Wine Investment in South Africa - Cape Wine Academy

people distrust wines of age and doubt the chance of them still giving any pleasure. An
investment culture needs to hold aged fine wines in reverence to add to their desirability.
The challenge in developing a sufficient wine culture to support a healthy investment
industry is in getting young people to adopt a wine based lifestyle despite mixed messages
linking wine with health issues and the lure of spirit based RTD’s. Ken Forrester believes it is
also about educating the public and developing discerning palates, something absent at
present ( Forrester, 2011 Appendix B ). Another challenge is to further encourage the black
and coloured population into an acceptance of dry wine styles and regular wine consumption
especially in areas where beer and spirits reign; it is perhaps easier to establish a wine
culture in the Western Cape where visiting vineyards is a popular activity, but as Norma
Ratcliffe says, “the market is in Johannesburg” ( Ratcliffe, 2011 Appendix G ). The potential
benefits to the wine industry and the Government of a wine consuming black population are
enormous. Some 79% of the population are black and more than 8% - some 2.7 million
people - comprise the salaried, educated and middle class ‘Black Diamonds’ who could
become a likely investment segment (UCT Unilever Institute of Strategic Marketing, updated
2008). Johann Krige at Kanonkop has sold lots of fine wine to prominent black South
Africans and thinks this will continue and increase ( Krige, 2011 Appendix E ).
Government has a role to play in developing a wine culture but it has the dichotomy of
promoting responsible behaviour and moderation whilst receiving some R38.7bn in duties
and VAT from wine products in 2010 ( SAWIS, 2011 ). More than 2.2% of the country’s
GDP comes from the wine industry which employs some 275,600 people ( SAWIS, 2011).
The Government has enjoyed a greater income from wine each year since 2005 than the
producers of the wine themselves. Yet in comparison to other countries the duties it
imposes seem fair. In SA, R1.62 is charged in Duty on a bottle of wine ( R2.32 p/L ) and
then 14% VAT ( SARS, June 2011 ); on a R20 bottle of wine this amounts to R4.65 or 23%
of the total. In the UK £1.69 is charged in Duty and then 20% VAT ( UK HM Rev & Customs,
March 2011). The average price paid for a bottle of wine in the UK ( Feb 2011 ) is £4.26 of
which the total tax is £2.88 and the Government’s share 47% of the total price, twice that of
SA’s. The percentage declines with increased bottle price; on a R100 bottle in SA the
government’s share would be 16%. More duties are collected along the chain, such as
storage, brokerage and delivery, but that is true of all countries. Duties and VAT do not seem
to be a barrier to developing a wine culture or investing in wine in South Africa, though
government support of the industry, where average turnover reached R40m per wine farm
last year, but average profits were nearer R200,000 ( den Dulk, 2011 Appendix A ), would
stimulate an industry recovery.
Undoubtedly, wine investment requires an active and broad based wine culture.
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