Govt report on Fonterra scare does not reassure

Fonterra's infant formula crisis in August was "the biggest food safety scare in New Zealand's history", the government's inquiry said in its report this past week.

"Was the incident due in any way to a crisis or failure in the regulatory food safety system governing the dairy industry?" the three-person panel asked on behalf of New Zealand and our customers overseas.

"Our conclusion is no," they said. "The immediate causes of this incident appear to lie elsewhere."

Fonterra has dissected the incident in minute detail in multiple reports of its own. But the Ministry for Primary Industries' investigation into whether Fonterra failed on any of its compliance obligations is still under way, and then the inquiry will discuss that in a later report.

Rather than wait to fully understand how the regulatory system performed, the inquiry has already delivered its judgment. Our regulatory system for dairy food safety is among the best in the world - there was nothing fundamentally wrong with it.

However, the report fails to reassure. It described a safety system under stress. Three main factors are: Inadequate government leadership and resources; an insufficient culture of food safety in the industry; and some commercial conflicts which blur lines of responsibility and reduce collaboration. Consequently, the inquiry makes a large number of major recommendations to overhaul the system. For a world-class food safety system, it is a surprisingly long and deep list.

A succinct summary of these concerns was given by Professor Alan Reilly in his report as the independent peer reviewer of the inquiry.

Professor Reilly, chief executive of the Food Safety Authority of Ireland and a professor in the Institute of Food and Health at University College, Dublin, identified, for example, the government's conflicting roles:

"A very important factor identified by the inquiry is the need to foster a strong food safety culture in both the private and government sectors. A key policy focus in recent times for the ministry has been on expanding dairy production, adding value and gaining greater access to overseas markets.

"Food safety appears not to have had the visibility it deserves in the ministry and there are the usual tensions between the roles of being a regulator and an enabler of industry; this is akin to being a poacher and gamekeeper at the same time."

The inquiry's report shows this conflict was created when multiple ministries and agencies were rolled up into the Ministry for Primary Industries in 2011.

The New Zealand Food Safety Authority ceased to exist and its roles were taken over within the new ministry. But food safety is not one of the four goals of MPI's long-term strategy. They are to maximise export opportunities; improve sector productivity; increase sustainable resource use; and protect against biological risk.

As the inquiry noted: "One potential weakness with this structure is the absence of a single branch responsible for food safety, or a dairy sector team."

In addition, the loss of a visible and independent food safety regulator has confused some governments, regulators and customers overseas, the inquiry noted. This concern was raised in a number of New Zealand dairy industry submissions to the inquiry.

Yet, the report recommends keeping the existing three-level structure. At the top, the government writes regulations; at the bottom, companies devise risk-management processes to comply; and, in the middle, "verifiers" audit the companies' performance.

There is also something of a conflict in this structure, given that two of the three verifiers in the dairy sector - AsureQuality and MPI Verification Services - are government-owned. The third, Eurofins NZ, is privately owned.

Compliance is also made difficult by the 12,000 pages of regulations, which take up 3 metres of shelf space, the inquiry noted. The regime was something of a "nightmare", it said, quoting a submitter.

Thus, the inquiry recommends: Reform of the tertiary layer, which will take two years; redesign of risk management programmes by industry, which will take a transition phase of one year; and full implementation (including re-evaluation and registration of industry participants with the ministry), to be completed by the end of the fourth year.

The inquiry also noted: "The shortage of experienced people exists at all levels of the system, whether it be putting together risk management programmes; carrying out accreditation and verification; providing leadership or technical know-how inside the regulator; or working within the ranks of the industry itself. Interviewees spoke of the difficulty of attracting such dairy experts, and also of that expertise drifting away from regulatory agencies and concentrating in dairy companies."

Remedying this talent shortfall "should be a priority, especially in light of the ministry's goal to double exports by 2025 - difficult to achieve without an expansion of value-added production, which cannot happen without more of the skills under discussion".

While the inquiry makes many useful recommendations, it remains a production-led view of the world.

What's still missing is a dairy industry and government response to a consumer-led world. This is being powerfully shaped by two new dynamics: Testing regimes that can detect substances down to single digit parts per billion; and social media. The two are intimately linked because food producers have to explain to consumers what is in their products.

Meanwhile, we're still waiting for the government's report on compliance in the infant formula crisis. Having the relevant ministry report on itself is not a good look.

Similarly, a total of five Fonterra and government reports is unhelpful. Each has had a particular focus, leaving us with a fragmented picture. The government should appoint a panel of truly independent experts to combine them into one comprehensive, illuminating, insightful report and one set of recommended changes.

Only then will we have a chance of creating a truly world-class food safety system.

Sunday Star Times