Call for Independent Enquiry into Kiwifruit Industry

Call for Independent Enquiry into Kiwifruit Industry

1. Background
1.1 IKGA Members have been asked by Growers for their opinion on industry issues and in particular the China Customs investigation following the decision of the Shanghai Court on Tuesday 17th July. This follows on from recent articles in the Farmers Weekly and The National Business Review of Friday 17 May 2013 and The Sunday Star Times on Sunday 19 and 20th May 2013. Growers have also called us in response to letters to Growers from the Chairman of Zespri, Mr McBride, dated 20 May 2013 and his letter to Zespri Shareholders dated 12 July 2013.

2. Call for Independent Government Enquiry
2.1 IKGA notes that Mr McBride comments in his letters to Growers and Zespri Shareholders that matters affecting the industry should be openly put to the industry and debated. We agree that all Growers should be able to have their voice heard. We do not agree, however, that it is possible for Growers to have a clean debate under the current structure of the Kiwifruit industry which we refer to as the KKK being the great Kiwifruit Klobbering Klub which monopolises information and attempts to shut down dissent and questioning.

2.2 For that reason, we support calls for an independent enquiry into the whole industry structure including NZKGI (which Growers have to pay compulsory levies to), KNZ (which Growers fund via Zespri), KVH ( which we consider to be a de-facto arm of Zespri) and of course Zespri itself which is in a privileged position because all Kiwifruit Growers are compelled to supply Zespri whether shareholders or not. There are also other reasons why an independent enquiry is necessary which are covered in the following paragraphs.

3. Mitigating Zespri Monopoly Powers – Grower Protection Not Working
3.1 Growers are compelled by law to supply Zespri for export of kiwifruit to markets other than Australia and New Zealand. The regulations have a number of measures which were intended to protect Growers from the abuse of these monopoly powers. The regulations state that these measures are designed to:

(a) Encourage innovation;
(b) Promote efficient pricing signals;
(c) Provide appropriate protection for Zespri shareholders and suppliers;
(d) Promote sustained downward pressure on Zespri’s costs.

3.2 We see no evidence that these mitigation measures are working. It is notable that since 1999 there has been no review of the regulations despite the concerns of the Producer Board Reform team.

3.3 It is not possible to see how the mitigation measures can work when KNZ shares the same offices as Zespri and the same common facilities. Furthermore , the Board of KNZ consists of a majority of producer-elected representatives who themselves either personally or through related parties are both Zespri Growers and shareholders, particularly growers of Zespri’s own kiwifruit varieties. Given this fact it is difficult to understand how KNZ can either promote downward pressure on Zespri’s costs or provide appropriate protection for Growers. Put simply, the majority of the Board of KNZ are conflicted and subject to allegations of bias by reason of their interests and associations with Zespri as well as their public comments. There is nothing in the regulations that limits KNZ from setting out requirements for eligibility for election as directors which would disqualify candidates for election who have any direct or indirect interests in Zespri. This does not happen.

4. Government and the Public have an Interest
4.1 The kiwifruit industry and kiwifruit growers are subject to government imposed regulations. The industry is also the beneficiary of Government funding. This has come in two forms recently. The first was the $25 million contributed to Kiwifruit Vine Health in response to the PSA Biosecurity incursion. Secondly, Zespri has a partnership with Plant & Food Research which is part-funded to the extent of $35.7 million dollars by the Government for redevelopment of new varieties. It is, therefore, quite wrong for Mr McBride to suggest that the China fiasco or any of the other matters affecting growers are simply industry only matters which should be debated solely behind closed doors within the industry. We have learned as have many of our members that this approach does not work and , more to the point, cannot work under the current industry structure.

5. KNZ & KVH are KILLING BIODIVERSITY
5.1 KNZ has a dismal track record of improving grower wealth through collaborative marketing. It also has a dismal record of approving non-zespri owned kiwifruit varieties for collaborative marketing on any basis that is commercially realistic for a variety owner. That is hardly suprising given the inherent bias of KNZ Directors in favour of Zespri and its public good funded kiwifruit varieties.
5.2 This means NZ Kiwifruit Growers are subject to the varieties and genetic information in one breeding program. The most likely place for a highly PSA tolerant or resistant variety to come from is Asia, particularly China. No offshore variety owner in their right mind would seek to commercialise in NZ so these varieties will be ( and are being ) planted in South America and South Africa to provide Southern Hemisphere supply of their varieties. That includes plantings of other NZ bred non- zespri kiwifruit varieties. Growers there seem to think they have commercial potential even if Zespri and KNZ want to deny NZ growers the opportunity to grow them in preference to Zespri’s own varieties.
5.3 KVH are, in our view, a de-facto Zespri subsidiary. Their research and science program appears to be largely contracted to Zespri. They have a scientific oversight committee that is neither a committee nor does it provide oversight. They appear to have a myopic focus on applying copper and we see no evidence of any research effort into combing the world for commercially viable PSA resistant or tolerant kiwifruit varieties. Their “science” programme appears to be more concerned with protecting Zespri’s proprietary kiwifruit varieties and building themselves an empire funded by compulsory levies on growers.

6. NZKGI is Ineffective
6.1 NZKGI also shares offices and facilities with Zespri. We do not consider they perform an effective watchdog role on behalf of Growers. Their enquiry into the China situation is, in our view, a case in point. We confidently predict that it will be a whitewash. We suggest that they take a look at the Fonterra Shareholders Council.

7. Concluding Comments
7.1 We do want to say that there are some good people in Zespri who do their best for Growers. The employee who has spoken to the Sunday Star Times is to be congratulated for speaking out. Director candidate Tom Wilson is also to be commended for his courage to speak out against Zespri.IKGA would encourage other employees who are sitting on information about the way Zespri KNZ & KGI conduct their activities do business to contact us in confidence. We also support calls made for an enquiry into the industry by Labour Party Agriculture Spokesmen Damien O’Connor and the ACT Party.

INDEPENDENT KIWIFRUIT GROWERS ASSOCIATION

Ross Hart 021 025 39882 or 5495644
Chris Dunn 027 481 7900 or 5331147

Information about IKGA

• IKGA was established in May 2010 by a group of concerned kiwifruit growers.
• IKGA aims to provide an independent voice for kiwifruit growers because it has no confidence in the ability of KNZ or NZKGI to act as effective watchdogs on the activities of Zespri.
• IKGA believes there are questions that are not being asked about the activities of Zespri, the way it operates and how grower funds are dealt with by Zespri.
• IKGA is concerned that Zespri has become another corporate and lacks proper accountability to growers.

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