Huge relief for bread prices in South Africa

Retailer Pick n Pay says the removal of external grain inspectors by the Department of Agriculture will spare South Africans from higher bread and grain-product prices.

The retail group joined other key players in South Africa’s grain industry in welcoming the move by the department to give Leaf Services the boot.

Leaf was designated in 2006 to apply or carry out inspection of grain and grain products sold in South Africa.

However, the group’s methodology and pricing was a big point of contention in the industry and challenged legally by the Consumer Goods Council of SA, Grain SA, the Chamber of Baking and others.

Since 2016, Grain SA actively opposed the implementation of Leaf Services’ custodianship over the grain grading system, citing excessive costs to producers, without sufficient consultation or methodological justification.

Formal objections were submitted, legal advice pursued, and a direct appeal was made to the Ministry in 2024 to revoke its appointment.

The department responded last week by officially revoking the designation of Leaf Services as an assignee responsible for inspecting grain and grain products in South Africa.

In revoking its designation, the Agriculture Minister John Steenhuisen cited many of the same reasons echoed by industry.

Notably, the department said that the fees charged by Leaf would have added tens of millions of rands to the cost of grain and oilseeds.

Grain SA said that its members would have had to pay over R600 million in fees, had Leaf applied the proposed R4-per-ton fee in 2016 as intended.

Pick n Pay CEO Summers said that, 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 specialty breads.

With Boxer it would have been about R15 million – for a service that was free in the past, he said.

“This would have unquestionably raised the price of staples,” Summers said.

“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.”

Completely unnecessary

According to Summers, no research was conducted at all to establish the level of compliance within the baking industry to see if there was an actual need to conduct inspections in the first place.

He said that bread quality is managed by producers, millers and retailers and the department, in the past, provided a free service to control quality.

The proposed service was not about food safety; it would have simply have looked at composition. 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 Pick n Pay’s batch codes are determined by the day’s production, this methodology would have substantially increased the operational complexity and cost.

The same would have been true of all other retailers.

”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,” Summers said.

Moving forward, the Department of Agriculture said it would again be taking over the inspection duties required.

“Considering the importance of the need to ensure that products, which amongst others form the stable diet of South Africans, are compliant with mandatory regulations, the department’s inspection unit will take over the mandate of inspection,” it said.

In the meantime, a “potent private-public partnership” inspetion model is being explored.