Lynda Loxton
The South African wine industry is flourishing. Exports are booming and heavy rains in the Cape hold out promise of a good crop. The only fly in the ointment remains the antiquated system through which KWV continues to dominate the price farmers get for their wine.
Distillers Corporation chairman Boetie van Zyl was upbeat this week at the corporation’s annual general meeting in Stellenbosch, especially over the fact that South African wines were the “flavour of the month” in Europe and the Americas now that sanctions have been lifted.
Export director Donald Gallow said South African wines had been well received in most markets but wine makers were not trying to copy popular wines abroad, like those from Australia and New Zealand.
Liqueurs have also done well as they were uniquely Southern African. Brandy exports had been less successful, but on the local market had shown strong growth, particularly among black male consumers.
Black women, however, were more interested in sparkling wines and this was an area requiring promotion and market development, Gallow said.
Managing director John Scannell said the group faced cost constraints, particularly for packaging, which called for innovative buying and co-operation with suppliers. He said he hoped the government would consider replacing the general export incentive scheme (GEIS), due to be phased out soon, with a support system aimed at encouraging the building up of trademarks in foreign markets.
But of abiding concern is the stranglehold that KWV still exerts on the wine market. In his annual report, Van Zyl said most of the controls that had inhibited the wine industry had, with the exception of the price and surplus elimination system controlled by KWV, been phased out to the benefit of the industry.
“At present the industry is involved in intensive negotiations aimed at the establishment of a new market-oriented price and stabilisation mechanism,” Van Zyl said.
Scannell said the price and surplus elimination system went back to about 1923, when local wine growers persuaded the government to introduce a system to allow for wine price stability in the face of overproduction.
What developed was a system in which all wine, whether it was to be used for distilling or for the production of table wine, had to be sold to KWV, which would buy it at set prices, regardless of whether there was a shortage or a surplus of wine. As a result, farmers did not always get the full market value of their wine and wine and brandy producers did not pay market prices for the wine bought from KWV, often to the benefit of KWV.
“After many years of bitter argument and differences of opinion, I believe that we are on the verge of agreement on a system that meets the needs of all parties. The system may have had its uses in 1923, but it is not suitable to conditions in 1995,” Scannell said.