SOUTH AFRICAN DIAMOND AND PRECIOUS METALS REGULATOR (SADPMR)

PRESENTATION TO THE PORTFOLIO COMMITTEE ON

SADPMR’s ANNUAL REPORT FOR THE 2012/ 2013 FINANCIAL YEAR

PRESENTATION OUTLINE

1. Introduction

2. Outstanding Audit matters raised by AG for 2011/2012 financial year

3. Annual Report for the 2012/ 2013 financial year

4. Human Resources

4. Achievements

5. Challenges

6. Discussions

3

INTRODUCTION

• This audit report covers the period 2012/2013

financial year.

• During this period our policies have been reviewed

and aligned to the PFMA requirements

• Relevant financial systems and controls have been

established and correctly implemented

4

OUTSTANDING AUDIT MATTERS RAISED BY AG FOR 2011/2012 FINANCIAL YEAR

• The South African Diamond and Precious Metals Regulator did not have audit issues that needed to be addressed;

• A clean audit opinion was obtained by SADPMR

5

ANNUAL REPORT FOR THE 2012/13 FINANCIAL YEAR

6

AUDIT OPINION• A clean audit report has again been obtained by SADPMR

Matters reported

• Restatement of corresponding figures – As disclosed in note 26 to the financial statement, the corresponding figures for 31 March 2012 were restated as a result of an error discovered during 31 March 2013 in the financial statements of the SADPMR for the year ended 31 March 2012

Action taken

• The financial statements were revised accordingly and internal controls to prevent recurrence of similar error are in place.

FINANCIAL PERFORMANCE- AUDIT REPORT

7

Report on other legal and regulatory requirements

• Predetermined objectives

No material findings concerning the usefulness and reliability of the information

• Compliance with laws and regulations

No instances of material non-compliance were identified• Internal control

No deficiencies were identified

PERFORMANCE INFORMATION- AUDIT REPORT

8

ANNUAL FINANCIAL STATEMENTS OVERVIEW

•The Regulator submitted the 2012/13 budget of R 62,521 million to National Treasury via the Department of Mineral Resources. •The final allocation was R41,601 million which left the Regulator with a shortfall of R20,920 million.•The budget and the classification of funds were adjusted in accordance with the final allocation. •In order to enable the Regulator to respond to its mandate, the National Treasury granted approval to retain accumulated surplus for contractual obligations and other capital projects.

9

ANNUAL FINANCIAL STATEMENTS

REVENUE• The audited actual revenue was R70,254 million

inclusive of Transfer Payment of R41,601 million. • The in-house generated revenue has increased by

37% to R28,653 million compared to the budgeted amount of R 20,920 million.

• The increase emanates from the implementation of Regulation 10 (2) (b) service fees which took effect from 02 May 2012.

10

ANNUAL FINANCIAL STATEMENTS

EXPENDITURE

• The actual audited expenditure for the year under review was R72,351 million inclusive of non-cash items such as depreciation and other provisions.

• The highest cost drivers were:

• Compensation of employees: R48,706 million;

• Other operating expenditure: R19,211 million and

• Non-cash expenditure: R4,434 million.

• Spending was kept within the allocated budget in order to deliver on the Regulator’s mandate.

11

ANNUAL FINANCIAL STATEMENTSTRANSFER PAYMENT

Transfer payment has been capped at an average of R40,500 million for the last three years as depicted below:   2012/13 2011/12 2010/11

R’000 R’000 R’000

Approved budget 62 521 68 607 55 533

(by the Board)

Grant received 41 601 39 374 40 643 

Add: Actual in house revenue 28 653 7 978 8 811

less: Expenditure 72 314 60 280 52 882

Restated Surplus/ (deficit) * (2 098) * (13 774) *(3 428)

(* excluding accumulated funds retained for capital projects and other contractual obligations as per National Treasury’s approval)

 

12

ANNUAL FINANCIAL STATEMENTS

TRENDS ON UTILISATION OF FUNDS

Highest cost drivers 2012/13 2011/12 2010/11 R’000 R’000 R’000

Compensation of employees 48 706 40 912 34 270

Other operating expenses 19 174 15 559 14 657

Payment for Capex 3 059 7 495 1 045

•Increase in employees’ compensation is attributable to increased head count as a result of the expansion/review of the organisational structure in order to align human resources to desired outcomes as well as the cost of living adjustment.•The operating expense has increased to ensure delivery of predetermined objectives set out in the annual performance plan.

13

CURRENT YEAR REPORT AS AT 30 SEPTEMBER 2013

14

CURRENT YEAR REPORT AS AT 30 SEPTEMBER 2013

15

HUMAN RESOURCES

EMPLOYMENT EQUITY

•As at 31 March 2013, the employment equity staffing ratios stood at 96% Blacks to 4% Whites; 59% Females to 41% Males; and 51% Core Function to 49% support function staff. The Regulator headcount currently stands at 116 employees as indicated at the below table:

17

EMPLOYMENT EQUITY FIGURES

18

Occupational LevelsMale Female

TotalA C I W A C I W

Top management 4 0 0 0 1 0 0 0 5

Senior management 3 0 1 0 3 0 0 1 8

Professionally qualified and experienced specialists and mid-management

17 0 1 1 13 1 0 1 34

Skilled technical and academically qualified workers, junior management and supervisors

11 0 0 1 28 2 2 0 44

Semi-skilled and discretionary decision making

7 0 0 0 7 1 0 1 16

Unskilled and defined decision making 2 0 0 0 5 0 0 0 7

TOTAL PERMANENT 44 0 2 2 57 4 2 3 114

Temporary employees 1 0 0 0 1 0 0 0 2

GRAND TOTAL 45 0 2 2 58 4 2 3 116

19

HUMAN RESOURCE DEVELOPMENTDivision No. of employees

trained No. of employees awarded bursaries

Internship programme

Legal Services 0 1 0Diamonds Inspectorate 1 1 1Office of the CEO 2 1 0Precious Metals and Beneficiation

7 4 1

GDV 6 0 1Security Risk Management 8 2 0Finance 0 3 1Human Resources Management

3 3 1

Information and Communication Technology

3 1 1

Diamond Exchange and Export Centre

8 2 2

TOTAL 38 18 8

HUMAN RESOURCES

• Employees were trained in the following core skills programme:- Rough diamond and planning course

- Jewellery manufacturing basic level

- Diamond familiarisation course

- Professional diploma programme in Jewellery

- Rough Diamond evaluation and grading

20

ACHIEVEMENTSSuccessful Chairship of the KPCS by the Republic of South Africa

During 2013, the Republic of South Africa successfully resumed the chairship of the Kimberley Process Certification Scheme;The Republic was reviewed by KP review team and still awaiting the final report.

Marketing of polished diamonds

The Regulator has successfully facilitated four (4) polished diamond tenders against a target of two which were planned for the year;The demand for polished diamond tenders is increasing.

21

ACHIEVEMENTSOverall organizational performance During the 2012/2013 financial year; the Regulator attained a 100%

achievement on all set targets

Improved inspections for diamonds and precious metal Inspections within the diamonds and precious metals industries has

improved significantly including disruptive operations with SAPS and or SARS

Strengthened stakeholder relations Engagements with the diamond and precious metals clients have

continued to improve; Industries have easy access to the Regulator, Board and CEO.Commendation by the Office of the Auditor General SADPMR has been nominated to receive a trophy for its consistent clean audit

reports for the past two financial years

Appointment of the new board (October 2012) SADPMR’s board was appointed with effect from October 2012, is under the

leadership of Ms Nombulelo Mkhumane

22

CHALLENGES

• Due to the capping of grant to an average of R40,500 million per annum for the past three years while the cost of operations has been increasing, the Regulator is compelled to identify other revenue streams to generate revenue that can sustain its operation.

• Access to funding for emerging businesses is still a problem

• Access to rough diamonds is dominated by financially stronger buyers

23

THANK YOU

&

DISCUSSIONS

24