A force for good? Markets, cellars and labour in the South African wine industry after apartheid

Abstract

This paper argues that on balance, deregulation and the exposure to overseas markets has been beneficial to the South African wine industry, resulting in strong growth, increased employment and much improved international competitiveness. However, the paper also draws attention to the fact that not everybody has benefited in equal measure from the process of upgrading, modernisation and internationalisation. Since the start of the transition in the mid 1990s, a number of growers have left the industry and for many workers employment has become less secure.

[Une dynamique pour le bien? Les marchès, les caves et la main-d'œuvre dans l'industrie du vin sud-africain aprés l'apartheid]. Cet article soutient que dans l'ensemble, la déréglementation et l'ouverture aux marchés d'outre-mer ont été bénéfiques pour l'industrie du vin sud africain, ce qui a entrainé une forte croissance, favorisé l'augmentation de l'emploi et une compétitivité internationale bien améliorée. Toutefois, le document attire également l'attention sur le fait que tout le monde n'a pas à part égale profité de ce processus d'amélioration, de modernisation et d'internationalisation. Depuis le début de la transition au milieu des années 1990, un certain nombre de producteurs ont quitté l'industrie car pour de nombreux actifs, le monde du travail était devenu moins certain.

Mots-clés : les marchès ; le vin ; l'Afrique du Sud

Keywords:

• markets
• wine
• South Africa

Acknowledgements

This paper draws substantially on two previous papers published jointly with two different colleagues: Stefano Ponte and Joachim Ewert, ‘Which way is “up” in upgrading? Trajectories of change in the value chain for South African wine’, World Development 37, no. 10 (2009): 1637–1650; and Joachim Ewert and Andries du Toit, ‘A deepening divide in the countryside: restructuring and rural livelihoods in the South African wine industry’, Journal of Southern African Studies 31, no. 2 (2005): 315–332. The vital contribution of both is hereby gratefully acknowledged.

Notes

Translates as Co-operative Winegrowers' Association of South Africa.

See Shaw (2001) for a concise political economy of the wine industry in South Africa. For a much more detailed exposition of its history, see Williams and Vink (1999) and Vink, Williams, and Kirsten (2004).

Although sanctions did play a part in curbing exports, their effect is generally exaggerated.

Much of the red-wine glut can be explained by three successive high-quality, big-volume vintages in Australia. In 1998, there were under 100,000 ha under vines in Australia; by 2006, the area had increased to 167,000 ha. In 2006, Australia left 100,000 tons of unharvested grapes in its vineyards, more than the equivalent of South Africa's domestic wine market (Fridjhon 2006).

According to studies of profitability among co-operative cellars carried out by PriceWaterhouseCoopers, net profit per ton went from R52 in 2004 to R29 in 2005. In 2006, they touched rock bottom at R5, before recovering partially to R31 in 2007; PriceWaterhouseCoopers, The SA wine industry – benchmarking of producer cellars, 2007 and 2008).

Pers. comm., Debbie Wait, SAWIS, 14 February 2012.

Cabernet Sauvignon, Shiraz, Merlot, Pinotage, Chardonnay and Sauvignon Blanc.

Nevertheless, producing better quality wine beyond ‘basic’ remains a challenge for most co-ops, because management can only advise and create financial incentives. In the final analysis however, it is up to the individual farmer to take the strategic decision. In this regard, research has shown that many growers do not attempt to achieve Class A grapes, because the price differential is not worth the extra costs, labour and otherwise.

Although this may include small growers who had a ‘quota’, but produced relatively little. KWV quotas set a maximum, but not a minimum.

As new red wine plantings started to come into production cellars, including co-operatives, started to invest in new red-winemaking technology, especially from 2000 onwards. Instead sharing these new production facilities, every co-operative installed its own, visibly increasing their liabilities.

Comtrade reports both value and volume of imports into the EU only for 2006 and 2007, not for previous years. Breakdowns on unit-price exports from South Africa to the EU are not available either from SAWIS or from Eurostat.

The drinks business: South Africa report, 2006.

For example, a relatively small cellar, Vlottenburg Co-operative (now known as ‘Stellenbosch Hills’), consisting of only 15 members, invested approximately R20 million between the mid 1990s and mid 2000s.

The Basic Conditions of Employment Act had already been extended to agriculture in 1993, a year before the first democratic elections. It laid down, amongst other things, the maximum length of the working day/week, overtime, sick leave and holiday pay.