SA wine industry calls on government to support recovery and growth

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"The key to South Africa – and the wine industry – emerging from the precarious position it finds itself in, lies in sustainable growth. Now is the time for conducive policy decisions that will create an enabling environment to achieve this growth. This is what we hope to hear from Finance Minister Enoch Gogodwana when he presents the Medium Term Budget Policy Statement next week."

The wine industry – unlike the larger agricultural sector that has performed relatively well over the past year due to favourable climatic conditions and the absence of Covid-19 restrictions – is currently faced with its own unique obstacles due to an economic downturn and more notably the significant impact of alcohol restrictions since the start of the pandemic. Basson says although the industry focuses on recovering and rebuilding, this challenging process might take longer than five years and would require short, medium and longer term interventions.

"We continue our efforts to forge a strong partnership with government on initiatives such as the Agricultural Master Plan and believe that a multilateral, rather than bilateral approach should be followed to create an enabling environment and stimulate the wine industry’s path to economic recovery. Meaningful engagement is crucial to ensure that all Government resources are accessed," says Basson.

Efficient infrastructure and service delivery

All major sectors in South Africa depend on reliant infrastructure and efficient service delivery, such as water, electricity and roads. "Inefficiencies have, however long plagued the wine industry with access to water, unreliable power provision from Eskom, as well as inadequacies at the major ports having a detrimental effect on producers, importers and exporters. For example, the Port of Cape Town, the country’s highest-rated port, is ranked a dismal 347 out of a total of 351 ports globally in terms of efficiency," says Basson.

The Cape Town Port Terminal is of strategic importance to the wine industry and is one of the busiest international shipping routes. South African wine exports represent almost half of its total production. Of these exports, 41% are packaged wine and 59% bulk wine. The UK, Germany, the Netherlands, the USA and Sweden are the top five markets for South African wine, with a total export value of close to R10bn, the second-highest of any South African agricultural product.

"An effective and fully operational port is essential to grow the economy of the country and create new jobs," says Basson. "The status of South Africa’s port terminals is, however, an obstacle for the wine industry to recover and grow. Therefore it is of utmost importance to increase the port efficiency and capacity.

"We also urge government to unlock additional access to water and specifically speed up water infrastructure investment such as the Brandvlei and Clanwilliam projects, while improving the ease of use of alternative energy sources."

Combat illicit trade through law enforcement

One of the unintended consequences of the repeated lockdowns and restrictions on the South African wine industry has been the growth of the illicit market. Because this illicit market is outside the regulatory reach of government and operates uncontrolled, it leads to devastating consequences from a health and economic perspective.

"The liquor industry is already heavily regulated. We urge Government to stop these crisis-driven Covid-19 related prohibitions on wine which have promoted the development of parallel illicit markets, plunging our industry into a financial abyss and reducing much-needed Government revenue. We want government to combat illicit alcohol trade and create fair and open competition in the domestic market by enforcing the laws that already exist."

Policy certainty and enablers

The wine industry is different from other alcohol industries – not only due to its tourism destinations attracting thousands of local and international visitors to the various wine regions and generating significant revenue for the economy, but also because it is a unique asset to the country. The wine industry has built and continuously maintains a strong brand reputation for South Africa on the global stage where we export to 132 countries.

Wine is also part of agriculture, as it is produced from grapes that ripen once a year and is not made from ingredients available all year round. Because wine is a cyclical product, it is important that Government engages effectively and timeously with the industry on liquor-related policies and legislation to ensure a more conducive trading environment.

"We ask for a clear taxation methodology as agreed with Treasury for wine-related products and an annual excise adjustment of below CPIX as the excise rate is already above the target incidence rate for wine and brandy. A clear policy framework with regard to beneficiation and inclusive growth in terms of access to existing and new water resources is also non-negotiable."

Covid-19 recovery support

The wine industry has suffered irreparable damage through the Covid-19 pandemic, says Basson – from a large number of small and medium wine businesses, particularly in the wine tourism sector, to wine grape producers and cellars which include several black-owned enterprises – with 28,000 jobs already lost. "We require urgent financial support and relief in order for these businesses to recover and rebuild and provide livelihoods.

"We believe the wine industry can be a catalyst for growth and employment in South Africa. Addressing these interventions will assist our industry and lead to policy and regulatory certainty, which will, in turn, result in economic growth, fiscal recovery and job creation post the pandemic. Failure to implement reforms quickly and effectively will, however, put the South African economy at further risk and exacerbate the country’s current economic challenges," says Basson.