Vinpro calls for growth-oriented policies for industry, economy to recover

5th November 2021

By: Schalk Burger

Creamer Media Senior Deputy Editor

     

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The South African wine industry is calling for conducive policy decisions that will create an enabling environment to achieve sustainable growth for South Africa and the wine industry.

“Key for South Africa, and the wine industry, emerging from the precarious position it finds itself in, is sustainable growth.

"Agriculture has been identified as one of the drivers of economic growth and job creation in South Africa and the wine industry plays an important role in this sector, contributing R55-billion to gross domestic product, or 1.1%, and supporting 269 096 employees in the total wine value chain,” says industry body Vinpro MD Rico Basson.

“The South African wine industry calls on government to join hands in rebuilding the sector towards a sustainable future by creating an enabling environment through sound policy decisions, infrastructure investment, stricter enforcement with regard to illicit trade, as well as financial support and relief.”

The wine industry is currently faced with its own unique obstacles owing to an economic downturn and, more notably, the significant impact of alcohol restrictions since the start of the pandemic.

Although the industry focuses on recovering and rebuilding, this process might take longer than five years and will require short, medium and longer term interventions, Basson says.

INFRASTRUCTURE RELIANCE
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,” Basson points out.

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, Netherlands, the US and Sweden are the top five markets for South African wine, with a total export value of close to R10-billion, 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. 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,” Basson says.

“We 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,” he adds.

Meanwhile, 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 the illicit alcohol trade and create fair and open competition in the domestic market by enforcing the laws that already exist.”

POLICIES
The wine industry is different from other alcohol industries, not only owing 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 and the industry exports 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 the National Treasury for wine-related products and an annual excise adjustment of below the consumer price inflation index, as the excise rate is already above the target incidence rate for wine and brandy,” Basson says.

“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,” he adds.

“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,” Basson says.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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