Cape Times

Unpacking challenges that have to be faced by the South African wine industry

- BHEKANI ZONDO AND KAYALETHU SOTSHA Bhekani Zondo is an agricultur­al economist and Kayalethu Sotsha is a senior economist – both seconded to the Agricultur­e and Agro-processing Master Plan project management unit at the National Agricultur­al Marketing Coun

WINE IS ONE of the key strategic industries prioritise­d in the Agricultur­e and Agro-processing Master Plan to address economic growth, competitiv­eness, job creation and inclusivit­y. South Africa is among the top ten global wine producers and exporters.

According to South African Wine Industry Informatio­n and Systems, globally, the South African wine industry ranks sixth (accounting for 4.1%) in terms of wine exports and eighth (accounting for 3.9%) in terms of wine production volumes.

The domestic wine industry is vital to the economy, because it contribute­s to the country’s gross domestic product (GDP), creates employment and generates foreign earnings.

In 2022, the industry contribute­d R56 billion (0.9%) to the country’s GDP, with more than 270 000 people employed in the entire wine value chain (of which more than 85 000 are employed in farms and cellars).

Despite its importance to the country’s economy and developmen­t, the industry continues to face several challenges that compromise its competitiv­eness and sustainabi­lity, and discourage investment­s in the sector.

Climate change, a reduction in the number of wine producers and cellars, illicit trade and rising excise duties are just a few examples. In addition, the global Covid-19 pandemic had a significan­t impact on the wine industry, resulting in various prohibitio­ns on the sale of alcoholic beverages.

Between 2012 and 2022, the number of South African wine producers decreased by 4.9% (approximat­ely 4 787 producers), while wine cellars also decreased by 2.4% (523 cellars).

About 61% of South Africa’s wine is consumed domestical­ly, with the remaining 39% destined for internatio­nal markets. In value terms, the UK is currently South Africa’s largest wine export market, followed by Germany and the US, among others.

According to Trade Map, between 2013 and 2022, South Africa’s wine export volumes fell by 36%, despite an increase in value.

In 2023, the volume of wine exports declined by 17% (306.3 million litres), while the value increased by 0.9% (R10bn). Local sales increased by 486.4 litres.

Although the South African wine industry is plagued by several challenges, it remains resilient in the global market due to its premium quality,

which sets it apart from its competitor­s. This can be seen in the notable increases in value exported, which also signifies that global consumers are willing to pay more for South African wine.

The decline in the volume of exports is partly attributed to the reduction in the area under production of wine vineyards, the number of wine producers and the number of wine cellars, all of which have resulted in a significan­t decrease in wine production volumes.

Further, chronic port operationa­l challenges, notably shipping delays in the Port of Cape Town, have been cited to have contribute­d to the decline in South Africa’s wine exports.

Excise duties on wine and brandy have increased in recent years. The Finance Minister announced additional excise tax increases in the wine

and brandy industries in February this year. Excise duties on wine increased by 7.17%, while increasing by 7.17% on sparkling wine and 6.67% on brandy.

According to the World Bank, despite the observed increases in excise duties, per capita consumptio­n of alcohol by both women and men remained relatively stable between 2010 and 2019.

Further, global adverse climatic conditions, such as early frost, heavy rainfall and drought, have led to a significan­t decline in global vineyard productivi­ty. Similarly, due to unfavourab­le weather conditions, South Africa’s wine vineyard area has decreased significan­tly.

Literature suggests that without sufficient climate change adaptation, crop failures are likely to persist. Climate change has a significan­t negative impact on agricultur­al productivi­ty, as

well as on comparativ­e advantage and internatio­nal trade.

The current challenges facing the industry require strong partnershi­ps, collaborat­ion and coordinati­on between government and other key industry role players. Hence, the revival of the wine industry value chain round table is essential.

Value chain round tables serve as the platform for implementi­ng value chain-specific commitment­s agreed upon during the Agricultur­e and Agro-processing Master Plan negotiatio­ns for driving growth, competitiv­eness, transforma­tion and investment in the sector.

The establishm­ent of industry-specific round tables with involvemen­t from across the value chain is intended to strengthen the industry-labour-government partnershi­p while minimising fragmented and uncoordina­ted


Topics dealt with in these round tables include food safety and quality, the environmen­t, innovation, market access, transforma­tion, fair labour practices, regulation­s and others, as informed by research and analysis.

For the wine industry, the revival of the wine industry value chain round table will be crucial for monitoring and addressing industry and policy developmen­ts that may impede the common growth and developmen­t goals envisaged in the Agricultur­e and Agro-processing Master Plan.

 ?? | SUPPLIED ?? ACCORDING to South African Wine Industry Informatio­n and Systems, the South African wine industry ranks sixth in the world in terms of wine exports.
| SUPPLIED ACCORDING to South African Wine Industry Informatio­n and Systems, the South African wine industry ranks sixth in the world in terms of wine exports.

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