In a significant move that has resonated across the South African baking industry, the Minister of Agriculture, John Steenhuisen officially revoked a contentious contract with Leaf Services, a decision met with relief from stakeholders including Pick n Pay, the Consumer Goods Council of South Africa (CGCSA), Grain SA, and the Chamber of Baking.
The original agreement, proposed in 2016, faced fierce opposition from various parties who argued that the appointment of Leaf Services would impose unnecessary financial burdens on an industry already grappling with slim margins.
The CGCSA successfully challenged this contract in court in 2021, but the Department of Agriculture had previously submitted what Pick n Pay’s CEO Sean Summers described as a “new equally unreasonable business model,” which continued to raise eyebrows.
Summers shared concerns regarding the appointment of an assignee that forced the industry to fund a service that had historically been provided for free by the Department.
“We accepted and supported that pan bread was legally regulated under the APS Act, yet we couldn’t understand the need for Leaf Services at all,” he said.
The CEO’s concerns resonated a sentiment shared within the industry that compliance with food safety regulations has always been under the purview of the producers, millers, and retailers.
In his detailed critique, Summers pointed out that the proposed inspections by Leaf Services were not focussed on food safety but merely on the composition of the bread.
“The methodology proposed would have necessitated three annual inspections at each of our 920 stores. This would have led to duplication in sampling, raising significant logistical and financial concerns,” he said.
He highlighted that over the years, Pick n Pay successfully baked and sold billions of loaves of bread without encountering compliance issues, showcasing a longstanding commitment to quality.
The imposition of such a stringent inspection regime would add an estimated R10-million a year to their operational costs, a burden Pick n Pay deemed unwarranted.
Meanwhile, the potential impact on wider industry members was equally alarming.
Grain SA estimated that had the proposed R4-per-ton fee been implemented as intended in 2016, it would have cumulatively cost its members more than R600-million by now.
Such expenses would unduly contribute to increasing the price of staples, particularly concerning given the economic strain many South Africans face.
Summers concluded with a strong affirmation of the decision to revoke the contract, expressing gratitude that the Minister listened to the collective concerns from the industry and took decisive action that prevented an unconscionable waste of resources.
“This decision not only protects our industry but ultimately ensures that basic bread remains affordable for those who need it the most,” he said.
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