'Unlikely that wine industry will make up the nearly R3bn it lost' due to SA lockdown
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Cape Town - It could take up to six months for the wine industry to recover from the nine-week lockdown prohibiting businesses from trading.
Agri SA chief executive Omri van Zyl said: “Wine farms rely on tourism and many of them have restaurants and tourist facilities, and this has been laying dormant for months.
"The margins are already very small and it means they could take extremely long to recover from this."
Because of the knock-on effect in the tourism industry, the profits of wine producers have taken a massive knock, Van Zyl added.
“I estimate that it could take six months for them to really get their foot off the ground, or longer, because the gradual easing of the lockdown could contribute to their recovery,” he said.
Last month, Vinpro said South Africa was the only wine-producing country not allowed to export under lockdown regulations. During the initial lockdown phase, farmers could harvest and produce wine for export.
However, government reversed this provision and banned the transportation of alcohol unless destined for the production of hand sanitisers or industrial use.
Vinpro said as many as 117 600 jobs have been lost in the alcohol industry, and 13% of the craft beer sector was in the process of closing, while the wine industry was in severe distress.
Vinpro managing director Rico Basson said: "The wine industry lost R200 million a week on exports during the five weeks of no exports and R300m in local sales per week, and these are just the direct costs. Indirect costs such as lost reputation internationally, listings, shelf space, relationships built over 30 years, etc, are incalculable. If the lockdown ends we will see a steady recovery in volume, but value will be a huge challenge and it is highly unlikely that the industry will make up the close to R3billion lost."
Basson also said the industry's recovery could take years: “A recent survey done by Vinpro indicates that for some businesses the tipping point has been reached
"The recovery will take a number of years and it's safe to say the industry will look vastly different from a structural perspective."
But the concerns of wine producers could deepen. The alcohol ban that was coupled with a six-week export freeze prompted concern buyers could turn to suppliers in countries abroad if the demand was not met. The risk of being delisted has been exacerbated by delays at ports.
Maryna Calow, spokesperson for Wines of South Africa, a non-profit that promotes wine exports, said wine producers were at risk of being de-listed by big retail markets.
“At the moment Cape Town harbour is operating on 50% capacity on a good day and on other days it’s just closed completely. Adding to that we have seen wine sitting in the harbour for months. We stand at risk of being de-listed if there’s no stock on the shelves,” she added.
Last week Mayco member for Economic Opportunities and Asset Management James Vos did a sector engagement with the wine industry.
“No doubt the measures in place to combat Covid-19 seriously impacted the wine industry in Cape Town, specifically as alcohol was banned and wine exports were brought to a halt. Early on in this crisis I established the tourism task team and we are well on our way in plans to assist industries intrinsically linked with travel and tourism on the way to recovery.
“For example, I have engaged my national counterparts to allow for the unrestricted reopening of the aviation sector so we can export our locally made goods across the world and tourism. This will also allow for the return of our tourists upon which much of our economy relies. Our approach will ensure we position Cape Town’s wine routes so we are top of mind for tourists, both local and international, can grow this sector and create more jobs,” Vos said.