Already losing R175m per week in lost exports, alcohol transport ban hits wine producers hard

South Africa’s wine industry is “deeply disappointed and shocked” by a new ban on the transport of alcohol, with some producers forced to cancel export shipments of wine due to be sent to ports on Friday, according to industry marketing body Wines of South Africa.  

The prohibition of the transport of alcohol, save for hand sanitizers and industrial use, was announced on Thursday by Minister for Cooperative Governance and Traditional Affairs, Nkosazana Dlamini-Zuma.

For the wine industry it is yet another setback as it struggles to deal with a steep drop in revenue caused by the prohibition of the sale of alcohol for the duration of the nationwide lockdown. 

When first announced by Cyril Ramaphosa in late March, the lockdown regulations included a ban on transporting liquor “between two points”, thus making the transport of wine to ports for export impossible. At the time, Rico Basson, managing director of vine producers’ organisation Vinpro, said this regulation contradicted earlier verbal commitments from national departments.  

After extensive lobbying by Vinpro and a task team of exporters and industry members, the wine industry was given permission by Transport Minister Fikile Mbalula at the end of the first week of April to transport its products to international ports and airports for export during the lockdown period. 

Dlamini-Zuma on Thursday announced amendments to the regulations governing the lockdown for the 14-day extension announced by Ramaphosa last week to slow the spread of the coronavirus. She said that the only alcohol that is allowed to be transported is that used for commercial purposes for sanitisers and related issues.”[The] liquor that we drink is not allowed to be transported, in the same way that it is not allowed to be sold. So that is what we are adding,” she said. 

Dlamini-Zuma indicated that SA’s economy would “incrementally” be opened up, and South Africans could expect the publication of new amendments almost every week.

‘Sudden Change’

“As an industry, we are deeply disappointed and shocked at this sudden change of direction, following extensive lobbying with various government agencies to relax the lockdown measures pertaining to the export and sale of alcohol,” said Maryna Calow, communications manager of Wines of South Africa, which markets SA’s wine exports. 

She estimates that the local wine industry is losing roughly R175 million in lost exports every week that the lockdown continues. Grape and wine production is one of the largest export-orientated agricultural value-chains, with a contribution of R49 billion to SA’s GDP.

Industry representatives have argued that the importance of being allowed to export lies not only in the foreign exchange it earns for the country, but also that local producers are trying to make up for a decline in wine exports of about 30{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} in 2019.

“We are pursuing legal routes and will continue to lobby with government despite this (latest) setback. The livelihood and long-term future of our industry is in grave danger and, therefore, we will explore all avenues in this regard,” said Calow.

“In addition to this, we will be losing listings in our export markets where it is reported that off-consumption sales of wine are at its highest as consumers are purchasing a lot of wine during their own lockdown periods. It could take as long as 10 years for those lost listings to recover again.” 

Calow noted that when lockdown regulations were initially announced by Police Minister Bheki Cele, harvesting and cellar processes were also forbidden This was later altered, and the 2020 harvest could be completed. Under the regulations, only processes that prevent the wastage of wine following the harvest are allowed. This includes pressing and fermentation. 

“For the week that the transport of finished export-ready wine was allowed to be taken to harbours and airports, there were some exports. However, we are aware of some producers who were loading their trucks on today (Friday) to be taken to the harbour and they had to drop everything,” said Calow.

Asked about a truck transporting wine that was hijacked recently, she explained that happens outside of lockdown conditions as well, so it was not necessarily unique to the current situation. 

Sending a message

Emile Joubert, a marketing consultant in the wine industry, warns that the transport ban is sending a message that SA is not a reliable trading partner and that the country does not support its very own wine industry.

“What kind of message is South Africa sending to the world about declaring exports of wine as illegal and leaving our international clients in the lurch?”

“SA is damaging its own reputation as well as that of the wine industry. This is the worst time possible, coming off a disastrous 2019 as far as exports are concerned,” he said.  

Tim Hutchinson CEO of DGB, which produces and markets Bellingham, Douglas Green, Boschendal, Brampton, Tall Horse, Franschhoek Cellars and The Old Road Wine Co, says exports are a big part of their business. The company’s sales and marketing offices based around the world distribute its wines in over sixty countries.

“As local producers and distributors I appreciate the rationale in the local market of prohibiting the sale of alcohol during the shutdown, but the government has erred badly by restricting exports as we are the only wine-producing country in the world who currently have restrictions on exports,” said Hutchinson.

“The South African economy desperately needs to increase export revenues so there is no logic to this decision. If the industry had been allowed to continue bottling and shipping, as an industry we could have protected our valuable listings in very competitive markets as in numerous countries with increased home consumption wine sales are buoyant and this would have had no detrimental impact on the presidents lockdown policies for South Africa, which we fully support.”

DGB’s executive management team had agreed to a 25{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} reduction in salary for three months, which will be donated to the Solidarity Fund set-up by the president to fight Covid-19. Hutchinson has personally taken a reduction of 50{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} in salary for donation to the fund. DGB’s international sales executives based around the world have on a voluntary basis offered a 20{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} salary sacrifice for this three month period.

According to Vinpro, nearly half of South Africa’s wine production is exported and a restriction on exports would have a severe effect on wine-related businesses, but most importantly the livelihood of close to 300 000 people employed by the wine industry value-chain.