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Daily Maverick
11 hours ago
- Business
- Daily Maverick
‘First step to cheaper food' — Steenhuisen axes controversial bread inspection contract
Following President Cyril Ramaphosa's call in the State of the Nation Address to reduce the cost of living, Agriculture Minister John Steenhuisen said on Tuesday that he had revoked a controversial bread inspection contract and that red meat costs were next on the agenda. When President Cyril Ramaphosa asked Minister of Agriculture John Steenhuisen to find ways to bring down the cost of food in South Africa, he and his team looked at where 'friction costs' and 'red tape' drove up prices. 'The contract for inspections by Leaf Services was one of the first things raised with me when I became the minister of agriculture,' Steenhuisen said on Tuesday. 'I spent the first three months of being a minister going out and speaking to stakeholders. I met with organised agriculture and the commodity bodies. I met up and down the value chain with as many people as possible. This was a common theme that came up from … millers, Agbiz [Agricultural Business Chamber], the various commodity organisations and of course the retailers. 'Their whole argument was that they are already required in terms of their product standards to do the testing, and what these assignee services do essentially is to add another layer of bureaucracy. It obviously adds to the cost of food, which ultimately has to be passed on to the consumer.' He said supermarkets, like Shoprite Checkers, that offered R10 meals had bread as one of their staples, but if assignee services had to be added on, it would be impossible for the stores to offer these meals. Unfair 'Their view was that it was unfair towards the lower end of the consumer chain.' Steenhuisen said retailers argued that this was fundamentally unfair as the assignee services (Leaf Services) would just duplicate product testing that the retailers were already doing. 'When they [retailers] get bread in from suppliers, they do their own testing of the quality,' he said. This included weighing the bread. 'They told me that if they sold bread that was below weight, their customers complained.' He said the assignee service contracts did not contain a proper business model of how they would carry out these tests. 'When it came to this particular assignee, Leaf Services, it was almost impossible to determine their value add,' he said. 'On a balance of probabilities and given the fact that the medium-term development plan has spoken about reducing the cost of living, and the President, at the State of the Nation Address, has asked us specifically to look at mechanisms to reduce the cost of food in the country, this was one of the first places to start. 'It is part of a wider process in the Department of Agriculture to look at red tape and friction costs around food costs and the value chain … and to try and remove as many of them as possible,' he said. 'But obviously without compromising consumer safety, which also has to be paramount. 'When Leaf Services originally advertised what they wanted to do, it was met with very strenuous opposition. All raised the same concerns.' He said that based on these objections he had revoked Leaf Services' assignee application. Payment to Leaf Services would have been compulsory, from the grain producers to the millers to the retailers. 'We are looking at other mechanisms as well throughout the regulatory space to cut red tape and reduce friction costs.' Nimble regulatory environment Steenhuisen said creating an agile, nimble regulatory environment that took into account the views of the sector was a key priority he had announced for his ministry, 'a modern, progressive, regulatory agenda that is adaptable to the space'. His decision to revoke Leaf Services' contract was part of delivering on this promise. He said that assignee services were one of the 10 priorities needing the Department of Agriculture's attention as set out by agriculture economists Wandile Sihlobo and Johann Kirsten in their book The Uncomfortable Truth about Agriculture in South Africa. 'Across the chain, it is the right move to make. We will also be looking at other areas where we can reduce the cost of food.' Red meat, he said, was next, and this would be done within eight weeks. He said the contract for Leaf Services had been ongoing for the past three to four years. 'The retailers' big thing was to argue that if you want the price of bread to go up, this was the best way to do it,' he said. Steenhuisen said he had little doubt that Leaf Services would litigate, given the lucrative nature of their contract. 'But I stand ready to defend this decision. The government needs to listen. Where people identify the impediments to growth, you have to listen and take it seriously.' Lack of transparency Dr Tobias Doyer, the CEO of Grain SA, said they and stakeholders from across the grain industry had persistently engaged with the government about the lack of transparency, stakeholder consultation and cost implications associated with Leaf Services' proposed role in grading inspections. 'We commend the minister and the department for the significant progress made towards a regulatory environment that is principled, transparent and accountable,' said Doyer. 'These strides reflect a growing commitment to regulatory stewardship that aligns with global best practices.' He said, 'Formal objections were submitted, legal advice pursued, and a direct appeal was made to the ministry in 2024 to revoke the appointment of Leaf Services.' Experts from Grain SA calculated that if the R4-per-tonne fee proposed by Leaf Services were implemented in 2016 as intended, it would have cost members more than R600-million. 'Seen differently, this revocation represents a R600-million saving for grain producers. Grain SA itself incurred R135,000 in legal costs to appeal the proposed implementation — an investment made in the best interest of our members and the broader industry,' said Doyer. 'The grain industry supports regulation that is coherent, cost-effective, enabling and respectful of the rights and responsibilities of both juristic and private actors across the food value chain. 'We believe that regulations, when properly applied, are not merely a safeguard, but a critical enabler of inclusive economic participation, innovation, and agricultural competitiveness.' Relieved Pick n Pay CEO Sean Summers said that when Leaf Services started their contract it would have raised the price of staples. 'As it is, basic bread is a low- or zero-margin product, given that it is a staple for most South Africans, especially those under considerable financial strain. 'We are obviously relieved that the minister listened to concerns raised by so many and took the right decision. This would have been an unconscionable waste of money to no benefit.' He said that while Pick n Pay and all others involved fully accepted and supported that bread was legally regulated, it was difficult to understand why the department had originally found it necessary to appoint Leaf Services, which in turn would force the industry to pay for a service that used to be free. Summers said that Leaf Services' appointment was successfully challenged in court in 2021 by the Consumer Goods Council of South Africa, and a new 'equally unreasonable business model' was submitted. He said no research 'at all' had been conducted to establish the level of compliance within the baking industry to see if there was a need to conduct inspections in the first place. 'Bread quality is managed by producers, millers and retailers, and the Department [of Agriculture] in the past provided a free service to control quality. The proposed service was not about food safety. It was completely unnecessary,' he said. 'When applying this to Pick n Pay alone, the inspection methodology proposed by Leaf Services, which included three annual inspections at each of our 920 stores across the country, raised significant concerns. 'The sampling process would have required duplicate samples from each batch and size of bread, drawn from the point of sale. Given that our batch codes are determined by the day's production, this methodology would have substantially increased the operational complexity and cost for our business, and that of all other retailers. 'Since foundation, we have baked and sold billions of loaves of bread across our stores, consistently of high quality. We have never encountered issues with compliance, which underscores our commitment to maintaining these standards voluntarily. 'The introduction of this new inspection regime by Leaf Services would have represented an unnecessary cost burden that could be better allocated to further enhancing the value and affordability we provide to our consumers. 'Had the minister not revoked this contract, the cost to Pick n Pay alone would have been in the region of R10-million a year, excluding the additional costs with speciality breads and other types of bread produced in our in-store bakeries. With Boxer, it would have been about R15-million for a service that was free in the past.' Responding to a request for comment from Daily Maverick, Leaf Services said: 'Leaf Services is aware of the notice published by the Department of Agriculture in the Government Gazette on 13 June 2025. 'Considering this development, we are currently evaluating our options. We consider it premature to comment further at this stage, but we will communicate our position in due course.' DM
IOL News
19 hours ago
- Business
- IOL News
Action taken against Leaf Services contract, potentially safeguarding bread prices in SA
In an era where economic pressures are acutely felt, the decision by Minister Steenhuisen to revoke the Leaf Services contract is a shining example of government responsiveness to industry concerns, potentially safeguarding the accessibility of affordable bread for millions of South Africans. Image: Simphiwe Mbokazi / Independent Newspapers. 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. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad loading 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. BUSINESS REPORT Visit:
The Citizen
a day ago
- Business
- The Citizen
Slice of relief: Bread prices saved from rising in South Africa
The removal of external grain inspectors will prevent higher prices for bread and grain products, sparing South African consumers. South Africans will breathe a sigh of relief following an intervention by the Department of Agriculture to stop the price of bread from going up. This is after the department last week revoked the designation of Leaf Services, which, since 2016, has been responsible for carrying out inspections of grain, grain products, and bread sold in the country. Inspections Since 2016, Grain SA has actively opposed the implementation of Leaf Services' custodianship over the grain grading system, citing excessive costs to producers, estimated at tens of millions of rands annually, without sufficient consultation or methodological justification. Formal objections were submitted, legal advice was pursued, and a direct appeal was made to the ministry in 2024 to revoke the appointment of Leaf Services. 'Had the proposed R4-per-ton fee by Leaf Services been implemented in 2016 as intended, it would have cost our members more than R600 million to date. Seen differently, this revocation represents a R600 million saving for grain producers,' Grain SA said. 'Grain SA believes that going forward, stronger, principled partnerships between government, industry, and the private sector are essential to building a regulatory framework that protects public interest while fostering productivity, sustainability, and prosperity – both in rural and urban communities'. ALSO READ: Modest decline in essential food prices but savings not always passed on Cost of grain In revoking its designation, Agriculture Minister John Steenhuisen, cited many of the same reasons echoed by the industry. The department said that the fees charged by Leaf would have added tens of millions of rands to the cost of grain and oilseeds. 'Considering the importance of the need to ensure that products, which amongst others form stable diet of South Africans, are compliant with mandatory regulations, the Department of Agriculture's Inspection Unit will take over the mandate of inspection of grain and grain products whilst a potent Private-Public Partnership inspection model as provided for in the Act is explored' Bread The DA said it has noted that national retailers have confirmed that Steenhuisen's actions will stop a price hike on loaves of bread. 'The contract that the DA leader has terminated would have allowed a service provider to charge retailers for an unnecessary testing service. And retailers would have had to pass this extra charge on to South Africans buying their bread'. The DA said it is engaged in fighting against the rising cost of living, 'in every way that we can, to lower prices for all people in South Africa'. NOW READ: Home affairs ID verification cost to increase by up to 6 500%
