diamond and precious metals resources for local beneficiation.• To collaborate and facilitate the establishment of the State Bourse for South Africa.

VALUESTime management Respect Integrity ConsistencyAccuracy Accountability

Strategic Overview

Legislative Mandate of SADPMR The SADPMR is classified as a Schedule 3A Public Entity in accordance with the Public Finance Management Act (PFMA) (Act No.1 of 1999), as amended. The entity was established in terms of Section 3 of the Diamonds Act (Act No. 56 of 1986), as amended.

The SADPMR’s mandate is to implement and enforce the provisions of the Diamonds Act and Precious Metals Act (No.37 of 2005), the Diamond Export Levy (Administration) Act (No.14 of 2007) and the Diamond Export Levy Act (No.15 of 2007). The above-mentioned legislation is implemented in conjunction with other legal frameworks that directly and indirectly affect the role and mandate of the organisation.



Organisational Structure

TRANSFORMATION

** GENERAL MANAGER:REGULATORY COMPLIANCE

(Vacant)

GENERAL MANAGER:DIAMOND TRADEMr Conrad Mlondo

GENERAL MANAGER:LEGAL SERVICE

Adv. Martin Mononela

* CHIEF FINANCIAL OFFICER

Ms Clarinda Simpson

GENERAL MANAGER:CORPORATE SERVICEMs Linda Nkhumishe

LICENSINGDIAMOND EXCHANGE

AND EXPORT CENTRE

LEGAL SERVICES

FINANCE MANAGEMENT

HUMAN RESOURCES MANAGEMENT

DIAMOND INSPECTORATE AND

BENEFICIATION

GOVERNMENT DIAMOND VALUATION

SUPPLY CHAIN MANAGEMENT

INFORMATION COMMUNICATION

TECHNOLOGY

PRECIOUS METALS INSPECTORATE

AND BENEFICIATIONS

SECURITY RISKMANAGEMENT

AUXILIARYSERVICES

COMMUNICATION

COMPANY SECRETARYMs Karabo Sibanyoni

INTERNAL AUDITMs Nthabiseng Matlhabe

BOARD

* CHIEF EXECUTIVE OFFICERMr CECIL KHOSA

* The CEO and the CFO were recently appointed during 2019/2020 Financial Year

** The GM: Regulatory Compliance was promoted to the CEO position during the 2019/2020 financial year

PERFORMANCEINFORMATION

PART B



1. AUDITOR-GENERAL’S REPORT: PREDETERMINED OBJECTIVESThe Auditor-General (AG) currently performs the necessary audit procedures on performance information to provide reasonable assurance in the form of an audit conclusion. The audit conclusion on the performance against predetermined objectives is included in the report to management, with material findings being reported under the Predetermined objectives heading in the report on other legal and regulatory requirements section of the AG’s report.

The AG’s report is included with the Annual Financial Statements (AFS). The findings of the work performed by the AG and the performance information will be more useful and relevant if it is read with the reporting of the performance information in the annual report commencing on page 56.

2. SITUATIONAL ANALYSIS 2.1 Service delivery environment The SADPMR annual target relating to new licences/permits issued to enable legitimate diamond and precious metals trade was exceeded, particularly with regards to beneficiation licences. The increase is due to successful implementation of the SADPMR Beneficiation and Marketing Strategies.

The number of inspections that aim to ensure compliance with legislation for new applications and existing licensees remained constant at 2,167.

Transformation of the industry remained the focus of the SADPMR, with an increase from 81 to 97 verification inspections, from the previous financial year in line with the conditions of the Mining Charter. This is attributable to the added capacity within the Transformation Unit, which enabled the unit to conduct more inspections within the diamond and precious metals industry.

The number of clients accessing the DEEC services increased from to 2,937 to 2,993 in line with the SADPMR’s objective of promoting equitable access to diamond resources and local beneficiation. The DEEC continued to prioritise access to local beneficiators during diamond tenders, which resulted in an increase in the participation of local beneficiators from 77 to 90 when compared to the previous year.

The SADPMR is a focal point of the KPCS in South Africa. It implements the minimum requirements of the Kimberley Process (KP), through processing of exports and imports of unpolished diamonds.

The GDV successfully valuated 100% of all diamonds presented by licensees for diamond tender, export, import and providing expert opinions on objects presented by the South African Police Service. Furthermore, there were no disputes declared on the fair market value.

2.2. Organisational environment The strategic positions of CEO and CFO were filled in the 2019/2020 financial year. The business premises where the SADPMR is located has been sold. However, the SADPMR continued to render services in same premises, which has been rezoned for property development. The SADPMR will remain in the current premises until relocation to new premises. The sale of the premises has led to all licensees relocating from the precinct, therefore the entity had to re-prioritise services such as inspections of new business premises and extended valuation and registration services for imports and exports. In addition to the above, the SADPMR formulated a new security plan to align to the changed environmental design.

2.3 Key policy developments and legislative changes The Broad-Based Socio-Economic Empowerment Charter (B-BSEEC) for the Mining and Minerals Industry was finalised in 2018 and the SADPMR implemented it accordingly in the processing of license applications and compliance inspections.


3. STRATEGIC OUTCOME-ORIENTED GOALS Strategic outcome Achievement to date towards five-year targets (2014/2015 – 2018/2019)

1. Job creation, skill development, and value addition to the precious metals and diamonds

The SADPMR issued 980 licences/permits and 294 licence renewals/permits were processed since the beginning of the 2014/2015 financial year to date to allow legitimate possession and trade of diamond and precious metals in the country. To date 336 Beneficiation Licences have been issued with the aim of promoting local beneficiation and creating jobs within the diamond and precious metals industries. A total of 47 new entrepreneurs were assisted to start or develop their businesses.

The organisation facilitated 5 skills initiatives which entailed: sorting, pricing, marketing, dia-mond planning and marking of diamonds. These sets of skills and knowledge enabled 5 new entrants to participate actively in the beneficiation and trade of diamonds.

The SADPMR explored the feasibility of a State Bourse and consulted relevant stakeholders in this regard. The final report will be concluded in the 2019/2020 financial year.

2. Transformed diamond and precious metals industries

Since the establishment of the Transformation Unit in the 2016/2017 financial year, 248 licensees and permit holders were verified against their commitments towards the Mining Charter.

The SADPMR held 14 workshops and information sessions from the 2016/2017 financial year to date, to facilitate skills development and to promote participation of Historically Disadvantaged Persons (HDP) in the diamond and precious metals industries.

3. Enhance local beneficiation and trade

The SADPMR offers various services to view and place bids on rough diamonds on tender. The number of clients that accessed services of the DEEC totalled 15 170 from the 2014/2015 financial year to date.

The number of diamond beneficiation licensees that accessed the DEEC was 688 in the period from the financial year 2014/2015 to date.

4. Compliance to legislation The GDV continues to ensure that fair market value of diamonds is upheld to ensure that South Africans derive benefits from diamond resources. The GDV has conducted valuation on all dia-monds offered by diamond producers in line with the Section 59B of the Diamonds Act, without the registration of valuation disputes by all affected parties.

The SADPMR, mandated to ensure compliance to the KPCS minimum requirements and this includes the submission of reports and issuing of Kimberley Process Certificates (KPC).

Since the 2014/2015 financial year to date, a total of 7 850 business premises inspections were conducted on existing licensees and new applications. This is done to ensure compliance with legislation and license conditions.

A total of 2 156 BBSEEC compliance inspections have been conducted from 2014/2015 to date. The aim was to ensure that licensees comply to the license terms and conditions.

The SADPMR assisted licensees whose operations remain dormant since the issuing of the license. This culminated in 157 licensees receiving assistance.

5. Effective, efficient and development-oriented regulator

Sound administration and implementation of the PFMA and other relevant legislation remain a focus of the SADPMR. The organisation received 2 unqualified audit opinions with no findings (clean audit) and 3 unqualified audit opinions with findings, in the past five years.

Good corporate governance best practices are being implemented and the organisation is continu-ously implementing risk management measures.

The WebAdmin System was developed to automate processes within the SADPMR that links all the programmes of the organisation. Of note, is the provision of efficient and effective service at the DEEC through the introduction of an automated bidding module, which promotes the integrity of the bidding process.

SADPMR ANNUAL REPORT 2018/201914 SADPMR ANNUAL REPORT 2018/201914

4. PERFORMANCE INFORMATION BY PROGRAMME4.1 Programme 1: AdministrationPurpose To provide strategic management, support services and capacity building to the SADPMR.

Strategic objectivesa) to ensure compliance with legislative requirementsb) to improve organisational capacity for maximum execution of excellence.

Sub-programmes Performance measure

Finance Management Reduction in the number of repeat audit findings

Human Resource Management Number of HR pillars implemented

Communication Number of engagements with internal and external stakeholders

Information and Communication Technology Number of Master Systems Plan (MSP) programmes implemented

Security and Risk Management Number of MISS programmes implemented

Legal Services % of matters referred for legal advice and addressed within 30 days

% of matters referred for external legal opinion


4.1.1 Strategic objectives, performance indicators, planned targets and actual achievements Programme: Administration

Performance indicator

Actual achievement 2017/2018



Planned target2018/2019

Actual achievement2018/2019

Deviation from planned target to Actual achievement for 2018/2019

Commenton deviations

To ensure compliance with legislative requirements

Reduction in a number of repeated findings

Less than 5 Less than 5 Less than 5 Less than 5 Achieved 4 Repeated audit findings were addressed during the year under review

Number of HR pillars implemented

5 5 5 5 Achieved 5 Pillars implemented

Number of engagements with internal and external stakeholders

12 12 12 15 Achieved 15 Workshops conducted

Number of MSP programmes implemented

3 3 3 3 Achieved 3 MSPs implemented

Number of MISS programmes implemented

3 3 3 3 Achieved 3 MISS programmes implemented

% of matters referred for legal advice and addressed within 30 days

100% of matters referred




Achieved 100% Matters referred addressed

% of contracts and SLAs vetted within 30 days

100% 100% 100% 100% Achieved 100% contracts and SLA vetted within 30 days


i. Sub-programme: Security and risk managementThe SADPMR is continuing with the implementation of three identified priorities in the MISS programmes, i.e. Security Screening/Vetting, Personnel Suitability Checks (PSC) and Contingency Planning.

During the period under review, all appointed employees in the SADPMR obtained positive results of PSC specifically on their Citizenship, Financial Worthiness and Criminal records. This process is in line with National Vetting Strategy that is meant to reduce the recruitment of personnel with undesirable background that my affect their occupation including National Security imperatives.

Security screening /vetting remains a priority in the SADPMR since officials are handling sensitive commercial information related to diamonds, gold, platinum and all its related metals. Furthermore, they conduct inspections, facilitate trade, import and export of diamonds which are high value goods that requires personnel with high level of integrity. In the period under review, all employees who applied for security clearance obtained positive results. This provides the basis on which SADPMR can confirm that the information and valuable goods are handled by personnel who are security competent.

In ensuring that employees, clients and visitors are safe during their stay in the SADMPMR buildings, the SADPMR continued to implement its Contingency Plan by conducting the bi-annual evacuation drill practices. The programme is in line with MISS that is meant to ensure that all State Entities develop emergency response plans in order to reduce risk during emergency situations.

ii. Sub-programme: Information and Communication Technology (ICT)

Information and Communication Technology (ICT) is responsible for the implementation of two major programmes in the Master Systems Plan for the Regulator. These are Disaster Recovery (DR) tests, the development and maintenance of the Web Administration System.

Disaster recovery (DR) implementation ensured data security, availability and integrity that aimed to protect the Regulator from the effects of significant negative events, and it also allows the organization to maintain and quickly resume mission-critical systems following a disaster.

The Web Administration System has been fully implemented and continuous maintenance is conducted to cater for enhancement raised, it also ensures that data captured is centralized to allow all the divisions’ access to the operational data required.

iii. Sub-programme: Communication A Communication and Marketing Strategy was implemented to inform the target audience about the SADPMR and its services. In the year under review, the SADPMR facilitated and participated in 15 activities intended to improve relations with stakeholders, such as workshops, roadshows and exhibitions.

iv. Sub-programme: Finance ManagementMatters of emphasis and other matters emanating from the 2017/18 AG report were followed up and addressed during the year under review. The procurement and spending plans were prudently monitored to ensure alignment with the approved budget. This was complemented by the completion of quarterly reports, supporting the link between the budget and the APP.

v. Sub-programme: Legal Services During the period under review, the SADPMR legal services handled several legal matters including signing and/or renewal of contracts with various stakeholders thereby ensuring that the SADPMR is not exposed to legal risks.

4.1.2 Strategy to overcome areas of under performanceAll targets were achieved under this programme.

4.1.3 Changes to planned targets There were no changes to the planned targets.


4.1.4 Linking performance with budgetsThe SADPMR focused on implementing the five pillars relating to the Human Resources Plan, the Master Systems Plan, Stakeholder Engagement and Risk Mitigation Measures, which were aimed at improving organisational capacity for maximum execution of excellence. The programme administration has reported an under-expenditure of R8.1 million. This emanates from the efficient savings and cost containment measures implemented during the year under review.

Programme/activity/objective

FY2018/2019 FY2017/2018

Budget R’000

Actual expenditure

R’000

Under expenditure

R’000Budget R’000

Actual expenditure

R’000

Over expenditure

R’000

Programme 1: Administration 72,742 64,674 8,066 68,059 60,960 7,099

Programme 2: Diamond TradePurpose The Diamond Trade Programme is responsible for the facilitation of local trade as well as exports and imports of diamonds in accordance with the KPCS and to ensure that diamonds are traded at fair market value.

Strategic objectives• to improve competitiveness, sustainable development and job creation in the diamond and precious metals industries.• to improve equitable access to resources for local beneficiation.• to ensure compliance with legislative requirements.

Sub-programmes

Sub-programme Performance measure

i. DEEC • Number of beneficiators accessing the DEEC• Number of clients accessing the DEEC• Percentage of compliance to KPC requirements

ii. GDV • Number of skills initiatives facilitated for industry • Percentage of valuation conducted regarding the fair market value lodged • Percentage of disputes regarding fair market value lodged


Strategic objectives, performance indicators, planned targets and actual achievements Programme: Diamond trade

Performance indicator Actual achievement 2015/2016



Planned target 2018/2019


Deviation from planned target to actual achievement for 2018/2019

Commenton deviations

Strategic objective: To improve competitiveness, sustainable development and job creation in the diamond and precious metals industries

Number of skills initiatives facilitated for the industries

2 2 2 5 Achieved 5 Skills initiatives facilitated for the industry

Number of beneficiators accessing the DEEC

131 135 77 81 Achieved 90 Diamond beneficiations accessed the DEEC

9 over achievement The prioritisation of DBs during tenders encouraged more participation

Number of clients accessing the DEEC

3546 2845 2937 2880 Achieved 2 993 Clients accessed the DEEC

113 over achievement The DEEC surpassed the planned targets due to an increase in the number of requests for extended services

Strategic objective: To ensure compliance with legislative requirements

% of valuations conducted regarding the fair market value lodged

100% 100% 100% Achieved 100% (565) of diamonds offered/presented

% of disputes on valuations regarding the fair market value lodged

100% 100% 100% 100% Achieved No disputes were lodged

% compliance to KPCS requirements

100% 100% 100% 100% Achieved (1 757) Compliance with the KPCS minimum requirements Kimberley office: 19JHB office: 1 738

4.2.1 Strategic objectives, performance

Diamond Exchange And Export Centre (DEEC)During the year under review, the DEEC received 5.9 million carats valued at approximately US$989 million which reflects an increase in the volume of carats offered locally at the DEEC when comparing to the previous financial year. Table 1, indicates the rough diamond tender activities facilitated at the DEEC during the 2018/2019 financial year.


Table 1: Rough diamonds offered for local sale by diamond producers, dealers and beneficiators

FY2018/2019 FY2017/2018

Total carats received 5,985,649 3,829,176

Total $ received 989,473,676 723,441,953

Total carats of parcels sold and qualified to be exported 5,976,054 3,809,092

Total $ value of parcels sold and qualified to be exported 990,818,523 811,917,737

Total carats withdrawn 9,595 20,085

Rough diamond exportsDuring the calendar year 2018, South Africa exported 10.6 million carats of rough diamonds valued at more than US$1.4 billion. This trend indicates an increase of over 700 000 carats from 9.8 million carats valued at US$1.3 billion reported during the year 2017. Table 2, represents rough diamond exported in 2018 between South Africa and other KP participants

Table 2: Rough diamond exports – 2018 vs 2017 (calendar years)

Participant

2018 2017

Carats Value ($) Carats Value ($)

Botswana 4,631,671 428,355,197 4,689,932 440,303,476

Canada 0 0 0 0

China PR 4,859 7,053,534 7,170 3,114,556

DR Congo 0 0 108 85,286

European Union 2,544,791 307,717,600 2,237,290 276,993,241

India 110,977 34,489,561 126,655 28,599,570

Israel 354,918 126,814,974 269,427 117,298,051

Namibia 148 950,000 80 350,385

Switzerland 51,348 42,519,487 139,918 97,079,517

Thailand 2,600 1,976,350 249 401,839

United Arab Emirates 2,913,334 442,239,966 2,424,852 329,582,790

United States of America 2,654 11730,338 1,568 10,891,209

Total 10,617,300 1,403,847,007 9,897,249 1,304,699,920

44%

27%

24%

3%

1%

1%

l Botswana

l European Union

l India

l Israel

l Switzerland

l United Arab Emirates

Rough diamond export trade


Rough diamond importsDuring the calendar year 2018, South Africa imported 496,211 carats of rough diamonds valued at more than US$ 501 million. The comparisons and analysis of statistical data for rough diamonds imports between 2017 and 2018 indicate an increase of import trade in 2018. Table 3, illustrate the increase in trade during the year 2018 of more than 106,554 carats compared to 390,657 carats of rough diamonds imported into South Africa in 2017.

Rough diamond import trade

1%2%

11%

3%

26%

15%

42%

l Botswana

l Brazil

l European Union

l Israel

l Namibia

l Switzerland

l United Arab Emirates

Participant

2018 2017


Botswana 129,221 193,489,778 122,008 157,492,871

Brazil 207 360,010 0 0

Canada 5 221 1 100

China, PR 137 2,700,000 32 324,440

Congo, DR 14,604 1,254,044 108 85,196

European Union 53,790 24,085,229 71,720 19,063,508

India 785 1,640,282 2,561 25,422,965

Israel 8,706 16,244,017 9,977 29,837,118

Liberia 47 58,063 0 0

Namibia 6,872 27,532,687 2,214 7,379,414

Sierra Leone 0 0 31 138,610

Switzerland 74,381 158,120,185 52,267 95,408,483

United Arab Emirates 207,323 75,100,861 126,553 43,028,988

United States of America

133 732,994 1,833 6,956,517

Zimbabwe 0 0 1,352 1,557,859

Total 496,211 501,318,371 390,657 386,696,069

Table 3: Rough diamond imports


KP certificates count for import and export KPC issued During the 2018/2019 financial year, SADPMR oversaw the administration and implementation of KPCS and KP participation, by ensuring compliance with KPCS requirements and other relevant legislation. A total of 1,723 KP certificates for exports were issued to 10 KP participants, which is a decrease of 48 in the number of KP certificates issued for exports when compared to 1,771 certificates issued in 2017.

Furthermore, South Africa received 225 KP certificates from 13 KP participants, which is a decrease of 48 in the number of certificates received during 2018 when compared to 273 certificates received in 2017.

Polished diamond exportsSouth Africa exported a total of 116,970 carats of polished diamond, valued at approximately US$ 999 million. There was a decrease of 4.18 % in the volume of diamonds exported compared to the previous financial year percentage difference of 4.22% as illustrated in Table 4. The trade fluctuation is related to the overall decline in diamond beneficiation.

Table 4: Polished diamond exports

FY2018/2019 FY2017/2018

Carats Value (US$) Rand Value(ZAR)

Carats Value(US$)

Rand Value(ZAR)

Total 116,970 999,071,759 13,828,061,855 121,862 842,310,232 11,069,109,307

Polished diamond importsThe DEEC received and cleared a total of 149,639 carats of polished diamond imports valued at approximately US$ 392 million. There was a decrease of 5.62% in the volume of diamonds declared during the period under review, when compared to the previous financial year percentage increase of 7.45% as illustrated in Table 5. The decrease is due to the decline in polished diamond sales globally, which has impacted the polished diamonds trade in South Africa.

Table 5: Polished Diamond imports

FY2018/2019 FY2017/2018

Carats Value (US$) Rand value(ZAR)

Carats Value(US$)

Rand value(ZAR)

Total 149,639 392,879,467 5,386,410,254 158,057 395,280,945 29,620,931,49

Synthetic diamond powder importsDuring the year under review, the DEEC received and processed over 62 million carats of synthetic diamond powder valued at approximately US$ 4 million imported for the purposes of manufacturing diamond tools.

Table 6: Synthetic diamond imports 2018/2019

FY2018/2019 FY2017/2018

Carats Value (US$) Rand value(ZAR)

Carats Value(US$)

Rand value(ZAR)

Total 62,190,525 4,839,037 75,528,651 157,253,050 7,874,001 103,455,61


ii. Sub-Programme: GDVThe GDV provides valuation services related to diamond exports, imports and diamond production offered to the State Diamond Trader (SDT) by producers in terms of the Diamonds Act 56 of 1986 as amended, to ensure that diamonds are traded at fair market value. The other function is to provide technical and expert opinion on diamonds in criminal investigations and judicial proceedings.

Diamond production offered to the SDT in terms of Section 59B of the Diamonds Act, 1986, declined by 1.40% from the previous financial year (2017/2018). The carats purchased by the SDT increased by 12.64% compared to the previous year 2017/2018 as reflected in Table 7.

Table 7: Diamond producers in carats of all unpolished diamonds verified by the GDV in terms of Section 59B

FY2018/2019 FY2017/2018


Diamond production presented to the SDT

9,873,097.97 1,147,141,673.67 10 011 920.30 1,216,563,141.87

10% purchased by the SDT 132,502.25 45,931,700.77 115 742.33 130 659 071.96

Objects confiscated by the SAPS

Province

2018/2019 Exhibits Totals

2017/2018 Exhibits Totals

DiamondsNon-

diamonds Carats Value (ZAR) DiamondsNon-

diamonds Carats Value (ZAR)

Gauteng 340 299 41 20.96 278,650.56 30 22 8 9.84 120,945.00

Free State 16 2 14 5.23 7,044.00 14 6 8 7.69 9,070.40

Northern Cape 1,431 518 913 438.56 1,264,150.60 236 81 155 19.19 79,398.00

Eastern Cape 0 0 0 0 0 1 0 1 0 0

North West 6 5 1 13.08 14,982.57 37 9 28 13.9 156,231.68

Mpumalanga 9 0 9 0 0 0 0 0 0 0

KwaZulu-Natal 61 34 27 3.96 43,440 0 0 0 0 0

Western Cape 61 61 0 43.46 88,398.00 50 21 29 48.07 74,998.00

Limpopo 100 88 12 142.11 174,014.00 0 0 0 0 0.00

Total 2,024 1007 1,017 667.36 1,870,679.73 368 139 229 98.69 440,643.08

Diamond valuation services rendered to South African Police ServiceThe GDV provides a service to the South African Police Service (SAPS) for all objects (suspected to be diamonds) confiscated for the purpose of seeking expert opinion. Table 8 represents exhibits presented for valuation to the GDV by SAPS.

During 2018/2019 financial year a total of 2 024 objects were presented by the SAPS to the GDV for valuation compared to 368 objects in the previous financial year. This shows an increase of 1656 objects compared to 2017/2018. From 2024 objects, 1007 were found to be rough diamonds of 667.36 carats compare to 368 objects in 2017/2018 which had 139 confirmed rough diamonds of 98.69 carats. This also displays an increase of 568.67 carats compared to 2017/2018.

Table 8: Objects confiscated by the SAPS


4.2.2 Strategy to overcome areas of underperformanceThere were no areas of underperformance.

4.2.3 Changes to planned targets There were no changes to planned targets.

4.2.4 Linking performance with budgets The overall spending was R13.7 million compared to the budget of R16.1 million. The underspending emanates from the legal liability cover which change from 24 months to 12 months. (See table below.)

Programme

FY2018/2019 FY2017/2018

Budget R’000

Actual expenditure

R’000

Under- expenditure

R’000Budget R’000

Actual expenditure

R’000

Over- expenditure

R’000

Programme 2: Diamond trade

16,140 13,718 2,423 13,797 14,529 (732)

4.3 Programme 3: Regulatory Compliance Purpose To regulate both diamond and precious metals industries.

Strategic objectives• to improve competitiveness, sustainable development and job creation in the diamond and precious metals industries.• to ensure compliance with legislative requirements.• to transform the diamond and precious metals industries.

Sub-programmes

Sub-programme Performance measure

Licensing Percentages of new licences issued within 60 working days based on completeness of applicationsPercentages of licences renewal processed within 60 working days based on completeness of applicationsNumber of beneficiation licences issuedNumber of B-BSEEC compliance audits conductedNumber of workshops/information sessions conducted

Diamond inspectorate Number of inspections conductedNumber of inactive business assisted Number of skills initiatives facilitated for diamonds and precious metals industries

Precious metals and beneficiation

Number of new entrepreneurs assistedNumber of inspections conductedNumber of inactive businesses assistedNumber of skills initiatives facilitated for diamond and precious metals industries

Transformation Number of licences verified against their commitmentBusiness case document developed (Bourse)


4.3.1 Strategic objectives, performance indicators, planned targets and actual achievements Programme: Regulatory compliance


Actualachievement2015//2016




Actual Achievement 2018/2019

Deviation from planned target to

Actual Achievement for 2018/2019

Comment on deviations


Percentage of licences issued within 60 working days based on the completion of the applications

195 180 207 75% of licenses application

received

Achieved: 90% (262/292) licenses issued

15% over- achievement

A substantially higher percentage of licenses were issued within 60 working days in line with the robust implementation of the Beneficiation Strategy

Percentage of licence renewals processed within 60 working days based on completion of the applications

90 75 26 100% of licenses

application received

Not achieved:82% (103/125) renewals license issued

15% under- achievement

In pursuit of promoting beneficiation, non-compliant beneficiation license applications were given more time to remedy the non-compliance. This resulted in licenses being issued outside the 60 working days.

Number of new entrepreneurs assisted

9 10 10 12 Not achieved:10 New entrepreneurs assisted

2 under- achievement

Constraint: Received less requests for assistance.Remedy:Continuously hold workshops to encourage new entrepreneurs to come for assistance with regards to diamonds and precious metals.

Number of B-BSEEC compliance inspection/audits conducted

408 461 492 471 Achieved: 523 Compliance audits conducted within the diamond and precious metals

92 over- achievement

Follow-up inspections for B-BSEEC were conducted concurrently for greater efficiency and cost-saving.


Number of beneficiation licences issued

66 56 61 64 Achieved:90 Beneficiation licenses issued

26 over- achievement Over-achievement was due to the implementation of the Beneficiation Strategy.


Programme: Regulatory compliance


Actualachievement2015//2016




Actual Achievement 2018/2019

Deviation from planned target to

Actual Achievement for 2018/2019

Comment on deviations

Strategic objective: To enforce compliance with legislative requirements

Number of inspections conducted

1,478 1,610 1,674 1,615 Achieved:1 644Inspections conducted within the diamond and precious metals

29 over- achievement

Over-achievement due to the number of new applications for licenses and permits, which was higher than the previous years.

Business case document developed (State Bourse)

N/A Establish baseline

Consultation with

stakeholders

Consultation with

stakeholders

Achievedconsultation with the DMR

Workshops and information conducted

Establish baseline

4 4 6 Achieved:6 Workshops/information sessions conducted

Number of inactive businesses engaged

31 31 32 36 Achieved:41Inactive licenses within diamond and precious metals

5 over- achievement A new trading house established presented an opportunity to assist more inactive businesses during the financial year.

Number of skills initiatives facilitated for the diamond and precious metals industries

3 3 3 5 Achieved:5Skills initiatives facilitated

To transform diamond and precious metals industry

Number of licensees verified against their commitments

Establishbaseline

75 81 80 Achieved:97Licenses verified against transformation commitments

17 Over- achievement

Over-achievement due to additional personnel in the transformation unit and the number of requests from licensing division for renewals applications.


i. Sub-programme: Licensing During the period under review there was an increase in the number of diamond dealer’s and diamond beneficiation licences issued, there was also a noticeable increase in the number of authorised representatives applications received in 2018/2019 as compared to the previous financial year. The overall increase in the types of licences and permits issued was attributed to the robust implementation of the beneficiation strategy and a high number of authorised representative renewals as illustrated in Table 1. These applications processed are inclusive of licenses/permits issued over 60 days.

Table 1: Diamond licences/permits issued

Diamond licences/permits FY2018/2019 FY2017/2018

Licence typeApplications

received Licences issuedApplications

received Licences issued

Diamond beneficiation 67 67 14 14

Diamond dealer 156 156 122 122

Diamond trading house 5 5 2 2

Diamond research 3 3 0 0

Temporary buyers permit 0 0 0 0

Diamond certificate 0 0 0 0

Authorised representative certificate 301 301 141 141

Diamond permit 18 18 25 25

Diamond endorsements 72 72 110 110

Total 622 622 414 414 Precious metals licences/permits issuedIn the financial year 2018/2019, a total increase of 200 precious metals licenses, permits and certificates were issued as compared to 184 in the previous year. There was no significant variance, however the slight increase was attributable to the number of precious metals refining and precious metals beneficiation licenses applications received as depicted in table 2. These applications processed are inclusive of licenses/permits issued over 60 days.

Table 2: Precious metals licences/permits issued

Precious metals licences/permits FY2018/2019 FY2017/2018

Licence typeApplications

received Licences issuedApplications

receivedLicences

issued

Precious metals refining 12 12 6 6

Precious metals beneficiation 7 7 0 0

Jeweller’s permit 62 62 70 70

Special permit 11 11 8 8

Permit to import 21 21 15 15

Export approval 26 26 18 18

Precious metals certificate 1 1 0 0

Precious metals endorsement 60 60 67 67

Total 200 200 184 184


Diamond and precious metals licences issued based on HDP ownership During the period under review a total of 304 principal¹ licences were issued of that total, 97 licences were issued to 100% HDP owned entities as compared to the total of 87 issued in the 2017/2018 financial year. In the period under review, 21 HDP females and 76 HDP males issued with licenses as shown in Table 3.

¹ Principal license refers to Diamond dealers, Diamond beneficiation, Precious metals beneficiation and Precious metals refining licenses.

Table 3: Diamond and precious metals licences issued based on HDP ownership for 2018/2019

Precious metals licences/permits

No. of licences 100% HDP ownership 26% HDP shareholding

Male Female Male Female

Diamond dealers 156 57 12 22 31

Diamond beneficiation 67 12 3 22 16

Jeweller’s permit 62 6 4 1 0

Precious metals beneficiation 7 0 0 2 1

Precious metals refining 12 1 2 5 4

Total 304 76 21 52 52

Note: HDP are South Africans from Black, Coloured, Indian and Chinese (resident or born in South Africa before 1994) communities.

ii. Sub-programme: Diamond inspectorate The inspectorate conducted 224 B-BSEEC compliance inspections shown in Table 4. The focus areas in terms of B-BSEEC compliance relate to Ownership, Human Resources Development, Employment Equity and Procurement.

Table 4: B-BSEEC compliance inspections conducted by licence type in 2018/2019 (*APP)

Licence/permit type No. of licenses inspected

Diamond dealer 68

Diamond beneficiation 182

Total 250

Inspections conducted by licence/permit typeTable 5, indicates that a total of 847 inspections were conducted. Of these inspections, 299 were related to new diamond licence applications, while 548 were follow-up inspections on existing licences. The total inspections conducted for the period under review has not changed from the previous financial year.

Table 5: Breakdown of the inspections conducted by licence/permit type

Licence/permit type

No. of inspections 2018/2019 No. of inspections 2017/2018

New premises inspections

Follow-up inspections



Dealing licence 194 198 159 214

Beneficiation licence 88 140 53 166

Trading house licence 8 107 1 96

Research licence 9 0 0 47

Producer permit 0 40 0 75

Import/export comfort letters 0 63 0 36

Total 299 548 213 634


Diamond beneficiation comparison and trendSouth Africa’s diamond beneficiation for the period under review was recorded at 320 702 carats, which was significantly higher than the 284 212 carats recorded to be beneficiated in 2017/2018 financial year. The increase is attributed to the higher purchases of rough diamonds by beneficiators.

Table 6: Diamond beneficiation trend (financial years)

Diamonds beneficiated (carats) 2018/2019 Diamond beneficiated (carats) 2017/2018

320,702 284,212

iii. Sub-programme: Precious metals and beneficiationPrecious metals inspectionsIn the financial year 2018/2019, a total of 782 premises inspections were conducted, of which 124 were related to new precious metal licence/permit applications, while the remaining 658 were follow-up inspections conducted on the premises of existing licence/permit holders as explained in Table 7. The number of premises inspections conducted represented a 6% decrease compared with the previous year whereby 831 inspections were conducted which made a balance of 123 new applications and 708 follow up licences/permits.

Furthermore, table 7 indicates that most premises inspections that were conducted related to applications for Jeweller’s permits 86 inspections and existing Jeweller’s permits 545, followed by inspections related to refining licences and beneficiation licences. Jeweller’s permit follow-up inspections dominate inspections as jewellery manufacturing is the main activity relating to precious metals, in terms of the number of participants in the domestic industry, followed by refining and manufacturers of autocatalytic convertors.

Table 7: Breakdown of inspections done by licence/permit type

Licence/permit type

No. of inspections 2018/2019 No. of inspections 2017/2018





Refining licence 15 71 33 60

Beneficiation licence 9 42 3 55

Jeweller’s permit 86 545 78 593

Special permit 14 0 9 0

Total 124 658 123 708

BBSEEC compliance audit inspections done by licence/permit typeA total of 299 BBSEEC compliance audit inspections were conducted on holders of precious metals licences and permits during the year under review as indicated in Table 8. The decline in premises inspections was planned to allow for B-BSEEC compliance inspections to be conducted concurrently with follow-up inspections.

Table 8: B-BSEEC compliance inspections conducted by licence/permit type in 2018/2019

Licence/permit type No. of licensees inspected

Jeweller’s permit 258

Precious metals beneficiation 20

Precious metals refining 21

Total 299


Precious metals beneficiationThe SADPMR recorded South Africa’s total gold jewellery fabrication at 1 017 kg in FY2018-19, which was marginally down on the 1,191 kg recorded last year (see Table 9). The use of platinum in jewellery declined to 39 kg from 49 kg in the previous year.

Platinum-group metal (PGM) fabrication is dominated by the fabrication of catalytic converters. The SADPMR estimates PGM fabrication at some 27 tons in 2018-19, similar to that in 2017-18 (Table 9). This sector is stagnant due to excess supply in the market.

Table 9: Precious metals fabrication, 2018/2019 and 2017/2018

Year PGM jewellery fabrication (kg) Gold jewellery fabrication (kg) PGM fabrication (tons)

2017/2018 39 1,017 27

2016/2017 49 1,191 27

iv. Sub-programme: Transformation During the year under review, a total of 97 verification audits were conducted on licensees with respect to their compliance to commitments made in their business plans to effect transformation within the diamond and precious metals industries. Of these audits, 37 were conducted in respect of diamond dealers, 25 for diamond beneficiation licences, 17 precious metals jeweller’s permits, 3 precious metals beneficiation licences and 15 precious metals refining licences.

Over and above compliance inspections, in-depth verification of license holder’s commitments to the B-BSEEC are conducted to determine the level of transformation in the diamond and precious metals industries. The increase has been attributed to an increase in personnel.

Table 10: Breakdown of licensees verified against their commitments

Licence/permit type No. of licensees verified FY2018/2019 No. of licensees verified FY2018/2019

Diamond dealer’s 37 14

Diamond beneficiation 25 26

Jeweller’s permit 17 31

Precious metals beneficiation 3 2

Precious metals refining 15 8

Total verified 97 81

4.3.2 Strategy to overcome areas of underperformanceThe SADPMR will encourage and remind licence holders to renew their licences well in advance.

4.3.3 Changes to planned targets There were no changes to planned targets.

4.3.4 Linking performance with budgets In performing the key activities, the organisation spent R24.6 million, which was R952,000 above the approved programme budget of R23.7 million. The overspending variance emanates from the increase in inspections conducted for change in premises as well as new applications received.


4.4 Revenue collection The total revenue of R113.8 million figure for FY2018/2019 was higher than that of FY2017/2018, which was R105.9 million. The total revenue realised includes licence fees, penalties and service fees. The increase is attributable to the increase in the grant received from National Treasury, which was R62.4 million compared to R59.2 -million for the 2017/2018 financial year.

Sources of revenue

FY2018/2019 FY2017/2018

BudgetR’000

Actualamount

collected R’000

(Over)/undercollection

R’000Estimate

R’000

Actualamount

collectedR’000

(Over)/undercollection

R’000

Licence, penalty and service fees 49,345 46,580 (2,765) 42,490 42,154 366

Interest received 3,800 4,355 555 3,223 4,198 974

Other income 241 444 203 354 378 (24)

Grant received 62,426 62,438 13 59,198 59,198 –

Total 115,812 113,817 (1,995) 105,266 105,928 662

4.5 Capital investment

Asset management plan During the year under review, there was no major procurement of equipment based on the National Treasury Instruction Note 2 of 2016/2017 on cost containment. The additions of assets were limited to replacing obsolete and beyond-economical-to-repair items.

Quarterly spot checks were performed and two physical asset verifications were conducted to ensure the effectiveness of asset management.

Infrastructure programme

FY2018/2019 FY2017/2018

Budget R’000

Actual expenditure

R’000

(Over)/under

expenditureR’000

Budget R’000

Actual expenditure

R’000

(Over)/under

expenditureR’000

Computer equipment 7,036 0 7,036 72 128 (56)

Furniture and fitting 389 20 389 46 48 (2)

Leased office equipment 750 738 (738)

Leasehold improvements 972 0 0 82 95 (13)

Office equipment 972 35 937 0 63 (63)

Total 8,397 793 7,604 200 331 (131)


CORPORATEGOVERNANCE

PART C

1. INTRODUCTION The SADPMR was established in terms of section 3 of the Diamonds Amendment Act 29 of 2005 and is classified in terms of the PFMA, 1999 as a Schedule 3A State entity.

The Diamonds Act of 1986, as amendedAs the enabling legislation of the SADPMR, this Act provides for the objectives, functions and role of the SADPMR. The Diamonds Act further makes provision for the appointment and composition of the Board of the SADPMR and the CEO as the accounting officer.

PFMA of 1999, as amendedAs a Schedule 3A State entity, the SADPMR’s corporate governance is achieved through the application of the provisions contained in the PFMA read together with the King Report IV on Corporate Governance.

2. PORTFOLIO COMMITTEES Parliament has an oversight role on the overall performance of the SADPMR. The Parliamentary Portfolio Committee on Mineral Resources (PPC) reviews and oversees all functions and duties of the SADPMR, including financial matters.

The SADPMR presented its annual report for the financial year 2017/2018 to the PPC on 16 October 2018. Furthermore, the PPC conducted an oversight visit to the SADPMR on 1 February 2018. The following key issues were raised during both interactions:• the SADPMR was encouraged to ensure that its strategy is aligned to the National Employment Equity standards and where

shortfalls were identified, plans should be devised to address them. The organisation was further lauded on its achievement on skills development initiatives and transformation of the industry and was also encouraged to focus on the impact of such initiatives

• the promotion of local beneficiation should receive more attention to ensure that unpolished diamonds are available for cutting and polishing in the country. The SADPMR should explore ways to promote trade within the African continent, as well as take advantage of South Africa’s BRICS membership to attract investment and trade.

The SADPMR was commended on its consistent good performance, which is reflected in its audit record over the years.

3. EXECUTIVE AUTHORITYThe SADPMR accounts to the Minister of Mineral Resources and Energy as the executive authority of the entity. Quarterly performance information and financial results are submitted to the honourable minister at the end of each financial year, as required by the PFMA. The SADPMR submitted the following quarterly reports:

2018/2019 Documents submitted Due date for submission

Date submitted by the SADPMR Status

Quarter 1 Performance and financial results 31July 2018 27 July 2018 Complete

Quarter 2 2018/2019 Budget and strategic plan 30 September 2018 28 September 2018 Complete

2017/2018 Annual report 30 September 2018 31 August 2018 Complete

Performance and financial results 31 October 2018 29 October 2018 Complete

Quarter 3 Performance and financial results 31 January 2019 30 January 2019 Complete

Quarter 4 Performance and financial results 31 April 2018 29 April 2019 Complete

4. THE ACCOUNTING AUTHORITY/THE BOARD The SADPMR Board is duly appointed by the Minister of Mineral Resources in terms of Section 6 of the Diamonds Act, 56 of 1986, as amended. The Board serves as the accounting authority of the entity.

The Board comprises non-executive members and the CEO of the SADPMR, who serves as an ex officio member of the Board. In terms of Section 6 (1) of the Diamonds Act, the Board must ensure that the functions of the SADPMR are performed and that, in so doing, the objects of the SADPMR are achieved. The Board is responsible for the strategic direction and financial management of the SADPMR in terms of the PFMA.



4.1 Board charterThe SADPMR Board is governed by a Charter, which is reviewed annually. The Board Charter outlines the Board’s responsibilities towards the SADPMR as stipulated in the Diamonds Act (as amended), PFMA, and King Report IV on Corporate Governance. The Board oversees the Strategic Plan, Annual Performance Plan and Quarterly Performance Plans of the SADPMR and ensures that the entity achieves all its strategic objectives as outlined in all these plans.

4.2 Composition of the Board All members of the SADPMR Board are non-executive directors, except the CEO, who serves on the Board as ex officio member. The Board is appointed by the Minister of Mineral Resources in accordance with the provisions stipulated in Section 6 of the Diamonds Act of 1986, as amended. The current Board was appointed with effect from 1 November 2016.


Members of the Board

Dr Sipho ManeseChairperson

Ms Ntombifuthi Monedi-NokoDeputy Chairperson

Mr Cecil KhosaChief Executive Offi cer

Mr Bothell DekaMember

Mr Kagiso MenoeMember

Mr Mandla MnguniMember

Mr Mochele NogeMember

Mr Tembani NgqezaMember

Ms Mamodupi Mohlala-MulaudziMember

Mr Bernard SternMember

Adv Nick Van RooyenMember

Mr Charles NevhutandaMember

Ms Mpho MosingMember

Ms Karabo SibanyoniCompany Secretary

Ms Monica LedingwaneMember

Absent from the above: Mr. Senna Mokoena and Mr. Pieter Arendse


Name

Designation (in terms of the Board structure)

Date appointed

Date resigned Qualifications Area of expertise

Board directorship (list the entities)

Other committees or task teams (e.g. audit committee/ministerial task team

No. of meetings attended

Dr S Manese • Board Chairperson

1 Nov 2016

– • PhD: Pyschopedalogy

Psychopedalogy • SADPMR• SDIMM

Trading & Projects

• SDIMM Security Services

• Mane–Dukoa (Pty) Ltd

• Taita the Slave

• Executive Committee

34

Ms. N Monedi–Noko • Board Deputy Chairperson

• Chairperson of Technical Committee

1 Nov 2016

– • BSc Geology • BSc (Hons)

Geology• MBA (Global

Business and Sustainability)

Geology and Mining

• SADPMR• Luhlaza

Integrated Sustainability Solutions


• Technical Committee

• Audit and Risk Committee

32

* Mr C Khosa • CEO of SADPMR

1 July 2018

– • BA (Geography) • BA Hons

(Geography)• Masters Earth

Sciences: Mining

• Management Development Programme

Earth Sciences and Mining

• SADPMR• Jomela

Consulting (Pty) Ltd

• All Committees

49

Mr M Noge CA (SA) • Chairperson of the Finance Committee

1 Nov 2016

– • BCom (Econ) • H Dip (Corp

Law) • Hons (Acc) • PGD (Tax Law)• PGD

(International Tax)

• MCom (SA and International Taxation

• CA (SA)

Finance • SADPMR• Emfuleni

Voerkrale (Pty) Ltd

• MJN Liquidators (Pty) Ltd

• Global Foreign Exchange Financial Services (Pty) Ltd

• The Lamb Shack (Pty) Ltd

• Phoka Investment Holdings (Pty) Ltd

• Gioberti Investments 1 (Pty) Ltd

• Ata Capital (Pty) Ltd


• Finance Committee

34

Mr T Ngqeza • Chairperson of the Audit and Risk Committee

1 Nov 2016

– • BCom • Strategic

Leadership Programme

Finance and Banking

• SADPMR• Yukoza

Enterprise • T & T Solar

Solution (Pty) Ltd



39

* Mr. X Mbonambi attended 11 meetings as Acting CEO, and Mr. Khosa attended 38 meetings as Acting CEO during the 2018/2019 financial year.


Name


Date appointed





Ms. M Ledingwane • Chairperson of Licensing Committee

1 Nov 2016

– • LLB • LLM

Legal • SADPMR• The 8th Group

Investment • Sixth Group

Investment • Gold Fields

Thusano Share Trust

• Consumer Advisory Panel, CAP

• Audit Committee member: Department of Health (DOH)


• Licensing Committee

29

Ms M Mohlala–Mulaudzi

• Board • HR Co–

coordinator

1 Nov 2016

– • LLB• LLM

Legal • SADPMR • Executive Committee


18

Mr P Arendse • Board Member

1 Nov 2016

– – Legal Enforcement

• SADPMR • Licensing Committee

–

Mr P Bailey • Board Member

1 Nov 2016

12 September 2019

• Matric Labour • SADPMR • Licensing Committee

• Executive Committee (Ad hoc member)

16

Mr S Mokoena • Board member

13 Sep 2019

– • National Diploma Internal Auditing

Labour • SADPMR • Licensing Committee

Mr B Deka • Board Member

1 Nov 2016

– • LLB • BCom

(Economics)• MCom

(Economics)

Finance and Legal

• SADPMR• State Diamond

Trader


10

Mr C Nevhutanda • Board Member

1 Nov 2016

– • BBusSc (Hons) Economics

• CAIB

Finance • SADPMR • Finance Committee


16

Mr. K Menoe • Board Member

1 Nov 2016

– • BSc Eng (Chemical)

Mineral Economics

• SADPMR • Technical Committee

9

Mr B Stern • Board Member

1 Nov 2016

– • National Diploma Physical Metallurgy

Metallurgy • SADPMR• Sterns casting

& Refining (Mauritius)


4


Name


Date appointed





Ms. M Mosing • Board Member

1 Nov 2016

– • LLB • LLM

Legal • SADPMR• Smoking

Rhinos (Pty) Ltd



• Ad hoc Member Executive Committee

21

Mr M Mnguni • Board Member

1 Feb 2018

– • B Admin (Hons) • CPMD–MF

Governance • SADPMR• SAFCOL SOC


5

Adv N Van Rooyen • Board Member

1 Nov 2016

– • LLB Legal • SADPMR • Audit and Risk Committee

17


Board committees

Committee No. of meetings held No. of members Names of members

Technical Committee 4 4 Ms N Monedi-Noko, Mr B Stern, Mr K Menoe and Ms M Mosing

Finance Committee 4 4 Mr M Noge, Mr B Deka, Mr C Nevhutanda and Ms M Mosing

Audit and Risk Committee

6 4 Mr T Ngqeza, Mr M Mnguni, Ms N Monedi-Noko, Adv N Van Rooyen

Licensing Committee 4 4 Ms M Ledingwane, Ms M Mohlala-Mulaudzi, Mr C Nevhutanda

Executive Committee 10 6 (2 ad hoc members)

Dr. S Manese, Mr M Noge, Mr T Ngqeza, Ms M Ledingwane, Ms N Monedi-Noko, Ms M Mohlala-Muladudzi, Ms M Mosing (ad hoc member), Mr S Mokoena (ad hoc member)

Joint Audit and Risk and Finance Meeting

3 8 Mr T Ngqeza, Mr M Mnguni, Ms N Monedi, Adv N Van Rooyen Mr M Noge, Mr B Deka, Mr C Nevhutanda and Ms M Mosing

The Technical Committee: It provides strategic technical advice to the SADPMR Board regarding the diamond and precious metals industries at a local and global scale. It also provides technical assistance and advice to other committees of the Board. Moreover, it makes recommendations to the Board on technical policy issues (KPCS, activities of the DEEC, insurance, etc.), taking cognisance of the statutory conditions, budgetary and financial constraints applicable to the SADPMR.

The Finance Committee: The Finance Committee: It supports the functions of the SADPMR as described in the PFMA. The committee ensures that the activities of the SADPMR align with the provisions of the PFMA. In addition, it has oversight over the SADPMR financial management, including operational planning and capital budgeting of the entity.

The Licensing Committee: It oversees the functions of the SADPMR in terms of the following pieces of legislation:• the Diamonds Act (Act 56 of 1986), as amended• Precious Metals Act (Act 37 of 2005)• Diamond Export Levy Act (Act 15 of 2007)• Diamond Export Levy Administration Act (Act 14 2007)

The Audit and Risk Committee: Its overall objective is to assist management with the creation and maintenance of effective control of the environment within the SADPMR. This includes financial control, accounting systems and reporting as well as overseeing the risk management within the SADPMR. The Audit Committee Charter is drawn in terms of paragraph 3.1.8 of the Treasury Regulations read with Section 77 of the PFMA.


4.4 Remuneration of board members

NameRemuneration,

(R)Other,allowance

(R)Other,re-imbursement,

(R)Total,

(R)

Dr S Manese # 340,148, 179,915, 33,599, 553,662

Ms M Noge # 214,750, 11,664, – 226,414

Mr T Ngqeza # 226,619, 20,411,,, – 247,030,

Ms M Ledingwane # 184,954, 7,776, 11,474, 204,204

Ms N Monedi–Noko # 218,033, 26,262, 8,851, 253,146

Ms M Mohlala–Mulaudzi # 96,970, ,960, – 97,930

Mr B Stern # 23,328, 7,776, – 31,104

Ms M Mosing – – 1,147, 1,147

Adv N Van Rooyen # 122,454, – – 122,454

Mr S Mokoena # 46,002, 3,775, 8,506, 58,283

Mr B Deka ## – – – –

Mr M Mnguni ## – – – –

Mr C Nevhutanda ## – – – –

Mr P Bailey # 92,004, 3,888, 58,313, 154,205

Mr K Menoe ## – – – –

Total 1,565,262, 262,427 121,890, 1,949,579# Paid to Board member## Employed by the State

5. RISK MANAGEMENT The Board of the SADPMR, through its Audit and Risk Committee has the overall responsibility to ensure that the SADPMR has and maintains effective, efficient and transparent systems of risk management and internal controls. The committee has an oversight role that is independent and objective in this regard. Furthermore, the Risk Steering Committee, which comprises of senior management ensures that the SADPMR risk management and internal control systems always remain adequate and effective.

Internal Audit and Audit and Risk CommitteesKey activities of the Internal Audit and Risk Committee:• assists management to accomplish objectives through assessing internal controls• provides an assessment of the organisation’s level of risk management, ensuring that controls and governance processes are

operating effectively and efficiently• examines and evaluates the adequacy and effectiveness of the organisation’s internal control systems• identifies and recommends changes that add value• provides sufficient, relevant and useful information that will assist management to ensure the organisation complies with policies,

procedures, laws and regulations.


Objective of internal auditThe objective of the internal audit is to provide assurance that the internal control systems of the SADPMR are effective, efficient and that controls are implemented as required by section 51 and 77 of the PFMA, under the guidance of the Audit and Risk Committee of the Board.

The table below indicates the audit engagements conducted by internal audit:

No. Audit plan engagements Status

1 Human resources Complete Q2

2 Regulatory compliance • Licensing• Diamond inspectorate • Precious metals and beneficiation

CompleteQ1

3 Diamond trade• The DEEC• GDV • Security Risk Management

CompleteQ4

4 Finance• Supply chain management• Asset management• Revenue and expenditure

CompleteQ4

5 Performance Information (quarterly review) CompleteQ4

6 Action plan on Auditor-General queries (FY 2016/2017) CompleteQ4

Key activities of the Audit and Risk Committee are:• review financial statements for completeness, accuracy and to ensure they comply with disclosure requirements• review the risk management framework for identifying, assessing, monitoring and managing significant risks• assess the steps management has taken to minimise significant risks and to ensure that a risk management module is developed

and maintained• monitors the effectiveness and adequacy of internal controls systems of the regulator• monitors the effectiveness and independence of the internal audit function• reviews significant findings, recommendations and corrective actions recommended by internal audit, together with the responses

of management.

Objectives of Audit CommitteeThe overall objective of the audit committee is to assist management with the creation and maintenance of an effective control environment within the SADPMR. This includes financial control, accounting systems and reporting, identifying material risks and giving management the attetion it requires.


6. FRAUD AND CORRUPTION As part of its commitment to fighting corruption, government’s has developed a national anti-corruption strategy, through the establishment of the National Anti-Corruption Hotline (NACH). The SADPMR has therefore adopted the services of the NACH and integrated it as part of its internal systems of combating corruption

Employees are encouraged to call the toll-free number 0800 701 701 and report any acts or intentions to commit acts of corruption. It may also be any act of corruption involving SADPMR employees, services, clients and stakeholders. Similarly, SADPMR clients may make anonymous calls to the NACH number. The number is managed by the Office of the Public Service Commission.

The risk of fraud and corruption is contained in the risk management plan which is continuously reviewed and mitigation matters are put in place.

Minimising conflict of interest The Public Services Regulations of 2016, require employees to disclose their financial interests to the employer. Employees are therefore required to submit financial declaration forms every financial year for the sake of ensuring transparency and accountability.

Members of the Board are also compelled to declare their financial interests annually and register any conflict of interests at every meeting of the Board and Committee.

Code of conductThe SADPMR endorses and applies the principles of good corporate governance and management. The code promotes ethical conduct and a high standard of professional ethics. It is a solid foundation on which the organisation is built.

The code of conduct fosters a culture of supreme integrity and organisational identity. It is intended to guide ethical decision-making within the SADPMR, while ensuring that employees contribute to a conducive working environment. Non-compliance or violation of the code will lead management to take disciplinary action against transgressors, upon which relevant sanctions will be applied in accordance with the code.

Name


Date appointed





Mr T Ngqeza • Chairperson of the Audit and Risk Committee

1 Nov 2016

– • BCom • Strategic

Leadership Programme

Finance and Banking

• SADPMR• Yukoza

Enterprise • T & T Solar

Solution (Pty) Ltd



3

Ms. N Monedi–Noko • Board Deputy Chairperson

• Chairperson of Technical Committee

1 Nov 2016

– • BSc Geology • BSc (Hons)

Geology• MBA (Global

Business and Sustainability)

Geology and Mining

• SADPMR• Luhlaza

Integrated Sustainability Solutions




5

Mr M Mnguni • Board Member

1 Feb 2018

– • B Admin (Hons) • CPMD–MF

Governance • SADPMR• SAFCOL SOC


3

Adv N Van Rooyen • Board Member

1 Nov 2016

– • LLB Legal • SADPMR • Audit and Risk Committee

5


7. HEALTH, SAFETY AND ENVIRONMENTAL ISSUES The entity complies with the Occupational Health and Safety Act and implements bi-annual emergency evacuation drills as part of the contingency plan.

The Health and Safety Committee meets four times a year to monitor any hazards as well as strategies to make the work environment healthier and safer. First aid and fire-fighting training is provided for interventions during emergency situations.

8. COMPANY SECRETARYThe Board of the SADPMR is appointed in terms of Section 6 of the Diamonds Act, as amended, and is assisted by the Company Secretary. The Company Secretary coordinates the following on behalf of the Board: • Annual schedule and compliance calendar• Overall administrative support and record keeping of all proceedings of meetings • Advice and guidance on corporate governance matters • Continuance, training on corporate governance principles

The above function is carried out in accordance to the Diamonds Act, PFMA and King Report IV on Principles of Good Corporate Governance.

The Company Secretary ensures that the Board reviews and approves all quarterly and annual performance reports, quarterly and annual financial results, five-year Strategic Plans, mid-term expenditure framework and Annual Report. It is the responsibility of the Company Secretary to submit the approved documents to the Executive Authority, as required by the PFMA.

HUMAN RESOURCESMANAGEMENT

PART D



1. INTRODUCTION The total staff complement of SADPMR during the year under review was 122, with 72 female and 50 male employees. Eight interns were appointed, compromising of three males and five females to acquire work experience in Licensing, Diamonds Inspectorate, Precious Metals and Beneficiation, DEEC, Finance and ICT divisions.

The SADPMR continues to develop its employee’s skills. During the period under review, eight bursaries in various study fields were awarded to employees. Employees also attended short courses to advance skills according to the personal development plans (PDP).

Skills awareness programmes and career guidance workshops were conducted for high school learners.

2. HUMAN RESOURCES OVERSIGHT STATISTICS 2.1 Personnel cost by programme/activity/objectiveTable 1, illustrates the personnel costs per programme. The total number includes 8 Interns, 3 terminated personnel and 1 WGM Chairperson.

Table: 1

ProgrammeTotal expenditure

for the entityPersonnel

expenditurePersonnel exp as a

% of total (R’000) No. of employees

Average personnelcost per employee

(R’000)

Administration 64,675,551 42,166,510 65.2% 69 611,109

Diamond trade 13,717,523 12,315,504 89.8% 19 648,184

Regulatory compliance

24,633,061 23,474,307 95.3% 45 521,651

2.2 Personnel cost by salary bandTable 2, demonstrates the personnel costs per salary band. The total number includes 8 Interns, 3 terminated personnel and 1 WGM Chairperson.

Table:2

Level Personnel

expenditurePersonnel exp as a %

of total cost (R’000)No. of

employees

Average personnel costper employee

(R’000)

Top management 8,284,239 10.6% 4 2,071,060

Senior management 11,348,591 14.6% 9 1,260,955

Professional qualified 25,245,137 32.4% 31 814,359

Skilled 21,632,163 27.7% 45 480,715

Semi-skilled 9,171,676 11.8% 37 247,883

Unskilled 2,274,516 2.9% 7 324,931

Total 77,956,321 100%, 133 5,199,902

*WGM chairperson.


2.3 Performance rewards The table below illustrates the percentages of the performance rewards paid to employees, from the personnel expenditure:

Table: 3

Level Performance rewardsPersonnel expenditure

(R’000)

% of Performancerewards to total

personnel costs (R’000)Top management 358,396 8,284,239 4.3%Senior management 617,762 11,348,591 5.4%Professional qualified 1,834,439 25,245,137 7.3%Skilled 1,682,955 21,632,163 7.8%Semi-skilled 535,656 8,412,969 5.8%Unskilled 111,397 1,515,809 4.9%Total 5,140,605 77,956,321

2.4 Training costTable 4, shows the personnel training and bursaries expenditure per programme.

Table: 4

Programme

Personnelexpenditure

(R’000)

Trainingexpenditure

(R’000)

Trainingexpenditure as

a % of personnel cost (R’000)

No. of employees

Averagepersonnel costper employee

(R’000)

Administration 42,166,510 108,281 0.3% 13 8,329

Diamond trade 12,316,504 89,317 0.7% 4 22,329

Regulatory compliance 23,474,307 121,671 0.5% 10 12,167

2.5 Internship programmeTable 5, illustrates the total number of interns appointment for 1 year internship programme. In total 8 interns were appointed in April 2018 however 1 female resigned in October 2018 and 1 male resigned in February 2019.

Table 5:

Male Female Foreign nationals

Total

A C I W A C I W Male Female

Internship programme 2 0 0 0 4 0 0 0 0 0 6

2.6 Employment and vacanciesTable 6, indicates number of approved, filled and vacant positions per programme. The vacant positions were advertised and potential candidates for 2 executive management level were recommended for appointment. The remaining posts for non-management will be filled during 2019/2020 financial year.

Table: 6

Programme

2018/2019No. of employee

(R’000)2018/2019

Approved posts2018/2019

No. of employees2018/2019

Vacancies % of

Vacancies

Administration 37,569,805 71 64 7* 9.8%

Diamond trade 12,452,121 19 17 2* 10.5%

Regulatory compliance 23,382,154 40 40 0 0%


Workforce profile As of 31 March 2019, the employment equity staffing ratios stood at 98.4% blacks to 1.6% whites; 57.4% females to 42.6% males; and 46.7% core function to 52.5% support function staff. The SADPMR headcount is 122 employees as indicated in Table 7.

Table: 7

Occupational levels

Male FemaleForeign

nationals

TotalA C I W A C I W Male Female

Top management 3 0 0 0 1 0 0 0 0 0 4

Senior management 3 0 1 0 4 0 0 0 0 0 8

Professionally qualified and experienced specialists and mid-management

15 0 1 0 13 1 0 1 0 0 31

Skilled technical and academically qualified workers, junior management, supervisors, foremen, and superintendents

12 0 0 1 27 2 2 0 0 0 44

Semi-skilled and discretionary decision making

11 0 0 0 15 1 0 0 0 0 27

Unskilled and defined decision making

2 0 0 0 5 0 0 0 0 0 7

Total permanent 46 0 2 1 65 4 2 1 0 0 121

Temporary employees 1* 0 0 0 0 0 0 0 0 0 1

Grand total 47 0 2 1 65 4 2 1 0 0 122

*WGM Chairperson

2.7 Employment changes Table 8, explains number of full-time personnel employed at the beginning of financial year, terminations and appointment at the end of financial year as per salary band. Interns and WGM Chairperson are not included.

Table: 8

Salary bandEmployment at

beginning of period Appointments Terminations Employment at end of period

Top management 4 0 0 4

Senior management 8 0 0 8

Professional qualified 30 1 0 31

Skilled 45 0 1 44

Semi-skilled 25 2 0 27

Unskilled 7 0 0 7

Total 119 3 1 121


2.8 Reasons for staff leaving Table 9, demonstrates number of terminated personnel during the year under review.

Reason Number

Death 1

Resignation 2

Dismissal 0

Retirement 0

Ill health 0

Expiry of contract 0

Other 0

Total 3

2.9 Labour relations: misconduct and disciplinary action

Nature of disciplinary action Number

Verbal warning 2

Written warning 5

Final written warning 1

Dismissal 0

2.10 Equity target and employment equity status Tables 10, 11 and 12 outline number of personnel current employment equity status and equity targets as per occupational levels.

Table: 10

Levels

Female

African Coloured Indian White

Current Target Current Target Current Target Current Target

Top management 1 2 0 0 0 0 0 0

Senior management 4 0 0 0 0 0 0 0

Professional qualified 13 0 1 1 0 0 1 0

Skilled 27 1 2 0 2 0 0 0

Semi-skilled 15 1 1 1 0 0 0 0

Unskilled 5 0 0 0 0 0 0 0

Total 65 4 4 2 2 0 1 0


Table: 11

Levels

Male

African Coloured Indian White

Current Target Current Target Current Target Current Target

Top management 3 0 0 0 0 0 0 0

Senior management 3 0 0 0 1 0 0 0

Professional qualified 15 0 0 1 1 0 1 0

Skilled 12 0 0 0 0 0 0 0

Semi-skilled 11 0 0 0 0 0 0 0

Unskilled 2 0 0 0 0 0 0 0

Total 46 0 0 1 2 0 1 0 Table: 12

Levels

Employees with disability

Male Female

Current Target Current Target

Top management 0 0 0 0

Senior management 0 0 0 0

Professional qualified 0 0 0 0

Skilled 0 0 0 1

Semi-skilled 1 0 0 1

Unskilled 0 0 0 0

Total 1 0 0 2


FINANCIALINFORMATION

PART E


REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTSOpinion 1. I have audited the financial statements of the South African Diamond and Precious Metals Regulator (SADPMR) set out on pages

62 to 92 which comprise the statement of financial position as at 31 March 2019, the statement of financial performance, statement of changes in net assets, statement of cash flows, budget statement for the year then ended, as well as the notes to the financial statements, including a summary of significant accounting policies.

2. In my opinion, the financial statements present fairly, in all material respects, the financial position of the SADPMR as at 31 March 2019, and its financial performance and cash flows for the year then ended in accordance with the South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP), and the requirements of the Public Finance Management Act of South Africa, 1999 (Act no.1 of 1999) (PFMA) and the Diamonds Amendment Act, 2005 (Act no. 29 of 2005) (DAA).

Basis for opinion 3. I conducted my audit in accordance with the International Standards on Auditing (ISAs). My responsibilities under those standards

are further described in the auditor-general’s responsibilities for the audit of the financial statements section of this auditor’s report.

4. I am independent of the public entity in accordance with sections 290 and 291 of the International Ethics Standards Board for Accountants’ Code of ethics for professional accountants (IESBA code), parts 1 and 3 of the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) and the ethical requirements that are relevant to my audit in South Africa. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA codes.

5. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Emphasis of matter 6. I draw attention to the matter below. My opinion is not modified in respect of this matter.

Material impairment 7. As disclosed in note 5 to the financial statements, material losses of R3 220 226 was incurred as a result of impairment of

irrecoverable trade debtors.

Responsibilities of the accounting authority for the financial statements 8. The accounting authority is responsible for the preparation and fair presentation of the financial statements in accordance with the SA

Standards of GRAP, the requirements of PFMA and the DAA, and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

9. In preparing the financial statements, the accounting authority is responsible for assessing the South African Diamond and Precious Metals Regulator’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the accounting authority either intends to liquidate the public entity or to cease operations, or has no realistic alternative but to do so.

AUDITOR-GENERAL’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS 10. My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,

whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

11. A further description of my responsibilities for the audit of the financial statements is included in the annexure to this auditor’s report.

Report of the auditor-general to Parliament on the South African Diamond and Precious Metals Regulator Report on the audit of the financial statements


REPORT ON THE AUDIT OF THE ANNUAL PERFORMANCE REPORTIntroduction and scope 12. In accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) and the general notice issued in

terms thereof, I have a responsibility to report material findings on the reported performance information against predetermined objectives for selected programmes presented in the annual performance report. I performed procedures to identify findings but not to gather evidence to express assurance.

13. My procedures address the reported performance information, which must be based on the approved performance planning documents of the entity. I have not evaluated the completeness and appropriateness of the performance measures included in the planning documents. My procedures also did not extend to any disclosures or assertions relating to planned performance strategies and information in respect of future periods that may be included as part of the reported performance information. Accordingly, my findings do not extend to these matters.

14. I evaluated the usefulness and reliability of the reported performance information in accordance with the criteria developed from the performance management and reporting framework, as defined in the general notice, for the following selected programmes presented in the annual performance report of the entity for the year ended 31 March 2019:

Programmes Pages in the annual performance report

Programme 2 – Diamond trade 17

Programme 3 – Regulatory compliance 23

15. I performed procedures to determine whether the reported performance information was properly presented and whether performance was consistent with the approved performance planning documents. I performed further procedures to determine whether the indicators and related targets were measurable and relevant, and assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.

16. The material findings in respect of the usefulness and reliability of the selected objectives are as follows:

Programme 3: Regulatory complianceNumber of Licenses issued within 60 working days based on the completeness of the applications17. The indicator approved in the annual performance was “number of licenses issued within 60 working days based on the

completeness of the applications”. However, the target reported in the annual performance report was “percentage of licenses issued”. Moreover, the approved planned target “75% applications received” was inconsistent with the approved performance indicator that was measured as number of licenses issued.

Number of License renewals processed within 60 working days based on the completeness of the applications 18. The indicator approved in the annual performance report was “number of license renewals processed within 60 working days

based on the completeness of the applications”. However, the target reported in the annual performance report was “percentage of license renewals received”. Moreover, the approved planned target “100% renewal applications received” is inconsistent with the approved performance indicator which was measured as number of licenses issued.

19. I did not raise any material findings on the usefulness and reliability of the reported performance information for this programme:

• Programme 2 – Diamond trade.

Other matters 20. I draw attention to the matters below.

Achievement of planned targets 21. Refer to the annual performance report on pages 17 to 23 for information on the achievement of planned targets for the year

and explanations provided for the under and over achievement of a number of targets. This information should be considered in the context of the material findings on the usefulness and reliability of the reported performance information in paragraphs 17 to 19 of this report.

Adjustment of material misstatements 22. I identified material misstatements in the annual performance report submitted for auditing. These material misstatements were on

the reported performance information of Diamond trade and Regulatory compliance. As management subsequently corrected only some of the misstatements, I raised material findings on the usefulness and reliability of the reported performance information. Those that were not corrected are reported above. Report on the audit of compliance with legislation


Introduction and scope 23. In accordance with the PAA and the general notice issued in terms thereof, I have a responsibility to report material findings on

the compliance of the entity with specific matters in key legislation. I performed procedures to identify findings but not to gather evidence to express assurance.

24. The material finding on compliance with specific matters in key legislations is as follows:

Procurement and contract management 25. Goods and services of a transaction value above R500 000 were procured without inviting competitive bids, as required by

treasury regulation 16A6.1.

OTHER INFORMATION 26. The accounting authority is responsible for the other information. The other information comprises the information included in the

annual report which includes the directors’ report and the audit committee’s report. The other information does not include the financial statements, the auditor’s report and those selected strategic objectives presented in the annual performance report that have been specifically reported in this auditor’s report.

27. My opinion on the financial statements and findings on the reported performance information and compliance with legislation do not cover the other information and I do not express an audit opinion or any form of assurance conclusion thereon.

28. In connection with my audit, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements and the selected strategic objectives presented in the annual performance report, or my knowledge obtained in the audit, or otherwise appears to be materially misstated.

29. I did not receive the other information prior to the date of this auditor’s report. When I do receive and read this information, if I conclude that there is a material misstatement therein, I am required to communicate the matter to those charged with governance and request that the other information be corrected. If the other information is not corrected, I may have to retract this auditor’s report and re-issue an amended report as appropriate. However, if it is corrected this will not be necessary.

INTERNAL CONTROL DEFICIENCIES30. I considered internal control relevant to my audit of the financial statements, reported performance information and compliance

with applicable legislation; however, my objective was not to express any form of assurance on it. The matters reported below are limited to the significant internal control deficiencies that resulted in the findings on the annual performance report and the findings on compliance with legislation included in this report.

31. Management did not ensure that sufficient controls are in place to prepare accurate and complete performance reports that are supported and evidenced by reliable information.

32. Management did not ensure that sufficient controls to monitor compliance with laws and regulations relating to procurement and contract management were implemented.

OTHER REPORTS 33. I draw attention to the following engagements conducted by various parties that have or could potentially have an impact on

the entity’s financial statements, reported performance information and compliance with applicable legislation and other related matters. These reports did not form part of my opinion on the financial statements or my findings on the reported performance information or compliance with legislation.

Investigation 34. An independent consultant investigated an allegation of possible misappropriation of the public entity’s assets at the request of the

public entity, which covered the period 1 April 2018 to 31 March 2019. The investigation concluded on 31 March 2019 and resulted in criminal proceedings against one employee. These proceedings were in progress at the date of this auditor’s report.

Johannesburg31 July 2019


Annexure – Auditor-general’s responsibility for the audit 1. As part of an audit in accordance with the ISAs, I exercise professional judgement and maintain professional scepticism throughout

my audit of the financial statements, and the procedures performed on reported performance information for selected objectives and on the public entity’s compliance with respect to the selected subject matters.

FINANCIAL STATEMENTS 2. In addition to my responsibility for the audit of the financial statements as described in this auditor’s report, I also:• identify and assess the risks of material misstatement of the financial statements whether due to fraud or error, design and perform

audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control

• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the public entity’s internal control

• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the accounting authority

• conclude on the appropriateness of the accounting authority’s use of the going concern basis of accounting in the preparation of the financial statements. I also conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the South African Diamond and Precious Metals Regulator’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial statements about the material uncertainty or, if such disclosures are inadequate, to modify the opinion on the financial statements. My conclusions are based on the information available to me at the date of this auditor’s report. However, future events or conditions may cause a public entity to cease continuing as a going concern

• evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation

COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE 3. I communicate with the accounting authority regarding, among other matters, the planned scope and timing of the audit and

significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

4. I also confirm to the accounting authority that I have complied with relevant ethical requirements regarding independence, and communicate all relationships and other matters that may reasonably be thought to have a bearing on my independence and, where applicable, related safeguards.

SADPMR ANNUAL REPORT 2018/201954 SADPMR ANNUAL REPORT 2018/201954

ANNUAL FINANCIALSTATEMENTS

PART F


Annual Financial Statements for the year ended 31 March 2019

INDEXThe reports and statements set out below comprise the annual financial statements presented to the shareholder:

Accounting Authority’s Responsibilities and Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Statement of Financial Position. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Statement of Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Statement of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Budget Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Segment Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Notes to the Annual Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63


Accounting Authority’s Responsibilities and Approval

The members of the Board are required by the Public Finance Management Act (Act 1 of 1999), as amended, to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is the responsibility of the accounting authority to ensure that the annual financial statements fairly present the state of affairs of the entity as at the end of the financial year and the results of its operations and cash flows for the period then ended. The external auditors were engaged to express an independent opinion on the annual financial statements and were given unrestricted access to all financial records and related data.

The annual financial statements have been prepared in accordance with Standards of Generally Recognised Accounting Practice (GRAP).

The annual financial statements are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The members of the Board acknowledge that they are ultimately responsible for the system of internal financial control established by the entity and place considerable importance on maintaining a strong control environment. To enable the members to meet these responsibilities, the accounting authority sets standards for internal control aimed at reducing the risk of error or deficit in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the entity and all employees are required to maintain the highest ethical standards in ensuring the entity’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the entity is on identifying, assessing, managing and monitoring all known forms of risk across the entity. While operating risk cannot be fully eliminated, the entity endeavours to minimise it by ensuring

that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The members of the Board are of the opinion, based on the information and explanations given by management that the system of internal control provides reasonable assurance that the financial records may be relied on for the reasonable, and not absolute, assurance against material misstatement or deficit.

The members of the Board have reviewed the entity’s cash flow forecast for the year to 31 March 2020 and in the light of this review and the current financial position, they are satisfied that the entity has or has access to adequate resources to continue in operational existence for the foreseeable future.

The Regulator is dependent on the government grants, license, penalties and service fees for the continued funding of its operations. The annual financial statements are prepared on the basis that the Regulator is a going concern and that the Board is primarily responsible for the financial affairs of the entity. The Regulator is supported by the entity’s internal auditors.

The Auditor-General of South Africa is responsible for independently auditing and reporting on the entity’s annual financial statements. The annual financial statements have been examined by the Auditor-General of South Africa.

The annual financial statements set out on pages 4 to 40, which were prepared on the going concern basis, approved by the accounting authority on 30 July 2019 and signed on its behalf by:

Mr. C Khosa Dr S Manese Chief Executive Officer Chairperson


Notes2019

R

Restated2018

R

Assets

Non-current Assets

Property, plant and equipment 2 6,962,157 7,577,409

Intangible assets 3 1,187,802 1,033,373

Total Non-Current Assets 8,149,959 8,610,782

Current Assets

Inventory 4 641,223 567,834

Receivables from exchange transactions 5 5,390,469 5,184,696

Cash and cash equivalents 6 27,496,169 40,470,843

Financial instruments 7 28,944,274 26,852,632

Total Current Assets 62,472,135 73,076,005

Total Assets 70,622,094 81,686,787

Net Assets and Liabilities

Accumulated Surplus 57,006,238 61,515,255

57,006,238 61,515,255

Non-current Liabilities

Finance lease obligations 8 355,285 -

Post retirement medical aid 9 674,000 1,327,000

1,029,285 1,327,000

Current Liabilities

Payables from exchange transactions 10 5,362,767 5,117,679

Provisions 11 4,250,000 7,362,140

Finance lease obligations 8 233,191 -

Deferred income 13 2,500,000 5,833,333

Operating lease liability 12 240,613 531,380

Total Current Liabilities 12,586,571 18,844,532

Total Net Assets and Liabilities 70,622,094 81,686,787

Statement of Financial Position


Notes2019

R

Restated2018

R

Revenue from exchange transactions 51,378,720 46,730,546

Licence, penalty and service fees 46,580,029 42,154,031

Interest income 4,354,770 4,198,280

Other income 14 443,921 378,235

Revenue from non-exchange transactions 62,438,332 59,198,334

Transfer payment (Grant) 59,105,000 55,865,002

WGM Grant 3,333,332 3 333 332

Total operating revenue 113,817,052 105,928,880

Expenditure

Finance costs 85,711 27

Debtors impairment 2,361,225 357,184

Debtors written off – 1,767

Employee costs 18 77,956,321 73,883,429

Depreciation and amortisation 1,548,974 1,750,425

Other operating expenses 17 21,073,904 22,878,292

Total expenditure 103,026,135 98,871,124

Fair value gain 66 73,485

Loss on disposal of property, plant and equipment – (26,895)

Total other income 66 46,590

Surplus for the year 10,790,983 7,104,346

Statement of Financial Performance

Statement of Changes in Net Assets

Figures in RAccumulated

surplus Total

Balance at 1 April 2017 54,410,909 54,410,909

Restated surplus 7,104,346 7,104,346


Correction of prior period error 1,469,713 1,469,713

Balance at 31 March 2018 61,515,255 61,515,255

Balance at 1 April 2018 61,515,255 61,515,255

Surrendered to National Treasury (15,300,000) (15,300,000)


Balance at 31 March 2019 57,006,238 57,006,238


Statement of Cash Flows

Notes2019

R

Restated2018

R

Cash flows from operating activities

Cash receipts from customers, government and others 109,256,509 103,089,720

Transfer payment (Grant) 59,105,000 55,865,002

Other receipts 50,151,509 47,224,718

Cash paid to suppliers and employees (107,705,253) (97,782,761)

Cash generated from operations 20 1,551,256 5,306,959

Interest received 4,104,032 3,977,311

Finance costs (85,711) (27)

Net cash from operating activities 5,569,577 9,284,243

Cash flows from investing activities

Property, plant and equipment acquired (793,613) (334,323)

Intangible assets acquired 3 (294,538) -

Re-investment of interest 7 (2,091,576) (1,945,128)

Net cash flows from investing activities (3,179,727) (2,279,451)

Cash flows from financing activities

(Decrease)/ Increase in defined benefits obligations (653,000) (100,651)

Surrendered to National Treasury (15,300,000) -

Increase/(Decrease) in finance lease obligations 588,476 (5,889)

Cash flows from financing activities (15,364,524) (106,540)

Increase in cash and cash equivalents (12,974,674) 6,898,252

Cash and cash equivalents at beginning of the period 40,470,843 33,572,591

Cash and cash equivalents at end of the period 27,496,169 40,470,843


Budget Statement

Figures in R Actual Budget Variance Variance %

Revenue from exchange transactions 51,378,720 53,385,913 (2,007,193)

Licence, penalty and service fees 46,580,029 49,344,955 (2,764,926) -6 %

Interest received 4,354,770 3,800,000 554,770 15 %

Other Income 443,921 240,958 202,963 84 %

Revenue from non exchange transactions 62,438,332 62,425,766 12,566

Transfer payment (Grant) 59,105,000 59,105,000 - 0 %

WGM Grant 3,333,332 3,320,766 12,566 0 %

Total revenue 113,817,052 115,811,679 (1,994,627)

Expenditure

Administration expenses 166,728 163,463 (3,265) -2 %

Advertising 3,861 3,600 (261) -7 %

Audit Fees 2,538,410 2,489,095 (49,315) -2 %

Board fees 1,844,046 1,694,000 (150,046) -9 %

CSR Programmes 15,500 15,500 - 0 %

Domestic Travel 1,969,093 2,081,822 112,729 5 %

Finance costs 85,711 85,000 (711) -1 %

Hiring of equipment 97,333 97,280 (53) 0 %

Hospitality 113,770 113,678 (92) 0 %

Inspection costs 300,484 325,623 25,139 8 %

Insurance 685,459 763,137 77,678 10 %

International travel 686,456 652,764 (33,692) -5 %

Inventory costs 803,981 960,363 156,382 16 %

Kimberley Process 3,182,802 4,320,766 1,137,964 26 %

Legal fees (1,711,676) - 1,711,676

Licences 983,217 1,217,159 233,942 19 %

Motor vehicle expenses 182,617 175,548 (7,069) -4 %

Office lease - Municipal services 2,456,678 2,713,264 256,586 9 %

Office lease - space and parking 1,308,742 1,302,544 (6,198) 0 %

Post employment benefits - Medical (575,445) 145,125 720,570 497 %

Postage and courier 59,617 74,552 14,935 20 %

Public relations 935,181 933,374 (1,807) 0 %

Recruitment and selection costs 227,124 228,144 1,020 0 %

Repairs and maintenance 524,299 540,577 16,278 3 %

Security 957,377 928,049 (29,328) -3 %

Staff remuneration 78,129,457 84,230,398 6,100,941 7 %

Staff Welfare 220,327 261,936 41,609 16 %

Subscriptions and membership fees 53,174 68,980 15,806 23 %

System support fees 211,628 211,305 (323) 0 %

Telecommunication 1,976,717 2,050,915 74,198 4 %


Budget Statement

Figures in R Actual Budget Variance Variance %

Training and Development 698,965 660,000 (38,965) -6 %

Transformation 27,377 150,000 122,623 82 %

Expenditure (continued)

Venue and Facilities 61,209 133,265 72,056 54 %

Warehousing 68,853 85,992 17,139 20 %

Total expenditure excluding non cash items 99,289,072 109,877,218 10,588,146

Surplus for the year before non cash items 14,527,980 5,934,461 8,593,519

Less non cash expenditure:

Debtors impairment adjustment 2,361,225 - (2,361,225) -100 %

Depreciation and amortisation 1,548,974 1,550,000 1,026 0 %

Fair Value Adjustment (66) - 66 -100 %

Leave pay provision (173,136) 1,285,726 1,458,862 -843 %

Total non cash expenditure 3,736,997 2,835,726 (901,271)

Surplus for the year including non cash expenditure

10,790,983 3,098,735 7,692,248

Variance Explanation

An explanation of the material differences between actual amounts and the budget amounts.

Revenue

Other income 84%The difference emanates from the receivables raised for the recovery of a loss incurred through misconduct.

Expenditure

Kimberly process: 26%The difference emanates from the reprioritisation of international engagements and technical assistance aligned with the chairing of the Working Group on Monitoring.

Post-employment benefits - Medical: 497%

The difference is due to the termination of benefits for a pensioner who passed-on during the year under review.

Transformation: 82%The difference emanates from the under spending on travel expenses as the focus was on the licensees located in and around Gauteng.

Venues and Facilities: 54%The difference is due to the reduction in hiring of venues for conferences and workshops. Most of the workshops were done in-house and in collaboration with the Department of Mineral Resources.


Segment Reportingfor the year ended 31 March 2019

Figures in RDiamond

tradeRegulatorycompliance Other

RestatedTotal

Revenue

Revenue from non–exchange transactions – 62,438,332 62,438,332

Revenue from exchange transactions 34,096,389 12,569,442 4,712,889 51,378,720

Total segment revenue 34,096,389 12,569,442 67,151,221 113,817,052

Expenses

Salaries and wages 12,315,504 23,474,307 42,166,510 77,956,321

Depreciation and amortisation – – 1,548,974 1,548,974

Other expenses 1,402,019 1,158,754 18,598,842 21,159,615

Total segment expenses 13,717,523 24,633,061 62,314,326 100,664,910

Assets

Segmental assets 1,628,361 627,862 68,365,871 70,622,094

Liabilities – – 70,622,094 70,622,094

Capital expenditure – – 1,088,151 1,088,151

Non–cash items excluding depreciation – – 2,361,225 2,361,225

for the year ended 31 March 2018

Revenue

Revenue from non–exchange transactions – – 59,198,334 59,198,334

Revenue from exchange transactions 38,392,241 3,854,190 4,484,115 46,730,546

Total segment revenue 38,392,241 3,854,190 63,682,449 105,928,880

Expenses

Salaries and wages 11,439,531 22,272,702 40,171,196 73,883,429

Depreciation and amortisation – – 1,750,425 1,750,425

Other expenses 5,407,217 1,142,697 16,328,405 22,878,319

Total segment expenses 16,846,748 23,415,399 58,250,026 98,512,173

Assets

Segmental assets 1,816,272 376,382 79,494,133 81,686,787

Liabilities – -81,686,787 81,686,787

Capital expenditure – -334,323 334,323

Non–cash items excluding depreciation – -358,951 358,951


1. ACCOUNTING POLICIES 1.1 Basis of preparationThe financial statements have been prepared in accordance with the South African Standards of Generally Recognised Accounting Practice (GRAP), as issued by the Accounting Standards Board in accordance with Section 91(1) of the Public Finance Management Act, (Act No 1 of 1999).

The annual financial statements have been prepared on an accrual basis of accounting and incorporate the historical cost conventions as the basis of measurement, except where specified otherwise.

The principal accounting policies, applied in the preparation of these annual financial statements, are set out below. These accounting policies are consistent with those applied in the preparation of the prior year annual financial statements, unless specified otherwise.

1.2 PRESENTATION CURRENCY AND FUNCTIONAL CURRENCYThese annual financial statements are presented in South African Rand, which is the functional currency of the entity.

Going concern assumptionThese annual financial statements were prepared based on the expectation that the entity will continue to operate as a going concern in the foreseeable future.

Use of estimates and judgementsPreparation of financial statements in conformity with GRAP requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and expenditure. Actual results may differ from estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

1.3 RECOGNITION AND MEASUREMENTRevenue recognitionRevenue from exchange transactionsRevenue from the sale of diamond books and registers is recognised at the date of sale.

Revenue from licence fees is recognised upon receipt of applications.

Revenue from service fees is recognised when services are completed and billed.

Revenue from non–exchange transactionsTransfer payments from the Department of Mineral Resources (DMR) are recognised as income over the periods necessary to match them with the related costs that they are intended to compensate.

Interest receivedInterest received is recognised on a time proportionate basis using the effective interest rate method.

Property, plant and equipmentItems of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Notes to the Annual Financial Statements


Depreciation is charged to surplus/deficit so as to write off the cost or valuation of assets over their estimated useful lives, using the straight line method.

Useful lives and residual values are assessed on an annual basis.

The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Trade discounts and rebates are deducted in arriving at the cost. Where an asset is acquired at no or nominal cost, its costs is its fair value as at the date of acquisition.

The estimated useful lives of property, plant and equipment are currently as follows:

Item YearsFurniture and fittings 20 yearsMotor vehicles 10 yearsOffice equipment 10 yearsComputer equipment 5 yearsSecurity equipment – Safes 50 yearsSecurity systems – other 10 yearsLeased office equipment Shorter of the lease term or useful lifeLeasehold improvements Shorter of the lease term or useful life

The residual value, as well as the useful life and depreciation method of each asset are reviewed at the end of each reporting date. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.

Items of property, plant and equipment are derecognised when the asset is disposed of or when there are no further economic benefits or service potential expected from the use of the asset.

During the year under review, assets that had zero carrying amount and were set aside for disposal, were brought back to circulation. The delay in moving to new offices, budget reprioritisation and the implementation of cost containment measures were some of the factors. Management has assessed the useful lives of the assets. This exercise has noted the useful lives of some of the assets being more than the revised ones which resulted in some inconsistencies with the above policy.

A gain or a loss arising from the derecognition of an item of property, plant and equipment is included in the surplus or deficit when the item is derecognised. A gain or a loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

Subsequent expenditure incurred on items of property, plant and equipment is only capitalised to the extent that such expenditure enhances the value or previous capacity of those assets. Repairs and maintenance not deemed to enhance the economic benefit or service potential of items of property, plant and equipment are expensed as incurred.

Intangible assetsIntangible assets are stated at cost less accumulated amortisation.

Amortisation is charged to surplus/deficit so as to write off the cost or valuation of intangible assets over their estimated useful lives, using the straight line method.



The amortisation period and the amortisation method for intangible assets are reviewed on an annual basis.The cost of an item of intangible assets is the purchase price and other costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Trade discounts and rebates are deducted in arriving at the cost. Where an asset is acquired at no or nominal cost, its costs is its fair value as at the date of acquisition.

An intangible asset shall be derecognised on disposal or when no future economic benefits or service potential are expected from its use or disposal.

A gain or a loss arising from the derecognition of an intangible asset is included in the surplus or deficit when the item is derecognised. A gain or a loss arising from the derecognition of an intangible asset is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

Item YearsSoftware owned 3 yearsLeased software Shorter of the lease term or useful life

LeasesFinance leases – lesseeFinance leases are recognised as assets in the statement of financial position at amounts equal to the lower of fair value of the leased property and the present value of the minimum lease payments. The corresponding lease commitments are recognised in the statement of financial position as a finance lease obligation.

The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the leases.

Minimum lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate on the remaining balance of the liability.

Operating leases lesseeOperating lease payments are recognised as an expense in the statement of financial performance on a straight line basis over the lease term. The difference between the actual amounts and straight lined amounts is recognised as an operating lease asset or liability in the statement of financial position.

Provisions and contingenciesProvisionsProvisions are recognised when the SADPMR has a present legal or constructive obligation as a result of past events, for which it is probable that an outflow of economic benefits or service potential will be required to settle the obligation, and a reliable estimate can be made of the obligation.

All provisions of the SADPMR are short term in nature and thus ignore the effect of discounting.

Contingent liabilitiesThese are liabilities that will only become payable by the SADPMR should some other event occur.



Due to the uncertainty of the occurrence or non–occurrence of such events, (the actual amount of the liability may not have been established), these are not accounted for in the statement of financial position and they are disclosed in the notes to the financial statements.

Contingent assetsThese are possible assets that arise from past events, and whose existence will be confirmed only by the occurrence or non–occurrence of one or more uncertain future events not wholly within the control of the entity.

Due to the uncertainty of the occurrence or non occurrence of such events, they are not accounted for in the statement of financial position and they are only disclosed in the notes to the financial statements.

InventoryInventory consists of broker’s notes, certificates and registers held for resale and consumables held for office use.

Subsequent measurementInventories shall be measured at the lower of cost or current replacement cost where they are held for distribution at no charge or for a nominal charge.

Cost is determined on the following basisBroker’s notes, certificates, registers and consumables are valued using the first–in–first–out basis.

Cost of salesWhen inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write–down, adjustments and all deficits of inventories are recognised in the surplus or deficit.

1.3.1 FINANCIAL INSTRUMENTSInitial recognition and measurementAll financial instruments are initially recognised at fair value, including transaction costs, with the exception of financial instruments measured at fair value through surplus or deficit, which are valued at fair value excluding transaction costs.

• Trade and other receivables from exchange transactionsTrade and other receivables from exchange transactions are stated at amortised cost, which, due to their short term nature, closely approximate their fair value.

Other receivables consist of deposits relating to the leasing of premises and legal fees recoverable.

• Trade and other payables from exchange transactionsTrade and other payables from exchange transactions are stated at amortised cost, which, due to their short term nature, closely approximate their fair value.

Other payables consist of export levy payable to the South African Revenue Services (SARS). These payables are stated at cost.

• Financial instruments at fair valueFinancial instruments at fair value are subsequently measured at fair value and the fair value adjustments are recognised in the surplus or deficit.



• Cash and cash equivalentsCash and cash equivalents comprise cash at bank, cash on hand and deposits held on call. Cash and cash equivalents are stated at amortised cost, which, due to their short term nature, closely approximate their fair value.

Financial liabilities• OffsettingFinancial assets and financial liabilities have not been offset in the Statement of Financial Position.

• Impairment of financial assetsAt the end of each reporting period the entity assesses all financial assets, other than those at fair value through surplus or deficit, to determine whether there is objective evidence that a financial asset or group of financial assets has been impaired.

The carrying amount of the receivable is reduced through the use of an allowance account. Impaired debts are derecognised when they are assessed as irrecoverable.

For amounts due to the entity, significant financial difficulties of the debtor e.g.defaulting on payment terms are all considered indicators of impairment. As the indicators are subject to uncertainty and as such may change in future financial periods. Such changes in estimates may have the effect of decreasing impairment losses recognised. Impairment losses are recognised in surplus or deficit.

• DerecognitionA financial asset (or, where applicable, a part of a financial asset) is derecognised when:– The rights to receive cash flow from the asset have expired;– The entity retains the right to receive cash flow from the asset, but has assumed the obligation to pay them in full without material

delay to a third party under a “pass–through” arrangement; or– The entity has transferred its right to receive cash flows from the asset and either • Has transferred substantially all the risks and rewards of the assets, or • Has neither transferred nor retained substantially all the risks and rewards of the assets, has transferred control of the asset,

A financial liability is derecognised when an obligation under the liability is discharged, cancelled or expires. On derecognition, the difference between the carrying amount of the financial assets and the sum of the proceeds receivable and any prior adjustment to reflect the fair value of the asset that had been reported in net assets, is included in the surplus or deficit for the period.

AccrualsAccruals are recognised as liabilities when the entity has taken receipt of the related goods or services without a corresponding payment.

The amount of accruals is the present value of the expenditure required to settle the obligation. Accruals are not recognised for future operating deficits.

CommitmentsCommitments are not recognised in the Statement of Financial Position and Statement of Financial Performance but are included in the disclosure notes of the annual financial statements. The Commitments amount represents the net of contract amount less payments and acruals up to the date of reporting

Employee benefitsEmployee benefits are all forms of consideration given by the Regulator in exchange for service rendered.



Post–employment BenefitsPost–employment benefits are benefits which are payable after the completion of employment.

Post–employment benefit plans are formal or informal arrangements under which the SADPMR provides post employment benefits for employees.

The SADPMR uses the cost to company remuneration policy and it expects its employees to make their own provisions for post–retirement benefits under this policy. Only two retired employees received the post–employment medical contributions and this is disclosed under note 9 to the financial statements.

Valuation methodThe actuarial valuation method used to value liabilities is the Projected Unit Credit Method prescribed by the accounting standards.

The most significant assumptions used for the current valuation are outlined below.

2019 2018

Consumer Price Inflation 5.61% 5.75%

Health care cost inflation 7.11% 7.25%

Discount rate 9.09% 8.09%

Real discount 1.85% 0.78% BudgetsBudget information in accordance with GRAP 1 and 24, has been provided in a separate statement of comparison of budget and actual performance. The operational budget is monitored against actual expenditure incurred.

Standards and Pronouncements comprising the GRAP Financial Reporting FrameworkThe following standards have been approved but are not yet effective as at 31 March 2019. The impact that these standards will have on the entity is detailed below. A list of these standards is provided below:

GRAP Standards Impact Effective date

GRAP 20 Related partydisclosures

The SADPMR complies with the standard requirements. 1–Apr–19

GRAP 32 Service ConcessionArrangements:Grantor

This standard will have no impact as the SADPMR does not engage in service concession arrangements.

1–Apr–19

GRAP 108 Statutory Receivables This standard will have an impact on the entity, as there are receivables raised on the basis of legislative requirements.

1–Apr–19

GRAP 109 Accounting byPrincipals and Agents

This will have an impact on the entity, if the Executive Authority engages in these types of transactions

1–Apr–19

Segment reportingThe entity is organised and reports to management on the basis of three functional areas: Diamond trade , Regulatory compliance and other services. The segments were organised around the type of service delivered. Management uses these same segments for determining strategic objectives. Segments were not aggregated for reporting purposes.



Information reported on these segments is used by management as a basis for evaluating the segments’ performances and for making decisions about the allocation of resources. The disclosure of information about these segments is also considered appropriate for external reporting purposes.

Segment results reported include items directly attributable to the segments as well as those that can be allocated on a reasonable basis.

MeasurementThe accounting policies of the segments are the same as those described in the summary of significant accounting policies

Material losses through criminal conductIn terms of section 55(2)(b)(i) of the Public Finance Management Act, 1999 the financial statements must include particulars of any material losses through criminal conduct.

Irregular expenditureIrregular expenditure means expenditure, incurred in contravention of, or that is not in accordance with a requirement of any applicable legislation, including:• The Public Finance Management Act, or• State Tender Board Act, 1968

Fruitless and wasteful expenditureFruitless and wasteful expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised. All irregular, fruitless and wasteful expenditure is charged against income in the period in which they are incurred.

Prior period errorsWhere material accounting errors, which relate to prior periods, have been identified in the current year, the correction is made retrospectively as far as is practicable and the prior year comparatives are restated accordingly.

2. Property, plant and equipment

Owned and leased assets

CostR

Accumulateddepreciation

R

31 March 2019Carrying value

RCost

R


R

Restated31 March 2018Carrying value

R

Computer equipment 6,590,027 (5,570,476) 1,019,551 6,590,027 (5,284,030) 1,305,997

Furniture and fittings 3,989,943 (1,956,806) 2,033,137 3,970,221 (1,815,269) 2,154,952

Leased office equipment 738,416 (184,604) 553,812 346,986 (346,986) –

Leasehold improvements 2,189,487 (2,004,778) 184,709 2,189,487 (1,855,074) 334,413

Motor vehicles 1,962,786 (1,567,075) 395,711 1,962,786 (1,412,443) 550,343

Office equipment 4,043,210 (2,359,743) 1,683,467 4,007,734 (2,056,632) 1,951,102

Security systems, machinery and safes

4,374,521 (3,282,751) 1,091,770 4,374,521 (3,093,919) 1,280,602

23,888,390 (16,926,233) 6,962,157 23,441,762 (15,864,353) 7,577,409

The carrying amounts of property, plant and equipment can be reconciled as follows:




Carrying valueat beginning

of yearR

AdditionsR

DisposalsR

DepreciationR


R

Computer equipment 1,305,997 – – (286,446) 1,019,551

Furniture and fittings 2,154,952 19,723 – (141,538) 2,033,137

Leased office equipment – 738,416 – (184,604) 553,812

Leasehold improvements 334,413 – – (149,704) 184,709

Motor vehicles 550,343 – – (154,632) 395,711

Office equipment 1,951,102 35,474 – (303,109) 1,683,467

Security systems, machinery and safes 1,280,602 – – (188,832) 1,091,770

7,577,409 793,613 – (1,408,865) 6,962,157


Carrying value at beginning

of yearR

AdditionsR

DisposalsR

DepreciationR


R

Computer equipment 1,490,661 127,992 (4,272) (308,384) 1,305,997

Furniture and fittings 2,250,018 48,213 (4,159) (139,120) 2,154,952

Leased office equipment 5,073 – – (5,073) –

Leasehold improvements 441,010 94,868 – (201,465) 334,413

Motor vehicles 659,222 – – (108,879) 550,343

Office equipment 2,200,559 63,250 (11,330) (301,377) 1,951,102

Security systems, machinery and safes 1,477,125 – (7,133) (189,390) 1,280,602

8,523,668 334,323 (26,894) (1,253,688) 7,577,409

Obligations under finance leases are secured by the lessors’ title to the leased assets.

3. INTANGIBLE ASSETS

Owned and leased assetsCost

R


R


RCost

R


R

Restated 31 March 2018Carrying value

R

Computer software – owned 4,361,516 (3,173,714) 1,187,802 4,066,976 (3,033,603) 1,033,373

4,361,516 (3,173,714) 1,187,802 4,066,976 (3,033,603) 1,033,373

The carrying amounts of intangible assets can be reconciled as follows:





of yearR

AdditionsR

AmortisationR

DisposalsR


R

Computer software – owned 1,033,373 294,538 (140,109) – 1,187,802

1,033,373 294,538 (140,109) – 1,187,802



of yearR

AdditionsR

AmortisationR

DisposalsR


R

Computer software – owned 1,530,111 – (496,738) – 1,033,373

1,530,111 – (496,738) – 1,033,373

2019R

Restated2018

R

4. INVENTORYInventory comprises:

Broker’s notes, certificates and registers 155,093 74,483

Office stationery and cartridges 177,807 152,201

Tamper proof stationery 308,323 341,150

641,223 567,834

Inventory consists of items on hand as at the end of the reporting year. The cost of inventory recognised as an expense is included under other operating expenses.

5. RECEIVABLES FROM EXCHANGE TRANSACTIONSReceivables 6,791,764 5,053,141

Receivables impairment (3,220,226) (859,001)

Interest receivable 250,738 220,969

Other receivables 492,837 199,208

Prepaid expenses 797,381 456,967

Staff debtors 277,975 113,412

5,390,469 5,184,696

Staff debtors consists of unpaid leave days, study fees and telecommunication costs.

5.1 Reconciliation for debtors impairment

Opening balance 859,001 2,413,317

Raised during the period 2,361,225 358,951

Amounts written off – (1,913,267)

Closing balance 3,220,226 859,001



2019R

Restated2018

R

6. CASH AND CASH EQUIVALENTSCash on hand 36,338 9,894

Call accounts 26,611,798 39,642,910

Current accounts 848,033 818,039

27,496,169 40,470,843

7. FINANCIAL INSTRUMENTS AT FAIR VALUEType: Financial instruments held for trading

Opening balance 26,852,632 24,834,019

Interest received 2,091,576 1,945,128

Fair value adjustment 66 73,485

Closing balance 28,944,274 26,852,632

8. FINANCE LEASE OBLIGATIONSLease of photo copiers.

Repayable within three years 355,285 –

Repayable within one year, transferred to current liabilities 233,191 –

588,476 –

Reconciliation between the total of the minimum lease payments and the present value of lease payments:

Minimum lease payments 706,955 –

– No later than 1 year 314,202 _

– Later than 1 year and no later than 5 years 392,753 _

Future finance charges on finance leases (118,479) _

588,476 _

It is the practice of the SADPMR to lease certain items of office equipment and related software under finance lease.

9. POST RETIREMENT MEDICAL AIDSADPMR has an obligation to provide medical benefits to certain pensioners and dependents. These liabilities have been provided for in full, calculated on an actuarial basis. These liabilities are unfunded. Periodic valuation of this obligation is carried out by an independent actuary, the latest being 31 March 2019.

The amounts recognised in the statement of financial position arising from the obligation in respect of the post–retirement medical plan is as follows:



2019R

Restated2018

R

Post–retirement benefit obligations 674,000 1,327,000

Reconciliation of the liability

Opening balance 1,327,000 1,427,651

Interest cost 102,000 119,000

Actuarial gain (677,445) (85,273)

Contribution payments (77,555) (134,378)

674,000 1,327,000

Net expense Recognised in the statement of financial performance

Interest cost 102,000 119,000

Actuarial gain (677,445) (85,273)

(575,445) 33,727

Contribution payments (77,555) (134,378)

10. PAYABLES FROM EXCHANGE TRANSACTIONSTrade creditors 306,944 427,495

Accruals 4,670,136 4,340,432

Other payables 363,398 341,339

Payroll third party payables 22,289 8,413

5,362,767 5,117,679

All payables are paid within 30 days, where possible and where there are no disputes.Payables are not secured.

11. PROVISIONSLegal fees 250,000 2,059,950

Performance bonus 4,000,000 5,302,190

4,250,000 7,362,140

Reconciliation of legal fees provision:

Carrying amount at the beginning of the year 2,059,950 5,208,408

Provision reversed (1,711,676) (1,138,856)

Utilised during the year (98,274) (2,009,602)

Carrying amount at end of the year 250,000 2,059,950

Reconciliation of provision for performance bonus:

Carrying amount at the beginning of the year 5,302,190 5,453,061

Utilised during the year (5,205,540) (5,254,050)

Reversed during the year (96,650) –

Additions 4,000,000 5,103,179

Carrying amount at end of the year 4,000,000 5,302,190



2019R

Restated2018

R

12. OBLIGATIONS UNDER OPERATING LEASES

12.1 At the statement of financial position date, the company has outstanding

commitments under non–cancellable operating leases that fall due as follows:

Johannesburg Office 2,055,358 5,884,741

– Not later than one year 2,055,358 2,312,883

– Greater than one year, less than five – 3,571,858

The SADPMR entered into a 5 year lease agreement with Redefine Properties Ltd, forthe rental of office space in Jewel City, Johannesburg. The lease commenced on 01September 2011 and was meant to terminate on 31 August 2016. The initial leasepayment was R112 731, with additional charges for parking at R26 791 and security atR3 420 per month. The lease agreement was amended resulting in reduction in rentalcharges from September 2015 and it was extended to 31 August 2020. The leaseprovides for an escalation of 8% per annum on rental, parking and security charges. Asecond addendum to the lease was effected from February 2019, by adjusting thetermination date to 31 January 2020.

Kimberly Office 3,822,693 213,401

– Not later than one year 678,132 213,401

– Greater than one year, less than five 3,144,561 –

The SADPMR entered into a 5 year lease agreement with ELS Properties CC, for the

rental of Kimberly office. The lease commenced on 01 April 2019 and terminates on 31

March 2024. The lease provides for an escalation of rental of 6% per annum and the

current lease payment is R56 511.00 per month.

Total lease obligations:

– Not later than one year 2,733,490 2,526,284

– Greater than one year, less than five 3,144,561 3,571,858

5,878,051 6,098,142

12.2 Payables from operating leases reflect the difference between the actual lease payments and the stratight-lined amounts

Lease liability 240,613 531,380

13. DEFERRED INCOMEGrant Received (WGM) 2,500,000 5,833,333

Deferred income relates to the payment received from the Department of MineralResources for chairing the Kimberly Process Certification Scheme (KPCS) : WorkingGroup on Monitoring



2019R

Restated2018

R

14. OTHER INCOMEAdministration Fee (client fees) 7,277 11,160

Bad Debts Recovered 76,680 118,784

Discount Received 60,267 62,285

Other income 201,897 63,106

Sale of diamond books and registers 85,800 92,400

Sale of tender documents 12,000 30,500

443,921 378,235

15. AUDITORS’ FEESExternal audit 2,538,410 1,560,726

16. BOARD EXPENSESMeeting fees 1,565,262 1,709,511

Other fees 262,427 233,887

1,827,689 1,943,398

Other fees relates to WGM and remuneration other than Board activities

17. OTHER OPERATING EXPENSESAdministration expenses 166,728 143,260

Advertising 3,861 16,917

Audit Fees 2,538,410 1,560,726

Board fees 1,844,046 1,659,195

CSR Programmes 15,500 14,600

Domestic Travel 1,969,093 1,067,363

Hiring of equipment 97,333 135,530

Hospitality 113,770 63,783

Inspection costs 300,484 477,148

Insurance 685,459 1,423,765

International travel 686,456 2,100,409

Inventory costs 803,981 849,739

Kimberley Process 3,182,802 4,340,481

Legal fees (1,711,676) (1,138,856)

Licences 983,217 777,672

Motor vehicle expenses 182,617 191,852

Office lease 2,456,678 2,565,641

Office lease municipal services 1,308,742 1,048,463

Post employment benefits – Medical (575,445) 33,727

Postage and courier 59,617 (8,075)



2019R

Restated2018

R

17. OTHER OPERATING EXPENSES (continued)Public relations 935,181 768,630

Recruitment and selection costs 227,124 256,143

Repairs and maintenance 524,299 653,339

Security 957,377 901,100

Staff Welfare 220,327 22,685

Subscriptions and membership fees 53,174 46,304

System support fees 211,628 107,730

Telecommunication 1,976,717 2,100,060

Training and Development 698,965 552,887

Transformation 27,377 –

Venue and Facilities 61,209 67,983

Warehousing 68,853 78,091

21,073,904 22,878,292

18. EMPLOYEE COSTSBasic salaries 62,603,642 57,516,835

Bonus –13th cheque 2,030,722 1,952,001

Compensation of injury and disease – COID (48,467) 194,287

Disability cover 882,857 796,828

Housing allowance 96,000 100,000

Leave pay provision (173,136) 326,281

Medical aid – entity contributions 2,499,076 2,212,558

Performance bonus 3,903,350 5,103,160

Pension – entity contribution 5,143,193 4,724,903

Skills Development Levy (SDL) 698,962 643,204

Travel allowance 101,143 96,000

Unemployment Insurance Fund (UIF) 218,979 217,372

77,956,321 73,883,429

19. EXECUTIVE AND NON– EXECUTIVE MEMBERS’ REMUNERATIONX Mbonambi – Acting Chief Executive Officer #

Acting allowance 155,664 654,407

155,664 654,407

L Nkhumishe – GM: Corporate Services

Basic Salary 1,663,269 1,553,263


Performance bonus 112,313 156,716

UIF, SDL, Medical and Pension fund 194,164 177,603

1,990,049 1,905,956



2019R

Restated2018

R

M. Mononela – GM: Legal and Compliance

Basic Salary 1,637,779 1,582,753



1,876,877 1,747,935

NC Khosa – GM: Regulatory Compliance ##


Basic Salary 1,664,878 1,543,415




2,268,143 1,960,013

C Mlondo – GM: Diamond Trade

Basic Salary 1,622,055 1,511,142




1,994,902 1,877,392

K Sibanyoni – Company Secretary

Basic Salary 1,131,686 1,053,814




1,347,625 1,293,329

A Damarupurshad – Manager: Precious Metals & Beneficiation

Basic Salary 1,193,307 1,112,290




1,446,237 1,387,007

J Lenka – Manager: Diamonds

Basic Salary 1,241,150 1,155,600




1,449,421 1,388,602



2019R

Restated2018

R

M Babu – Manager: Licencing (Compliance)

Basic Salary 1,150,227 1,066,332




1,408,057 1,361,597

S Mandlazi – Manager: Finance


Basic Salary 1,295,828 1,206,510




1,723,395 1,638,875

P Maka – Manager: Information and Communications Technology

Basic Salary 1,195,670 1,113,881




1,452,928 1,392,006

Thulare – Manager: Human Resources

Basic Salary 1,219,499 1,135,441




1,423,183 1,363,034

A Pholoha – Manager: Government Diamond Valuator

Basic Salary 1,094,404 1,019,590




1,348,561 1,237,235

Total Executive Remuneration 19,885,042 19,207,388

This represents the total cost to company, the choice of salary structure is that of the employee.# Acting CEO’s term ended 18 June 2018## Appointed Acting CEO from 19 June 2018



Meeting fees

2019WGM &

otheractivities Total

Non–executive members of the Board and other committees

Dr S Manese # 340,148 179,915 520,063

N Monedi–Noko 218,033 26,262 244,295

M Noge 214,750 11,664 226,414

T Ngqeza 226,619 20,411 247,030

M Ledingwane 184,954 7,776 192,730

M Mohlala–Mulaudzi 96,970 960 97,930

B Stern 23,328 7,776 31,104

N Van Rooyen 122,454 – 122,454

S Mokoena $$ 46,002 3,775 49,777

P Bailey $ 92,004 3,888 95,892

Total non–executive remuneration 1,565,262 262,427 1,827,689

Meeting fees

2018WGM &

otheractivities Total

Dr S Manese # 536,241 173,779 710,020

N Monedi–Noko 204,416 16,992 221,408

M Noge 163,014 10,479 173,493

T Ngqeza 201,224 13,972 215,196

M Ledingwane 156,910 18,665 175,575

M Mohlala–Mulaudzi 59,276 – 59,276

B Stern 51,748 – 51,748

M Mosing 218,130 – 218,130

N Van Rooyen 71,612 – 71,612

P Bailey $ 46,940 – 46,940

Total non-executive remuneration 1,709,511 233,887 1,943,398

Other Board activities includes fees for attending training,events and other activities, etc.# Dr Manese chaired the WGM until 30 September 2018. $ Term ended 12 September 2018$$ Appointed 12 September 2018



2019R

Restated2018

R

20. CASH GENERATED FROM OPERATIONSSurplus/(Deficit) per statement of financial performance 10,790,983 7,104,346

Adjustment for: (2,720,151) (2,494,418)

Depreciation and amortisation 1,548,974 1,750,425

Interest income (4,354,770) (4,198,280)

Finance costs 85,711 27

Deficit on disposal of assets – 26,895

Adjustment – financial instrument at fair value (66) (73,485)

8,070,832 4,609,928

Movements in working capital (6,519,576) 697,031

Increase in inventory (73,389) (77,860)

Increase/ (Decrease) in deferred income (3,333,333) 5,833,333

Increase/ (Decrease) in operating lease liability (290,767) 63,271

Increase/ (Decrease) in trade and other payables 245,088 (3,402,473)

Decrease in provisions (3,112,140) (3,299,329)

Increase in trade and other receivables 44,965 1,580,089

Cash generated from operations 1,551,256 5,306,959

21. RELATED PARTY TRANSACTIONSDuring the year under review the entity entered into the following transactions:

Amounts received/paid to related party

Name and nature of services

2019 2018

Department of Mineral Resources 59,105,000 55,865,002

The transactions relate to the transfer payment (grant) from the Department of Mineral Resources and there were no balances owed by or due to DMR at the end of the year under review.

22. IRREGULAR EXPENDITUREOpening balance 1,322,880 –

Irregular expenditure – Current period 82,966 1,322,880

Less: Expenditure condoned (1,341,879) –

Irregular expenditure awaiting condonation 63,967 1,322,880



A printing bid was finalised during the transitional period of the previous and current Board, however the current Board requested management to re–advertise the bid. Therefore an approval to extend the contract was granted on a month to month basis. The application of Paragraph 8.1 of the Instruction note 3 of 2016/17 was effected due to an emergency created by the need to continue with the printing services while the cancellation and re–advertisement of this contract was in progress. Paragraph 8.1 was erroneously applied instead of paragraph 9.2 due to the misinterpretation of the circumstances since the contract had expired. The irregular expenditure amount of R70 821 and R18 999 does not include the cost of variable amount per unit: Cost for black and white was R0.06 and colour print was R0.40

An irregular expenditure of R1 252 059 was incurred for travel arrangement of 2017/18 financial year. The travel bookings were decentralised to various functionaries. As a result of decentralisation, various travel request were confirmed with the previous service provider without following internal booking processes.

The SADPMR procured short–term insurance from Kapara Insurance Brokers through the invitation of quotations rather than following the competitive bidding process for procurement above R500 000 (VAT included). The short–term contract of R1 037 579.04 started on 01 February 2019 and will expire on 31 January 2022. The total payment made for the year under review is R63 966.50.

The R1 341 879 irregular expenditure amount was condoned by the relevant authority as disclosed and the balance await condonation. Disciplinary measures were actioned in respect of the parties responsible for incurrence of this expenditure.



2019R

Restated2018

R

23. FRUITLESS AND WASTEFUL EXPENDITURE – –

Opening balance

Fruitless and wasteful expenditure – Current period 42,000 –

Less: Expenditure condoned (42,000) –

Fruitless and wasteful expenditure awaiting condonation – –

In June 2018, Mr Mbonambi the former Acting Chief Executive Officer was due to travel to Brussels. The travel arrangements were done without the approval of the delegated official. Mr Mbonambi was then requested to resume his duties at the Department, which the trip had to be cancelled. The SADPMR incurred fruitless and wasteful expenditure of R42 000 for non–compliance to the internal policies and the late cancellation of the confirmed ticket. The R42 000 amounts were condoned by the accounting authority. Disciplinary measures were actioned in respect of the parties responsible for incurrence of this expenditure.

24. MATERIAL LOSSES THROUGH CRIMINAL CONDUCTFinancial misconduct – 201,897

Misappropriation of Funds by an employee – 5,000

Alleged procurement misconduct 55,352

55,352 206,897

The SADPMR incurred a loss estimated at R201 897. As a result of the misconduct (theft and/fraud) for upgrading and requesting new cell phone contracts without authorisation. The official was subjected to the disciplinary tribunal and she was subsequently dismissed from the employment of the Regulator. The misconduct was deemed a criminal offence and was thus reported to the South African Police Services. The matter is currently under investigation by the SAPS.

The R5000.00 relates to the theft and / fraud for the employee who accepted client’s money (paid as licence application fee in cash) without approval for her own benefit. The employee was subjected to the disciplinary hearing. Sanction was applied according to the recommendation of the presiding officer.

The R55 352 relates to an alleged financial misconduct in relation to the procurement of personal travel arrangements using the SADPMR’s resources. The employee paid R25 026 to the service provider and the amount outstanding at year end was R30 326



2019R

Restated2018

R

25. CORRECTION OF PRIOR PERIOD ERRORThe comparatives have been restated as follows:

Decrease in expenses – 1,469,713

Decrease in liabilities – (1,469,713)

Increase in surplus for the year – 1,469,713

During the 2018/19 financial period the SADPMR realised that the domestic travel accruals amounting to R1 469 713 were overstated in 2017/18 financial statements due to error. The prior period was adjusted retrospectively. The effect of the error on the individual line items in the financial statement is disclosed above.

26. FINANCIAL RISK MANAGEMENTThe SADPMR has limited exposure to the financial risks in the course of normal operations and attempts to manage the following financial risks:

Liquidity risks

The entity manages liquidity risk through proper management of working capital, capital expenditure and actual versus forecasted cash flows. Adequate reserves and liquid resources are also maintained.

The maturity analysis of trade payables at reporting date were as follows:

Payables

Current (0 – 30 days) 302,969 477,364

31 – 60 Days – 19,671

61 – 90 Days – (10,063)

91 – 120 Days – (37,550)

121 + Days 3,975 (21,927)

306,944 427,495

The following are the entity’s other liabilities, including interest payments:

– Not later than one year

Finance lease obligations 233,191 –

Provisions 4,250,000 7,362,140

4,483,191 7,362,140

– Greater than one year, less than five

Finance lease obligations 355,285 –

355,285 –



2019R

Restated2018

R

Market RiskMarket risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in commodity prices, interest rates and equity prices.

A significant part of the market risk encountered arises from financial instruments that are managed by other financial institutions.

Deposits and call accounts attract interest rates that vary from prime. The SADPMR’s policy is to manage interest rate risk by investing in a range of balanced portfolios so that fluctuations in variable rates do not have a material impact on the surplus or (deficit).

At the end of the year, financial instruments exposed to interest rate risk were as follows:

The objective of the market risk management policy is to protect and enhance the statement of financial position and surplus or a deficit by managing and controlling market risk exposures and to optimise the funding of business operations and facilitate capital expansion.

Interest Rate RiskDeposits and call accounts attract interest rates that vary from prime. The SADPMR's policy is to manage interest rate risk by investing in a range of balanced portfolios so that fluctuations in variable rates do not have a material impact on the surplus or (deficit).

At the end of the year, financial instruments exposed to interest rate risk were as follows:

(i) Balances with banks, current and call accounts.

Credit Risk

Credit risk is the risk of financial loss to the entity if a customer or other counterparty (including government and financial institutions) to a financial instrument fails to meet its contractual obligations. Credit risk arises primarily from the sale of goods and services in the ordinary course of business. Credit risk includes counterparty risk and delivery or settlement risk. Counterparty risk is the risk that a counterparty is unable to meet its financial and/or contractual obligations during the year of a transaction.

Credit risk consists mainly of call deposits, cash equivalents and trade receivables. The SADPMR only deposits cash with major banks with high quality credit standing and limits exposure to any one counter party. Trade receivables are presented net of allowance for doubtful receivables.

The maximum exposure to credit risk of financial assets is:

Loans and receivables 7,813,314 5,586,730

Financial instruments at fair value 28,944,274 26,852,632

Cash and cash equivalents 27,496,169 40,470,843

64,253,757 72,910,205




Cash and cash equivalents

Cash and deposits are regarded as having insignificant credit risk. The balances of cash and cash equivalents were as follows:

Bank Type Balance at31 March

2019

Balance at31 March

2018

Investec LTD Call 11,676,430 10,950,236

Nedbank LTD Current 848,033 818,039

Nedbank LTD Call 14,934,200 28,691,576

Nedbank LTD Call (Salary savings) 1,168 1,098

Petty Cash On hand 36,338 9,894

27,496,169 40,470,843

Credit Risk (continued)

The ageing of the entity’s receivables is as follows:

2019 2018

Gross Impaired Gross Impaired

0 – 30 days 307,006 – 340,420 –

31 – 60 days 408,777 – 174,644 –

61 – 90 days 290,484 – 158,565 –

Over 91 days 5,785,497 3,220,226 4,379,512 859,001

6,791,764 3,220,226 5,053,141 859,001

The impairment of debtors consists of cancelled licences with outstanding balances, expired licences, expired licences not renewed and non–responsive licensees who failed to make payment arrangements



2019R

Restated2018

R

27. UNRECOGNISED CONTRACTUAL COMMITMENTSAFC Technology Service (Pty) Ltd 34,725 105,835

Air Technology Services 57,143 –

Associated Insurance Brokers 180,051 –

Bidvest Steiner 27,874 81,862

Fidelity Security Services 211,485 874,291

Finware Enterprise Systems 45,756 168,264

Freshive New Media Replay 11,745 –

Kapara Insurance Brokers 973,613 –

Microsep (Pty) Ltd 74,831 180,592

Microsoft 751,031 1,688,923

National Safe Co (Pty)Ltd 4,757 9,576

NBC Holdings 148,250 –

Omega Fire and Security 151,975 123,816

Abbafada Holdings – 17,000

Pest Prohibitation 70,350 –

SITA – 720,629

Tracker Connect (Pty) Ltd 75,924 98,423

2,819,510 4,069,211

28. CONTINGENT LIABILITIESSADPMR is in the process of relocating offices to the Gauteng Industrial Development Zone. The SADPMR is finalising the rental agreements and will be requesting approval to utilise the accumulated surplus for the relocation project from National Treasury.


To the best of my knowledge and belief, I confirm the following: All information and amounts disclosed in the Annual Report are consistent with the annual financial statements audited by the Auditor-General.

The Annual Report is complete, accurate and free from any omissions.

The Annual Report has been prepared in accordance with the guidelines on the Annual Report as issued by National Treasury.

The annual financial statements (Part E) have been prepared in accordance with the GRAP standards applicable to the public entity.

The Accounting Authority is responsible for the preparation of the annual financial statements and for the judgements made in this information.

The Accounting Authority is responsible for establishing and implementing a system of internal control that has been designed to provide reasonable assurance as to the integrity and reliability of the performance information, the human resources information and the annual financial statements.

External auditors are engaged to express an independent opinion on the annual financial statements.

In our opinion, the Annual Report fairly reflects the operations, the performance information, the human resources information and the financial affairs of the entity for the financial year ended 31 March 2018.

Yours faithfully

Mr. C Khosa Dr S Manese Chief Executive Officer Chairperson of the Board

Annexure A: Statement of Responsibility and Confirmation of Accuracy


Annexure B: Report of the Audit and Risk CommitteeREPORT OF THE AUDIT AND RISK COMMITTEEWe are pleased to present our report for the financial year ended 31 March 2019.

Audit and Risk Committee’s ResponsibilityThe Audit and Risk Committee is a committee of the Board and has discharged its responsibilities accordingly in terms of section 51 (1) a (ii) of the PFMA and 27.1.8 of the Treasury Regulations. The Audit and Risk Committee adopted a formal terms of reference, its Audit and Risk Committee charter.

The committee has conducted its affairs in compliance with these Terms of Reference for the year ended 31 March 2019 and has discharged its responsibilities contained therein.

The committee is satisfied that it has complied with its legal, regulatory, and other responsibilities.

STATUTORY DUTIESThe committee has performed the following statutory duties:

External auditorThe committee has satisfied itself that the external auditor, Auditor General, was independent of the Regulator as set out in PFMA, which includes consideration of compliance with criteria relating to independence or conflicts of interest as prescribed by the Independent Regulatory Board of Auditors.

The committee, in consultation with executive management, agreed to the engagement letter, terms, audit plan and budgeted audit fees for the 2018/2019 financial year.

Effectiveness of internal controlsDuring the year various reports of the Internal Auditors as well as the audit report on the Annual Financial Statements and Management Letter of the Auditor General indicated that the system of internal control has shortcomings in limited areas. The Audit and Risk Committee has noted these and based on the outcome of such reviews and the information provided by Management, the Audit and Risk Committee is of the opinion that the internal controls of the Regulator operated effectively throughout the year under review.

The Regulator has achieved an unqualified audit report.

Financial statements and accounting practicesThe committee reviewed the annual financial statements as well as the accounting policies and practices of the Regulator and is satisfied that they comply with the relevant provisions of the PFMA and the Generally Recognised Accounting Practice Standards. The committee recommended the annual financial statements of the Regulator to the Board for approval.

Going ConcernThe Audit and Risk Committee agrees that the adoption of the going concern premise is appropriate in preparing the Annual Financial Statements.

DUTIES ASSIGNED BY THE BOARD The committee has performed the following duties assigned to it by the Board:


Internal AuditThe Regulator has an in-house internal audit function. The Committee has an oversight responsibility for the Internal Audit function. As delegated by the Board, the committee reviews and approves the Internal Audit Charter annually. The Internal Audit function has the responsibility of reviewing and providing assurance on the adequacy of internal controls across the Regulator’s operations. It therefore plays an integral role in the governance of risk.

The Audit and Risk Committee reviewed the activities of the internal audit function and has concluded the following:• The function is effective and that there were no unjustified restrictions or limitations;• The internal audit reports were reviewed at Audit and Risk Committee meetings, including its annual work programme, co-ordination

with the external auditors, the reports of significant audit investigations and the responses of management to issues raised therein.

The 2018/2019 Internal Audit plan and budget were approved by the committee timeously. The committee is satisfied with the three-year rolling internal audit plan in that there is a clear alignment with the major risks, adequate information systems coverage and a good balance between different categories of audits, i.e. risk-based audits, mandatory and follow up audits.

Risk management and GovernanceThe Board has assigned the oversight of the Regulator’s risk management function to the committee. The committee fulfils an oversight function regarding risks in all areas of the Regulator.

A risk management framework and policy has been adopted and approved by the Board. A process of risk management was implemented by the Regulator wherein risk assessments are conducted on a quarterly basis by management and updated on an annual basis by the Internal Audit function at both senior management and Board level. The committee has reviewed the risk register and reports from management’s risk committee.

Based on this assessment and the ongoing oversight of the committee nothing came to the attention of the committee that would suggest that the prevailing system of risk management is not all material respects effective.

The quality of in-year management and monthly reports/quarterly reports submitted in terms of the PFMAThe Committee has noted and is satisfied with the content and quality of quarterly financial reports prepared and issued by the Regulator during the year under review, in compliance with the statutory reporting framework.

Part of the responsibilities of the committee includes the review of performance management. The committee has performed the following functions:• Reviewed the alignment of the Annual Performance Plan, Budget and Strategic Plan,• Reviewed the relevance of indicators to ensure that they are measurable and relate to services performed by the Regulator,• Reviewed compliance with in year reporting requirements, and• Reviewed the Regulator’s performance management system and making recommendations for its improvement

The committee is satisfied that the performance report has been prepared in terms of the PFMA and Treasury Regulations requirements for reporting performance.

Meeting with Internal and External Audit During the year under review, in accordance with standard practices, the Audit and Risk Committee had an in committee meeting the external auditors.

On behalf of the Audit and Risk Committee

Tembani NgqezaChairperson of the Audit and Risk CommitteeSouth African Diamonds and Precious Metals Regulator

Head OfficeJewel City. 251 Fox Street, Doornfontein, 2028, JohannesburgTel: +27 11 223 7000 • Fax: +27 11 334 8898

Kimberley Office66 Jones Street, 3rd Floor, Trust Centre, Kimberley, 8301Tel: +27 31 335 9677 • Fax: +27 31 301 6950

Cape Town Office10th Floor, Atterbury House, 9 Riebeek Street, Cape Town, 8000Tel:+27 21 427 1070 • Fax: +27 866 612 4907

Email: [email protected]: www.sadpmr.co.za

ISBN: 978-0-621-47837-2