---

|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

T A B L E O F C O N T E N T S

|1.1    | DATE                                                                          | 2     
|------ | ----------------------------------------------------------------------------- | ------
|1.2    | OVERVIEW                                                                      | 2     
|1.3    | SELECTED
      ANNUAL INFORMATION                                             | 16    
|1.4    | SUMMARY OF QUARTERLY
      RESULTS                                            | 18    
|1.5    | RESULTS
      OF OPERATIONS                                                   | 19    
|1.6    | LIQUIDITY                                                                     | 20    
|1.7    | CAPITAL
      RESOURCES                                                       | 21    
|1.8    | OFF-BALANCE SHEET
      ARRANGEMENTS                                          | 21    
|1.9    | TRANSACTIONS WITH RELATED PARTIES                                             | 22    
|1.10   | THIRD QUARTER                                                                 | 24    
|1.11   | PROPOSED
      TRANSACTIONS                                                   | 25    
|1.12   | CRITICAL ACCOUNTING
      ESTIMATES                                           | 25    
|1.13   | CHANGES
      IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION               | 26    
|1.14   | FINANCIAL INSTRUMENTS AND
      OTHER INSTRUMENTS                             | 26    
|1.15   | OTHER
      MD&A REQUIREMENTS                                                 | 26    
|1.15.1 | ADDITIONAL DISCLOSURE FOR
      VENTURE ISSUERS WITHOUT SIGNIFICANT REVENUE . | **26**
|1.15.2 | DISCLOSURE OF OUTSTANDING SHARE DATA                                          | 26    

1

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

|1.1 | Date
|--- | ----

This Management Discussion and Analysis ("MD&A") should be
read in conjunction with the audited consolidated financial statements of
Rockwell Diamonds Inc. ("Rockwell", or the "Company") for the nine months ended
February 29, 2008, prepared in accordance with Canadian generally accepted
accounting principles, and publicly available on SEDAR at www.sedar.com.

In December 2007, the Companys Board of Directors approved a
resolution to change the Companys year end from May 31, 2008 to February 29,
2008.

This MD&A is prepared as of May 20, 2008. All dollar
figures stated herein are expressed in Canadian dollars, unless otherwise
specified.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|This discussion includes certain statements that may be
      deemed "forward-looking statements". All statements in this discussion,
      other than statements of historical facts, that address future production,
      reserve potential, exploration drilling, exploitation activities and
      events or developments that the Company expects are forward-looking
      statements. Although the Company believes the expectations expressed in
      such forward-looking statements are based on reasonable assumptions, such
      statements are not guarantees of future performance and actual results or
      developments may differ materially from those in the forward-looking
      statements. Factors that could cause actual results to differ materially
      from those in forward-looking statements include market prices,
      exploitation and exploration successes, continued availability of capital
      and financing and general economic, market or business conditions.
      Investors are cautioned that any such statements are not guarantees of
      future performance and that actual results or developments may differ
      materially from those projected in the forward-looking statements.

|Cautionary Note to Investors
      Concerning Estimates of Indicated Resources                                                                                                                                                                                                                                                                                                                 
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                               
|This section uses the term indicated resources. The
      Company advises investors that while this term is recognized and required
      by Canadian regulations, the U.S. Securities and Exchange Commission does
      not recognize it. Investors are cautioned not to assume that any
      part or all of mineral deposits in this category will ever be converted
      into reserves.

|Cautionary Note to Investors
      Concerning Estimates of Inferred Resources                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|This section uses the term inferred resources. The
      Company advises investors that while this term is recognized and required
      by Canadian regulations, the U.S. Securities and Exchange Commission does
      not recognize it. Inferred resources have a great amount of uncertainty
      as to their existence, and as to their economic and legal feasibility. It
      cannot be assumed that all or any part of a mineral resource will ever be
      upgraded to a higher category. Under Canadian rules, estimates of Inferred
      Mineral Resources may not form the basis of economic studies, except in
      rare cases. Investors are cautioned not to assume that any part or all
      of an inferred resource exists, or is economically or legally
      mineable.

|1.2 | Overview
|--- | --------

Rockwell Diamonds Inc. ("Rockwell" or the "Company") is engaged
in the business of alluvial diamond production. The Company is focused on
acquiring additional operating diamond properties or projects that have
near-term potential for alluvial diamond production.

|1.2.1 | Summary
|----- | -------

During the February 29, 2008 fiscal period, the Company
operated three alluvial diamond mines and one bulk sampling project. Rockwell
received 51% of the net proceeds from production at these properties. Subsequent
to the nine months ended February 29, 2008, the Company acquired an additional
23% interest in the Holpan/Klipdam and Wouterspan properties thereby increasing
their interest to 74%, with the remaining 26% being held by a Black Economic
Empowerment (BEE) consortium as required by the Department of Minerals and
Energy Act in South Africa.

2

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

In the nine month period ended February 29, 2008, total diamond
production of 17,746.40 carats was derived from 2,368,110 cubic meters of
gravels mined and processed at Holpan/Klipdam and Wouterspan and from bulk
sampling at Makoenskloof. The Company sold 17,667.67 carats at an average price
of US$1,984.68 per carat. Diamonds in inventory at February 29, 2008 totaled
1,036.59 carats.

The Company received revenues from sales of $36 million,
inclusive of revenue received from subcontractors of $0.2 million. Cost of sales
and amortization totalled $29.2 million, resulting in an operating profit of
$6.8 million for the period. Other expenses were $7.8 million, taxation
amounting to $2.4 million and, together with an amount of $5.9 million
representing the 49% non-controlling interest of the South African operating
subsidiaries, this resulted in a loss for the nine months ending February 29,
2008 of $9.4 million or $0.05 per share.

In March 2007, Rockwell and the Trans Hex Group (Trans Hex)
reached a conditional agreement whereby the Company would purchase Trans Hexs
Middle Orange River Operations located in the Northern Cape Province of South
Africa. The Middle Orange River Operations include the Saxendrift and
Niewejaarskraal Mines (currently on care and maintenance) and certain associated
prospecting projects in the same area. Subsequent to the nine months ending
February 29, 2008, the suspensive conditions to the conditional agreement were
fulfilled. Certain mineral rights, including the Saxendrift mining right, have
been transferred to Rockwell. Transfer of others is pending issue of final
documents by the South African Department of Mineral and Energy (DME), which
the companies expect in due course. Rockwells operational staff has mobilized
to the Saxendrift property and begun re-commissioning the plant and recovery
unit. The objective is to re-open the mine and provide additional carat
production in the near future.

In other corporate developments, Rockwell began trading on the
Toronto Stock Exchange (TSX) on February 22, 2008. The Company now trades in
Canada on the TSX and in South Africa on the Johannesburg Stock Exchange (JSE)
under the trading symbol of RDI, and in the United States on the
Over-the-Counter Bulletin board (OTCBB) under the symbol RDIAF.

|1.2.2 | Financings
|----- | ----------

In the prior fiscal year ended May 31, 2007, the Company
completed two significant equity financings. During the nine month period ended
February 28, 2008, the Company completed a brokered private placement
financing.

$21 million private placement financing

In November 2006, Rockwell completed a private placement of $21
million, consisting of 42 million units at $0.50 per unit (the Offering). Each
unit consists of one common share (Share) in the capital of the Company and
one Share purchase warrant. Each warrant entitles the holder to buy one common
share in the capital of the Company at the exercise price of $0.60 during the
first year from completion of the financing, or at an exercise price of $0.80
during the second year or at an exercise price of $1.00 during the third year.
The third year term of the warrants is conditional upon Rockwell achieving Tier
1 status on the TSX Venture Exchange within the first two years. During the
year, the Company listed on the TSX. All securities are subject to a four month
holding period in Canada expiring on March 23, 2007, and a portion will be
subject to additional US resale restrictions in the United States. The Company
paid cash commissions of $1,215,770.

3

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

Rockwell is using, or has used, the net proceeds from the
Offering (a) to acquire the interests and/or rights in the four alluvial diamond
properties in South Africa and the DRC, (b) to discharge the convertible
promissory notes of $9.5 million, (c) to carry out exploration and development,
and (d) for general working capital and corporate development purposes.

Financing to raise up to $60 million

In May 2007, the Company completed a private placement and
issued 116,007,154 million equity units at a price of $0.52 per unit for
aggregate proceeds of up to $60 million, comprised of approximately $50 million
to be issued to investors under the brokered offering and $10 million to be
issued in a non-brokered offering. Each unit consists of one common share and
one share purchase warrant exercisable at $0.70 for a 24 month period from
completion. Units issued under the brokered offering were being offered by a
syndicate of agents. Closing of the offering occurred on the May 9, 2007.

The Company paid cash commissions of $3,877,665, issued
1,093,440 common shares fair valued at $568,588 as compensation to agents as
well as 5,772,000 broker warrants fair valued at $1,693,197 to the agents,
bringing the total issued common shares to 117,100,594 and total commissions to
$6,139,450.

The net proceeds from the offerings will be used to fund
Rockwells acquisition of the MORO from Trans Hex, expand production capacity at
its Wouterspan operation across the river from the MORO, implement improvements
at its other operations, and for general corporate purposes.

January 2008, Private Placement of $14.5
million

In January 2008, the Company completed a brokered private
placement, which had been announced on November 28, 2007, and issued a total of
24,101,526 Common Shares at a price of $0.60 per share for total proceeds of
$14,460,916. The Company issued 500,000 Common Shares and paid a cash fee of
$300,000 as finders fees relating to the private placement. All shares issued
pursuant to the private placement were subject to a hold period that expired on
March 31, 2008.

Proceeds from the financing will be used to fund Rockwells
diamond operations and new project evaluation and development.

|1.2.3 | Agreements
|----- | ----------

Durnpike Agreement

On June 30, 2006, the Company entered into an
Agreement-in-Principle to acquire interests and/or rights in four alluvial
diamond properties in South Africa and the Democratic Republic of Congo (DRC).
These four properties include the Holpan/Klipdam Property in South Africa,
Wouterspan Property in South Africa, Kwango River Project in the DRC and Galputs
Minerale Project in South Africa.

Subsequently and pursuant to the terms of the Definitive
Agreement, the Company acquired all of the shares and loans in Durnpike, a
private South African company, from eight vendors (the Vendors) for
consideration set forth below, payable in common shares of the Company (Common
Shares) related to the closing price of the Common Shares on the TSX Venture
Exchange on the specified dates described below. Durnpike holds an interest in
respect of and/or rights in the four alluvial diamond properties.

4

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

The Holpan/Klipdam Property and the Wouterspan Property were
indirectly owned by the H.C. Van Wyk Diamante Trust (Van Wyk Trust), a
business trust registered in South Africa. The Van Wyk Trust held 99% of HC Van
Wyk Diamonds Ltd (HCVW), a private South African company, and 99% of Klipdam
Mining Company Limited (Klipdam), a private South African company. The
remaining 1% of HCVW and Klipdam was owned by nominees of the Van Wyk Trust.
HCVW and Klipdam were collectively referred to as The Van Wyk Diamond Group of
companies (VWDG).

On July 7, 2006, Durnpike completed the acquisition of an
initial 49% of the issued and outstanding shares of HCVW and 51% of the issued
and outstanding shares of Klipdam (the Acquisition Interest) for South African
Rand (ZAR) 50 million ($7.8 million) and agreed to pay an additional ZAR30
million ($4.5 million) to the Van Wyk Trust on July 7, 2007.

To facilitate Durnpikes payment of ZAR50 million to the Van
Wyk Trust on July 7, 2006, the Company advanced a non-interest bearing loan to
Durnpike of ZAR50 million (Cdn$7.8 million). This loan is secured by a pledge of
Durnpikes Acquisition Interest. The payment of ZAR30 million was made to the
Van Wyk Trust in June 2007.

Durnpike had the option to increase its shareholding in HCVW to
a 51% controlling interest by (a) subscribing for additional shares in HCVW for
the amount of ZAR1 million ($160,000) and (b) introducing a ZAR24 million ($3.9
million) working capital loan into VWDG. These conditions were met in January
2007.

The Company also entered into an Exchange Agreement with the
Van Wyk Trust to acquire the remaining shareholding of VWDG for ZAR 60 million
($9 million), payable in Common Shares. The Exchange Agreement became effective
upon Rockwell completing its listing of the Companys Common Shares on the JSE.
In March 2008, subsequent to the nine months ending February 29, 2008 and
pursuant to the Exchange Agreement, the Company issued Common Shares to the Van
Wyk Trust and increased its ownership by 23% to a total of 74% of the VWDG
assets.

Pursuant to the Definitive Agreement:

- The Company acquired from the Vendors all of their shares and loans in
  Durnpike for consideration of ZAR 39.8 million ($6.1 million), payable in
  common shares of the Company on the earlier of (i) the date of the JSE
  listing; and (ii) within approximately 12 months from signature of the
  Definitive Agreement. By virtue of such acquisition, the Company acquired
  Durnpikes interests in the four alluvial diamond properties in South Africa
  and the DRC. The ZAR consideration does not include payment in respect of the
  Kwango River Project, which payment stands to be made by the Company only when
  (and if) the feasibility study referred to below has been completed and
  approved by the board of directors of the Company.On November 30,
  2007, the Company began trading on the JSE and hence completed its JSE listing
  condition. Consequently, the Company issued 7,848,663 Common Shares as
  settlement of its commitment and also 1,676,529 Common Shares as finder fees
  relating to the Durnpike acquisition.
- The Company will spend US$7 million on a feasibility study on the Kwango
  River Project by August 31, 2007. This deadline may be extended to February
  29, 2008 at no cost and be further extended to December 31, 2008 by payment of
  US$1 million in Common Shares. As it seems highly unlikely that the deadline
  of February 29, 2008 will be met, the Company is currently negotiating an
  extension to such deadline. If the Company wishes to retain the

5

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

Kwango River Project following
completion of the feasibility study, the Company must (i) pay to the Vendors an
amount equal to 60% of the net present value of the Kwango River Project
Valuation (as determined in terms of the feasibility study and subject to a
minimum acquisition cost of US$13 million and a maximum acquisition cost of
US$26 million), which payment shall be effected by the issuance of Common Shares
and (ii) commit to incur an additional amount of up to US$6 million in
expenditures for development of the Kwango River Project within 16 months from
the date of completion of the feasibility study. If the Company does not wish to
retain the Kwango River Project following completion of the feasibility study,
the Definitive Agreement provides for Durnpike being divested of such project on
certain terms, with the Company nevertheless retaining 100% of the shares in
Durnpike (and therefore the indirect interests in the Holpan/Klipdam, Wouterspan
and Galputs properties). In such event, the full and final purchase
consideration for Durnpike will be limited to the ZAR Consideration.

Durnpikes interest in the Kwango River
Project is constituted by an agreement (Midamines Agreement) with Midamines
SPRL (Midamines), the holder of the exploration permit on the Kwango River
Project, to act as contractor on behalf of Midamines to manage and carry out
exploration and mining. Durnpike will be entitled to an 80% share of the net
revenue from the sale of any diamonds produced from the contract area.

Under the Midamines Agreement, Durnpike
agreed to certain minimum royalty payments being made to Midamines. These
royalties take the form of a series of recurring annual minimum royalty payments
of US$1,200,000 per annum (commencing on December 31, 2007). (As to the
enforceability of this commitment in light of developments pertaining to the
Midamines Agreement, see note 15(a) to the audited financial statements for the
nine months ending February 29, 2008). During the third quarter of 2008 the
Company paid consideration of $600,000 to Midamines in order to increase the
size of the concession (Permit 331).

All of the Common Shares issued to the Vendors pursuant to the
acquisition, other than the Common Shares issued to extend the feasibility study
deadline, will be held in escrow for at least nine months from the date of
issuance, provided that a limited portion of those escrowed Common Shares may be
released to enable the Vendors to meet certain specified obligations.

On January 31, 2007, all the conditions precedent to
implementation of the Acquisition as per the Definitive Agreement, were
fulfilled. The Company also received the necessary regulatory approvals in
Canada and South Africa. As provided for in the Definitive Agreement, the
Company executed an agreement in relation to the acquisition of control of the
mineral rights relating to the Galputs Minerale Project. To date the Company is
still awaiting the final approval from the DME relating to the transfer of the
shares of Galputs Minerale Project from Virgilia Investments Inc. to the
Company.

During the year ended May 31, 2007, a BEE group purchased 15%
of the VWDG from the Van Wyk Trust for an amount of ZAR22.5 million ($3.4
million). Subsequent to the nine months ending February 29, 2008, the BEE group
is in the process of increasing its shareholding from 15% to 26% by subscribing
for an additional 11% shares in the VWDG. This additional 11% will be at a
subscription price of ZAR17.5 million and the BEE group will also inject ZAR10.5
million in working capital into the VWDG. The BEE company is African Vanguard
Resources (Pty) Ltd., the holding company of Richtrau No 136 (Pty) Ltd.

6

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

Makoenskloof property acquisition

In conjunction with the acquisition of Durnpike, HCVW had an
option agreement to acquire the Makoenskloof alluvial diamond project. The
Makoenskloof property is located on the north bank of the Middle Orange River,
approximately 20 km from the town of Douglas, South Africa, and 40 km upstream
from the Wouterspan diamond operation. As a result of the acquisition of HCVW by
Durnpike, and concurrent acquisition of Durnpike by Rockwell, the Company
assumed the option to purchase the Makoenskloof property.

In November 2006, HCVW exercised its option to purchase the
property and the company that held the mineral rights of the Makoenskloof
property. HCVW paid ZAR5.4 million ($880,000) in January 2007 for the property
and mining permits. Pursuant to this option exercise, HCVW also entered into a
subcontracting agreement with Folmink Delwery CC to perform bulk sampling,
commencing in March 2007. In April 2007, HCVW entered into an agreement to
purchase ZAR21.3 million (approximately $3 million) in plant and equipment from
the sub-contractor and to terminate the sub-contracting arrangement. The Company
has paid a total consideration of ZAR19 million ($2.7 million) and is committed
to pay the remaining consideration in monthly payments of ZAR500,000 ($63,000).
The monthly payments shall incur interest calculated at the prime rate of the
Standard Bank of South Africa.

In December 2007, Makoenskloof property was placed on care and
maintenance in order for management to evaluate the results of the bulk sampling
activities which had taken place up until the end of November 2007. No work is
planned in 2009.

Middle Orange River Operations (MORO)
Agreement

In March 2007, Rockwell and Trans Hex, through its wholly owned
subsidiary Trans Hex Operations (Pty) Ltd (THO), announced that the companies
had entered into an agreement whereby Rockwells wholly owned South African
subsidiary, Rockwell Resources RSA (Pty) Ltd (Rockwell RSA), would acquire two
open pit alluvial diamond mines (Saxendrift and Niewejaarskraal) currently on
care and maintenance, and three alluvial diamond exploration projects
(Kwartelspan, Zwemkuil-Mooidraai, and Remhooget-Holsloot) referred to
collectively as the Middle Orange River Operations from Trans Hex (the
Transaction). Pursuant to the terms of the Transaction, Trans Hex will transfer
all its relevant mineral rights and associated assets into a new special purpose
vehicle (Saxendrift Mine Pty (Ltd)) which Rockwell acquired via Rockwell
RSA.

The MORO include:

- the rights to prospect and explore for and/or mine precious stones and/or
  other minerals and/or metals held directly or indirectly by THO in the
  Saxendrift area (described above);
- substantial indicated and inferred mineral resources (see Table in section
  1.2.5 below);
- the material plant, machinery, equipment and other movable assets owned
  and/or used by THO - These operating assets were independently valued by
  Manhattan Mining Equipment (Pty) Limited in April 2005 at ZAR53.3 million
  ($8.0 million);
- the employees of THO in terms of Section 197 of South Africas Labour
  Relations Act of 1995; and

7

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

- a rehabilitation liability which will be taken over by Rockwell on the
  basis that the tailings and other heaps of unprocessed diamond bearing
  middlings gravel and Rooikoppie gravels will be reprocessed by Rockwell to
  recover contained diamonds. The plan is to process the material and
  simultaneously rehabilitate these areas.

The Company has paid cash consideration to Trans Hex of
ZAR100.4 million ($14.8 million) and assumed potential liabilities for staff
layoffs of ZAR4.7 million (capped at ZAR5 million ($0.8 million)) and
rehabilitation bonds (capped at ZAR4.25 million ($0.6 million)). An independent
consultant has been appointed to determine the value of the rehabilitation
bonds. All payments and liabilities are expected to total $16.2 million, subject
to certain final adjustments. Trans Hex will transfer all its relevant mineral
rights and associated assets into Saxendrift Mine Pty (Ltd) to be acquired by
the Rockwell RSA.

The Transaction was completed in April 2008. Registration of
transfer to Saxendrift Mine Pty (Ltd) of the Saxendrift mining right, as well as
prospecting rights in respect of the Kwartelspan, Zwemkuil-Mooidraai and part of
the Remhoogte-Holsloot projects has already been obtained. Cession of the
Niewejaarskraal mining right is still awaited at this time from the DME, and the
Remhoogte prospecting right is in the process of being renewed. Both companies
are confident that these rights will be awarded pending which the funds of
ZAR26.8 million allocated for their purchase will continue to be retained in an
interest-bearing Trust account. Once the DME has issued the necessary cession
and renewal documents, these rights will also be transferred to Rockwell RSA via
the Saxendrift Mine Pty (Ltd) and the funds in Trust released to Trans Hex.

Farhom Property

On July 30, 2007, H.C.Van Wyk Diamonds acquired 100% of the
shares and shareholder loans of Farhom Mining & Construction (Pty) Ltd for
ZAR10 million ($1.5 million). This company holds the mineral rights over the
Farhom farm property. This transaction was concluded in terms of an option
granted to HCVW on February 24, 2005 and later amended on July 10, 2007.

|1.2.4 | Production Properties
|----- | ---------------------

Production and Sales  Fiscal 2008 Year

A summary of diamond production and sales for the nine month
period to February 29, 2008 (fiscal 2008 year) is provided in the following
table:

Operation
    Volume (cubic
      meters)
    Production (carats)
    Sales (carats)
    Value of Sales (US$)
    Value of Sales (Cdn$)
    Inventory (carats)Holpan
    676,026
    5,385.82
    5,425.29
    7,218,906
    7,383,320
    366.28Klipdam
    584,643
    5,018.88
    5,061.47
    7,264,657
    7,430,113
    360.01Wouterspan
    890,059
    6,398.00
    6,237.59
    16,067,663
    16,433,611
    309.92Makoenskloof
    217,382
    943.70
    943.32
    4,513,376
    4,616,170
    0.38Total
    2,368,110
    17,746.40
    17,667.67
    35,064,602
    35,863,214
    1,036.59


A summary of Rockwells share of diamond production and sales
for fiscal 2007 (during the four month period of February 1 to May 31) is
provided in the table below:

8

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

Operation
    Volume (cubic meters)
    Production (carats)
    Sales (carats)
    Value of Sales (US$)
    Value of Sales (Cdn$)
    Inventory (carats)Holpan
    487,535
    2,850.57
    2,947.27
    2,936,597
    3,329,223
    405.78Klipdam
    257,900
    1,883.85
    1,762.04
    1,388,938
    1,588,261
    402.55Wouterspan
    370,888
    2,272.86
    2,435.99
    2,859,328
    3,200,163
    149.53Total
    1,116,323
    7,007.28
    7,145.30
    7,184,863
    8,117,647
    957.86


Production and Sales  Quarter by Quarter
Comparison

Rockwell did not acquire its interest in the alluvial diamond
projects until January 31, 2007, so there are not any comparative results for
the prior nine month period. Instead, the current quarters production is
compared to the previous quarter.

PRODUCTIONOperation
    3 months ending February 29, 2008
    3 months ending November 30, 2007Volume (cubic
      meters)
    Carats
    Average grade (carats per
      100 cubic meters)
    Volume (cubic
      meters)
    Carats
    Average grade (carats per
      100 cubic meters)Holpan
    167,338
    1,266.46
    0.76
    232,930
    1,673.29
    0.72Klipdam
    182,583
    1,234.80
    0.68
    142,534
    1,256.06
    0.88Wouterspan
    194,468
    1,786.87
    0.92
    341,099
    2,016.54
    0.59Makoenskloof
    18,029
    73.12
    0.41
    136,154
    633.28
    0.47Total
    562,418
    4,361.25
    0.78
    852,717
    5,579.17
    0.65


SALES, REVENUE AND
      INVENTORYOperation
    3 months ending February 29, 2008
    3 months ending November 30, 2007Sales (carats)
    Value of Sales
      (US$)
    Average value (US$
      per carat)
    Inventory (carats)
    Sales (carats)
    Value of Sales
      (US$)
    Average value (US$
      per carat)
    Inventory (carats)Holpan
    1,272.18
    1,645,214
    1,293.22
    366.28
    2,683.94
    2,437,250
    908.09
    372.00Klipdam
    1,257.73
    946,534
    752.57
    360.01
    2,044.82
    1,076,732
    526.57
    382.94Wouterspan
    1,973.48
    6,222,776
    3,153.20
    309.92
    2,511.57
    4,975,788
    1,981.15
    496.53Makoenskloof
    155.39
    705,254
    4,538.60
    0.38
    787.93
    3,808,122
    4,833.07
    82.65Total
    4,658.78
    9,519,778
    2,043.41
    1,036.59
    8,028.26
    12,297,892
    1,531.83
    1,334.12


The above table does not include minor contract diamond revenue
sales from properties.

Holpan/Klipdam

The Holpan/Klipdam Property is located 45 km from Kimberley,
South Africa. It consists of the contiguous Holpan 161 farm and Klipdam 157
farm, covering an area of 3,836 hectares. The production from Holpan and Klipdam
is accounted for separately because they are separate operating entities.

Production at Holpan in the quarter ending February 29, 2008
was 1,266.46 carats from 167,338 cubic meters (334,676 tonnes) of gravels
processed, compared with 1,673.29 carats from 232,930 cubic meters (465,860
tonnes) of gravels processed in the previous quarter. The decrease on the
previous quarter is mainly due to the mine closure over part of December and
January for the Christmas holidays.

9

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

Sales from Holpan were 1,272.18 carats at an average value of
US$1,293.22 per carat, a decrease in carats sold but increase in value per carat
sold from 2,683.94 carats at an average value of US$908.09 per carat in the
previous quarter. The inventory at Holpan is 366.28 carats.

Production at Klipdam was 1,234.80 carats from 182,583 cubic
meters (365,166 tonnes) of gravels, compared to 1,256.06 carats from 142,533
cubic meters (285,066 tonnes) of gravels produced in the previous quarter.

Sales from Klipdam were 1,257.73 carats at an average value of
752.57 per carat, a decrease in carat sales but increase in value per carat sold
from 2,044.82 carats at an average value of US$526.57 per carat in the previous
quarter. There is an inventory of 360.01 carats for Klipdam.

Wouterspan

The Wouterspan Property is located near Douglas, South Africa.
It comprises portions, totalling 969.4 hectares, of the Lanyon Vale 376 farm.
Operations are taking place on two portions of the property called the Farhom
and Okapi farms, exploiting the Rooikoppie and Primary gravel units.

During the quarter ended February 29, 2008, the property
produced 1,786.87 carats from 194,468 cubic meters (388,936 tonnes) of gravels,
a decrease from 2,016.54 carats from 341,099 cubic meters (682,198 tonnes) of
gravels in the previous quarter. The decrease on the previous quarter is mainly
due to the mine closure over part of December and January for the Christmas
holidays

Sales from Wouterspan were 1,973.48 carats at an average price
of US$3,152.20 per carat, a decrease in carats sold but increase in value per
carat sold from 2,511.57 carats at an average value of US$1,981.15 per carat
sold in the previous quarter. The inventory at Wouterspan is 309.92 carats.

Makoenskloof Property

The Makoenskloof property is located on the north bank of the
Middle Orange River, approximately 20 km from the town of Douglas, South Africa,
and 40 km upstream from the Wouterspan diamond operation.

During the quarter ended February 29, 2008, the volume of bulk
sampling was 18,029 cubic meters (36,058 tonnes) of gravels from which 73.12
carats were recovered. Sales from Makoenskloof were 155.39 carats at an average
value of US$4,538.60 per carat, a decrease in number of carats sold and a
decrease in value per carat from 787.93 carats at an average value of
US$4,833.07 per carat in the previous quarter. The inventory at Makoenskloof is
0.38 carats.

10

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

Production Costs

Production was lower for during the December to February
quarter because of the annual shutdown over the Christmas period. The average
operating cost during the period of December through February was approximately
US$4.66 per tonne. Operating costs have also decreased from US$5.48 per tonne in
the comparative last quarter of the financial year ending May 31, 2007. The
overall higher costs previously were related to costs for bulk sampling at
Makoenskloof, downtime related to maintenance in the plant at Klipdam and the
effect of exchange rates.

Mineral Resource Estimates and Plans for 2009

Holpan/Klipdam

The inferred mineral resources at February 29, 2008 after
depletion from mining since the prior estimate at March 31, 2007 are 8.86
million m3 grading 0.84 carats per 100 m3. The estimate
was completed by Rockwells Manager, Resources, G. Norton, Pr.Sci.Nat., a
qualified person who is not independent of the Company.

A program of 400 boreholes (6,000 m) is currently underway to
delineate the edges of the Klipdam Channel and to identify palaeo-channel
remnants on Holpan. Once the information from this program is compiled, a new
resource estimate will be reported. A further $300,000 drilling and trenching
program is planned for 2009.

Wouterspan

Mineral resources based on work to October 31, 2007 were
estimated by T. Marshall, PhD, Pr.Sci.Nat., a qualified person who is
independent of the Company. Depletion from mining since that time was determined
by Rockwells Manager, Resources, G. Norton, Pr.Sci.Nat., a qualified person who
is not independent of the Company.

The mineral resources at Wouterspan as of February 29, 2008 are
5.26 million m3 grading 0.71 carats per 100 m3in the
indicated category and 37.77 million m3 grading 0.71 carats per 100
m3 in the inferred category.

Some 20,000 m of additional drilling was planned for fiscal
2008. A second phase 15,000 m program is currently underway. Once the
information from this program is completed, a new resource estimate will be
done.

|1.2.5 | Exploration and Development Properties
|----- | --------------------------------------

Middle Orange River Operations

The MORO include the Saxendrift mine (being re-commissioned)
and Niewejaarskraal mine (currently on care and maintenance) and certain
associated prospecting projects, totaling approximately 14,950 hectares.

11

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

Saxendrift and Niewejaarskraal are located across the Middle
Orange River from the Wouterspan operation. The Wouterspan diamond bearing
gravel sequence constitutes a large alluvial diamond deposit, which is a remnant
of an extensive braided river system represented by coarse gravel deposits, sand
rich lenses, an upper calcrete layer and surface deflation layer typically
referred to as the Rooikoppies. Deposits found at Wouterspan are contiguous
with the Saxendrift and Niewejaarskraal deposits located on the south bank of
the river.

The Saxendrift area has had a long history of diamond
production dating back to the mid 1920s. An estimated 96,000 carats of diamonds
were extracted from the area between 1928 and 1964. Trans Hex commenced
exploration and mining in the area in 2000, after a merger with GEM Diamond
Mining Limited, which held the mineral rights to Saxendrift at that time.
Production on Saxendrift was achieved by open cast mining methods with
processing and recovery being achieved by a combination of rotary pan plants,
dense media separation and flow-sort X-ray recovery. From commissioning to the
end of 2005, the Saxendrift mine produced a total of 76,803 carats. The average
diamond price realized by THO for Saxendrift during the period May 2001 to the
end of 2005 was US$1,400 per carat.

THO began development of the Niewejaarskraal mine with a bulk
sampling program in mid-2001. A dense media separation plant was erected on site
and full-scale production commenced in April 2002. This operation was suspended
in late 2006. An average price of US$1,375 per carat was achieved for
Niewejaarskraal for the period September 2001 to the end of 2005.

THO also conducted exploration and evaluation work on several
large alluvial gravel terraces on the Kwartelspan property, located to the
north-east of Saxendrift, and on the Vieglandsput, Zwemkuil-Mooidraai and
Remhoogte-Holsloot properties, located to the south-west of Niewejaarskraal. The
exploration work included reverse circulation drilling, trenching and bulk
sampling. Inferred Mineral Resources were estimated based on this work,
indicating the development potential of the projects.

Mineral Resource Estimates and Plans for 2009

The Indicated and Inferred Mineral Resources as of March 2007
were estimated by the South African consulting company Venmyn. C.A. Telfer,
Pr.Sci.Nat., of Venmyn is an independent qualified person as defined by National
Instrument 43-101.

MORO INDICATED RESOURCESMINE/PROJECT
    MINING AREA
    VOLUME (cubic meters)
    GRADE (carats/100
      cubic meters)Saxendrift
    Saxendrift Terrace A
    1,824,000
    0.83Saxendrift Terrace B
    422,000
    1.15Stockpiles
    385,539
    0.46Total
      Saxendrift Indicated
    2,631,539
    0.82Niewejaarskraal
    Niewejaarskraal
    4,164,745
    0.80Viegulandsput
    1,802,822
    1.16Total
      Niewejaarskraal Indicated
    5,967,567
    0.91GRAND TOTAL
    
    8,599,106
    0.88


12

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

MORO INFERRED RESOURCESMINE/PROJECT
    MINING AREA
    VOLUME (cubic meters)
    GRADE (carats/100
      cubic meters)Saxendrift
    Saxendrift Terrace A
    5,723,000
    0.48Saxendrift Terrace B
    1,821,000
    0.68Stockpiles
    263,000
    0.29Total
      Saxendrift Inferred
    7,807,000
    0.52Niewejaarskraal
    Niewejaarskraal
    1,696,000
    0.48Viegulandsput
    1,465,000
    0.47Nieweskraal TB2
    4,919,000
    0.90Total
      Niewejaarskraal Inferred
    8,080,000
    0.73Zwemkuil-Mooidraai
    N/A
    1,640,000
    0.95Remhoogte-Holsloot
    N/A
    11,503,000
    1.15Kwartelspan
    N/A
    1,385,000
    1.50Total
      Exploration Projects Inferred
    14,528,000
    1.16GRAND
      TOTAL
    30,415,000
    0.88


Since completion of the Saxendrift mineral rights subsequent to
year end, a Project Team has been deployed at that site to re-commission the
existing diamond processing plants and start-up mining operations. Good progress
has been made, and Phase 1 of the two-phase development plan was largely
completed by late May. Phase 1 included re-commissioning of a 35 tonne per hour
Dense Media Separation Plant; gravel screening and rotary-pan plants; the
Flow-sort X-ray final recovery unit; and setting in place mining and earth
moving equipment with sufficient capacity to deliver gravels to the two
metallurgical plants. Once the above plants are fully operational, the Company
expects to achieve a through-put of approximately 60,000 tonnes of mined gravel
per month. Phase two comprises the construction and commissioning of a new Wet
Plant at Saxendrift.

Once the final permitting has been acquired for
Niewejaarskraal, the Project Team currently responsible for the re-commissioning
of Saxendrift operations will be tasked with the re-start at this mining
site.

Galputs Minerale Project, Northern Cape Province, South
Africa

The Galputs Minerale Project consists of the mining rights to
the Galputs 104 farm on which diamondiferous gravels have been identified. The
project is indirectly owned by Virgilia Investments Inc, a British Virgin
Islands corporation. Virgilias wholly-owned subsidiary, Galputs Minerale (Pty)
Limited, a private South African company, holds mining rights to the Galputs
Project.

A program was proposed in 2006 for further exploration and bulk
sampling operations. No work was done in 2007 or 2008, or is immediately planned
for fiscal 2009, as attention is focused on production at Holpan/Klipdam and
Wouterspan and initiating production on the recently acquired MORO
properties.

13

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

Kwango River Project, DRC

The Kwango River Project comprises approximately 109 square km
within Exploitation Permit Number 331 (PPE331) held by Midamines, a DRC
company. Durnpike has an option agreement with Midamines (Midamines Agreement)
to manage and carry out exploration and mining on a portion of PPE331, as
contractor for and on behalf of Midamines, and is entitled to an 80% share of
the net revenue from the sale of any diamonds produced from the contract area.
PPE 331, issued in December 2003, is valid until January 2017 (and is renewable
for a second term) and allows the holder to conduct exploration, develop and
exploit the deposit as well as market the diamonds produced from the deposit
according to local government requirements and the Kimberley process.

The Project encompasses over 75 km of river frontage and also
extends across elevated, palaeo-river terraces. Alluvial diamond deposits occur
as gravel assemblages within the modern Kwango River, underlying its banks and
in the adjacent terraces, which are being mined by small scale operations.

In 2007, the Company advanced the logistical activities for its
planned exploration and bulk sampling initiative with Midamines, established a
working base in Kinshasa and conducted geophysical and other investigations on
site. No work was done in fiscal 2008.

One of the 50% shareholders of Midamines has, subsequent to the
conclusion of the Midamines Agreement denied the validity of that agreement. The
other 50% shareholder disputes this view and remains committed to the Midamines
Agreement. Due to this dispute, Midamines has not afforded Durnpike access to
the site, and assistance as regards its proposed operations on the site, in the
manner contemplated in the Midamines Agreement. This failure has significantly
delayed the Companys proposed operations on the site, and it is consequently
the Companys position that the required royalty payments have become suspended
for the duration of the dispute.

The Company will obtain formal legal advice from counsel and
evaluate its available remedies. Although the outcome is not currently
determinable the project is not a material operation of the Company. During the
third quarter of 2008 the Company paid consideration of $600k to Midamines in
order to increase the size of the concession

Ricardo Property, Chile

The Company holds a 100% interest in the Ricardo Property, a
copper prospect located within the Calama Mining District, Chile. The Company
continues to maintain the Ricardo Property in good standing.

The property is situated on the West Fissure Fault, a
structural trend that hosts a number of porphyry copper deposits, including
Corporación Nacional del Cobre de Chiles (Codelco, Chiles national mining
company) Chuquicamata Mine. There are targets on the Ricardo property that have
yet to be tested and the Company is seeking partners to continue exploration or
a potential divestiture of the property.

14

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

|1.2.6 | Market Trends
|----- | -------------

The Diamond Market

Over the nine month fiscal period ending February 29, 2008,
prices for rough diamonds increased by 5-30%, varying from 5% for 0-2 carat
stones to 15-20% for 2-10 carat stones to 30% or more for plus 10 carat
diamonds. Prices for polished stones have also increased by 20%.

Overall, the average dollar per carat prices received by
Rockwell have increased more because of 65% of its production was plus 2-carat
stones (see table below), and a significant proportion was plus 5-carat stones.
The international shortage in supply of plus 5-carat diamonds led to increased
prices.

SIZE
    % CARATS OF PRODUCTION
    % US$ REVENUE0.05 - 2.00
      carats
    43%
    5%2.00 - 5.79
      carats
    25%
    12%5.80 -10.79
      carats
    12%
    13%10.80 carats+
    20%
    70%


The table shows general prices increases for the different size
ranges; however, clarity and colour are major factors in prices received.

Diamond clarity is rated using the following scale:

GIA DIAMOND CLARITY GRADING
      SCALECategory
    Flawless
    Internally Flawless
    Very Very Slightly Included
    Very Slightly Included
    Slightly Included
    IncludedGrade
    FL
    IF
    VVS1
    VVS2
    VS1
    VS2
    SI1
    SI2
    I1
    **I2**
    **I3**


- Diamonds with clarity of SI1 or better have experienced the greatest
  increase in prices increases.
- Diamonds with a grade of less than SI1 have remained relatively stable
  with smaller increases and a lack in demand. Polished diamonds that have black
  inclusions are difficult to sell.

The full range of colours have experienced an increase in
price, but major price increases occurred from D-K colour range and
predominantly in the D to F colors. Prices for D colors increased the most; an
overall percentage increase for this colour range is hard to determine because
of scarcity and extreme demand. Similar increases have been experienced for
fancy colour diamonds i.e. pinks and blues. Fancy yellows are relatively common
in Rockwell production. These have also experienced increases in price, as
demand is high for the dark yellow (intense to vivid) range. All of these
coloured and rare D colour diamonds have become regarded as investment pieces,
comparable to art from a known artist.

Diamond Sales by Tender Process

The diamond tender system continues to be the preferred form of
sales by producers throughout the world, particularly in the junior mining
segment, because of the transparency in the process, which gives investors
comfort, and the opportunity for producers to expose their stone to a larger
variety of diamonds

15

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

dealers. Larger diamond mining companies also adopted the use
of tender system as a form of sales of segments of their diamonds
production.

Rockwell was involved in 10 tenders during the 2008 financial
year, held in the offices of Flawless Diamond Trading House, Johannesburg, South
Africa. There was an average of 60 buyers at these tenders. During the nine
month period, three plus 100-carat diamonds were recovered and sold, which is
in-line with production forecasts based on size frequency calculations, and
compared to charts with the recovery of different sizes of diamonds relating the
number of tonnes produced. The recently acquired Middle Orange River projects
are expected to add to production of carats, with comparable size and quality to
the Companys past production.

Beneficiation

The Steinmetz/Rockwell joint venture for beneficiating
special diamonds has proved extremely successful. We expect that the gross
dollar value percentages will greatly increase once further income has been
accounted for after the sales of such polished diamonds. Further to this,
Rockwell expects that our gross average dollar value per carat will increase by
at least 5% once accounting for these post sales is completed.

Rockwell is presently establishing a diamond cutting facility
in South Africa, which will specialize in cutting and polishing of a specific
segment of its diamond production. A plan to investigate which diamonds can be
manufactured viably and professionally within the South African economic
structure has been formulated and will be carried out in fiscal 2009.

Summary

Due the shortages of supply of rough diamonds to the
international diamond industry it is very clear that the industry has become
dominated by specialists. The rough diamond trader is no longer effective in
purchasing the diamonds that have experienced major price increases; the latter
diamonds are now purchased by manufacturers with specialized knowledge in sales
of specific items.

The Company expects the diamond market to remain strong in
fiscal 2009, particularly for diamonds in the plus 5 carats.

|1.3 | Selected Annual
      Information
|--- | ---------------------------------

The consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles, and are
expressed in Canadian dollars except common shares outstanding.

16

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

|                                           |   | Nine months ended |  |   | Years ended  | 
|------------------------------------------ | - | ----------------- |  | - | ------------ | 
|Balance
      Sheets                       |   | February 29, 2008 |  |   | May 31, 2007 | 
|Current assets                             | $ | 38,596,562        |  | $ | 56,142,572   | 
|Mineral properties                         |   | 25,247,937        |  |   | 24,121,855   | 
|Other assets                               |   | 69,848,625        |  |   | 49,341,956   | 
|Total assets                               |   | 133,693,124       |  |   | 129,606,383  | 
|                                           |   |                   |  |   |              | 
|Current liabilities                        |   | 12,502,301        |  |   | 29,399,774   | 
|Other liabilities                          |   | 34,076,016        |  |   | 28,613,767   | 
|Shareholders
      equity (deficiency)    |   | 87,114,807        |  |   | 71,592,842   | 
|Total liabilities and shareholders equity | $ | 133,693,124       |  | $ | 129,606,383  | 

|                                                          |   | Nine months ended |   |   | Years ended  |  
|--------------------------------------------------------- | - | ----------------- | - | - | ------------ | -
|Statement of
      Operations                             |   | February 29, 2008 |   |   | May 31, 2007 |  
|Revenue                                                   | $ | 36,149,308        |   | $ | 10,103,328   |  
|Mine site operating costs                                 |   | (22,730,271       | ) |   | (8,974,742   | )
|Amortization and depletion                                |   | (6,533,941        | ) |   | (2,074,415   | )
|Operating profit (loss)                                   |   | 6,885,096         |   |   | (945,829     | )
|Expenses                                                  |   |                   |   |   |              |  
|Accretion of reclamation obligation                       |   | 464,316           |   |   | 55,471       |  
|Exploration                                               |   | 604,169           |   |   | 1,371,351    |  
|Foreign exchange loss (gain)                              |   | (751,318          | ) |   | (3,580,364   | )
|Legal, accounting and audit                               |   | 790,725           |   |   | 691,759      |  
|Office and administration                                 |   | 2,697,077         |   |   | 2,993,453    |  
|Property Investigations                                   |   |                  |   |   |             |  
|Shareholder communications                                |   | 198,985           |   |   | 200,574      |  
|Stock-based compensation                                  |   | 1,826,317         |   |   | 79,623       |  
|Travel and conference                                     |   | 654,705           |   |   | 666,194      |  
|Transfer agent filings                                    |   | 544,232           |   |   | 176,530      |  
|Subtotal                                                  |   | 7,029,208         |   |   | 2,654,591    |  
|Gain on sale of marketable securities                     |   |                  |   |   |             |  
|Loss on disposal of equipment                             |   | 402,411           |   |   | 94,621       |  
|Interest income                                           |   | (1,118,396        | ) |   | (372,149     | )
|Interest on capital leases                                |   | 1,289,385         |   |   | 433,125      |  
|Convertible note accretion and interest
      expense     |   | 270,976           |   |   | 2,466,839    |  
|Loss on early extinguishment convertible promissory notes |   |                  |   |   | 137,957      |  
|Write-off of amounts receivable                           |   | 18,360            |   |   | 224,942      |  
|Write-down of marketable securities                       |   |                  |   |   | 1            |  
|Write-down of mineral property interests                  |   |                  |   |   |             |  
|                                                          |   | 862,736           |   |   | 2,985,336    |  
|Loss before income taxes                                  |   | 1,006,848         |   |   | 6,585,756    |  
|Income tax expense                                        |   | 179,290           |   |   |             |  
|Future income tax (recovery) expense                      |   | 2,261,110         |   |   | (635,773     | )
|Loss before non-controlling interest                      |   | 3,447,248         |   |   | 5,949,983    |  
|Non-controlling interest                                  |   | 5,955,779         |   |   | 415,159      |  
|Loss for the
      year ended                             | $ | 9,403,027         |   | $ | 6,365,142    |  
|Basic and diluted loss per common share                   | $ | (0.05             | ) | $ | (0.11        | )
|Weighted average number of common shares outstanding      |   | 196,428,551       |   |   | 55,418,242   |  

17

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

|1.4 | Summary of Quarterly
      Results
|--- | ----------------------------------

Expressed in thousands of Canadian dollars, except per-share
amounts. Minor differences are due to rounding.

|                                           |   | Feb 29  |   |   | Nov 30  |   |   | Aug 31  |   |   | May 31  |   |   | Feb 28  |   |   | Nov 30 |   |   | Aug 31 |   |   | May    |  
|------------------------------------------ | - | ------- | - | - | ------- | - | - | ------- | - | - | ------- | - | - | ------- | - | - | ------ | - | - | ------ | - | - | ------ | -
|                                           |   | 2008    |   |   | 2007    |   |   | 2007    |   |   | 2007    |   |   | 2007    |   |   | 2006   |   |   | 2006   |   |   | 31     |  
|                                           |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |        |   |   |        |   |   | 2006   |  
|Current assets                             | $ | 38,597  |   | $ | 36,823  |   | $ | 46,861  |   | $ | 56,143  |   | $ | 25,751  |   | $ | 23,063 |   | $ | 8,397  |   | $ | 257    |  
|Mineral properties                         |   | 25,248  |   |   | 24,928  |   |   | 25,589  |   |   | 24,122  |   |   | 18,788  |   |   |       |   |   |       |   |   |       |  
|Other assets                               |   | 69,848  |   |   | 66,544  |   |   | 55,997  |   |   | 49,342  |   |   | 36,884  |   |   | 42     |   |   | 32     |   |   | 32     |  
|Total
      assets                         |   | 133,693 |   |   | 128,295 |   |   | 128,447 |   |   | 129,606 |   |   | 81,423  |   |   | 23,105 |   |   | 8,429  |   |   | 289    |  
|                                           |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |        |   |   |        |   |   |        |  
|Current liabilities                        |   | 12,502  |   |   | 17,173  |   |   | 23,899  |   |   | 29,400  |   |   | 43,261  |   |   | 6,149  |   |   | 9,599  |   |   | 1,146  |  
|Other liabilities                          |   | 34,076  |   |   | 30,395  |   |   | 32,297  |   |   | 28,613  |   |   | 21,966  |   |   |       |   |   |       |   |   |       |  
|Shareholders
      equity (deficiency)    |   | 87,115  |   |   | 80,727  |   |   | 72,251  |   |   | 71,593  |   |   | 16,196  |   |   | 16,956 |   |   | (1,169 | ) |   | (857   | )
|Total liabilities and                      |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |        |   |   |        |   |   |        |  
|shareholders
      equity                 |   | 133,693 |   |   | 128,295 |   |   | 128,447 |   |   | 129,606 |   |   | 81,423  |   |   | 23,105 |   |   | 8,429  |   |   | 289    |  
|                                           |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |        |   |   |        |   |   |        |  
|Working capital
      (deficit)            |   | 26,905  |   |   | 19,650  |   |   | 22,962  |   |   | 26,743  |   |   | (17,510 | ) |   | 16,914 |   |   | (1,202 | ) |   | (890   | )
|                                           |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |        |   |   |        |   |   |        |  
|                                           |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |        |   |   |        |   |   |        |  
|Revenue                                    |   | 9,802   |   |   | 12,125  |   |   | 14,222  |   |   | 7,684   |   |   | 2,419   |   |   |       |   |   |       |   |   |       |  
|Mine site operating costs                  |   | (7,350  | ) |   | (9,571  | ) |   | (5,809  | ) |   | (7,100  | ) |   | (1,874  | ) |   |       |   |   |       |   |   |       |  
|Amortization                               |   | (2,418  | ) |   | (2,141  | ) |   | (1,975  | ) |   | (1,680  | ) |   | (395    | ) |   |       |   |   |       |   |   |       |  
|Operating profit (loss)                    |   | 34      |   |   | 413     |   |   | 6,438   |   |   | (1,096  | ) |   | 150     |   |   |       |   |   |       |   |   |       |  
|                                           |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |        |   |   |        |   |   |        |  
|Expenses                                   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |        |   |   |        |   |   |        |  
|Accretion of reclamation obligation        |   | 378     |   |   | 28      |   |   | 59      |   |   | 55      |   |   |        |   |   |       |   |   |       |   |   |       |  
|Exploration                                |   | 174     |   |   | 127     |   |   | 304     |   |   | 162     |   |   | 508     |   |   | 526    |   |   | 175    |   |   | 120    |  
|Foreign exchange                           |   | 16      |   |   | (126    | ) |   | (641    | ) |   | (2,856  | ) |   | (336    | ) |   | (394   | ) |   | 6      |   |   | 3      |  
|Legal, accounting and audit                |   | 472     |   |   | 253     |   |   | 66      |   |   | 403     |   |   | (252    | ) |   | 326    |   |   | 215    |   |   | 118    |  
|Office and administration                  |   | 1,147   |   |   | 850     |   |   | 700     |   |   | 1,651   |   |   | 621     |   |   | 409    |   |   | 313    |   |   | 227    |  
|Property investigation                     |   |        |   |   |        |   |   |        |   |   |        |   |   |        |   |   |       |   |   |       |   |   | 139    |  
|Shareholder communications                 |   | 65      |   |   | 64      |   |   | 69      |   |   | 57      |   |   | 53      |   |   | 51     |   |   | 40     |   |   | 11     |  
|Stock-based compensation                   |   | 1,177   |   |   | 617     |   |   | 32      |   |   | 8       |   |   | 16      |   |   | 18     |   |   | 38     |   |   | 63     |  
|Travel and conference                      |   | 382     |   |   | 147     |   |   | 126     |   |   | 285     |   |   | 120     |   |   | 125    |   |   | 136    |   |   | 30     |  
|Transfer agent
      filings               |   | 439     |   |   | 98      |   |   | 7       |   |   | 56      |   |   | 23      |   |   | 52     |   |   | 45     |   |   | 3      |  
|Subtotal                                   |   | 4,250   |   |   | 2,058   |   |   | 721     |   |   | (179    | ) |   | 754     |   |   | 1,113  |   |   | 968    |   |   | 714    |  
|Gain on sale of marketable securities      |   |        |   |   |        |   |   |        |   |   |        |   |   |        |   |   |       |   |   |       |   |   |       |  
|Gain on investments                        |   |        |   |   |        |   |   |        |   |   | 16      |   |   | (16     | ) |   |       |   |   |       |   |   |       |  
|Write-off of amounts receivable            |   | 18      |   |   |        |   |   |        |   |   | 225     |   |   |        |   |   |       |   |   |       |   |   |       |  
|Loss (gain) on disposal of equipment       |   | 424     |   |   | 3       |   |   | (25     | ) |   | 82      |   |   | 12      |   |   |       |   |   |       |   |   |       |  
|Interest income                            |   | (447    | ) |   | (186    | ) |   | (486    | ) |   | (222    | ) |   | (97     | ) |   | (51    | ) |   | (2     | ) |   | (1     | )
|Interest on capital leases                 |   | 391     |   |   | 427     |   |   | 471     |   |   | 433     |   |   |        |   |   |       |   |   |       |   |   |       |  
|Accretion and interest expense             |   | 84      |   |   | 102     |   |   | 86      |   |   | 610     |   |   | 356     |   |   | 1,156  |   |   | 345    |   |   |       |  
|Loss on early retirement of                |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |        |   |   |        |   |   |        |  
|convertible note                           |   |        |   |   |        |   |   |        |   |   |        |   |   |        |   |   | 138    |   |   |       |   |   |       |  
|Write-down of mineral property             |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |        |   |   |        |   |   |        |  
|interests                                  |   |        |   |   |        |   |   |        |   |   |        |   |   |        |   |   |       |   |   |       |   |   | 47     |  
|Profit (loss) before income taxes          |   | (4,687  | ) |   | (1,991  | ) |   | 5,671   |   |   | (2,061  | ) |   | (859    | ) |   | (2,356 | ) |   | (1,311 | ) |   | (760   | )
|Future income tax
      recovery (expense) |   | 698     |   |   | 26      |   |   | (1,768  | ) |   | 646     |   |   | (10     | ) |   |       |   |   |       |   |   |       |  
|Profit (loss) before non-controlling       |   | (5,385  | ) |   | (1,965  | ) |   | 3,903   |   |   | (1,415  | ) |   | (868    | ) |   | (2,356 | ) |   | (1,311 | ) |   | (760   | )
|interest                                   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |        |   |   |        |   |   |        |  
|Non-controlling interest                   |   | (3,322  | ) |   | 837     |   |   | (3,472  | ) |   | (506    | ) |   | 91      |   |   |       |   |   |       |   |   |       |  
|Profit (loss)
      for the period         | $ | (8,707  | ) | $ | (1,128  | ) | $ | 431     |   | $ | (1,921  | ) | $ | (777    | ) | $ | (2,356 | ) | $ | (1,311 | ) | $ | (760   | )
|                                           |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |        |   |   |        |   |   |        |  
|Basic and diluted profit (loss) per        |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |        |   |   |        |   | $ |        |  
|share                                      | $ | (0.04   | ) | $ | 0.00    |   | $ | 0.00    |   | $ | (0.03   | ) | $ | ( 0.01  | ) | $ | (0.08  | ) | $ | (0.05  | ) |   | (0.03  | )
|Weighted average number of common          |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |        |   |   |        |   |   |        |  
|shares outstanding (thousands)             |   | 223,891 |   |   | 187,817 |   |   | 187,132 |   |   | 99,614  |   |   | 68,307  |   |   | 30,322 |   |   | 24,191 |   |   | 23,675 |  

18

---

|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

|1.5 | Results of
      Operations
|--- | ---------------------------

The Company had a loss of $9,403,027 for the nine month period
ended February 29, 2008 compared to a net loss of $6,365,142 for the year ended
May 31, 2007. The biggest component of this loss is attributable to the
non-controlling interest of $5,955,779 for this year compared to the $415,159
for the year ended May 31, 2007. Of this $5,955,779 an amount of $4,463,261
related to an exchange gain as a result of the 49% non-controlling interest
being held at the South African operating subsidiaries rather than at the
consolidated entity level whereby they would have shared in a net foreign
exchange gain of only $751,358 thereby reducing the loss by $4,095,096 to
$5,307,931. The further increase in net losses during the period resulted from
stock based compensation expenses recognized on stock options granted during the
nine months ending February 29, 2008, lower foreign exchange gains, interest
expense on the Companys capital leases, increased accretion of reclamation
obligations, loss on disposal of assets and future income tax expenses which was
offset by lower exploration and convertible note accretion expenses incurred in
the year ending May 31, 2007. The Company recorded a loss of $0.05 per share for
the nine months ended February 29, 2008, compared to a loss of $0.11 per share
for the year ended May 31, 2007.

During the nine months ended February 29, 2008 the Company
realized rough diamond sales of $36,038,106 of which $9,802,308 was earned
during the third quarter of fiscal 2008 compared to $12,125,363 for the second
quarter of fiscal 2008 and to $nil for the comparable period in the prior year.
Mine site operating costs for the nine months ended February 29, 2008 amounted
to $29,264,212 (three months ended February 29, 2008 - $9,768,420, three months
ended November 30, 2007 - $11,712,135), which includes amortization and
depletion charges of $6,533,941 (six months ended November 30, 2006  nil).

Exploration expenses (excluding stock-based compensation)
decreased to $604,169 for the nine months ended February 29, 2008 compared to
$1,371,351 for the year ending May 31, 2007. This decrease is due to higher
exploration activities incurred during the year ended May 31, 2007 performed on
the African diamond properties which included the Holpan/Klipdam property. The
exploration expenses for the nine months ended February 29, 2008 were mainly
incurred on the Kwango River Project in the DRC and the Ricardo property in
Chile.

The Company incurred a foreign exchange gain of $751,318 for
the nine months ended February 29, 2008 compared to a foreign exchange gain of
$3,580,364 for the year ended May 31, 2007 due to a higher amount of South
African denominated liabilities and the strengthening of the Canadian dollar.
Foreign exchange gains to the amount of $11,900,802 were realized in Durnpike
and in Minera Ricardo (of which the non-controlling interests share of this
gain was $4,463,261), while foreign exchange losses of $11,149,484 were
accounted for in Rockwell RSA, Cayman Islands and Rockwell Canada (the
non-controlling interest did not share in these losses) for the period ended
February 29, 2008. Because the non-controlling interest did not share in the
loss, this increased the loss for the consolidated company.

Administrative costs for the nine months ended February 29,
2008 amounted to $2,697,077 in comparison to $2,993,453 incurred in for the year
ended May 31, 2007, the variance is primarily due to reduced consulting and
salary expenses as the Company has completed its major corporate financing,
acquisition, operational management and property investigation activities.
Travel and conference expenses amounted to $654,705 for the nine months ended
February 29, 2008 compared to $666,194 for the year ended May 31, 2007, largely
due to reduced travel as the acquisition activities have been completed. Legal,
accounting and audit expenses for the nine months ended February 29, 2008
amounted to $790,725

19

---

|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

compared to $691,759 incurred for the year ended May 31, 2007.
This increase was primarily due to increased legal and accounting services
related the listing on both the Johannesburg Stock Exchange and the TSX, these
increases were however partially offset by reduced legal and accounting services
as the Companys acquisition activities of Durnpike and HC Van Wyk have been
completed.

Stock-based compensation increased to $1,826,317 for the nine
months ended February 29, 2008 in comparison to $79,623 for the year ended May
31, 2007 due to an increase in the number of options granted during fiscal
2008.

Interest expenses decreased to $270,976 for the nine months
ended February 29, 2008, compared to $2,466,839 for the year ended May 31, 2007,
mainly due to the accretion and interest charges relating to the issuance of the
convertible promissory notes incurred during the year ended May 31, 2007.

|1.6 | Liquidity
|--- | ---------

Historically, the Company's sole source of funding has been the
issuance of equity securities for cash, primarily through private placements to
sophisticated investors and institutions. The Company has issued common share
capital in each of the past few years, pursuant to private placement financings
and the exercise of warrants and options. The Company's access to exploration
financing, when the financing is not transaction specific, is always uncertain.
There can be no assurance of continued access to significant equity funding.

At February 29, 2008, the Company had a working capital of
$26,094,261 compared to working capital of $26,742,798 at May 31, 2007.

During the period of the nine months ended February 29, 2008,
the Company, as part of the Durnpike acquisition, completed the remaining
payment of $6.12 million by issuing 7,848,663 Common Shares of the Company to
the Vendors. In addition the Company completed the payment of ZAR30 million
($4.5 million) in cash to the Van Wyk Trust during the first quarter of fiscal
2008.

The Company has the following payment commitments: (a) payment
of ZAR2.3 million ($294,402) in cash to Folmink Delwery CC (Makoenskloof) for
plant and equipment (b) minimum lease payments of ZAR117 million ($14.8 million)
in installments up to the year 2010 to various financial institutions for plant
and equipment.

In March 2008, subsequent to the nine months ending February
29, 2008, pursuant to the Exchange Agreement the Company issued Common Shares to
the Van Wyk Trust and increased its ownership by 23% to a total of 74% of the
VWDG assets.

Other than described above the Company has no "Purchase
Obligations" defined as any agreement to purchase goods or services that is
enforceable and legally binding on the Company that specifies all significant
terms, including: fixed or minimum quantities to be purchased; fixed, minimum or
variable price provisions; and the approximate timing of the transaction.

20

---

|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

|1.7 | Capital
      Resources
|--- | -----------------------

As described in 1.2.2 Financings, the Company did not
complete any debt financings during the period, however the Company has
sufficient funds available to meet its capital expenditure requirements.

In January 2008, the Company completed a $14.5 million private
placement which will be used to fund Rockwells diamond operations and new
project evaluation and development (described in item1.2.2
Financings).

As at February 29, 2008, the Company has the following capital
expenditure commitments:

| | a) | Pursuant to the Definitive Agreement, the Company is
      required to spend US$7 million on a feasibility study on the Kwango River
      Project by August 31, 2007. This deadline may be extended to February 29,
      2008 at no cost and be further extended to December 31, 2008 by payment of
      US$1 million in Common Shares. In addition, Under the Midamines Agreement,
      Durnpike agreed to certain minimum royalty payments being made to
      Midamines. These royalties take the form of a series or recurring annual
      minimum royalty payments of US$1,200,000 per annum (commencing on December
      31, 2007). (As to the enforceability of this commitment in light of
      developments pertaining to the Midamines Agreement, see Kwango River
      Discussion at 1.2.5 Exploration and Development Properties  Kwango
      River Project);
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | In April 2007 the Company, entered into an agreement in
      relation to Makoenskloof property to purchase plant and equipment in the
      amount of ZAR21.3 million (approximately $3.2 million) from Folmink
      Delwery CC. As at February 29, 2008 the Company is committed to pay the
      remaining consideration of ZAR2.3 million ($294,402) and is committed to
      pay the remaining consideration in monthly payments of ZAR500,000
      ($63,000). The monthly payments shall incur interest calculated at the
      prime rate of the Standard Bank of South Africa                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | b) | In relation to the acquisition of Saxendrift Mine (Pty)
      Ltd., the Company will pay cash consideration of approximately ZAR100.4
      million ($14.8 million) and will assume potential liabilities for staff
      layoffs (capped at ZAR5 million ($0.8 million)) and rehabilitation bonds
      (capped at ZAR4.25 million ($0.6 million)). All payments and liabilities
      are expected to total approximately ZAR109.9 million ($16.2 million),
      subject to certain final adjustments.                                                                                                                                                                                                                                                                                                                                                                          

Pursuant to the Exchange Agreement (described in item1.2.2
Financings).the Company issued Common Shares to the Van Wyk Trust and
increased its ownership by 23 % to a total of 74% of the VWDG assets.

Subsequent to the nine months ending February 29, 2008, the BEE
group is in the process of increasing its shareholding from 15% to 26% by
subscribing for an additional 11% shares in the VWDG at a subscription price of
ZAR17.5 million and injecting ZAR10.5 million in working capital into the
VWDG.

Other than already described, the Company had no commitments
for capital expenditures and no lines of credit or other sources of financing
which have been arranged but as yet unused as at February 29,2007.

|1.8 | Off-Balance Sheet
      Arrangements
|--- | ------------------------------------

None.

21

---

|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

|1.9 | Transactions with
      Related Parties
|--- | ---------------------------------------

| |                                       |   | As
      at       |  |   | As
      at  | 
| | ------------------------------------- | - | ----------------- |  | - | ------------ | 
| | Balances
      payable                |   | February 29, 2008 |  |   | May 31, 2007 | 
| | Hunter Dickinson Inc.
      (a)       | $ |                  |  | $ | 37,571       | 
| | Euro-American Capital Corporation (b) |   |                  |  |   | 2,879        | 
| | CEC Engineering (c)                   |   |                  |  |   | 5,558        | 
| | Durnpike shareholder loans (i)        |   |                  |  |   | 1,503,566    | 
| | Banzi Trading (j)                     |   |                  |  |   | 2,191        | 
| | Jakes Tyres (k)                       |   | 49,604            |  |   | 10,993       | 
| | Cashmere Trading (g)                  |   |                  |  |   | 46,543       | 
| |                                       | $ | 49,604            |  | $ | 1,609,301    | 
| | Balances receivable                   |   |                   |  |   |              | 
| |                                       |   |                   |  |   |              | 
| | Hunter Dickinson Inc. (a)             | $ | 78,504            |  | $ |             | 
| | Flawless Diamonds Trading House (h)   |   | 477,298           |  |   | 781,928      | 
| | Banzi Trading (j)                     |   | 33,744            |  |   |             | 
| | Diacor CC (n)                         |   | 3,888             |  |   |             | 
| | AA Van Wyk (l)                        |   |                  |  |   | 57,325       | 
| |                                       | $ | 593,434           |  | $ | 839,253      | 

| |                                                   |   | Nine
      Months |  |   |                   |  |   |         | 
| | ------------------------------------------------- | - | ----------------- |  | - | ----------------- |  | - | ------- | 
| |                                                   |   | ended             |  |   |                   |  |   |         | 
| |                                                   |   | February 29       |  |   | Year ended May 31 | 
| | Transactions                                      |   | 2008              |  |   | 2007              |  |   | 2006    | 
| | Services rendered and expenses reimbursed:        |   |                   |  |   |                   |  |   |         | 
| | Hunter Dickinson Inc. (a)                         | $ | 869,861           |  | $ | 1,988,027         |  | $ | 578,134 | 
| | Euro-American Capital
      Corporation (b)       |   | 14,393            |  |   | 18,765            |  |   | 18,630  | 
| | CEC Engineering (c)                               |   | 39,766            |  |   | 187,225           |  |   |        | 
| | John Bristow (d)                                  |   |                  |  |   | 115,320           |  |   |        | 
| | Jeffrey B Traders CC (e)                          |   | 52,740            |  |   | 141,318           |  |   |        | 
| | Seven Bridges Trading
      (f)                   |   | 57,952            |  |   | 55,534            |  |   |        | 
| | Plateau Resources (Proprietary) Limited
      (j) |   |                  |  |   |                  |  |   | 124,737 | 
| | Cashmere Trading (g)                              |   | 353,736           |  |   | 43,357            |  |   |        | 
| | Banzi Trade 26 (Pty) Ltd (k)                      |   | 47,575            |  |   | 251,942           |  |   |        | 
| | Jakes Tyres (l)                                   |   | 1,141,454         |  |   | 267,361           |  |   |        | 
| | AA Van Wyk (m)                                    |   | 148,658           |  |   | 173,977           |  |   |        | 
| | Diacor CC (n)                                     |   | 3,888             |  |   |                  |  |   |        | 
| |                                                   |   |                   |  |   |                   |  |   |         | 
| | Sales rendered to:                                |   |                   |  |   |                   |  |   |         | 
| | Flawless Diamonds Trading House (h)               | $ | 36,038,106        |  | $ | 10,085,536        |  | $ |        | 

| | (a) | Hunter Dickinson Inc. (HDI) is private company equally
      owned by several public companies, one of which is Rockwell, and has
      certain directors in common with the Company. HDI provides geological,
      technical, corporate development, administrative and management services
      to, and incurs third party costs on behalf of, the Company on a
  full
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

22

---

|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

| |     | cost recovery basis pursuant to an agreement dated
      January 1, 2001. There are no specific terms of repayment.                                                                                                                                                                                                                                                                  
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                      
| | (b) | Euro-American Capital Corporation is a private company
      controlled by Rene Carrier, a director of the Company, which provides
      management services to the Company at market rates for those
    services.                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                      
| | (c) | CEC Engineering Ltd. is a private company owned by David
      Copeland, Chairman and a director of the Company, which provides
      engineering and project management services at market rates.                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                      
| | (d) | John Bristow, President, Chief Executive Officer and a
      director of the Company, provided engineering consulting services at
      market rates to the Company.                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                      
| | (e) | Jeffrey B Traders CC is a private company controlled by
      Jeffrey Brenner, a former director and employee of the Company, which
      provides management and marketing services to the Company at market
      rates.                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                      
| | (f) | Seven Bridges Trading is a wholly owned subsidiary of
      Randgold Resources, a public company where Mark Bristow, a director of the
      Company, serves in an executive capacity. Seven Bridges Trading provides
      administrative and management services at market rates to the Companys
      South African subsidiaries.                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                      
| | (g) | Cashmere Trading is a private company owned by Hennie Van
      Wyk, an officer of the Company, which provides helicopter services at
      market rates.                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                      
| | (h) | Flawless Diamonds Trading House (Flawless) is a private
      company where certain directors, former directors and officers of the
      Company, namely, Messr. Brenner, Bristow and Van Wyk, are shareholders of.
      Flawless is a registered diamond broker and purchases diamonds from the
      Company at market prices.                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                      
| | (i) | Pursuant to the Company agreement to acquire all of the
      shares and loans in Durnpike Investments (Pty) Limited from eight
      individuals (the Vendors), of which three individuals from the Vendors
      were subsequently appointed to the Companys Board of Directors (Messr.
      Brenner, M.Bristow, J.Bristow).                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                      
| | (j) | Plateau Resources (Proprietary) Limited (Plateau) is a
      wholly-owned subsidiary of Anooraq Resources Corporation, a Canadian
      company which has certain directors in common with the Company. Plateau
      shares certain premises and other facilities with the Company pursuant to
      a cost-sharing arrangement with no profit element involved.                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                      
| | (k) | Banzi Trade 26 (Pty) Ltd (Banzi) is 50% owned by Hennie
      Van Wyk Family Trust, 30% by Ronnie Visagie, a member of the van Wyk
      family and 20% by Bokomoso Trust. Banzi is a private company focused on
      providing self sustaining programs to local communities. During the
      period, Banzi provided the Company with buildings materials at market
      rates.
| |     |                                                                                                                                                                                                                                                                                                                                                                                      
| | (l) | Jakes Tyres is a private company with certain directors
      and officers in common with the Company that provides consumable materials
      at market rates.                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                      
| | (m) | AA Van Wyk is a private company owned by a party related
      to the directors and officers of the Company, which provides contract
      mining services at market rates.                                                                                                                                                                                                          

23

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

| | (n) | Diacor CC is a private company with certain directors and
      officers in common with the Company that purchases consumable materials at
      market rates.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|1.10 | Third Quarter
|---- | -------------

The Company had a net loss of $8,706,846 for the quarter ended
February 29, 2008 compared to a net loss of $1,921,445 for the same period in
the prior year. The increase in net loss during the period is primarily due to
the stock based compensation expense, the foreign currency movements which
resulted in a loss for the quarter and slightly increased operating
expenses.

During the quarter ended February 29, 2008, the Company
realized rough diamond sales of $9.8 million (quarter ended May 31, 2007 - $7.7
million). Mine site operating costs were $7.3 million (quarter ended May 31,
2007 - $7.1 million), and amortization and depletion charges were $2.4 million
(quarter ended May 31, 2007 - $1.7 million).

Exploration expenses for the third quarter ended May 31, 2007
amounted to $173,784 compared to $162,523 for the same period in the prior year.
The increase is mainly due to increased engineering activities, geological
activities and site activities incurred on the Kwango River Project in the DRC
and the Ricardo property in Chile.

The Company incurred a foreign exchange loss of $16,346 for the
third quarter of fiscal 2008 compared to a foreign exchange gain of $2,856,110
for the same period in the previous year due to a higher amount of South African
denominated liabilities and the strengthening of the Canadian dollar.

Administrative costs for the quarter ended February 29, 2008
decreased to $1,147,241 compared to $1,651,984 incurred in the same period in
the previous year, primarily due to reduced consulting and salary expenses as
the Company has completed its major corporate financing, acquisition,
operational management and property investigation activities. Travel and
conference expenses increased to $381,458 for the quarter ended February 29,
2008 compared to $285,222 for the same period in the previous year due to more
travel by the Companys expanded personnel base and to more properties in South
Africa and the DRC.

Legal, accounting and audit expenses for the quarter ended
February 29, 2008 was $472,352 compared to $402,402 in the same quarter in the
prior year. The increase was due to the listing on both the Johannesburg Stock
Exchange and the TSX.

Stock-based compensation increased to $1,177,352 for the
quarter ending February 29, 2008 in comparison to $7,578 for the same period in
the previous year due to an increase in options vesting in fiscal 2008.

Interest expenses decreased to $83,584 (quarter ended May 31,
2007 - $610,331) for the third quarter of fiscal 2008 as a result of the
Companys no longer relying on bridge loans or other lending facilities.

24

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

|1.11 | Proposed
      Transactions
|---- | ---------------------------

Please refer to the discussion of the proposed transaction in
Section 1.2.3 Acquisitions, The Middle Orange River
Operations.

|1.12 | Critical Accounting
      Estimates
|---- | -----------------------------------

The Company's accounting policies are presented in note 3 of
the consolidated financial statements for the year ended February 29, 2008,
which have been publicly filed on SEDAR at www.sedar.com and as presented in
changes in accounting policies item 1.13 The preparation of consolidated
financial statements in accordance with generally accepted accounting principles
requires management to select accounting policies and make estimates. Such
estimates may have a significant impact on the financial statements. These
estimates include:

- mineral resources and reserves,
- the carrying values of property, plant and equipment,
- restoration costs following completion of the mining activities, and
- the valuation of stock-based compensation expense.

Actual amounts could differ from the estimates used and,
accordingly, affect the results of operation.

Mineral resources and reserves, and the carrying values of
property, plant and equipment

Mineral resources and reserves are estimated by professional
geologists and engineers in accordance with recognized industry, professional
and regulatory standards. These estimates require inputs such as future metals
prices, future operating costs, and various technical geological, engineering,
and construction parameters. Changes in any of these inputs could cause a
significant change in the estimated resources and reserves which, in turn, could
have a material effect on the carrying value of property, plant and
equipment.

Site restoration costs

Upon the completion of any mining activities, the Company will
ordinarily be required to undertake environmental reclamation activities in
accordance with local and/or industry standards. The estimated costs of these
reclamation activities are dependent on labour costs, the environmental impacts
of the Company's operations, the effectiveness of the chosen reclamation
techniques, and applicable government environmental standards. Changes in any of
these factors could cause a significant change in the reclamation expense
charged in a period.

Stock-based compensation expense

From time to time, the Company may grant share purchase options
to employees, directors, and service providers. The Company uses the
Black-Scholes option pricing model to estimate a value for these options. This
model, and other models which are used to value options, require inputs such as
expected volatility, expected life to exercise, and interest rates. Changes in
any of these inputs could cause a significant change in the stock-based
compensation expense charged in a period.

25

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

|1.13 | Changes in Accounting
      Policies including Initial Adoption
|---- | ---------------------------------------------------------------

The CICA issued Section 3855, Financial Instruments
Recognition and Measurement, Section 3861, Financial Instruments  Disclosure
and Presentation, Section 3865, Hedges, and Section 1530, Comprehensive
Income, all applicable to the Company for annual or interim accounting periods
beginning on June 1, 2007.

Section 3855 requires all financial assets, financial
liabilities and non-financial derivatives to be recognized on the balance sheet
and measured based on specified categories. Section 3861 identifies and details
information to be disclosed in the financial statements.

Section 3865 sets out when hedge accounting can be applied and
builds on existing Canadian GAAP guidance by specifying how hedge accounting is
applied and disclosed.

Section 1530 introduces new standards for the presentation and
disclosure of the components of comprehensive income. Comprehensive income is
defined as the change in net assets of an enterprise during a reporting period
from transactions and other events and circumstances from non-owner sources.

The CICA also issued Section 1506, Accounting Changes, which
revises the current standards on changes in accounting policy, estimates or
errors as follows: voluntary changes in accounting policy are allowed only when
they result in financial statements that provide reliable and more relevant
information; changes in accounting policy are to be applied retrospectively
unless doing so is impracticable; changes in estimates are to be recorded
prospectively; and prior period adjustments are to be corrected retrospectively.
In addition, this standard calls for enhanced disclosure about the effects of
changes in accounting policies, estimates and errors on the financial
statements.

|1.14 | Financial Instruments
      and Other Instruments
|---- | -------------------------------------------------

The Company's financial instruments consist of cash and
equivalents, restricted cash, amounts receivable, security deposit, reclamation
deposit, accounts payable and accrued liabilities, reclamation obligation,
capital leases, amounts owing pursuant to acquisition and balances receivable
from or due to related parties. It is management's opinion that the Company is
not exposed to significant interest, currency or credit risk arising from these
financial instruments. The fair values of these financial instruments
approximate their carrying values, unless otherwise noted.

|1.15 | Other MD&A
      Requirements
|---- | -----------------------------

Additional information relating to the Company is available on
SEDAR at www.sedar.com.

|1.15.1 | Additional Disclosure
      for Venture Issuers Without Significant Revenue
|------ | ---------------------------------------------------------------------------

Not applicable. The Company is not a venture issuer.

|1.15.2 | Disclosure of
      Outstanding Share Data
|------ | ------------------------------------------

26

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

The following details the share capital structure as at May 20,
2008, which is the date of this MD&A. These figures may be subject to minor
accounting adjustments prior to presentation in future consolidated financial
statements.

|                       |  |                    |  |   | Exercise |  |  |             |  |  |             | 
|---------------------- |  | ------------------ |  | - | -------- |  |  | ----------- |  |  | ----------- | 
|                       |  | Expiry
      date  |  |   | price    |  |  | Number      |  |  | Number      | 
|Common shares          |  |                    |  |   |          |  |  |             |  |  | 238,041,569 | 
|                       |  |                    |  |   |          |  |  |             |  |  |             | 
|Share purchase options |  | March 28, 2008     |  | $ | 0.50     |  |  | 150,000     |  |  |             | 
|                       |  | July 10, 2010      |  | $ | 0.68     |  |  | 300,000     |  |  |             | 
|                       |  | September 24, 2012 |  | $ | 0.62     |  |  | 5,903,000   |  |  |             | 
|                       |  | November 14, 2012  |  | $ | 0.63     |  |  | 1,109,000   |  |  | 7,462,000   | 
|                       |  |                    |  |   |          |  |  |             |  |  |             | 
|Warrants               |  | November 22, 2008  |  | $ | 0.80     |  |  | 39,600,000  |  |  |             | 
|                       |  | May 9, 2009        |  | $ | 0.70     |  |  | 121,779,154 |  |  | 161,379,154 | 

|1.15.3 | Internal Controls over
      Financial Reporting Procedures
|------ | -----------------------------------------------------------

The management of the Company is responsible for establishing
and maintaining adequate internal controls over financial reporting. The
Companys internal control system was designed to provide reasonable assurance
to the Companys management and the board of directors regarding the preparation
and fair presentation of published financial statements. Internal control over
financial reporting includes those policies and procedures that: (1) pertain to
the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the Company, (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP, and that
receipts and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company, and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Companys assets that could have a
material effect on the financial statements. All internal control systems, no
matter how well designed, have inherent limitations. Therefore, even those
systems determined effective can provide only reasonable assurance with respect
to financial statement preparation and presentation.

The Companys management, with the participation of the Chief
Executive Officer and the Chief Financial Officer, has evaluated the
effectiveness of internal control over financial reporting based on the
framework and criteria established in Internal Control  Integrated Framework,
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this evaluation, our management has concluded that internal control
over financial reporting was effective as of December 31, 2007 to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements in accordance with GAAP.

|1.15.4 | Disclosure Controls and
      Procedures
|------ | ----------------------------------------

As of the end of the period covered by this report, our
management carried out an evaluation, with the participation of our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)
under the Securities

27

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|ROCKWELL DIAMONDS INC.              
|------------------------------------
|NINE MONTHS ENDED FEBRUARY 29, 2008 
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    

Exchange Act of 1934 (the Exchange Act)). Based upon
that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that, as of the end of the period covered by this report, our
disclosure controls and procedures were effective in recording, processing,
summarizing and reporting, on a timely basis, information required to be
disclosed by us in reports that we file or submit under the Exchange Act.

It should be noted that while our Chief Executive Officer and
our Chief Financial Officer believe that our disclosure controls and procedures
provide a reasonable level of assurance that they are effective, they do not
expect that our disclosure controls and procedures or internal control over
financial reporting will prevent all errors and fraud. A control system, no
matter how well conceived or operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system will be met.

28

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