SA wine industry update: Status of Govt deliberations

by | Apr 22, 2020 | Covid-19

Following President Ramaphosa’s national address 21 April 2020 regarding expanded COVID-19 economic and social relief measures to the amount of R500 billion, we would like to applaud the South African Government for the bold steps it is taking to provide crucial socio-economic relief to vulnerable citizens.

At the same time, we would like to acknowledge the great work that is being done by NGO’s and many wineries and wine grape producers at farm level to provide support to wine industry communities.

In anticipation of the President’s next update on 23 April 2020 during which we hope to receive further guidance on a phased reopening of the economy from 1 May 2020, we would like to provide an overview of the South African wine industry’s deliberations with Government.

WINE EXPORTS

Since our previous communication on Friday, 17 April, the industry, through its Exporters Task Team, has made contact with Government on numerous occasions in an attempt to gain clarity on the rationality behind a restriction on the transport of wine (announced on 16 April 2020), which has abruptly halted wine exports following a concession on 7 April 2020.

The transport of wine is necessary to enable the industry to finalise various commercial transactions entered into prior to the recent prohibition on the transportation of liquor, and which may have, among others, potentially disastrous financial and reputational consequences.

The wine industry already faces significant economic and reputational losses due to these and other restrictions. We cannot operate on uncertainty, and need to be able to create realistic expectations with our international buyers with regard to future supply.

We believe that exporting wine has a low transmission risk, as it has a low human involvement (following the necessary protocols), and is a high value commodity that can earn much-needed foreign exchange for the country. The industry is also willing to implement safeguards for containers being transported, at its own cost.

Along with the transport of wine for exports, we are also seeking confirmation on whether related activities may continue in support of exports, including preparing wine for the export market through bottling and labelling of wine.

The frustration at industry level is the lack of consultation, engagement or feedback on formal submissions from relevant National Government departments, since the start of lockdown. In view of this and taking account of the significant financial and socio economic implications, the task team has sought legal counsel on the matter in an effort to obtain urgent clarity.  At this stage we unfortunately still do not have a formal response, but remain positive that more certainty will emerge from the announcement of economic relief measures towards end of week.

We would however like to express our appreciation to Premier Winde and his Cabinet in the Western Cape and various other stakeholders such as AgBiz and AgriSA for supporting our cause and providing assistance during the deliberations thus far.

PHASED APPROACH TO LOCAL WINE SALES

We continue with the deliberations to ensure a liquor recovery strategy, once entering the first phase of lockdown-exit, following 1 May 2020. In the same spirit we have already drafted a safety protocol for production units, wineries and bottling plants. We will keep you posted once it is ready to distribute.

EXCISE DISPENSATION

We have requested the SA Revenue Service (SARS) to provide dispensation on the payment of excise duties of at least 90 days, in addition to the current days payable. This is based on the 21-day lockdown that has been declared by Government.

If this extension is not granted, our industry will experience severe short-term liquidity restrictions, which will limit our ability to pay our various suppliers and place us at risk of breaching our financial contracts.

The request that was submitted did not articulate a theoretical conundrum for our members, but a very real one which is currently unfolding. We know of members who are currently facing this very real dilemma and who need to decide which of the payments to prioritise; we expect that more members will be faced with this dilemma in the coming weeks.

It is encouraging that the Honourable Minister of Finance called on businesses to prioritise the payment of salaries and suppliers, especially small and medium enterprises. However without any income during the lockdown for our members, they will have to make some very tough decisions. SARS usually issues significant fines for delays or failure to pay excise taxes; hence the request to SARS to favourably consider the industry’s request for extended payment.

While we acknowledge that during this difficult time the Department is dealing with a number of issues simultaneously, we have asked them to prioritise the request.

FINANCIAL RELIEF

Wine-related businesses have already been hit hard by the current restrictions on exports and local wine sales, with further losses expected over the next few weeks and even months.

With regard to whether the R500 billion funding towards socio-economic and economic relief will also be available to wine producers, cellars and farm/cellar workers, we will have to await clarity on this, as Government is still in the process of finalising the details on the practical implementation of the relief measures. We will communicate once we have more information on this.

The wine industry is continuously in discussion with commercial banks to ensure informed decision-making and possible restructuring of facilities to accommodate the cash-flow realities. In the interim, please refer to the following summaries of financial aid available to businesses and their employees.
Western Cape Department of Agriculture: Financial Support Schemes during COVID-19
Agbiz Summary of Financial Support Schemes

WINE TOURISM

While a number of deliberations are taking place, all sectors in the economy will have to demonstrate their readiness to resume operations and to put health and safety requirements first. It is our understanding that the economy recovery strategy will be based on the economic activity of a sector versus the transmission risk (of the COVID-19 virus).

From a wine tourism perspective, a survey was launched to wineries on 21 April 2020 to gage their logistical and staffing needs to operate the tasting rooms and/or restaurants during a phased exit from the COVID-19 lockdown. During the course of the day we have already received more than 100 survey responses – many thanks for your cooperation. This information will be used for a motivation that winery restaurants and tasting rooms be allowed to operate during certain phases of a staggered exit from the COVID-19 lockdown.

SEASONAL WORKERS

A big challenge the industry currently faces is the fact that seasonal workers need to return to their respective homes (often in other provinces), but that no transport of persons across town/provincial borders is permitted. This matter is still a priority for Agri SA and Agri Western Cape in discussions with Government, and we will communicate any developments in this regard.

We would like to once again emphasise that the South African wine industry is continuously working on finding solutions during an unprecedented time of uncertainty, during which a fine balance needs to be struck between the health and safety of South African citizens, and the country’s economic and socio-economic survival.

We hope to gain clarification on the abovementioned agenda points by the end of the week and will keep you updated on any further developments as they unfold.

ENQUIRIES:
Vinpro
info@vinpro.co.za

WoSA
maryna@wosa.co.za

SALBA
kmoore@salba.co.za

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