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State pension fund enters farm fray

The Government Employees Pension Fund (GEPF), which is the single largest investor in the four major food retailers listed on the JSE, will engage with its environmental, social and governance team to consider ways of helping to address the problems facing the farming community in the Western Cape.

John Oliphant, the GEPF’s principal officer, told Business Report that the fund’s approach to investing was based on evidence of sustainable practices with regard to environmental, social and governance factors.

While he was unable to comment on company-specific issues with regard to the role played by food retailers in the sourcing of farm produce, he said it was important that the profits of retailers were sustainable.

“If retailers believe that our expectation as investors is that profits be delivered at any cost, then it is important that we change that message,” he said.

The GEPF, which is responsible for R1 trillion of investments, is the single largest shareholder in Woolworths with a 17 percent stake, in Spar with 19 percent, in Shoprite with 13.45 percent and in Pick n Pay with 10.7 percent.

Oliphant’s comments come as the key parties involved in the acrimonious protests in the Western Cape are realising that a lasting solution to the problem will require the involvement of stakeholders other than the government, unions and the farming industry.

Cosatu’s Western Cape regional secretary, Tony Ehrenreich, said yesterday that the solution would have to recognise that the farmers were “price takers” and not “price makers”. Mercia Andrews of Trust for Community Outreach and Education said the current turmoil was part of a bigger picture.

An in-depth analysis of the local horticultural industry has highlighted the power the retailers have to set prices, which in turn determines what farmers can afford to pay workers.

The report, which was released late last year by UCT, revealed that the share of the final retail price of table grapes that accrues to farmers is just 18 percent, or 26 percent if packhouses are included, while supermarkets capture 42 percent.

A large proportion of the Western Cape’s table grapes are exported to the UK where they end up on the shelves of retailers such as Tesco, Waitrose and Aldi. Farmers who supply to these retailers say they are hesitant to demand more of the final retail price because they fear the retailers will abandon them and use alternative suppliers in Chile and New Zealand.

However, industry analysts say that, given the quantity and quality of South African grapes, the farmers are overstating the ease with which UK retailers can switch to alternative suppliers.

Previous efforts by community groups to influence international retailers to improve working conditions achieved some success, but involved additional costs for the farmers, who not only had to finance the improvements but also had to pay for audits of these.

Success was also limited by the fact that the farmers who supplied to the retailers only had to comply with the requirements laid down by local legislation. “These involve very low wages and very low standards,” one academic said.

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