Xenophobia threatens SA’s African trade ambitions

Much indeed, Regional Managing Director for Southern Africa at the Chartered Institute of Procurement and Supply. Money Web at Midday for all your up-to-date stories. South Africa's dairy farmers are warning that they're being squeezed to breaking point. One of the country's biggest milk buyers, Lactalis, is cutting the price it pays farmers by a total of 70 cents a litre. That is roughly 10% at a time when fuel, energy, and other production costs are soaring. Now, the

The dairy cooperative Similco says farmers simply cannot continue absorbing these pressures and is now considering legal action under competition legislation. It's also taken its concerns to the Competition Commission. The chief executive of the cooperative is Andrei van Hierden, who joins me on the program now. Andrei, just explain it to us from your perspective then. If I understand this correctly, is Lactalis using its buying power to force farmers to accept prices that you

Would contend are simply unsustainable. Yes, Jeremy. You know, with dealing with milk buyers, the bargaining power is obviously at the side of the milk buyer. So although we've got committees where we sort of negotiate and convey certain information, you're still the price taker to a large extent. And Parmela or Luxille is one of the biggest buyers with a lot of buying power, obviously.

Talk about a 70% reduction per litre. Could you give me a sense of how many of your farmers are now producing milk at a loss? Jeremy, I would estimate, you know, our main footprint of our farmers are Southern Cape farmers talking about from Caledon all the way to George. And that's primarily your smaller to medium-sized farmers. And these guys are, you know, mixed enterprise farmers. So I think there's a lot of cross-subsidizing.

I presume most of these guys are running at a loss, especially when it's 70 cents reduction, which is, as you refer to, a 10% reduction that you just can't afford anymore. Isn't the uncomfortable truth, Andre, that South Africa may simply be producing more milk than the market can absorb and farmers are having to pay that price? Yeah, you see, Jeremy, the only way to survive is that you have to expand to have the advantage of your

Economy of scale. And we've got an export market to Denny Lux and the SATC countries. But we've lost some of our contracts to the Middle East, especially Saudi Arabia. And I think that is probably one of the main contributions to our, what I call it, a fake surplus or not a surplus in the normal sense of the word. What responsibility, Andre, I want to.