Is Shi pulling a  fast-one on farmers?

Is Shi pulling a fast-one on farmers?

. . . as opaque payment system triggers uproar….

MASERU – STONE Shi could be pulling a fast one on Basotho wool farmers through an elaborate payment system that looks dubious, an investigation by the thepost has revealed.
The opaque system seems to have been designed to confuse the farmers when it comes to payments.

It is the main reason why farmers are getting far less than what they used to be paid for the same amount of wool at the auctions in South Africa.
Documents show that Shi’s company, Maseru Dawning, is paying farmers for what it calls “conditioned weight”.
Invoices seen by thepost show that Shi is invoicing only 10 900kgs for every 19 000kgs of wool he ships to his buyers in China.
An example of this murky payment system is a packing list for the wool consignment Maseru Dawning shipped to a Chinese company called Zhangjiagang Free Trade Zone Yulian Wool Industry Co, Ltd in February.

The packing list shows that the shipment had a gross weight of a little over 17 000kg while the net weight was recorded at 16 900kg.
Curiously, one column of the packing list shows the “conditioned weight” to be 10 900kg. On the same day Maseru Dawning invoiced Zhangjiagang for 10 900kg.
That invoice doesn’t mention anything about the net weight shipped to the Chinese company. It shows that Maseru Dawning will be paid US$10.20 per kgs of the “conditioned wool”, bringing the total of the invoice to US$111 088 for 10 900kg.

The invoice has notes showing that it was prepared according to International Wool and Textile Organisation (IWTO) standards. Is says according to those standards wool in that consignment has an average yield of 64 percent. It also mentions the microns (the strength of the fibre) as 17.3.
So what has happened to the other 6 000 kg of wool in the consignment?

Shi is telling the farmers that it was only dirt like soil, faeces and vegetable matter.
If that explanation is correct it means the Chinese buyer was prepared to pay for the shipment in which 36 percent is just rubbish.
There are several problems with Shi’s explanation to the farmers.

First, the term “conditioned weight” sounds unfamiliar to most farmers who have always known that they are paid for the weight of the greasy wool.
At the shearing sheds each bale is pressed and weighed. By the time the wool leaves the shed each farmer has a clear record of how much greasy wool they have delivered.
They don’t talk about “conditioned weight” but just the “weight” because that is how they have sold their wool for decades.
At auctions in South Africa the buyers pay for the weight not the “conditioned weight”.

Second, by “conditioned weight” Maseru Dawning is referring to what is internationally called “clean weight”.
The trouble with that explanation is that it is not backed with credible test results of each bale of the wool sold.
Shi has not provided those test results.

Without testing certificates, a standard requirement at all wool auctions in the world, it is impossible to know what Maseru Dawning is calling the “conditioned weight” (clean weight) of wool.
The test certificates are supposed to be handed to the farmers before the auctions because they are what determines the price of the wool.
There is a testing certificate for every bale on the auction floors. Maseru Dawning’s invoice shows the “average yield” of a consignment.

What the company calls “average yield” could be just a thumb-sucked figure.
At the auctions the testing certificate of each bale is displayed for the buyers.
In the absence of a credible laboratory test the “conditioned weight” Shi is quoting on his invoices look dubious.

That, in part, explains why the farmers are up in arms against Maseru Dawning over payments. Most don’t believe Shi’s numbers and feel cheated.
Their worries and grumbles are not overdone.

There is no way the farmers can verify if Shi’s telling the truth because they don’t get the test certificates as they do at the South African auctions.
In an interview this week Shi said his figures are credible because the wool is tested at a laboratory in New Zealand.

“Every bale is tested. There is no way we can sell the wool without the tests,” Shi said.
He said he has testing reports to prove that his payment system is above board.
“We are sending the samples to New Zealand by air or ship,” he said.
What we get from the laboratory are testing reports, he said.

But internationally wool, especially at auctions, is not sold using testing reports but testing certificates. The difference between a report and a certificate in the wool sector is crucial.
A testing report does not specify from which bale the sample has come from and does not identify the source of the wool.
The testing bureau does not necessarily supervise the sampling and therefore does not put its head on the proverbial block.

A testing report merely mentions the findings but does not specify from whom it comes and from which bale it originates.
What really matters to buyers are the testing certificates with have all the details. It is a testing certificate that the factories want because it assures them of the quality of the product they are buying.

Put simply, the distinction between a testing report and a testing certificate is the same as the difference between a chief’s letter and a birth certificate.
A chief’s letter confirms that you are a resident of a village while the birth certificate gives exact details about you, your parents and place of birth.
thepost has not established if Shi is indeed testing Lesotho’s wool in New Zealand.
But if he is doing so just to get testing reports several issues arise.

The first is that testing reports don’t specify the bale.
Which then begs the question: from which bale does he get the 64 percent as the yield?

Shi is using averages in an industry that has exact numbers as its cornerstone.
The other issue is that for a testing report the laboratory is not supervising the collection of the samples from each bale. It is Shi himself who collects the samples and sends them to the laboratory.

The credibility of those samples cannot be independently verified.
The laboratory is testing what he gives them. The problem with that is that Shi then becomes a player in a process that he is supposed to be independent.
Unsupervised, he can cherry-pick the samples to determine the results.

IWTO standards state that for a test to be credible the testing bureau should collect the samples without the involvement of the broker.
In Lesotho’s case the broker collects the samples, packs and ships them to the testing centre. And he doesn’t share the results with the farmers who own the wool.

Farmers who spoke to thepost said it is highly unlikely that as much as 36 percent of a wool consignment could be dirt.
“Not even a 1000 kgs of that 17 000 is dirt. It cannot be above 20 percent,” said a Mokhotlong farmer who has been involved in the sector for more than 20 years.
“The reality is that you never sell wool that way. We have never heard of conditioned wool,” he said.
Shi said he is explaining to the farmers because they don’t seem to understand his system.
“It’s the first year so they might not understand our system. We are having a meeting to explain how our system works,” Shi said.

Staff Reporter

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