Never has the local wine industry been in greater need of a toast to its good health. And never before has the South African Treasury been in greater need of the foreign currency it could be earning for the country during this State of Disaster.
In a presentation to Parliament’s Finance and Appropriations Committee on 30 April, the SARS Commissioner, Edward Kieswetter announced that in the first 29 days of April, it had lost just under R300 million in revenue from the government’s inexplicable ban on the export of wine during its hard lockdown. When the export of beer, spirits and cigarettes are added to the mix, R1.7billion has been sacrificed – in one month.
Given the fact that no other country has clamped down on either the consumption or production of alcohol during the world-wide fight against COVID-19, this capricious decision by the South African government defies comprehension. Furthermore, Its tendency to flip-flop continuously between yes you can, no you can’t, has made it impossible for wine producers to guarantee foreign clients on- time delivery.
And, as if that weren’t bad enough, during the past five weeks the sale and transportation of wine to the local market has been completely prohibited. Indeed, even before lockdown came into effect, there was a period when no alcohol could be sold or consumed after 18:00, which started the downhill slide for producers. In a region where the wine industry is a major contributor to its prosperity, providing permanent employment to hundreds of people and casual employment to thousands more, down on the ground, this has had a devastating effect on individual lives.
We spoke to a number of local wine producers to find out what impact it has had on them and their employees; we also wanted to know how the lifting of the ban on exports from this week on would affect them, and how they viewed the future. Some of those we spoke to have been in the business for many years, while some are relative newcomers; some are major exporters, some focus mainly on the local market.
One thing they all had in common, though, was the understanding that it was going to take a lot of courage and a harder, smarter work ethic than ever before to survive this catastrophe. It would mean thinking out of the box, sometimes reinventing their business strategy. Carolyn Martin of Creation Wines put it this way: “We are in the cocoon stage of a complete metamorphosis. When this is all over, there will be a new Creation.”
Market share between export and internal consumption varied between 50/50 to 20/80%. Now that the export ban has been lifted, both Sebastian Beaumont of Beaumont Wines and Bevan Newton Johnson of Newton Johnson Wine Estate will be dispatching their first consignment of export wines to Cape Town harbour on Monday 4 May. As Bevan says, the greatest challenge may well be to get through whatever roadblocks they may encounter on the way. “We’ve got all the necessary permits, of course, but who knows whether the police manning the road blocks have been informed of the new regulations?” The other factor is whether the port, which has been operating on a reduced staff complement, will be able to handle the increased workload.
Sebastian, Bevan and Carolyn all pay tribute to the loyalty of their overseas clients, with some of whom they have been doing business for many years. Fortunately, their countries have also experienced pandemic-related challenges and they are prepared to cut them a bit of slack, but, as Carolyn says, they too have a supply line to satisfy and if the chain is broken, the system collapses. In some cases, non-delivery from South Africa has resulted in a producer from another country being brought in to fill the gap. Sebastian agrees and says that countries like Sweden and Canada, where wine exports are controlled by government, products are purchased on tender and if suppliers default on deliveries, they are automatically removed from the procurement list.
Because most of their clients pay on a 60–90 day basis, they are still receiving payment for orders delivered before lockdown, but Sebastian estimates that the real cash flow crunch for many will come round about June/July this year as a result of no sales having taken place during the past five weeks.
The clampdown on local sales has delivered to the industry its deadliest body blow, however. Since most of the producers have their own tasting rooms and restaurants, which rely to a considerable extent on local and international tourism, it has been a triple whammy for them. Not only can’t they sell to outside restaurants and retail outlets, but they can’t trade from their own in-house facilities either, and even if they could, where would their customers come from?
They are still able to market their products online, but they cannot deliver orders. Most producers are offering discounts to private online buyers, especially if they are willing to pay upfront, with delivery after the ban is lifted. This is the aspect that Carolyn finds most difficult to accept. “It simply makes no sense to me,” she says, “and for some, it could be the difference between survival and closure.”
What most of them find particularly stressful is the uncertainty of the situation, the chopping and changing of regulations by government and the constantly moving ground beneath their feet. Bernhard Heyns of Gabriëlskloof is expecting no meaningful changes in under a year, with 18 months the more likely scenario. “I’m generally optimistic, but it’s going to be very tough for the foreseeable future,” he says.
Difficult as their situation is, they are unanimous in their support for the restaurant and accommodation sectors, whose position, they say, is far worse than theirs. As Anthony Hamilton Russell is quoted as saying, “At least – unlike our unfortunate colleagues in the restaurant business – a sale lost today is not a sale lost forever. We still have the wine, and it will sell later if we can’t sell it at present. Financing the delayed receipt of sales revenue is, however, a deep concern for many.”
There is universal agreement among all the winemakers we spoke to that their workers should enjoy their utmost support. As Holly Bellingham Turner comments: “Our people are as important as our terroir in the production of our premium wines. If we are to weather the storm, we must do everything we can to take good care of them.” So far, they have all managed to retain their permanent staff, sometimes with a salary cut, and are using this opportunity to further upskill them. Depending on what happens in the future, they may, however, be forced to reduce the number of seasonal workers they would normally employ later in the year.
In the meantime, many of them are assisting with food parcels for the needy communities from which they draw their casual workers. Carolyn has been particularly active in assisting the municipality’s Disaster Management team with supplier contacts and opportunities to acquire goods at reduced prices, as well as keeping the Pebbles ECD project afloat and developing a larger vegetable garden there. “The important message this pandemic has sent us, both as businesses and as a community is to become more sustainable; we need to deepen communications, facilitate connectivity and understand that we will only survive if we all pull together.”
Bernhard Heyns expresses a similar sentiment: “All we can do in these times of uncertainty is to look after ourselves, look after our people and look after our product. This will help us pull through.”