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BRIEFING SESSION TO THE PORTFOLIO COMMITTEE ON MINERALS AND ENERGY

Key insights and future plans discussed in the 2003/2004 financial report. Emphasis on audit concerns and Kimberley Process Certification Scheme.

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BRIEFING SESSION TO THE PORTFOLIO COMMITTEE ON MINERALS AND ENERGY

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  1. BRIEFING SESSION TO THE PORTFOLIO COMMITTEE ON MINERALS AND ENERGY 1. HIGHLIGHTS OF THE 2003/2004 FINANCIAL YEAR END,(WITH EMPHASIS ON THE AUDITOR GENERAL’S REPORT) 2. KIMBERLEY PROCESS CERTIFICATION SCHEME 3. FUTURE PLANS

  2. DIAMOND PRODUCTION – LARGE SCALE MINES

  3. ESTIMATED DIAMOND PRODUCTION FROM SMALL SCALE PRODUCERS

  4. TOTAL ROUGH DIAMOND EXPORT

  5. TOTAL ROUGH DIAMOND IMPORTS

  6. TOTAL POLISHED DIAMOND IMPORTS

  7. TOTAL POLISHED DIAMOND EXPORTS

  8. EXPORT OF ROUGH DIAMONDS BY VARIOUS LICENSE HOLDERS

  9. US DOLLAR VALUE OF UNPOLISHED DIAMONDS EXPORTED BY LICENSE HOLDERS

  10. ESTIMATED TOTAL DIAMOND PRODUCTION FROM SA

  11. FINANCIAL PERFORMANCE

  12. LICENSES APPROVED

  13. LICENCE APPLICATIONS PERIOD UNDER REVIEW : O1 APRIL 2004 TO CURRENT APPROVED NOT TAKEN UP Dealers license 128 62 Cutting license 25 12 Research license 4 1 TOTAL APPLICANTS15775 BLACK APPLICANTS 33% 41%

  14. EMPLOYEE DEMOGRAPHICS

  15. 2003/2004 AG’S REPORT • 4.1 Internal Control Shortcomings • Inadequate control on fixed assets • All assets accounted for and loaded on the new Greater Plains system • N(i) Forms selected did not have invoice numbers – • Response? • 4.2 The South African Diamond Board did not have an Audit Committee for the period under review • Audit committee has been established as per the PFMA requirements, and an Audit Committee charter has been adopted. Five members constitute the Audit committee

  16. Continued…. • 4.3 Internal audit function, A rolling three year strategic internal audit plan, an internal audit plan for the first year and plans indicating the scope of each audit in the annual audit plan • Internal audit functions defined,Internal risk assessments conducted and the three year strategic internal audit plan finalized

  17. Continued…. • 4.4 Financial Lease on motor vehicle • Terminated • 4.8 Policy for the provision of bad debt • Draft policy with Audit Committee

  18. CONTINUED….. • 4.9 Validity of exemptions under Sect. 63 and 59 of the Diamond Act : • Meeting held at the AG’s office on 20 July 2004, agreed that DME and National Treasury would obtain a final legal opinion from the Chief State Law Advisor

  19. KPCS- LEADERRSHIP SYNOPSIS • LAUNCHED IN SWITZERLAND SEPT. 2002 • IMPLEMENTATION DATE JAN. 2003 • THE LEADERSHIP SINCE INCEPTION OF THE SCHEME • Mr. A CHIKANE ( SADB CHAIRMAN) FOR THE YEAR 2002 AND 2003 • 2004 CANADA • 2005 RUSSIA • 2006 BOTSWANA ?

  20. KIMBERLEY PROCESS • SADB PARTICIPATED ON THE FOLLOWING • REVIEW VISITS – SADB AS TEAM MEMBER • DUBAI (UAE) • DEMOCRATIC REPUBLIC OF CONGO • REVIEWS (SA - LEADER) • MISSION TO CONGO BRAZAVILLE • VISIT SIERRA LEONE • FACT FINDING MISSION TO LIBERIA • VISIT GUINEA

  21. COMMITTEES ESTABLISHED • WORKING GROUP ON MONITORING AND CONTROL • DIAMOND EXPERTS WORK GROUP • STATISTIC WORKING GROUP • PARTICIPATING WORKING GROUP

  22. NUMBER OF KIMBERLEY CERTIFICATES ISSUED FOR THE CALENDER YEAR 2003

  23. KIMBERLEY PROCESS REVIEW VISIT(19/10/2004 – 21/10/2004) • FINDINGS: SOUTH AFRICA FULFILLS IN A SATISFACTORY MANNER ITS UNDERTAKING UNDER THE KPCS AND THEREFORE MEET THE REQUIREMENTS OF THE KPCS. THROUGH THE PROPOSED NEW LEGISLATION, INTERNAL CONTROLS WILL BE CONSIDERABLY ENHANCED.

  24. BEST PRACTICES: • - FOUR PARTS LAYOUT OF THE CERTIFICATE ENABLES A MORE COMPLETE AUDIT TRAIL OF THE EXPORT. • -INTERGRATED DATABASE SYSTEM • TENDERS AFFORDTHE SMALL SCALE MINERS TO REALISE FAIR MARKET VALUE ON THEIR GOODS.

  25. RECOMMENDATIONS • To take an inventory of all stocks held by all agencies in S A. i.e privately owned mines included. • Ensure that all Small mining operations are registered. • Apply tracking from mine to point of export for Rough diamonds production. • Institute a sign-off procedure to provide a cross-check by more than one person on each KPC.

  26. RECOMMENDATIONS CONTINUED • Enhance informatics system to provide verification with an up-to-date KP participants List. • Centralize the filing system in a coherent manner to permit an audit of the paper trail. • Introduce an audit process to identify leakage in the rough diamond market.

  27. Department of Minerals and Energy SOUTH AFRICAN DIAMOND BOARD (As per Diamond Act, Act 56 of 1986) Chairman (non-executive) Board of Directors representing: DME DTI Dept. Finance SAPS DTC Producers Industry Assoc. Civil Society Jewellery Council Board committees Audit Committee Executive Committee Licensing Committee Section 59 Committee Technical Committee Finance Committee BEE Committee CEO Finance Inspectorate Licensing Data Administration

  28. FUTURE PLANS BASED ON THE CHANGES ANTICIPATED AFTER THE AMENDMENT TO THE DIAMOND ACT, ACT 56 OF 1986 • Restructuring of the Board • Collection of the 5% duty on rough diamonds exports • Establishment of a section 21 company to focus on the Diamond Exchange and Diamond trade • Section 59 agreements • Deferments

  29. HUMAN RESOURCES PLAN WITH THE ESTABLISHMENT OF THE SECTION 21 COMPANY, WHICH WILL BE TASKED WITH CREATING A DIAMOND EXCHANGE /EXPORT CENTRE AND A TRADING CENTRE : A TOTAL OF 21 NEW JOBS WILL BE CREATED Care will be taken to ensure that there is equitable representation in all occupational categories and levels as per the Employment Equity Act

  30. HUMAN RESOURCES NEEDS AS A RESULT OF THE RESTRUCTURING Additional Diamond Inspectors Additional Export Administrators Additional License Officers Debtors Clerks

  31. FUTURE PLANS ON BENEFICIATION • FEASIBILITY STUDIES ON THE ESTABLISHMENT OF AFRICAN JEWEL CITIES • Kimberley • Cape Town - • Polokwane • Johannesburg International Airport

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