SAWIS has released its latest internal review of the South African wine industry. Arnold Kirby reviews the statistics and analyses the sectors challenges ahead.

South African wine exports over the past five years have grown beyond all expectations, according to the latest study by the South African Wine Industry Information and Systems (SAWIS).

In a study, based on 1999 figures, it was found that the total turnover of the wine and associated alcoholic based beverage industry amounted to R7369.8m, of which R1595.9m was exported.

The demand for red wine has proved problematic

Exports between 1997 and 1999 performed spectacularly, increasing by 29% in volume terms, while there was a growth of 133% in value during this period. Wine-based imports amounted to R500.6m or 8.6 % of domestic sales.

However, compared to 1997 figures, the study also indicated that the industry has been under severe pressure. This has been due to the small overall increase in volumes and steep increases in input costs, which are not being fully compensated for by final product price.

With a decline of 5.7 % in the domestic volumes of wine and wine-based alcoholic beverage consumption, it could be concluded that the wine industry finds itself under pressure to remain profitable and competitive.

On top of this the industry has been faced with constantly changing market conditions domestically and abroad. In particular the demand for red wine has proved problematic. And although it has resulted in a shift towards more red varietal plantings, these had stood at only 26% of area under vine.

Wine Welfare

Western Cape: Drostdy

The study determined that the wine industry contributes R14,557m to the annual GDP of the country. With its roots firmly embedded in the Western Cape, an estimated 60% of the industry's activities have an impact on the region's economy. That amounted to about 9.7 % of the Western Cape's total Gross Geographical Product (GGP) in 1999.

Analysts said a rough estimate indicated that of the R14,557m GDP contributions, about R8,700m would remain in the Western Cape.

The wine industry also provided employment opportunities, directly and indirectly, for a total of 208,298 people in various sectors ranging from primary agriculture to cellars, manufacturing, wholesale and retail, as well as tourism. Of these, 159,952 people were involved with the different facets relating to the industry and 48,346 were tourism related.

The report found that a total household income of R9763.7m was generated by the wine and tourism industries. Of this, 18%, or R1797.7m went to low-income households. This was slightly lower than the national average of 19.2 % and again pointed to the fact that the winemaking industry was slightly more capital intensive than other agricultural-based industries. Analysts warned, however, that they were forced to make certain assumptions that might have affected the quality of the results of these calculations.

KWV range

The South African wine industry has undergone major changes over the past ten years. This was reflected by the changes in its economic structure and institutional framework. These included KWV relinquishing its statutory obligations when it converted to a company and the formation of the Wine Industry Trust.

South Africa's re-introduction into the world markets has brought huge opportunities, as reflected by the increase in exports, but on the other hand it has also brought pressure to bear on its competitiveness, both locally and overseas.

The wine industry's size and structure in terms of forward and backward linkages is substantial. And, its investment, employment and income generating activities is of crucial importance to South Africa's economic well-being. This is especially true of the contribution it makes to the economic existence and well-being of lower income rural groups, demonstrating its vital social and developmental role in rural South Africa.

Fortunately, the industry has acknowledged the challenges that need to be addressed in a co-ordinated manner, to ensure its long-term financial viability. It will have to become more market-driven and will need to ensure its information requirements are met on a more regular basis.