South Africa's wine industry suffers badly

Exports are the only bright spot in the disaster that Covid-19 has unleashed in South Africa's wine business.

South Africa's wine harvest is just a few weeks ahead and a pressure to full cellars, source: WOSA/Alain Proust
South Africa's wine harvest is just a few weeks ahead and a pressure to full cellars, source: WOSA/Alain Proust

Since December 26, South Africa has again had an alcohol sales ban, the third since the start of the Corona pandemic. In the last twelve months, South Africa's producers have thus had to cope with an 18-week sales stop on the domestic market, where half of South Africa's wine volume is usually sold.

This poses major challenges for South Africa's wine producers. The loss of income for the wine sector has also been exacerbated by the decline in tourism. This affects both the wine regions, but also the nationwide tourist facilities, which are an important sales channel for the winemakers. 

It is obvious that the wineries are not sold out, even if there is uncertainty regarding the excess quantities. An excess of 2.5-3 mill. hectoliters does not seem unrealistic. This raises concerns regarding the upcoming 2021 vintage, which will begin in early February. A stronger green harvest, combined with hopes for better qualities and better prices, is often the subject of discussion in South Africa.

South African wine exports stable

Exports provide a small ray of hope, although they also took place under difficult conditions and were banned for five weeks in 2020. Overall, export volume remained almost stable at 319.2 mill. liters (-0.2%), while export value increased by 7.7 percent to 9.1 billion rand (about €500 million). In exports, therefore, at least no additional price pressure appears to have been built up. However, the price level is already low.

In contrast, the South Africans were set back in their long-standing strategic goal of increasing exports of bottled wine. While cask wine exports increased by 3.7 percent to 181.5 million liters, the volume of bottled wine fell by 5.6 percent. In value, however, bottled wines were up 8.3 percent. At 7.2 billion rand, they represent nearly 80 percent of export value, but only 43 percent of volume.

Siobhan Thompson, CEO Wines of South Africa: "We are relieved that our wine exports have recovered worldwide. Even if this did not allow us to fully compensate for the loss of sales on the local market. But we are grateful for the great loyalty we have experienced worldwide."

Grim outlook for South African wine industry

Still, concerns about the future of the South African wine industry prevail. Even after the first wave of Corona, Vinpro, the winegrowers' association, estimated that about 80 wine producers (out of 533) and 350 winegrowers (out of 2,800) would have to close their businesses, resulting in the loss of about 21,000 jobs out of about 300,000. It seems realistic that this will lead not only to upheaval but also to a downsizing of the small-scale industry. 

South African growers understand that protecting health and containing the Corona pandemic are priorities, but they are obviously not happy with the situation. "Our associations are in close negotiations with the government. But the issue of alcohol consumption is a critical one and we need to work closely together on this, and not lose sight of a good balance between precaution and preservation of jobs and economic security," Thompson says.

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