Blame government for food inflation, says Astral

The government and state-owned entities are the cause of South Africa’s food price inflation, according to the boss of the country’s largest poultry producer, Astral Foods.

During a discussion after the presentation last week of Astral’s six-month financial results, CEO Chris Schutte has some sharp responses to a report by the Competition Commission which suggested that excessive price increases by poultry producers were driving up food prices.

In addition to record high feed costs, the Astral presentation detailed the extraordinary costs Astral faced because of water, electricity and other infrastructure failures. These include state-owned entities such as electricity utility Eskom and rail operator Transnet.

The cost of power outages alone came to R741 million in the first six months of Astral’s financial year, and are estimated at a further R844 million in the second half. At a combined hit of approximately R1,5 billion on their bottom line in one year, what hope of survival do small, medium and family owned producers have?

It has spent R90 million installing generators at its operations, and is looking at adding solar power as well. Diesel to power the generators is costing R45 million a month, and this will rise if Eskom has to resort to even higher levels of power outages.

Astral is building a R100-million pipeline to bring water seven kilometres from the Vaal River to its production facility in Standerton. Because of rail failures, the company is spending four times more to truck raw materials to its operations.

Schutte said that both poultry producers and retail groups were subsidising consumers by absorbing some of the rising costs.

“If the Competition Commission wants to investigate poultry price increases, they must first sweep in front of the door of state-owned entities, because they are the cause of food price inflation, not producers.”

Schutte said that, while raw material costs might come down in the second half of the year, Astral would still have to spend R45 million a month to power its generators.

“Mr Government, that is food price inflation, it’s not poultry profiteering,” he stated.  

In a comment in the Sunday Times, Schutte said load shedding was pushing up the cost of food for vulnerable communities. “If the masses are hungry, the rich and fortunate won’t sleep,” he warned.