IT IS SUCH A BEAUTIFUL COUNTRY but things aren’t so heavenly in South Africa. It has just come out of the worst drought in living memory; there is immense political and economic uncertainty; and the South African wine industry is feeling the pinch.
Cape 2018, Wines of South Africa’s now triennial wine fest, was a mixed bag of messages. Recent rains had, at last, alleviated the drought but, longer term, it was made crystal clear that unless South Africa can make more from its wines, farmers will continue to grub up vines and plant more profitable crops.
That was the sombre message from Wosa’s non-executive chair at the opening. Carina Gous told a packed auditorium at the Cape Town conference centre that profitability was a “huge, huge, challenge” with many farmers giving up growing vines. A 2016 survey showed that 5,000ha (5% of South Africa’s total vineyards) were lost in the five years since 2010.
Showing a graph of all the leading wine-producing countries with South Africa at the very bottom in terms of profitability, Gous said the country needed to “head north east, or north”.
She said producers and brand owners need to concentrate on the on-trade and specialist retailers and improve quality and value, “otherwise we will not have a sustainable future”.
She added that exports had gone from 25% of total, peaked at 60% and was now 52% but she was concerned at the amount being shipped in bulk. She called on the industry to concentrate on packaged wines which were more profitable and would mean more jobs for locals.
The situation was not helped by political uncertainty, she said. Unemployment was 27%, but rose to 40% if you included people who had given up work. There was also inflation, VAT increases and the volatility of the rand.
KEY MESSAGES
So, the key messages from Cape 2018 were:
• The price of South African wine needs to rise otherwise it is not profitable for farmers to cultivate vines and producers to make wine;
• The 2019 is likely to be a good, but a short, vintage. The 2018 was 15% down – 40% down in some places;
• Vines are being grubbed up and there have been few new plantings, relatively speaking, and some of the red vines are getting old and need replacing. are affordable, people can buy them. For many speciality wine buyers, premium South Africa is able to offer their customers a genuinely great alternative to many more established wine regions. The key issue to the industry now is one of profitability and we have an industry goal to increase return on investment from where it is currently at 1%, to 5% by 2025 – 37% of the South African industry is loss-making. This goes deeper than just prices on shelf. It’s the prices growers can get for their grapes to ensure they continue farming, and also structural issues such as employment, wages and investment back into the vineyards.”
