South Africa (SA): Strengths and Weaknesses of Wine Industry

December 3, 2024

Important source: Tim Adam’s Sept 2023 Report on SA (herein “TA”)

Strenghts

1. Long tradition (dating from mid 1600’s), well-known, also for international varieties – TA: even in 1970, Lanzerac Cab Sav from Stellenbosch already recognised as top quality.
2. Strong ongoing industry: 8th largest producer in world (more than eg Germany); 6th on wine exports
3. Good reputation for integrity (no recent wine scandals), backed by quality research from Univ of Stellenbosch, eg into clones.
4. High quality wine makers with international experience and reputation: Danie de Wet (trained at Geisenheim in Germany; of De Wetshof in Robertson, “King of Chardonnay”); Charles Back, Graham Beck, Robertson for Cap Classique sparkling), Peter Finlayson (at Hemel-en-Aarde [Heaven and Earth]), Beyers Truter (Father of the New Pinotage – Beyerskloof, Stellenbosch.)
5. Great whites: Chenin Blanc (CB) and Ch; international reputation for CB – (TA). Int conference for CB held in SA. In whites, variation in styles even in one variety, in one producer: eg Alheit Vineyards, CB across a number of areas: eg Stell. Swartland
6. Improvement in reds: Cab and Syrah; not so tannic and heavy (TA).
7. Innovation: focus on soil types, eg in Stellenbosch, Robertson (TA)
8. Developing of new, quality wine areas, like Hemel-en-Aarde valley, just inland of the coastal resort of Hermanus on the south coast, en Voor-Paardeberg, inland, near Paarl (with an offering of good Marsanne).
9. Variation: styles (CB); generally, including brandy, sweet wines (the world famous, luscious Vin de Constance made from Muscat Blanc à Petits Grains), and sparkling wines as in Cap Classique. Old vines in Swartland. Like Aust, also varieties like Viognier – Lismore Estate, Greyton, rated by TA.
10. Quality control and integrity across industry
    1. Control of claims about area of origin, variety and vintage. As level of District and Ward, shared terroir qualities required, yet flexibility because no quotas, prescribed varieties, yields, and the like – similar to Australia; very unlike most of Europe.
    2. Testing by Wine and Spirits Board Panels: Wines are evaluated for minimum acceptable quality and for faults but the range of factors considered are wide, eg one disqualifying factor: wine has no or insufficient recognisable wine flavour. Gets certification seal on capsule of bottle.
11. Organisations such as:
    1. Fair Trade and WOSA address seek to address ongoing issues from Apartheid era, notably in respect of labour on farms,
    2. And also issues such as quality, climate change and sustainability, through organisations such IPW, BWI (undergone name change); Sustainable Wine South Africa.
    3. Integrity and Sustainability seal by W&S Board for chemical and water usage, introduction of natural predators; linked to Wine of Origen scheme.
12. Marketing international:
    1. AGOA – privileged access to USA,
    2. Beneficial trade agreements with UK and EU; but had to give up some names like Prosecco. Compensation recently paid to SA for this.
    3. Labels readily in English, and highly informative.
    4. Ready Access to nearby states like Mozambique and Angola.
    5. Close political ties to and access to Chinese market, notably after the trade war between China and Australia which went to the ITO and knocked Treasury Wines/Australian imports into Australia badly.
13. SA Rand low exchange rate – good for exports.
14. Relatively cheap labour available on wine farms.
15. Well-developed wine tourist industry – amongst best in the world.
16. Growing foreign investment: Heineken acquired Distells, largest producer by far.

Weaknesses

1. Producers face dire economic circumstances – only 12% are making money (VinPro).
2. Economy overall in bad shape: very high unemployment and crime rate including “farm murders” directly affecting wine trade; and lack of infrastructure or reliable infrastructure: thus rolling “load shedding” ie power interruptions, with no end in sight.
3. Climate change challenges: notably drought – Cape Town nearly ran out of water. Also unseasonally heavy rains: Cape in 2023.
4. SA wines may have traditionally been “too cheap” on international markets – seldom are high prices obtained, and difficult to lift price profile or category. Beyerskloof Pinotage at Aus $ 170 high exception. Target markets typically at US $ 8-10, UK £ 6.99 to 8.99 (TA)
5. A signature variety and varietal wine has been Pinotage – traditionally loathed for “rusty nails” or “burnt rubber” or nail varnish remover . Even with marked improvements (eg great P from likes of Beyerskloof), seldom of international standard or a winner – somewhat like Gamay; contrast success of Malbec from Argentina.
6. SA far from its markets outside Africa – African countries have limit possibilities for high quality wine sales because of their own, dire economic circumstances.
7. After Covid, ocean transport very expensive, and South African harbours generally in a state of disfunction.
8. Close political ties with China and Russia may threaten lucrative arrangements like AGOA with the USA.
9. ANC government unsympathetic and interventionist: banned all sales and exports of wine for months at a time on end during severe Covid spells in South Africa.
10. Production of cheap and cheerful wines predominate volume wise, and may be more lucrative than production of quality wines: so 60% domestic consumption: eg CB, Cinsaut and Colombard (last mentioned for brandy). These aim not higher than about SA Rand 100 a bottle, so roughly less than Aust $ 10 per bottle.
11. Labour force still suffers huge issues, such as low wages and alcoholism, and eviction from farms where they lived.
12. Slow process to get more wine producers “of colour”, to use TA’s term.
13. Apartheid (rightly) put wine industry in the cross-hairs of criticism, scrutiny and boycotts (see eg report Human Rights Watch: “Ripe with Abuse”) – and this still continues, eg by SOMO in the Netherlands, targeting sales of SA wines to supermarket chains there.