The report noted that small businesses within the wine industry had suffered the most, while bigger businesses were the least affected. Picture Reuters/Mike Hutchings
The report noted that small businesses within the wine industry had suffered the most, while bigger businesses were the least affected. Picture Reuters/Mike Hutchings

Western Cape wine industry feels brunt of alcohol bans, report shows

By Robin-Lee Francke Time of article published Jul 27, 2021

Share this article:

Cape Town - While the move to alert level 3 of the Covid-19 lockdown by President Cyril Ramaphosa, which allows for the sale of alcohol, has been welcomed, the Western Cape’s wine industry has suffered severely.

In a statement released on Tuesday, MEC for Agriculture Dr Ivan Meyer said the industry has been under immense pressure, and a report commissioned by his department on the economic impact of government restrictions on the alcohol industry confirmed this.

The report, titled “Economic Impact of Government Restrictions on Domestic and International Trade of Alcohol”, involved research conducted by the company Optimal Agricultural Business Systems (OABS), with the modelling by the Bureau for Food and Agricultural Policy (BFAP).

The report noted that small businesses within the wine industry had suffered the most, while bigger businesses were the least affected by the four bans on alcohol sales, with the latest alcohol sales ban being implemented on June 27.

It stated that 30% of craft breweries closed their doors, while 90% of those still available were at risk.

Harvest is down by 18% compared with the 2019/20 harvest, leading to a 77% decline in the net profit made by wine farms.

The implication is that net average profit is R33 160 per hectare, below the level of long-term sustainability.

At farm level, gross margins have declined by more than 50% to as low as R3 500 per hectare during 2020.

The current restrictions will cut R3.5 billion from the gross value of production by 2027.

The report found that lower prices will further reduce producer margins during 2021 and as a result gross margins will decline by close to 70% from the baseline.

It also found that an estimated 165 000 jobs were lost and a further restriction will only increase the numbers.

Investments valued at R6 billion were suspended, the GDP loss amounted to R51.9 billion and R29.3 billion was lost in tax revenue.

Illicit trade in alcohol increased to 22% of sales.

Domestic wine consumption declined by 15% and exports by 11%.

“The above figures reflect the national impact of the blanket ban on liquor sales. It is worth noting that 95% of the wine industry is located in the Western Cape, and so it was extremely devastating for our provincial economy.

“The relaxation of restrictions means that the industry can now rebuild a crucial sector in the Western Cape and save jobs,” Meyer said.

African News Agency (ANA)

Share this article: