South African wine industry: Masters of our own destruction?

Monday, 7 March, 2022
Petri de Beer
A look at what could be the reasons for the friction the South African wine industry is experiencing in working with the government and having our concerns and problems addressed in a meaningful way.

After numerous bans on alcohol sales and restrictions on it along with the increase in the tax on wine, I am once again forced to take stock of what is left to save.

I am in no way minimising the impact of Covid-19 on other industries or the South African economy.

But to me, it seems that the South African wine industry has taken a disproportionate brunt of the economic impact of this pandemic and the restrictions that followed to curb the spread.

I ask myself: why would the government have implemented such broad, ham-fisted measures, causing irreparable damage to small and medium-sized enterprises (SMEs)? SMEs that the same government loudly profess as the lifeblood of the economy come election time.

Initially I thought there is only one simple answer to this complicated question – we do not matter to them in the greater scale of things. But a simple answer will not suffice for a complicated, emotionally-loaded question. Hence, I was forced to take closer look at our own industry. It’s time for some much-needed introspection.

Could we, the South African wine industry, be the masters of our own destruction?

Does the government not care about us? And if so, why? Could we be the masters of our own destruction on some shape or form?

South African wine production has traditionally been driven by exports and is quite resilient to domestic GDP changes. It has been shown that there is an incongruous relationship between the performance of the South African wine industry and the real GDP per capita of South Africa.

Simply meaning a lot of the money does not siphon back into the wider domestic economy. Are we seen as the rich brother, gallivanting abroad while our brothers and sisters suffer in South Africa? To answer this question, we need to go back in time.

The alcohol industry didn’t escape the oppressive and racist laws implemented throughout South Africa’s troubled history.

The implementation of the 1928 liquor act made it illegal for non-white citizens to consume so-called European alcohol which included liquor, clear beer, and wine. The 1962 amendment to the liquor act allowed persons of color to consume these alcoholic beverages. It should be noted that this decision was a purely economic one as the government of the day saw the black community as a large untapped pool of tax money that could be gained through alcohol tax.

(I strongly advise the reader to read “The First Decade of 'European Beer' in Apartheid South Africa: The State, the Brewers and the Drinking Public, 1962-72 ” by Anne Merger just to see the absolute ridiculousness of this whole debacle.)

One of the most important caveats in this new amendment was that people of colour could now be consumers, but not producers or sellers of wine or liquour. The coloured and black communities were left as outsiders to the industry, forming no cultural connection with wine or the industry, seeing it as part of the white European culture. Enter the infamous “Dop System”.

With the Dop System, also known as the Tot System, farm workers would receive payment with a daily measure of cheap wine as a fringe benefit. This practice increased and exacerbated alcoholism among farm workers. It resulted in widespread social damage among communities we still see today. Although the practice was officially banned in 1960 it was rarely enforced and there were still reports of this practice in the late 1990s.

To this day we are dealing with the socio-economic aftermath of this system, including the terrible fetal alcohol syndrome statistics South Africa has.

South Africa is widely criticized for income inequality, the clear divide between the haves and the have-nots. The wine industry is no exception to this as it is the most capital-intensive agricultural industry with vast amounts of money needed to build and maintain the infrastructure needed to farm wine grapes and make wine.

Baring this in mind, by promoting wine as a luxury product and heavily using expensive cellars and manor houses to show off the wine’s exclusivity, we are not doing ourselves and our industry any favours.

Limitations in the wine industry hampering change

Wine farming is very labour-intensive and uses large numbers of low skilled workers. The sharp increase in labour costs in the last decade has seen the casualization of large work forces on wine farms and the extensive use of labour brokers in the industry. We might see it as a necessary evil, but again we are not doing ourselves any favours as labour brokers are seen in a very negative light.

There are also contributing factors to the government’s seemingly lack understanding for our struggle, that our industry has little to no control over.

We are geographically limited. Wine grapes can only be grown in a small area of South Africa. This has the unfortunate effect of limiting the areas that its economic expansion can influence. Unfortunately for the industry it is situated in a province that is not controlled by the powers that be and as such will have minimal negative effect on their standing should the local economy be negatively affected by legislation.

Because of the amount of tax coming from the sale of alcohol it is one of the most regulated industries in the country. You are not able to produce, move, adjust, distribute, sell, or export alcohol without informing regulatory agency.

This iron fist is why the government restricted or banned the sale of alcohol during these trying times. It is an easier way of enforcing social control. Easier than deploying under resourced and over stretched police out to try and enforce other more targeted social control legislation that could be just as effective but have a less disruptive influence on the lives of ordinary South Africans.

Are you rolling your eyes and thinking: “But the wine industry contributes almost R55 billion to the national GDP and provides jobs to almost 300 000 people”?

You are not wrong, but you might be forgetting that the currency of politics are votes, not Rands and jobs. Votes are cast by humans, determined by social interaction and emotions. Voters don’t necessarily care about or understand the numbers... But they do feel the emotional turmoil of a pandemic and see restrictions as necessary to save lives.

Final thoughts and lessons

To summarize: Is it wrong to think that our industry does not matter to the government? Not entirely.

Damage to our industry does not translate to damage to the government on a political level. We will continue to be seen as low hanging fruit to be picked by a government who is trying to hide its failures to fulfill its mandate to the people of South Africa.

Let’s be honest, there is not much else they can do. They don’t have the capacity to enforce measures that protects all the people and all the industries. With our history, we made ourselves easy targets.

I do not want to end this article on a negative note and leave the reader with the impression that I am on a witch hunt of my own industry. I have dedicated my whole life to this industry and will continue to do so.

The wine industry is at the forefront of agricultural processing showing how an agricultural commodity can be processed locally and enormous amounts of value added to it. It has the potential to add a lot more value to local communities. Plus, it is very capable of attracting large amounts of foreign capital to South Africa.

Maybe we don’t even realize our own potential. All we need to do now is to embrace and acknowledge our faults, learn from history, continue to fight to change policy and public perception, and grow.

Petri de Beer

Winemaker, agricultural economist, farmer, and writer. Petri de Beer is an award-winning winemaker based in Stellenbosch. Having finished his Masters degree in Wine Chemistry at Stellenbosch University, he is currently broadening his repertoire with a Masters degree in Agricultural Economics focussing on the South African wine industry and writing for wine.co.za about topical issues affecting the industry.