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SA export ban raises fears of longer-term damage for industry

Published:  22 April, 2020

South Africa stands alone in the world as a country that has barred exports of wine, leading to grave concerns from both exporters and their importers over significant damage to the future of the industry.

In a statement, Wines of South Africa (WoSA), while acknowledging the “magnitude of the Covid-19 crisis” and the need to deal with containment in a fully responsible way, raised the concerns of the whole sector.

“We also need to position that the ban on the export of bulk and packaged wine, raises a significant risk towards the economic sustainability of this industry and, more importantly, the social-economic stability of the rural communities where more than 40,000 workers and their dependants are employed on grape farms and wineries,” it said.

“The effect of this, compounded with the fact that all local sales and distribution of wine and all other alcohol products is strictly prohibited, could see an industry which has been struggling financially for years, finally brought to its knees.”

Exports account for around 50% of total wine production, contributing in excess of R49 billion (£2.1bn) annually to domestic GDP, directly or indirectly supporting 290,000 jobs, with wine also the second largest agricultural export from South Africa.

The South African government initially made an exemption for wine exports on 7 April following intense lobbying by an Industry Exporters Task Team, but then made a dramatic a U-turn on 16 April, bringing all exports of wine to a halt.

"It is estimated that the five-week ban during the lockdown period could conservatively have a direct export revenue loss of more than R1 billion (FOB value), however the damage to reputation and consistent supply as well as future market opportunities could in fact be astronomical in the longer term with the loss of listings for many South African wines within the retail environment,” said WoSA.

Producer Carolyn Martin at Creation Wines added: “Exporting wine and selling on the internet provides no social distancing issues. It is simply destroying an important sector of our economy that provides jobs to a significant amount of people. There is no other country in the world that has this approach.”

In the UK, a key export market for South Africa, importers voiced similar concerns.

“Obviously the losses being incurred by the wineries during the lockdown will continue to mount, with both exports and the local market now closed for any sales of alcoholic beverages. This will impact on employment and the wine communities across South Africa,” said Kevin Wilson, buying controller at Kingsland Drinks.

“No wine being exported will mean that other countries that are allowed to continue to export their wines, will fill these gaps on the shelves of the retailers and wine shops, that are left vacant by the lack of availability of South African wines.”

Garreth Anderson, regional director Europe at DGB, added: “The ban on both the production and export of wine is very likely to force the closure of a number of businesses and the impact in the Cape will be significant, from both a social and an economic perspective. The viability of the industry is our biggest concern and at DGB we implore the South African government to reverse the current ban on the production and export of wine.

“In the short term retail shelf space will close due to unavailability but in the mid-long term I would not expect the trade to implement punitive measures against South Africa in response to the ban. Consumers will stay loyal to South African wine in the long-term if we can continue to produce and market high quality, value for money wines – but this is highly dependent upon having a viable industry.”

It is to be hoped that further lobbying being done by Vinpro and WoSA will mean that the regulation on wine exports will be reviewed, with the latter organisation pointing out that wine, in the global official nomenclature, is classified as an agricultural product.

“This is confirmed by our main competitor nations in export markets, such as Argentina, Chile, Australia, USA and New Zealand, who all classify wine as an agricultural food product and their governments are allowing exports to continue during the current crisis,” said WoSA’s Maryna Calow.

“Even countries such as Italy, which has one of the highest rate of infections and deaths from Covid-19, has allowed its wine industry to export as it is considered an essential service. South Africa is therefore the only wine producing country to experience such a stringent ban on exports at this time.”