PPC PRESENTATION Annual Performance Plan Budget 201819 INTRODUCTION

PPC PRESENTATION Annual Performance Plan & Budget 2018/19

INTRODUCTION During the review of the strategic environment for 2018/19 and beyond, the Board of the State Diamond Trader made the following observations and challenges to its mandate: The conceptualisation of the SDT was premised on the assumption that all rough diamonds produced in South Africa can be economically cut and polished locally resulting in the inaccurate conclusions in relation to the funding of the entity and its ability to grow local diamond beneficiation. An analysis of rough diamonds purchased in an eighteen (18) month cycle found that only 15% purchased by the entity were desired by clients. 2

INTRODUCTION CONT…. STATE DIAMOND TRADER KEY CHALLENGES RUN OF MINE LACK OF FUNDING UNDESIRABLE GOODS SOLD TO CLIENTS DECLINED PURCHASES NOT LEADING TO BENEFICIATION DEPRESSED GROWTH OF THE LOCAL DIAMOND BENEFICIATION INDUSTRY REVIEW OF LEGISLATIVE ENVIRONMENT FOR MEANINGFUL GROWTH OF THE BENEFICIAITON OF THE COUNTRY’S DIAMOND RESOURCES 3

VISION AND MISSION VISION MISSION Ensure acquisition of and equitable To be a catalyst for transformation and growth of the local diamond beneficiation industry access to rough diamonds with particular focus on HDSAs Promote the growth of the diamond beneficiation industry through relevant interventions Establish and maintain a transformed client base of local diamond beneficiators 4

THE DIAMOND BENEFICIATION INDUSTRY The Object of the State Diamond Trader, in terms of the Diamonds Act 56 of 1986 as amended, is to promote equitable access to and local beneficiation of the Republic’s diamonds. Since Inception, the State Diamond Trader has had an average of seventy eight (78) clients though which equitable access of the Republic’s rough diamonds should be promoted. To address the injustices of South Africa’s past, the State Diamond Trader segmented its clients as seen in slide 5. 5

GROWTH AND TRANSFORMATION SEGMENT (11) CRITERIA Small companies, relatively new entrants High level Black management participation (>50%) Companies that have shown a track record; Consistent trading with the State Diamond Trader Sound business acumen Financial capability (resources) Ability to polish diamonds (beneficiate) and market finished product Some indication of growth potential (job creation) TREATMENT high priority segment, clients shall receive an allocation (offer of rough diamonds) every sales cycle (when possible) Clients in this segment willing to form a “partnership” with the State Diamond Trader in order for them grow and the State Diamond Trader to achieve its strategic targets for job creation, transformation and beneficiation growth This segment benefits from the majority of the State Diamond Trader’s client specific marketing activities as identified in the Marketing and Industry Promotion Strategy 6

Equitable Access CLIENT SEGMENT (33) Small companies Clients receive supply on a rotational basis, as and when the State Diamond Trader has suitable rough diamonds available High level Black management participation (>50%) Likely to purchase a limited quantity and range of rough diamonds segment supported through developmental initiatives such as skills development and access to finance and markets 7

NICHE AND LARGE CLIENTS SEGMENT (34) Established companies Limited Black management participation Companies that contributes largely the financial viability of the State Diamond Possess the necessary skills to ensure maximum value of finished product proven track records able to purchase and process a wider range of rough diamonds than other segments Supplied on a rota basis, as and when the State Diamond Trader has the suitable rough diamonds available do not need access to the additional services as indicated in the Marketing and Industry Promotion Strategy 8

RETURN ON INVESTMENT IN THE GROWTH AND TRANSFORMATION CLIENT SEGMENT To date segment employs a total of forty nine (49) people State Diamond Trader contribution to the businesses propelled the clients for selection to participate in a programme of a big producer with the aim of further upskilling and ensuring sustainability of those businesses to become sight holders. Segment participants still affected by issues of supply of rough diamonds which is exacerbated by the State Diamond Trader’s ability to supply Run of Mine as well as pricing. The State Diamond Trader is in a partnership with this segment of clients and together continues to explore issues of funding and access to markets 9

STATE DIAMOND TRADER GROWTH POTENTIAL ENABLING REGULATORY FRAMEWORK • Funding • Access to diamonds suitable for local consumption FUNDING • Import of diamonds suitable for local consumption • Capacitate the entity in respect of the resources • Increased efforts in marketing of finished products • Implementation of projects aimed at rejuvenation of the industry SUITABLE ROUGH DIAMONDS • Satisfaction of consumer base • Increased export of finished products 10

STRATEGIC OUTCOMES FOR STRATEGIC PERIOD NDP INITIATIVES Decent employment through inclusive economic growth DMR OUTCOMES Increased investment in the minerals and mining sector SDT OUTCOMES Growth in employment and diamond beneficiation by the local diamond beneficiation industry Equitable access to rough diamonds by local diamond beneficiators Building a capable and developmental state Transformed minerals sector A Transformed Diamond Beneficiation Sector 11 Transformed minerals sector

STATE DIAMOND TRADER STRATEGIC OBJECTIVES 2018/19 No. Strategic Outcomes Strategic Objectives Increase the amount, by carats, of rough diamonds sold Growth in employment and diamond 1. beneficiation by the local diamond beneficiation industry on primary allocation by 10 percent annually Increase local beneficiation of -3 gr gem quality and all sizes of near gem quality and industrial diamonds by SDT clients to 10, 000 carats per annum by 2022/23 2. 3. A transformed domestic diamond beneficiation industry Increase sales to black owned companies, as a percentage of total SDT sales by mass, to 30 percent by 2022/23 Equitable access to rough diamonds by local Meet 30 percent by mass, rough diamond requirements of diamond beneficiators clients by 2022/23 Be a knowledge based organisation 4. A capable and developmental organisation 12 Promote corporate governance and manage financial resources

Strategic Objectives 2018/19 Strategic Objective Activities Performance Targets 2018/19 1. Increase the amount, by carats, of rough diamonds sold on primary allocation by 10 percent annually Secure more gem quality rough diamonds for primary allocation Percentage increase in the amount of rough diamonds sold through primary allocation by 10% Develop and implement process for rough aggregation from different producers to create suitable mixes for local beneficiators Approved procedures for drawing up rough purchasing plans Secure funding from other organs of State, for use in acquiring more rough for primary allocation Report on organs of State from which funding can be 13 for secured and proposals same (Outside legislative

Strategic Objectives 2018/19 Strategic Objective Activities Planned Targets 2. Increase local beneficiation of -3 gr gem quality and all sizes of near gem quality and industrial diamonds by SDT clients to 10, 000 carats per annum by 2022/23 Facilitate local beneficiation of -3 grainer gem quality diamonds by developing a model to attract State Diamond Trade clients to beneficiate -3 grainers (Unwanted rough diamonds) Develop and approve a model for marketing of -3 grainers 14

Strategic Objectives 2018/19 Strategic Objective Activities Planned Targets 3. Increase sales to black owned companies, as a percentage of total SDT sales by mass, to 30 percent by 2022/23 Increased efforts on the enterprise development project (EDP) No enterprises expected in 2018/19, two (2) planned for 2019/20 Pilot a model for the supply of rough diamonds to black owned businesses on developmental terms Pilot and report on the model Facilitate access to the major local and international diamond jewellery markets International exposure for clients 15

Key Activities 2018/19 Strategic Objective Activities Planned Targets 3. Meet 30 percent by mass, rough diamond requirements of clients by 2022/23 Provide clients with requisite volumes and qualities of rough diamonds Survey and find means to provide clients with desired goods 4. Be a knowledge based organisation § § Staff Training Development and alignment as close as possible to corporate governance prescript Review of Funding environment Review and finalise Business Case for the State Diamond Trader § Expose at least six (6) staff members during the financial year 16

SDT 2018/19 Budget Sales 751 378 905 Cost of Goods Sold (720 891 131) Gross Profit 30 487 774 17

SDT 2018/19 Budget Overheads (29 335 178) Of which: Salaries 14 596 302 Leases 760 541 Computer and other IT 733 324 Travel 2 863 369 Fees 1 966 391 Other 8 415 251 18

SDT 2018/19 Budget EBIT 1 152 596 Interest Income Interest Expense 3 117 475 (1 096 205) Profit before Taxation 3 173 867 Taxation Net Profit 3 173 867 19

The State Diamond Trader