Despite its beautiful surroundings and enormous potential for fine wine, South Africa's high profile political problems have been an obstacle to attracting international investment. Chris Brook-Carter reports

The original properties of the Vergelegen winery in South Africa's Cape, a quintessential Victorian colonial estate which has played host to dignitaries such as Bill Clinton, are set among gardens of fairytale proportions. Sitting in its tranquil surroundings, the turmoil that currently grips this country as it struggles with its new identity is at worst a distant memory.

Vergelegen
Somerset West

The dichotomy of the two South Africas this presents can be paralleled against the state of the South African wine industry, as it too struggles to establish itself in the international community. Vergelegen, after investment from the mining conglomerate Anglo-American, is testament to what can be achieved if the right money is there. A gleaming new winery and plantings of international varieties have produced wines of structure, ripeness and complexity.

But unfortunately Vergelegen's success so far is conspicuous because it is set against an industry that as one insider puts it is "playing a game of catch-up".

This is not to suggest that there are not good wines on the market, and for all South Africa's problems it must be remembered that it has only been competing in the "real world" since 1994 - it has not done all that badly in six years.

However, to be taken seriously it needs to be judged by international standards and there is still too much poor wine sloshing around. Furthermore, what good wine is available is not made in significant enough volumes by enough producers to make a concerted international challenge.


"Only 10%-20% of the growers really know what they are doing the rest are just farmers"

Apartheid has a lot to answer for. Apart from the obvious social consequences, South Africa was excluded from all the benefits of international competition. One foreign winemaker now working at one of South Africa's leading wineries told just-drinks.com that while he believed the wineries in South Africa were only five years behind the rest of the world, in the vineyards the country was up to 15 years adrift.

"The influences of winemaking here are too insular. We rely too heavily on European wine techniques that are for an European climate. We are still teaching German trellising techniques at the University, you don't do this in a 40 degree climate," he says.

Many growers are only local farmers with little or no education. Trying to get them to change techniques that have paid bills in past years is proving tough.

Ben Radford is the winemaker at Winecorp, a group of wineries with considerable investment which includes the brand Longridge. He says: "Only 10%-20% of the growers really know what they are doing the rest are just farmers. There is development in equipment with some of the best in the world. But the main concern is the planting material and management of the vineyards - it's quite scary."

Stellenbosch Winelands
From the Helderberg

There are, however, signs of change. Radford explains: "Two years ago I was still rejecting grapes by the truck load. We are now buying grapes by the hectare rather than by the tonne to get growers to lower yields. Even so I have had to cut the growers I use from eight to four in two years as the others would not work the way I wanted."

But real change will not take place without investment. Lynne Sherriff, a consultant with Wines of South Africa believes: "If you look at most other international wine industries and compare them with South Africa, I think there is a fair bit of overseas investment. Most industries would want to maintain a fair bit of individuality - I don't think we are hugely out."

But Sherriff does concede money is needed in the vineyards. "We have had a huge number of problems with virus-infected material, a lot of that that needs replanting and that is where investment is most needed."

Others though are less optimistic about the state of industry finance. Dan Tooth, MD of Vergelegen, says: "We need international competition and the international market, the only thing that will do that is international investment."


"There is not enough of a commitment. In South Africa a lot of people see it [the wine industry] as a lifestyle investment, where as in Australia people regard it as a financial investment."

The worry about the state of the vineyards is a common theme. Gerrie Wagener of Afrika Vineyards says: "Around 80% of total production is still white and a large percentage is made of inferior varieties. The industry needs investment to replant to better varieties and develop better areas."

On top of the red/white imbalance, a third of the harvest goes to distillation and another third ends up in bag-in-the-box. Furthermore, Chenin Blanc remains the most planted variety and as one winemaker put it "no-one is going to take that seriously".

Plantings have improved as Sherriff explains: "The South Africans have identified what they call the big six varietals: Sauvignon Blanc; Chardonnay; Shiraz; Pinotage; Merlot and Cabernet, with a healthy amount of Chenin Blanc thrown in. If you look at plantings in 1998, 63% belonged in this category."

But while South Africa lies something like ninth or tenth in terms of plantings, Australia still outstrips it four times in terms of quality wine growing vines.

Identifying a lack of funds as the problem is one thing, finding a solution to it is another. Tooth says: "There is not enough of a commitment. In South Africa a lot of people see it [the wine industry] as a lifestyle investment, where as in Australia people regard it as a financial investment."

Private enterprise needed

Unlike the EU, the South African government is unlikely to help by handing out grants to grub up. "There is unlikely to be government aid as the wine industry is seen as a bastion of the last regime - ie Afrikaner dominated with loads of cash - they don't want to be associated with the wine industry," says one producer. But, Sherriff rightly points out that the government has much more pressing issues at present to spend limited funds on, including hospitals, education and housing.

Lanzarac
Stellenbosch
Investment must therefore come from private enterprise. "Money will come from within South Africa but also more and more from abroad as we can convince potential investors that Africa is not all bad news," says Wagener. "But its difficult as South Africa is seen as a 'province' of Africa. Political instability, a weak economy, a weak currency, crime and the Zimbabwean situation are all major problems in attracting investors."

As one producer explained: "When the board of a company based abroad is confronted with this situation or the 'surer things' of Chile and Argentina, for example, it becomes an easy decision to make about where to invest."

However, as Wagener says: "Nowhere in the world is land and the potential to produce outstanding wines available at such low prices. I am aware of several deals with overseas investors."

Further good news lies in the Vision 20/20 plan, South Africa's equivalent of the Australian Vision 2025. The fragmented nature of the South African industry will make implementation of 20/20 tough, but Sherriff is keen to point out that there is a spirit of growing cooperation among the younger generations of producers.

However, Tooth sums it up when he says: "The real test will be when the 20/20 conclusion is reached - but the fundamental issue is investment."

 


SOURCE: ACNielsen

 

SOURCE: ACNielsen