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Life in a Time of Prohibition: The Impact of the Alcohol Ban in South Africa!

Prohibition South Africa

Dan Really Likes Wine, hosted by broadcaster, writer and wine enthusiast Dan Nicholl, is based around a weekly online wine show presented by Pick n Pay, as well as live tastings with top winemakers and personalities from SA and beyond.

With the alcohol sales ban continuing to decimate the SA alcohol trade, the 21 January 2021 episode of Dan Really Likes Wine – entitled “Life in a time of Prohibition” – took an earnest look at the ongoing total alcohol ban in SA, and its impact on the country’s wine, tourism and restaurant industries.

Dan was joined by Wines of South Africa CEO Siobhan Thompson, VINPRO MD Rico Basson, and chef and restaurateur Reuben Riffel.

The wine value chain spans jobs in the vineyards and logistics chains, in hospitality and in glass manufacture. In an article[1] written during the previous blanket ban in August 2020, writer Malu Lambert described the extent of the industry in SA as follows:

“The South African wine industry’s GDP contribution to the country’s economy is more than £2.17bn (R49bn) per annum and it creates 290,000 job opportunities directly and indirectly. And if we account for the knock-on effect on the entire supply chain, something closer to half a million jobs are at stake.”

 

This industry is now facing an unprecedented threat, and each of Dan’s guests set out their evaluation of the extent of this threat and the ways in which the industry had tried to cope.

Rico Basson
As an economist, the picture is scary. The word that comes to mind is “dire”. Since the end of March 2020 the industry has been unable to operate for 18 weeks – that’s one in every three days. And because the wine industry is a value-adding, agricultural industry, it has long planning cycles and is not built to ensure the stop and start of unanticipated bans.

The uncertainty is compounded by the fact that as one of SA’s most regulated industries, with such a wide value chain, wine professionals typically interact regularly with eleven separate government departments. And what we’ve seen is that there isn’t coordinated messaging or information being delivered from government.

South Africa has a world-class tourism offering, and have become one of the world’s premier destinations for wine-lovers. We sell 1 million bottles of wine every day around the world, and wine has become an exceptional ambassador for the country.

International visitors spend an average of two days exploring our winelands. We have 533 wine farms in SA. 400 of those are micro-enterprises (turnover below 10m) and highly reliant on direct sales. And that is where the challenge lies; without tourists, without tastings, they don’t have the financial stability to remain viable.

With the harvest beginning next week it’s an extremely challenging time. We’ve already seen losses of around R8 billion (which exclude losses downstream and in restaurants), and those losses are set to continue, if not accelerate.

I think we’ve passed the point of no return. There will be a structural change to the industry, and many businesses will not survive. We could lose 60-80 wineries, and 300 producers. There is also an impact on the vineyards themselves. There’s a good harvest due this year, and we’re going to do some strange things with it: produce millions of litres of concentrate for grape juice, produce alcohol for hand sanitiser. These things help with stock, but they don’t make money. This is bad short term, but worse long term, because it has a ripple effect on our ability to produce the next vintage.

It’s interesting to see the value of wines purchased overseas increase, because the danger was that with rising stock levels, and no other avenues to sell them, we could have seen producers decide to dump wine internationally, thereby undoing many years of work to raise our international profile.

The business models of the wine farms differ, and some are more exposed internationally than others, some of which only sell locally. And of course, other countries have put in place their own restrictions on the consumption of alcohol. So we can’t rely entirely on the export market. The reality is that unless we get tourism, restaurants and the local market open, it’s going to be very difficult to survive.

One positive point is that the level of industry innovation over the past year has been amazing. We’ve made about six-to-seven years of progress in terms of online capability in a year, not just in terms of online retail, but also in the use of online communication and marketing channels.

Siobhan Thompson
Wine has become an inextricable part of Brand SA, and that has suffered. Wine is part of our tourist offering, part of our national character, and from a pure marketing aspect, we’ve seen some real damage done to our image.

The export market has surprised us and is a glimmer of hope for the industry. Exports were 1% down in 2020, which, given the context, is a remarkable performance. Interestingly, export value was up just shy of 8%. Part of this is currency-exchange related, but I think we’ve also seen buyers getting involved at higher price tiers.

Part of this is due to a concerted, industry-wide campaign to generate international support for the SA industry. Under the first ban we very quickly realised we were going to start losing shelf space. Initiatives such as the Spectacular SA campaign saw international customers rallying around buying and sharing SA wine, while at home the #SaveSAWine initiative saw wine farm staff join together with other stakeholders to create awareness of the industry’s plight.

I’d like to say to wine producers and others in the industry: Use social media, use the forums available to you, talk to importers and buyers overseas, let them know about our situation. Keep communication flowing. It has worked.

Reuben Riffel
As restaurateurs, we focused everything we could on surviving the first lockdown. We couldn’t have known at that stage that it was the first of a series. Just as we began to recover from the initial ban, just before what we were hoping would be a strong festive season, it was reinstated. Paired with another travel ban, this alcohol ban has devastated the industry. Both local and international bookings have dwindled.

The difference with this ban is that while initially there was a small amount of TERS (Temporary Employer/Employee Relief Scheme) support available, this time there’s nothing. We’re not getting any assistance from government – and I’m not just talking about financial assistance, I’m talking about communication and consultation.

And the result is heart-breaking but inevitable: we’ve had to start letting people go. In the restaurant, industry staff become like family. We want to protect them, and it’s painful that we’re running out of options. It’s dire.

Franschhoek, amongst many other Western Cape towns, is reliant on tourism, and wine plays a big part. Right now it’s a ghost town. I’m surprised, personally, that we’ve survived so far, but I don’t know how long we’ll last. Lots of businesses – cleaning, construction, transport, logistics, food supply, produce – rely on the tourism business and the restaurants.

If it continues like it is – and let’s not forget that we’re also now struggling with load shedding – I don’t think we’ll survive past February.

 

The conversation turned to possible solutions to the crisis, with the consensus being that compromise and consultation were key to unlocking the greatest benefit, economically and in terms of health outcomes.

Reuben
We know that alcohol can wreak havoc on small communities like Franschhoek. Educational campaigns will help, but we really need more effective policing. Laws do exist to curb the abuse of alcohol, but they need to be enforced. We sometimes feel that it’s easier to police us as an industry than it is to police individuals abusing the system. But whatever the details, we do agree that there is a need for a positive social intervention to address the issue.

If there were a middle ground, somewhere between normal operations and this blanket prohibition, then we could make it work. After the first lockdown, we didn’t make any money, but we were able to stay open and pay salaries. We’d all be happy to find a middle way that allows us to weather the crisis. We can work around protocols, we can work around curfews, we can keep staff and patrons safe. But we’ve been left without options.

Siobhan
Blanket bans kill too many innocent businesses and livelihoods. It’s about finding a middle ground, moderation. Restricting consumption to the home, while keeping curfews in place, restricting trading hours, and limiting sales, could be a start. The industry could help to target trouble areas and hotspots, where more severe regulations could apply.

Rico
Our concern is that there might well be several subsequent waves of the virus, and we can’t be taken by surprise by regulations each time. We need to have a forward-looking, proactive plan. We need to know what is likely to happen so that we can work together to survive it.

We’re not going to have a different result from other prohibitions that have been attempted throughout history. Illicit trade of alcohol in SA has doubled under the ban. I do feel strongly that alcohol misuse is a problem, but the context and narrative has been skewed. 60% of South Africans are teetotallers, and a minority are binge drinkers. We need to address this with education and through targeted intervention. The industry has offered to name and shame where license conditions are broken, to cut off supply to hotspots. I have all the empathy in the world for health professionals in trauma units, but the fact is that curfews have a bigger effect on trauma admissions than regulated alcohol availability.

Our ask would be to open the regulated channel, Monday to Thursday, and allow the wine farms to open over weekends as well. This would probably restore 50% of volumes without causing additional significant risk.

I would also suggest that decision making should be made at provincial level. Premiers of provinces are better positioned to judge their hospital levels and the situations of industries specific to their province. There should be leeway. From an industry perspective, we have made considerable efforts to address the issues of binge drinking, youth drinking, driving under the influence and gender-based violence. I don’t think we’re often given credit for that. More than R200 million has gone into these programmes. I mention that by way of suggesting that there is a middle ground to be found, that there is good faith, and there is a desire to be constructive and find solutions to the benefit of South Africans.

 

Dan closed off the discussion by asking each of his guests to answer two questions:

  • What’s a good reason to smile amidst all the gloom?
  • What wine are you going to celebrate with when the ban is relaxed?

Reuben
We have the best wine in the world, and the most beautiful place in the world to drink it.
If the weather continues like this then Chenin Blanc: one of my favourites being from Avondale in Paarl.

Siobhan
We have a wonderful country, with world-class wines and magical people.
Celebration means bubbly, so Silverthorn’s The Green Man Cap Classique.

Rico
We’re resilient, we’ll overcome COVID, and when we do we’ll have plenty of stock available for celebrations.
I’ll head to Tulbagh for my choice: Rijk’s Chenin Blanc.

Visit www.danreallylikeswine.com.

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