JOHANNESBURG—South Africa’s $1.5 billion wine industry is reeling after a series of pandemic-induced shocks, including successive bans on the sale of alcohol totaling some 14 weeks.
The country’s Chardonnays and Cabernet Sauvignons have become household staples world-wide, and wineries centered in the rolling farmlands around the Western Cape are among South Africa’s most successful and lucrative industries. As alcohol sales resumed nationwide this week, many of these businesses have emerged battered, and some might not survive.
The wine industry in South Africa—the world’s eighth largest producer and exporter—employs about 290,000 people, while the broader liquor industry accounts for roughly 1 million jobs. Liquor sales and taxes typically account for about 3% of South Africa’s $351 billion economy and 10% of its total tax revenue, according to the South African Liquor Brand Owners Association, which represents manufacturers and distributors in the liquor industry.
But the measures taken by the ruling African National Congress government to halt the spread of the coronavirus have dealt twin blows: two bans on booze sales—along with shorter bans on wine exports—and the closing of South Africa’s borders, since the wine industry’s revenue is closely intertwined with tourism.
Wines of South Africa, an industry organization that promotes the nation’s wines in international markets, estimates the industry has lost in excess of 7 billion South African rand ($406 million) in revenue and roughly 21,000 jobs. VinPro, an industry group that represents South African wine producers, cellars and stakeholders, expects more than 80 wineries and 350 wine-grape producers to go out of business.
“We’re hanging on by our fingernails,” said Alastair Rimmer, head winemaker at Kleine Zalze Wines in Stellenbosch, in the heart of the wine-producing region.
South Africa’s government says the alcohol bans were needed to prevent people from spreading the virus in gatherings and to free up hospital beds from alcohol-related trauma injuries. “Let’s give alcohol a break,” said Nkosazana Dlamini Zuma, cooperative governance and traditional affairs minister, during a press briefing after the second ban was announced in July. “No soldiers can win a fight while drunk.”
The blow to the wine industry shows the dilemmas for economies in the global south with huge income disparities: Governments are simultaneously legislating to curb an uncontained coronavirus outbreak in poorer communities while trying to keep alive industries that employ millions of people who might otherwise be forced into the already swollen ranks of the unemployed.
Jan van Riebeeck, who founded Cape Town for the Dutch East India Company, produced the first wine from South African-grown grapes in 1659, but South African wineries made their way onto the international scene after the end of apartheid in 1994. By 2010, sales by volume had overtaken French wines in the U.K. wine market, according to Wines of South Africa. The country’s wines are now sold in more than 110 countries.
South Africa’s nationwide ban on alcohol sales went into effect when the country went into coronavirus lockdown on March 26 and lasted—with a six-week relaxation from June 1 to July 12—until last Monday. The ban was the most visible of a string of rules, including a ban on cigarette sales and, for a time, exercising outdoors—including dog walking—that made South Africa’s lockdown measures among the strictest in the world.
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After the alcohol ban was reinstated, many producers skirted the laws. Vineyards in the picturesque wine lands outside Cape Town transformed into bootleggers and restaurants across the country into speakeasies, serving rosé out of tea cups and Pinot Noir from coffee mugs.
“Initially we were very supportive…but the second lockdown pushed everyone over the edge,” said a winemaker at a small, family-owned Stellenbosch winery that sold bottles of its Syrah and Chenin Blanc despite the sales ban. “We had to do it to keep paying salaries.”
To stay afloat, some vineyards sold clandestinely through agents over Facebook Inc.’s messaging platform WhatsApp, while some restaurants in Johannesburg served wine out of teapots to lure customers to businesses also hit hard by the lockdown. Other eateries located off main thoroughfares served wine in stemmed glasses but recorded the sales on their receipts as items like “specialty cakes.”
Wine farms and restaurants have acted in step with the thousands of citizens who have been brewing homemade beers from pineapples, pomelos and bananas. Within days of the announcement that the country was imposing an alcohol-free lockdown, the price of pineapples at wholesale produce markets more than tripled.
Exports, which account for about a third of South Africa’s wine sales, have also been hit. After two export bans totaling about four weeks early on in the country’s lockdown, producers say they had trouble shipping from Cape Town’s port because of extensive delays. That led to reductions in shelf space for their products at wine shops and supermarkets around the world.
There are broader knock-on effects in an economy already in free fall. The International Monetary Fund last month agreed to lend South Africa $4.3 billion, the largest loan any African country has received since the start of the coronavirus crisis. The IMF predicts South Africa’s economy will shrink 8% this year, its steepest contraction since the end of apartheid.
It isn’t just winemakers that are hurting. Anheuser-Busch InBev NV’s South African Breweries cut salaries by 10% across the board to avoid eliminating jobs. In July, Anheuser-Busch took a $2.5 billion write-down on its South Africa business due to the liquor ban and uncertain economic outlook. SAB has also paused 2.5 billion rand in capital investments that it had planned for this year, and is reviewing another 2.5 billion rand slated for 2021.
For South Africa’s wine industry, the ban is likely to have a long-term impact, not just on bottom lines but also on the wine itself.
“We will see wineries merging, some sales and some simply going out of business,” said Jean-Pierre Rossouw, publisher of Platter’s South African Wine Guide, which reviews about 800 local producers annually. “It’ll mean kind of a reduction of the interest and complexity of our wines.”
Write to Alexandra Wexler at [email protected]
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