Good news for South African wines

South Africa's wine industry has cause to lift a glass or two after the latest overseas sales figures were released in early December.

An industry report compiled by South African Wine Industry Statistics (SAWIS) showed that wine exports had jumped by 16% in the 11 months ending on November 30, with year-end exports predicted to hit 300m litres, a record performance and a far cry from the 20m litres of 15 years ago.

Su Birch, chief executive of Wines of South Africa (WOSA), said the industry was now in a stronger position, thanks to the diversification of its markets.

"Whereas five years ago, 72% of our packaged exports went to just the UK and the Netherlands, the net has widened so that the UK, Sweden, the Netherlands, Germany and the US currently account for 70% of total export volumes," Birch said in an interview with local press on December 12.

The strong growth in exports was especially powered by increased sales to Sweden, where South African wines are second only to Australian products in terms of imports, as well as across Scandinavia, where sales improved by more than 10%.

Even more significant was the 40% growth in the volume of sales to Germany, with South Africa moving into fifth place as a supplier of imported wines to that country.

According to WOSA spokesman André Morgenthal, South Africa's wine industry has also benefited from the long running drought in Australia, which has curbed production over the past few years.

The drop in Australian output has seen locals seize the opportunity to fill the gap, with an estimated 4m litres of South African wines being exported to meet the shortfall, he said.

South Africa has long been a leading producer of wines and currently accounts for around 3.4% of global output, making it the ninth biggest international producer.

With just over 100,000 hectares of land planted for vines, a figure that is increasing as demand is stepping up, South Africa regularly produces more than 700m litres of wine annually, with the 2007 harvest yielding around 736m litres, according to SAWIS.

The coming grape harvest is set to continue the trend, with SAWIS estimating that around 1.3m tonnes of grapes of all varieties will be picked, similar to the figures for the previous season.

South Africa's wine growers take industry standards seriously. In September the department of agriculture's council on genetically modified organisms (GMOs) ruled against an application to sell genetically modified yeast made by a South African-born scientist and his business partners to local wine producers.

The council said allowing the use of genetically modified yeast could pose a threat to South Africa's export trade with Europe, the backbone of the industry. On December 5, Julian Jaftha, the chairman of the council, said the application had been rejected purely on trade grounds, rather than environmental or health concerns. The council made its ruling after intense lobbying from South Africa's leading wine producers, the South African Wine Council and the local non-governmental organisation Biowatch, which campaigns against GMOs.

In another move for the wine industry, Mosibudi Mangena, the minister of science and technology, gave a commitment at the end of October to provide additional funding to boost research so as to help ensure the sector's future.

"The wine industry cannot afford to lag behind in terms of innovation and research," Mangena said in a joint press statement with Kader Asmal, chairperson of the SA Wine Industry Council. "Apart from substantial export earnings of $480m per annum, the wine industry also played an important role in economic growth and rural development in South Africa."

The government's commitment to the wine industry is leading to increased sales at home and abroad. WOSA's Birch has warned that increasing overseas demand for South African wines could lead to a domestic shortage of reds by 2010, the year South Africa will host the football World Cup.

"South Africa is still a very young exporter in global terms and to be unable to meet market demands could make us vulnerable," she said.

While there may be potential shortages in the future, at the moment South Africa's wine industry is giving off a distinctly appealing bouquet. Oxford Business Group