Withdrawal of millers from chamber ‘puts free-market system at risk’

Two of South Africa’s milling giants,Pioneer Foods and Premier Foods, as well as Pride Milling and Godrich Flour Mills, have quit their membership of the National Chamber of Milling and are no longer required to submit sales information to the chamber.

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The move has caused alarm about the chamber’s ability to gather crucial industry information. This information is used by millers, farmers, the Reserve Bank and the Department of Agriculture, Forestry and Fisheries (DAFF).

A lack of information will make it difficult to track the staple food trends and to calculate statistics like the gross domestic product (GDP).

National Chamber of Milling executive director Jannie de Villiers said the millers had pulled out due to Competition Commission concerns. “They’re getting hurt and want to avoid sitting in the same room as the opposition at all cost,” he said.

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They have to be perceived to be making amends for what they have done wrong in the past.” De Villiers said there was a chance other millers would pull out, although they had approval “at their highest level of authority to maintain the institutional capacity”.

“It could put the free-market system in jeopardy,” he said. “If the big companies withdraw, we lose our information base and the whole free-market system is at risk. The big companies might be able to buy information, but the smaller guys can’t afford it. All agricultural information is vested in private-sector institutions and I don’t see that government has the capacity or priority to pick up the ball. If we don’t have good enough information, it makes for poorer decisions and allocation of resources, whether we are importing, exporting or planting.”

The threat to the free flow of information was one of the “unintended consequences” of the commission investigations that Agricultural Business Chamber (ABC) CEO Dr John Purchase warned about some months ago. “It’s a pity (millers have withdrawn) but one can understand given what has happened with companies giving evidence against other companies to the commission.

For the bigger, broader organised agriculture, a lack of information would pose a problem. But there was collusion and we must be careful not to overreact now.”

Dr Purchase said the ABC, DAFF and the National Agricultural Marketing Council were putting their heads together to develop a position from agriculture. “We want to put constructive proposals to the commission. I think we have solutions.”

Grain SA CEO Dr Kobus Laubscher said the information the chamber gathered was critical interms of food security and the grain value chain. “I hope millers get their ducks in a row and reunite,” said Dr Laubscher.

Meanwhile, the commission has referred a probe into price-fixing by the white maize millers to the Competition Tribunal. It named an extensive list of cartel members – Pioneer Foods, Foodcorp, Godrich Milling, Progress Milling, Pride Milling, Westra Milling, Brenner Mills, Blinkwater Mills, TWK Milling, NTK Milling, Carolina Mills, Kalel Foods, Bothaville Milling, Paramount Mills, Keystone Milling, Premier Foods and Tiger Brands.

With the exception of Tiger Brands and Premier Foods, which were granted conditional immunity for cooperating with the bread investigation, the companies face a fine of 10% of total turnover if found guilty of discussing pricing, agreeing on price increases and the timing of those increases.

The investigation into collusion in the bread market has resulted in huge fines, including R98 million for Tiger Brands, R45 million for Foodcorp and R156 million for Pioneer Foods.

On 7 April the tribunal confirmed a consent order agreement (settlement agreement) between the commission and Keystone Milling in which the latter has agreed to pay a penalty of R6 730 349.