‘First step to cheaper food' — Steenhuisen axes controversial bread inspection contract

Daily Maverick

25-06-2025

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