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Current as of 26/05/17 07:40PM NZST

Fran O'Sullivan: Full inquiry Key's only option

The botulism scandal has raised questions over the culture of Fonterra, which is led by chief executive Theo Spierings. Photo / Dean Purcell
The botulism scandal has raised questions over the culture of Fonterra, which is led by chief executive Theo Spierings. Photo / Dean Purcell

John Key's Cabinet must ensure an independent inquiry - with full powers to subpoena Fonterra executives and directors to give evidence under oath - is held into the latest food safety scare to envelope the company that prides itself on being our national champion.

Anything less will simply be a butt-covering exercise and merely bolster Fonterra's confidence it can continue to play the "national interest" card instead of making obvious changes to its culture.

Key will be mortified by the dairy giant's performance since the July 31 discovery of the bacteria which causes botulism in whey concentrate that Fonterra's Darnum Park plant, in Australia, used to make bulk infant formula for Nutricia to refine into Karicare at its Mt Wellington operation. This, after all, is the company which the Prime Minister himself has proudly spruiked to China's top leaders, and to high-level political and business audiences in countries ranging from China, Indonesia, Brazil, Colombia and Chile, as the exemplar for new Zealand's ability to produce high-quality and safe proteins and play a lucrative role in assisting developing countries to do the same.

What happened over this past week, since Fonterra held its first press conference last Saturday morning, will quickly pass into the annals of amnesia as the company pulls the public shutters over the affair and other events overtake it.

That's unless the Key Cabinet decides to show New Zealand - not just our most important trading partner, China - that it means business this time round when it comes to showing Fonterra just who is boss when it comes to maintaining New Zealand's international reputation.

It will take a high-level independent inquiry - not Fonterra's internal inquiry which is being supervised by four of its "appointed" directors, nor the Ministry of Primary Industries' own planned probe - to get to the bottom of why the dairy company's culture is so amiss that it did not simply park the affected whey concentrate powder when it found heightened levels of the Clostridium bacteria in March.

And why, after three major food safety issues in a mere five years, Fonterra still does not have cast-iron protocols in place for dealing with such issues; why its executives lacked the competence to provide reliable information to the New Zealand public on such vital matters as which Karicare formula brands were affected; why it took days to change the bucolic imagery on Fonterra's website to reflect the fact that the company was dealing with a food recall; why Fonterra did not alert AsureQuality within 24 hours of finding on July 31 that it had a major issue ... the list goes on and on.

Key will also be miffed at being called out by China's Communist Party-controlled news agency Xinhua, which this week slammed the 100% Pure brand as "a festering sore" and aimed a direct and well-targeted kick at the Prime Minister himself, by saying the issues need to be fixed before New Zealand's trading partners stop "loving it". And that yet again he will have to head up to China to restore New Zealand's reputation.

Yesterday, Fonterra's top brass once again headed off to the Beehive to apologise for bringing New Zealand's reputation into disrepute.

Fonterra got off lightly from the 2008 melamine affair when former Prime Minister Helen Clark and our diplomats in Beijing blew the whistle to the Chinese Government over the cover-up its joint-venture partner had tried to orchestrate at the Sanlu plant.

Then like now, Fonterra's key China executives were based in Shanghai, far away from the seat of political and bureaucratic power in Beijing and without the necessary insight into the Chinese psyche on food issues affecting babies, and the retaliation that would be exacted if the correct steps were not taken.

The Fonterra board brought in Control Risks to audit its Chinese operation after Sanlu; but buried the report from the public.

The appointed directors all have strong commercial reputations - but they are not independent of Fonterra.

Neither is the Ministry of Primary Industries - which itself has been a running joke in the way it has discharged its responsibilities on a wide range of issues affecting New Zealand's major exports. It is headed by acting director-general Scott Gallacher, who to his credit fronted this latest affair himself, unlike his predecessor on the DCD affair.

But MPI is also in the frame. It does not have rigorous processes when it comes to monitoring our major food exporting company. It fell short badly during the DCD disaster when it displayed a total tin ear towards Chinese consumers. Labour's agriculture spokesman, Damien O'Connor, is right on the button when he questions why this Government has slashed the MPI budget by $26 million when "New Zealand's export reputation has been dented by the incursion of the Psa virus on our kiwifruit vines, Fonterra's earlier DCD contamination scare, the meat on the wharves in China fiasco, the discovery of an animal limb in shipments of palm kernel expeller and now the potential whey contamination."

Key's only real option is to announce a fully fledged inquiry to probe this affair and act on its recommendations.

This country's livelihood is otherwise at stake.

- NZ Herald

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Head of Business for NZME

Fran O'Sullivan has written a weekly column for the Business Herald since its inception in April 1997. In her early journalistic career she was a political journalist in Wellington and subsequently an investigative journalist who broke many major business stories including the first articles that led to the Winebox Inquiry in both NBR and the Sydney Morning Herald. She has specific expertise in relation to China where she has been a frequent visitor since the late 1990s. She is a former Editor of the National Business Review; has twice been awarded Qantas Journalist of the Year and is a multiple winner of the Westpac Financial Journalism Supreme Award.

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