2023/2024 Chairman’s Report

INTRODUCTION.
It is an honour and privilege to report on the activities of SADPO over the past financial year. It has been an eventful year full of challenges, and I am going to attempt to summarize the most important activities but will also report on the circumstances that we do not have control over that have a significant impact on our side of the producing industry.

CIRCUMSTANCES BEYOND OUR CONTROL.
2024 was an election year where we saw for the first time in South Africa’s true democratic history, that none of the competing political parties could get a majority, and it resulted in us now being governed by a Government of National Unity. It is new terrain for us as a country, and despite early signs of higher business confidence, it remains to be seen how it will impact on policy certainty over the medium and longer term. This certainty is highly important to us as an industry, since it remains one of the key drivers in determining investors’ appetite to invest in a country. Given the fact that there are no financing alternatives available to us as alluvial diamond producers, we are even more dependent on investors.
The report year is also marked by several full-scale wars in the Middle East and Eastern Europe, all of which had an impact on the international price of our product. Add to that the spike in LGD production and sales, resulting in a drop in the international price of natural diamonds that exceeded 50% in some cases, and, unlike what we took as a given based on history, the market is yet to correct itself. We are currently absorbing these low prices for a longer period ever recorded since the great depression of the early 1930’s. On top of this the EU and G7 countries (representing around 70% of our consumer market) want to sanction all Russian production, resulting in the necessity for authentication of origin certification, over and above the current KP certification. All the mentioned factors have a negative impact on our marketing costs and the price of our product, resulting in a serious threat to our financial viability.

SADPO ACTIVITIES.
Through the Minerals Council of SA (MINCOSA), SADPO attended a meeting with the US Embassy discussing the implications of the G7 sanctions, highlighting the added costs it would entail, and I can report that it remains a work in progress. Currently it has no significant influence in our marketing cost, but it is my humble opinion that the certification of origan of our diamonds would be a positive marketing tool in future and would enhance the transparency of our industry, something that is needed and long overdue. This led to SADPO researching all possible alternative ways of authentication of origin (other than the current KP Certificate) and as a result, entered into an exclusive collaboration agreement with Authentia SA. SADPO will earn a commission on fees payable to Authentia by companies that were introduced to them by us and making use of their certification of origin process. We did this to bolster our income, but unfortunately, to date, none of the introduced companies has entered into an agreement with Authentia. There is however still a possibility that this MOU might still bear fruit.
SADPO was also invited by the DMRE (Department of Minerals Resources and Energy) to attend a meeting between the mining industry and the Department, discussing ways and means to sustain current job opportunities and avoiding the possibility of future retrenchments. It was a robust and honest discussion between the industry and the department (which was headed by the Minister, assisted by the DG and CI, and Industry was led by the CEO of MINCOSA). I made use of this opportunity to highlight probably the biggest contributor to the shrinking of the number of operators in the industry SADPO represents, apart from the market price of our product, namely the cost of compliance in general, but more specifically on MH&S regulations. Other factors like the waiting periods for license applications (mining and water-use) were discussed, and I could sense true willingness from the Department to be accommodative.
Following the abovementioned meeting, SADPO, via the JEMLF (Junior and Emerging Miners Leadership Forum) of MINCOSA, attended two meetings with the Chief Inspector of Mines and his deputies, and, with one or two exceptions, I am humbly proud to announce that there has been an attitude change in the approach of the Inspectorate during routine audits. There is now a better understanding of the risk-based approach members are using and the emphasis that the Inspectorate had on prescribed technology has somewhat subdued. It has also enabled SADPO to engage with the office of the Chief Inspector of Mines, something we successfully utilized recently. This arrangement is ongoing, and we will be meeting at least three times a year. I also want to underline the fact that we are in full support of the Zero Harm initiative by the Tripartheid alliance between industry, the Mine Health and Safety Council and labour Unions. SADPO is also proud to report that through our intervention we managed to obtain the documentation needed from the Department for new engineers to become certificated, something the engineers battled to obtain for more than two years.
The Department also invited us to participate in meetings to discuss the amendment of the MPRDA (Mineral and Petroleum Resources Development Act). We did this on two occasions, firstly on our own and secondly, through MINCOSA. It is important for our members to note that we are recognized by the department and our inputs, although not always accepted, are heard, and most importantly give us the opportunity to highlight our concerns prior the official publication of the amended legislation. This remains a work in progress, and it must be noted that the Portfolio Committee of Parliament has also invited us to meet with them in this regard. We are going to present to them some of the current challenges we see and lobby for their support in finalizing the amendments. As was reported the previous year, the ASM (Artisanal and Small-scale Mining) Policy document that was published in the Government Gazette is still just that, a policy document, and we are strongly lobbying for it to become legislation. With our inputs, and importantly, the proposed amended MPRDA, must encapsule the legislation applicable to the ASM sector. To name but one of the aspects that SADPO is officially involved in, is the proper definition of a small-scale miner. We are striving to acquire a definition that would include the vast majority of our members, and it would help us to overcome some of the onerous legislation and regulations (written for the big mining houses) that is currently applicable to us. It is after all the aim of the ASM Policy Document.
SADPO on its own, and with the DLF (Diamond Leadership Forum) of MINCOSA, is also playing a leading role in engagements with the SADPMR (South African Diamond and Precious Metals Regulator) and the SDT (State Diamond Trader). It is officially known that the amendment of the Diamond Act is also imminent, and therefore our role is vitally important to highlight our unique challenges which differs significantly from the big diamond producers’ mining methods and marketing. This remains a work in progress and meetings are taking place on a three-monthly basis. I just want to emphasize some of the points that are currently under discussion which also involves National Treasury. There is a proposed so-called 10-point plan which includes, amongst others, a request for the removal of VAT on all natural diamonds in SA. Secondly there is a proposal that all producers producing less than 400ct per production cycle, would be exempted from the legal obligation to avail themselves of their production to the SDT prior to sale of marketing. It is also proposed that diamonds sold through the Trading Houses to Beneficiating License Holders should be identified by a different coloured Brokers Note, in order for the producers to be able to quantify their production sold to Local Beneficiating License Holders, and hence, if it exceeds 15% of the value of a specific sales cycle for a specific producer, the rest of that producers’ production for that cycle can be exported without having to pay the 5% export levy. This will obviously help us as producers to get the maximum value for our production, something that might help us survive. Importantly I am humbly proud to report that all of these Governing bodies recognize SADPO as the official representing body of the smaller side of the diamond industry, not only producing but also marketing.
SADPO is also engaging with the DWS (Department of Water and Sanitation) on one of our huge challenges, namely the process in obtaining a Water Use License. Without going into the details, it remains a problem for most of our members and includes also the invoicing of the water used. SADPO is proud to report that through our intervention we could at least resolve some of these invoicing issues which amounted to muti-millions of Rands during the reporting period. Sadly, we are far from satisfied yet and confirm that it also remains a work in progress, but on the positive side we are also recognized, and the door is at least open.
SADPO is frequently approached by the media for interviews, not only locally but also internationally, and we did agree to do some of them. We however refrain from doing so when it is about or linked to controversy. SADPO is keeping its website relevant, and I would like to encourage our membership to visit it more frequently.
SADPO successfully hosted another charity golf day, and we were able to assist with deserved cases. I want to take this opportunity to specifically thank DJ Fourie and his team in this regard. Without their contribution in terms of the organization of the day it would not have been possible. It is highly appreciated.

CONCLUSION.
Sadly, I have to report that SADPO is suffering on the financial side. I am the first one to admit, so is our membership, but I remain convinced that the main reason is that we have too many producers that are willingly sharing in our successes but do not contribute to our cause. I am dumbfounded by what the reasons could be and fail to understand the recognition we experience outside our potential membership, but not from within. I am and remain convinced that our industry would have been a lot more challenging without our Organisation, and again plea that we must all take hands in these trying times. The fact remains that we cannot carry on with our efforts if there is not a drastic change in the Organization’s income, as you will see in our Financial Statements. All our activities are costing money and the ones mentioned above are just a fraction of what we do. So, all I can do is ask to please come onboard.

THANK YOU.
I want to firstly thank all our loyal contributing members. Without you we would not have been able to get to where we are. Secondly to my National Committee members, thank you for your time and effort in support of our organization, and at zero remuneration. It is highly appreciated. Thirdly to my ExCom who avails themselves even more frequently and also without any remuneration, another big thank you! Here I need to name a few. Dougie your support and willingness is beyond reproach, notwithstanding the hour of day. Lyndon thanks for always being able to know you are just a phone call away. Thank you for your insight and contribution, I would have battled without you. Yamkela, in your absence I thank you as well. I wish you a full recovery and are looking forward to having you beside me again. Most of all Rosalind, I do not have the vocabulary to even come close to what actually needs to be said. Therefore, all I can say is I salute you. Despite trying times, you were there, and your efficiency is remarkable. Thank you so much! Lastly also thank you to my Heavenly Father who has carried me often during this year, and without Whom I would not have made it.

I thank you.

GERT VAN NIEKERK
CHAIRMAN