Government is ignoring its golden goose industry
Once a year — pretty much at the start of the vintage — the great and good of the wine industry gather in Cape Town for the VinPro Symposium. Organised by the grape producers’ official organisation, it aims to give growers and winemakers a real sense of focus before the year gathers pace.
While there’s not much a producer can do in late January to influence the quality of the crop ripening on the vines, there’s no harm in stimulating a little thought. In an industry where lead times are counted more in decades than in months, you can never start soon enough.
The pre-vintage moment is the ideal time to get the growers and producers into one place: once the harvest is over, the year acquires a momentum that affects all of them differently. Growers are farmers and their timetable is driven by the vineyard year. Wine producers have multiple roles: they go from being fruit growers and winemakers to salesmen and marketers. In an industry that exports about half its production, selling wine almost always involves foreign trade shows and foreign travel.
For people in the industry, it’s worth making an effort to attend the symposium. It is the most effective way to find out what has been achieved and what still needs to be done in the world of SA wine production. Some of the presentations are focused on viticulture, others on marketing. Insofar as the state of the economy affects the consumer environment, it is analysed in great detail. There’s even an attempt to make sense of regulatory and legislative policy.
With this in mind, it would have been nice if agriculture, land reform & rural development minister Thoko Didiza had actually pitched up and addressed the symposium as she was scheduled to, instead of ducking the commitment with the last-minute lame excuse that she had to go to Botswana on presidential business.
The wine industry is the one solid (and reasonably unconstrained even by cyclical factors) segment of agriculture that fills the state coffers every year without any input or funding from the government. It delivers more than R7bn in VAT and excise, which makes it more profitable to the state than it is to its own investors.
When your goose gives you golden eggs worth more in weight and wealth than the volume or value of what it eats, you should take its health seriously. Instead, except for the interest shown by the fiscus, the government studiously ignores the wine industry.
It should take a leaf out of the Australian hymnal. There the government shares in the cost of building Brand Australia. That government has also been exceptionally pro-active in negotiating free trade deals in major markets. The effect has been staggering: in 2014/2015 the total value of Australian wine exports to China came to A$392m. In 2019 this number had increased to A$1.2bn. This makes China the biggest market by value for Australian wine and the second biggest by volume. In total, Australia’s wine exports have increased from A$1.9bn to A$2.9bn in five years.
IN THE ABSENCE OF ANY STATE ASSISTANCE, THE CAPE WINE INDUSTRY SURVIVES BUT IT DOESN’T ALWAYS FLOURISH
In the absence of any state assistance, the Cape wine industry survives but it doesn’t always flourish. It receives no subsidies and it funds its activities as well as its very successful quality control regulations on a user-pays basis. (If Eskom could reproduce the wine industry model it would be cash positive and SA would be a net exporter of electricity.)
Wine farming, once the preserve of the rich and entitled, has taken a hammering over the past few years, but is coming back. In 2015 only 15% of growers were actually profitable; the number has now risen to 28%. More importantly, return on investment has risen over the same period from 1% to 4.8%, with net farming income up 37% compared with 2018.
While the premium end of the industry is battling with the flat economy, the grape growers at least look as if they’re coming up for air for the first time in more than a decade.