Wine industry says it's 'at the edge of a cliff'

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 in the next three to 12 months due to the recurring and now fifth domestic wine sales restrictions.

This is according to a survey by Vinpro, which represents about 2,600 wine and grape producers.

“According to the Impact of Covid-19 on the Wine Value-Chain Survey that Vinpro conducted early in July 2021 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 challenges related to Covid-19, and 22% will in all probability not be able to survive at all. Even more alarming is 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,” the organisation said on Thursday.

According to the survey, participants already had to lay off a significant number of workers since the start of the lockdown in March 2020, had to take in less seasonal labour or were unable to fill new positions. “Many who have managed to keep staff on, were unable to pay their full salaries.”

“Should the ban continue for another six weeks after July 11 2021, respondents in the survey indicated that they would only be able to fund 51% of their normal monthly payroll. Compared to this, black-owned brands and farms will only be able to fund 31% of their payroll, leaving more than two thirds of their staff without an income.”

Vinpro MD Rico Basson said there was a lack of assistance from national government.

“Many wine businesses are at the edge of a cliff and the livelihoods of thousands of employees are being endangered in the process. South Africa is the only country in which liquor sales have been banned with no financial assistance from national government, despite repeated requests from the wine industry. Instead, government chooses to close our industry without reliance on empirical evidence to back their decisions and seem apathetic towards its citizens’ plight for survival,” he said.

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 R8bn.

“The Western Cape department of agriculture need to be commended in heeding the call and for funding two initiatives, namely a R12m Wine Tourism Worker Support Stipend (WTWSS) and a R13.5m Producer and Brand Owner Protection Support Grant,” Basson continued.

“However, that national government chooses not to take a differentiated approach to decisions with regard to the management of Covid-19 means that the current ban could be extended for the next four to five weeks after the current two-week ban is set to end on July 11 2021. Many wine businesses would go under, or would have to lay off staff as they won’t have sufficient cash flow to fund their payroll,” Basson said.

He said Covid-19 was endangering both the lives and livelihoods of South Africans.

“It is not viable to cut off an entire industry’s lifeline every time there is a spike in infections, in part due to citizens not being disciplined, as well as delays in the vaccine rollout. Urgent intervention is needed by government to ensure proper policing, and to accelerate the vaccination programme.

“The liquor ban is not only about whether people are allowed to enjoy their favourite drink or not. It’s also about keeping businesses afloat that put food on the table. As long as government continues denying these businesses’ their income, while not providing any financial relief, we will see many people not only suffering from Covid-19, but also from poverty.

“This irrational cycle needs to stop. 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,” Basson said. 

Wendy Petersen, operations manager at the South African Wine Industry Transformation Unit, said black-owned brands and farms had worked hard over the years to stay abreast and try to be sustainable in an ever-challenging industry.

“The recent ban on alcohol sales has deteriorated this situation and we are unsure if these enterprises will survive the next month. This is devastating to witness as livelihoods of people and families are at risk and the situation is out of their control.”

Daphné Neethling, owner of PaardenKloof, said her wine farm was a “100% black and female-owned wine farm which operates within the entire wine industry value-chain”.

“Almost 99% of our sales and income is 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 cash flow for more than three weeks. We employ 35 people across our organisation, and will have to reduce staff to between 5 to 8 people and go into care and maintenance from August 1 2021. Given our fixed operational costs, we will permanently shut down all components of the business from September 1 2021 if the lockdown continues beyond July 11 2021.”

“We are 100% certain that our consumers, which are middle to high LSM consumers, are responsible alcohol users and are not the subsector of the alcohol industry that cause casualty ward hospital beds from being overrun. In this regard we believe that the lockdown liquor policy has been wholly inappropriate and lazy, as it has not dissected the finer nuances of consumption patterns and consumer behaviour,” said Neethling.

Meanwhile the industry's court application against government’s 14-day lockdown level 4 booze ban was postponed again this week.

The case was due to be heard in the Western Cape High Court on Wednesday after it was postponed on July 2.

However, there were no judges available to hear the urgent interim interdict application.

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