The South African wine industry, already strained by logistical failures and economic pressures, faces a new challenge: a proposed excise tax increase of up to 80%. Industry body South Africa Wine warns that this drastic rise could jeopardise thousands of jobs and force many producers out of business. The sector, which supports over 270,000 jobs and contributes R56 billion annually to the economy, is a cornerstone of rural development and tourism, and an industry that forms the heart of the Cape.

Rico Basson, CEO of South Africa Wine, described the potential excise hikes as destabilising, particularly for communities already grappling with economic hardship. The National Treasury’s proposed framework, outlined in an Alcohol Taxation document, is set for implementation during the February 2025 budget. However, the industry criticises the limited consultation period, arguing that 30 days is insufficient for a thorough impact assessment.

The wine body urges the government to reconsider, highlighting that current excise rates align with international standards and meet public health objectives without undermining industry sustainability. Instead of punishing compliant producers, Basson advocates for intensified efforts against illicit alcohol trade, which accounts for over 22% of the market. He points to countries like France, Italy, and Spain, where negligible excise duties bolster the wine industry.

The wine sector's plight extends beyond tax concerns. A recent macroeconomic impact report highlights ongoing logistical disruptions at ports, unreliable power supplies, and policy uncertainty. The latter of these issues may not be as severe anymore, but uncertainty with hope can be better than certainty with none.

South Africa has lost over 10% of its vineyard area since 2013 due to droughts and rising costs. Farmers are increasingly turning to more profitable crops like citrus and blueberries. The country’s ageing vineyards—56% are now over 15 years old—further reflect a lack of reinvestment.

Wine exports, once a stronghold, have also declined. In 2023, volumes to key markets such as the UK and Germany fell by 3% and 16%, respectively. The US market saw the steepest drop, importing 50% less than in the previous year. Persistent delays and inefficiencies at ports exacerbate these challenges, adding to the sector's woes.

Despite these difficulties, wine tourism has shown a little resilience, contributing R9.3 billion to the economy in 2022. It remains a lifeline, particularly for small producers, with over a third of their revenue stemming from tourism-related activities. This sector’s potential underscores the importance of balanced policies and strategic investment in infrastructure.

Like much of the rest of South Africa’s agricultural sector, small farm bankruptcies will see foreign landowners and corporate megafarms take an increasing share of the market, and could spell the end of the last of the legacy family farms.

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