SOUTH AFRICA – South Africa’s wine body, Vinpro, has raised red flags pertaining to the continued restrictions imposed on domestic wine sales, which is deemed to potentially cripple most businesses within the sector.
According to the non-profit organization representing 2 600 businesses, the South African wine industry is at a tipping point as many businesses, particularly small companies and those under black ownership, face potential closure in the next three to 12 months.
This is according to the Impact of Covid-19 on the Wine Value-Chain Survey that Vinpro conducted early in July 2021 among wine grape producers, wineries and other wine-related businesses.
The study indicated that 58% of the 549 respondents would have to make drastic changes over the next year to be able to overcome the current challenges related to Covid-19, and 22% would in all probability not be able to survive at all.
More alarming was that 46 percent of black-owned brands and farms believed that their businesses would not be able to survive the next year and 50% would need to make drastic changes.
The study further indicated that the local market is of particular importance to smaller wineries and black-owned brands, which are heavily reliant on sales channels such as their tasting rooms, hospitality offerings and e-commerce, Vinpro emphasises.
Around two-thirds of all respondents’ revenue was generated from domestic wine sales, compared to 30% exports and 4% from other sources.
Black-owned brands and farms receive 64% of their income from local sales, 27% from exports and 9% from other sources.
Vinpro Managing Director Rico Basson said, “It’s especially the small and micro enterprises that do not have sufficient bridging finance to sustain them through the current and continued restrictions.
“Many wine businesses are at the edge of a cliff, and the livelihoods of thousands of employees are being endangered in the process.
Wine industry cries out over lack of support
South Africa is the only country in which liquor sales have been banned with no financial assistance from national government, despite repeated requests from the wine industry, hinted Vinpro.
“Instead, government chooses to close our industry without reliance on empirical evidence to back their decisions and seems apathetic towards its citizens’ plight for survival,” Basson lamented.
Vinpro and its partners in wine, tourism and agriculture are reported to have submitted a number of funding proposals over the past year to various government departments to stabilise an industry that has already incurred financial losses of more than R8 billion.
It said the Western Cape Department of Agriculture needed to be commended on heeding the call and for funding two initiatives: a R12-million wine tourism worker support stipend and a R13.5m producer and brand-owner protection support grant.
Wine industry weary of ban extension
Basson said the fact that the national government chose not to take a differentiated approach to decisions with regard to the management of Covid-19, meant that the ban could be extended for the next four to five weeks after the current two-week ban set to end on July 11.
He further highlighted many wine businesses would go under, or would have to lay off staff, because they would not have sufficient cash-flow to fund their payroll.
According to the survey, participants already had to lay off a significant number of workers since the start of the lockdown in March last year, had to take in less seasonal labour or were unable to fill new positions.
Many who have managed to keep staff on were unable to pay their full salaries, which also had a negative effect on the livelihoods of the families dependent on the industry.
If the ban continued for another six weeks after July 11, respondents indicated that they would be able to fund only 51 percent of their normal monthly payroll.
Compared to this, black-owned brands and farms would be able to fund only 31 percent of their payroll, leaving more than two-thirds of their staff without an income.
In the survey, 38% of all respondents indicated that there was a high probability that their business would close down if the local wine sales ban continued for six weeks after July 11. About 68% of black-owned brands and farms expect they will have to close down.