The South African wine industry is at a tipping point, with many wine businesses – especially smaller companies and those under black ownership – facing potential closures over the next three to twelve months due to the recurring, and now sixth, domestic wine sales restrictions.
According to the Impact of Covid-19 on the Wine Value-Chain Survey that wine industry body, Vinpro, conducted early in July – among wine grape producers, wineries and other wine-related businesses – 58% of the 549 respondents indicated that their businesses would have to make drastic changes over the next year to be able to overcome the current challenges related to COVID19.
Nearly a quarter (22%) indicated that they would, in all probability not be able to survive at all. Even more alarming is the fact that 46% of black-owned brands and farms believe that their businesses won’t be able to survive the next year.
Around two-thirds of all respondents’ revenue is generated from domestic wine sales, which reiterates the importance of domestic trade for the survival of the industry. The local market is of particular importance to smaller wineries and black-owned brands, which are heavily reliant on sales channels such as their tasting rooms, hospitality offering and e-commerce.
According to the Economic Value of Wine Tourism Study conducted by Vinpro in 2019, wine tourism represents 41% of these small businesses’ total turnover. “It is especially the small and micro enterprises that do not have sufficient bridging finance to sustain them through the current and continued restrictions,” said Vinpro MD, Rico Basson.
Vinpro and its partners in wine, tourism and agriculture have submitted numerous funding proposals over the past year to various national government departments to stabilise an industry that has already incurred financial losses of more than R8 billion (€465.7m).
“The Western Cape Department of Agriculture needs to be commended for heeding the call and for funding two initiatives, namely a R12 million (€698 000) Wine Tourism Worker Support Stipend, and a R13.5 million (€785.8m) Producer and Brand Owner Protection Support Grant,” said Basson.
He pointed out that the alcohol ban was not only about whether people were allowed to enjoy their favourite drink or not. “It’s also about keeping businesses afloat that put food on the table for thousands of families.
“Substantial structural damage has been done to the extensive value chain, ranging from the vineyard to wineries and the market, which will take years to mend,” he added.
The industry weighs in
“Black-owned brands and farms have worked hard over the years to stay abreast and try to be sustainable in an ever-challenging industry,” commented Wendy Petersen, Operations Manager of the South African Wine Industry Transformation Unit.
The situation had deteriorated due to the recent ban on alcohol sales and it was unsure whether these enterprises would survive the next month, said Petersen. “This is devastating to witness as livelihoods of people and families are at risk and the situation is out of their control.”
“PaardenKloof is a 100%-black and female-owned wine farm that operates within the entire wine industry value-chain,” said Daphné Neethling, Owner of PaardenKloof. “Almost 99% of our sales and income are dependent on the local tourism market, our own restaurants, wine tasting rooms and our wine club. Lockdown has reduced this income to zero, due to liquor and restaurant restrictions.
“We will not be able to sustain the erosion of our cashflow for more than three weeks. We employ 35 people across our organisation and will have to reduce staff to between five and eight people and go into care and maintenance from August 1. Given our fixed operational costs, we will permanently shut down all components of the business from September – especially with another lockdown extension on the cards,” said Neethling.
“We are 100% certain that our consumers, who are middle- to high-LSM consumers, are responsible alcohol users and are not the sub-sector of the alcohol industry that cause casualty ward hospital beds to be overrun. In this regard, we believe that lockdown liquor policy has been wholly inappropriate and lazy, as it has not dissected the finer nuances of consumption patterns and consumer behaviour.”
“The continuous ban on the sale of alcohol will inflict irreversible damage on the South African wine industry,” said Carmen Stevens, owner of Carmen Stevens Wines. “This is reckless decision-making, which will have a disastrous effect, especially on new entrants to the industry.”
Urgent court interdict application frustrated
Meanwhile, Vinpro’s urgent interim interdict application to lift the ban on wine sales in the Western Cape last week was pushed out.
The interim interdict application was confirmed to the roll for July 7 for a hearing after Vinpro launched an urgent application on June 29, when the latest liquor ban came into force.
The two duty judges for the hearing of urgent applications last week both indicated that they would not be in a position to hear the interim interdict application as they had already been appointed to hear Vinpro’s main application set down for hearing in August. No alternative judges were available.
Vinpro’s legal team immediately approached the Judge President on an urgent basis to arrange for the hearing of the interim interdict application before a new judge on a date to be arranged.
“We are extremely disappointed by this turn of events and are currently in urgent consultation with our legal team on the way forward,” said Basson.
