A winemaker shows his winery in the Swartland region of South Africa, November 28, 2014. JENNIFER BRUCE/AFP/Getty Images
A report released on Tuesday describes how South Africa’s wine industry has increased its contribution to the country’s GDP and has created more domestic jobs. According to South African Wine Industry Information and Systems (Sawis), which examined the period from 2008-2013, domestic demand has modestly increased and exports have done extremely well even in the depressed global economic environment.
South Africa is the world’s eighth-largest wine exporter by volume, and in 2013 the wine industry accounted for 1.2% of GDP, sustaining nearly 290,000 direct and indirect jobs. It contributed $3.18 billion to GDP, a 37.8% increase from 2008, and almost 14,000 jobs were added over the same time period. Measured in value, from 2008 to 2013 domestic wine sales increased 38.4% and export sales doubled.
57.4% of South Africa’s wine production was exported in 2013, almost entirely to affluent developed countries. The exchange rate for the South African rand has been volatile but has generally trended downward, helping South African wine to be more affordable for European and American importers. South African wine producers look forward to a new E.U. trade agreement that, from 2016 onward, will raise the bloc’s duty-free quota for South African wines from the present 50 million liters to 110 million liters per year.
“It is our hope that if we can continue the momentum, we can look forward to expediting free trade agreements in other key export markets, notably in Asia, where some of our competitors, such as Chile, Australia and New Zealand, already have a significant head start,” said Yvette van der Merwe, executive manager of Sawis.
However, South African wineries are overlooking opportunities elsewhere in Africa, which already has a huge demand for alcoholic beverages. The African market will only increase as the population grows and becomes more affluent over the decades to come. For example, in 2013 Shoprite’s CEO Whitey Basson said that its seven stores in Nigeria sold more of the French-produced Moët & Chandon champagne than all of the group’s liquor stores in South Africa combined. While France is a major wine exporter to the continent, South African wine reaches just a tiny portion of the external African market. On January 22, Craig Irving, CEO of Consumer Insight Agency, said a “phenomenal amount” of alcohol is sold on the continent, and exclaimed that all the wine drunk in Kinshasa is French.
Irving called on South African winemakers to expand their presence in the informal outlets where nearly all African consumers purchase alcohol. “Unilever does it, Diageo does it, Heineken does it, Johnson & Johnson does it. So why can’t the South African wine industry do it? And why do you allow the French wine industry to beat you to the African continent?” he asked. The wines have to be adapted to the distinct cultures, but labels, packaging, and marketing can be adjusted fairly easily.
South Africa’s geographical proximity is an advantage that would reduce shipping costs to other African markets relative to France and other top exporters, helping to offset the lower sales prices there. An all-of-the-above strategy for South Africa’s wine exports will best assure the industry’s future growth.
