The wine industry is among the industries hit hardest by the Covid-19 lockdown in South Africa. It’s a major economic driver, contributing R36 billion to the fiscus and providing over 290 000 jobs annually across its value chain. It’s also one of the Western Cape’s biggest employers and revenue generators, and thus a significant contributor to the province’s economy.
The wine sector had already been under pressure for several years before the pandemic due to declining margins and fewer hectares under vine as wine producers moved to citrus and other high-value crops. However the loss of revenue since lockdown, caused by the local ban on alcohol sales, which normally account for about 40-50% of total volume, and on-again-off-again decisions around exports, is likely to have a long-term impact on the entire value chain. Wines of South Africa (WoSA) estimates that the local wine industry lost about R175 million each week that the transportation of wine to harbour was banned during the lockdown. This also had dire consequences for the Western Cape due to a loss of income from tax revenue, foreign exchange and excise duties.
These factors have massive cash flow implications for producers and wine estates as they face delayed payments and lower grape prices, and there’s growing concern among South African wine producers and distributors about losing shelf space and status in export markets and with retailers. On the upside, the 2020 wine grape crop is estimated at 1 349 883 tonnes – an 8,2% increase year on year, according to industry body SAWIS, while Vinpro’s Annual Wine Harvest Report 2020 predicts that this year’s harvest will yield exceptional wines.
Online wine sellers are also reporting strong sales. Wine.co.za has seen the number of online orders and value triple since lockdown, while Getwine.co.za has reported that its sales for April alone were almost 70% of last year’s total sales despite no marketing, while orders from new clients grew by a third.
Nedbank believes South Africa’s farming community is resilient, resourceful and innovative, and is confident producers will weather the storm. They wish to help clients see money differently by applying a bigger-picture business banking approach to understand the specific challenges and opportunities they face. As a bank committed to using our money expertise to grow the economy, Nedbank believes it’s critical for clients to have proactive discussions with experienced teams about immediate debt relief, increased working capital to deal with time delays, disrupted value chains and logistics, moratoriums on debt repayments, and debt restructuring over a longer term.
Nedbank Business Banking sees agriculture as a long-term investment which plays a vital role in our economic recovery. They partner with their clients to contribute to a growing, competitive, transformed and resilient agricultural sector that ultimately contributes positively to South Africa’s economy for the benefit of the country as a whole.
Nedbank Business Banking | Daneel Rossouw | divisional manager, agriculture | 0860 555 333 | firstname.lastname@example.org