Wine Investment in South Africa - Cape Wine Academy

asset returns typically made in the literature are comparisons of pre-tax returns, these
comparisons understate the value of wine investment’ ( Fogarty, 2006 ).
Potential investors may not be aware that they may be less at risk of poor judgement than
buyers of stocks and shares as they already know of the quality of the product, it has already
been judged and determined for its value and quality and unlike the holders of shares in
businesses which may or may not succeed wine investors can largely predict the future of
their assets.
Similarly, investors may not realise that wine can fall under the ‘personal collectibles’ SARS
category and any profits made from resale will be exempt from Capital Gains Tax. Unless
the investor regularly trades his wine as a business activity the income he receives from any
gains made in sales are not taxed. With other investments dividends received are taxed and
not only does this affect the potential returns of other types of investments but it can also
affect the individual’s overall income tax liability.
8.2.10 Lack of confidence
It could be argued that South Africa is neither New World or without a history of fine wine
production. With constant production of wine for over three hundred and fifty years and a
wine generally regarded amongst the best in the world since then ( Vin de Constance ) it
might be expected that SA wines already hold a certain prominence and credibility around
the world. Yet there remains a lack of confidence in SA fine wines. Internationally, the wines
have to prove their longevity and must continue to prove their quality. Only time can provide
the answers and tastings of 20+ year old vintages conducted by the likes of Johann Krige
provide the evidence. The old world remains sceptical of new world wines’ staying power,
German wine merchant Jan-Erik Paulson is an example,
‘Wines from the New World and fashionable new style wines do not in my opinion
have the potential for a long term increase in value. The reason for this is the ability
to produce an ever increasing amount of bottles and the lack of proof of their ageing
potential’ ( Paulson, 2006 ).
Paulson is incorrect in his assumption that winemakers can produce an ever increasing
amount of bottles. The Wine of Origin scheme and a growing understanding of terroir has
made icon wine production very site specific. Most top wines come from limited areas, even
single vineyards, restricted by the extent of suitable terroir with its particular soil, aspect and
microclimate. Part of the investibility of, for example, Domaine de la Romanée-Conti is that
it cannot come from anywhere else and certainly cannot be duplicated anywhere else. It is
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