Letter From Johannesburg: prohibition and hangovers

The Coronavirus pandemic has exposed governmental lack of preparedness, naivety, fear and tawdry political opportunism in many countries, but it may be hard to find a regime that scored a more spectacular own goal than that inflicted on the wine industry here in South Africa. Across the world economic hardship is an obvious and foreseen result of lockdown strategies, but this is a horrid example of damage way beyond any strategic logic or understanding of the dynamics of global marketing.  

In recent years perceptions of many of South Africa’s world class attributes and assets have sadly - and justly - declined.  But in marked contrast its reputation for producing global best class wines has encouragingly grown. Our Western Cape boasts some of the world’s most interesting wine terroir and finest wine tourism experiences. The global marketing of South African wine was however rather inane, driving perceptions of good value but rather ordinary wines. But a new wave of winemakers and marketing had in recent years started to change that by producing  unique and distinctive quality wines, and telling compelling stories of their provenance. Winning over influential critics and influencers followed, leading to a surge in international enthusiasm and a boon in exports of quality niche wines.

Enter Covid-19. Our government gifted us some of the harshest lockdown regulations imposed anywhere in the world. As I write, we still have a nationwide nightly curfew, international travel remains forbidden and a complete ban on alcohol, in two waves that lasted a total of 15 weeks, has only just been lifted - but with many restrictions and just two days ahead of a Court challenge to force government to reopen wine sales.

South Africa is one of less than a handful of countries globally that outlawed alcohol as part of its efforts to curb the spread of the virus Covid-19. And bizarrely, for nearly half that time, the ban included the exporting of wine! Government refused to give reasons for this or to engage with the industry and just didn’t seem to understand or care that hard worked for listings with overseas distributors and retailers were at severe risk of being lost. Wines of South Africa, the body that promotes the country’s wines in international markets, estimates the industry has lost in excess of R7bn in revenue and roughly 21,000 jobs. Another industry group expects as many as 80 wineries and 350 wine-grape growers to go out of business.

But here’s the most tragic irony: Bloomberg has reported that through these prohibitions our government lost more in tax revenue in the first three-and-half months of this fiscal year than it has been forced to borrow from the International Monetary Fund and the African Development Bank combined.

Far from being a commodity, wine is culture. Our government neither understood nor respected wine as a cultural industry “that combines the creation, production and commercialisation of contents that are intangible and cultural in nature” as defined by UNESCO. Nor that reputation building, positioning, and demand creation in mature and sophisticated global markets require consistency and credibility. With South African wine now experiencing a crisis that beggars belief, its survival and recovery will obviously require commercial nouse and patience.

Gratifyingly, support and understanding from our major international markets appears to be holding steady. International critics are still talking up our wines. Naked Wines, the UK online retailer, has launched a crowd funding campaign in support of South African winemakers and despite limited stocks Waitrose undertook a South African promotion. The marketing efforts before Covid-19 may just pull us through. But the hangover will last for years!

Words by John Little, Regional Managing Partner, Middle East and Africa, The Observatory International