The South African wine harvest that concluded in April was 10% smaller than last year due to climatic conditions, according to South Africa Wine CEO Ricco Basson.
Basson said while the sector had clear climatic risks and mitigation strategies combined with technical expertise, there was often still an impact.
"Further to this the electricity disruption during the growing season and the harvest did have an impact and most certainly escalated costs,“ he said.
The stock level of the industry was currently at an equilibrium, level - unlike other countries that had significant surplus stock.
The sector could utilise opportunities from this notwithstanding a tough trading environment due to consumer inflation, logistical disruptions, and geopolitical challenges, Basson said.
He said a positive aspect of the low global production was that it matched the reduced demand, “and as the OIV states, stock levels globally are back to balance”.
The International Organisation of Vine and Wine (OIV) said last week that global wine production had fallen this year to its lowest level since 1961 as vineyards were pummelled by extreme weather events,
Presenting its first estimates, the intergovernmental body said output reached 244.1 million hectolitres, down 7% from last year.
Once again, extreme climatic conditions such as early frost, heavy rainfall, and drought had significantly impacted the output of the world vineyard; the organisation which provides data to grape and wine-producing and consuming countries.
A number of major producers in the southern hemisphere had significant drops in production. Australia, Argentina, Chile, South Africa and Brazil all saw output drop between 10% and 30%.
Italy lost the title of top world producer as its output fell 12%, allowing France to reclaim first place as its production held steady.
Spain held onto its position as the world's third largest wine producer although its production fell by 14% and was down 19% from its five-year average.
The silver lining, if any, for the industry was said to be that it may help alleviate the market imbalance.
In a context where global consumption was declining and stocks were high in many regions of the world, the expected low production could bring equilibrium to the world market, said the OIV.
While the OIV spoke of extreme weather events affecting production, they had yet to definitively link it to climate change, said Inaki Garcia de Cortazar-Atauri at the French National Agronomical Research Institute (INRAE).
A specialist on the impact of climate change on agriculture said that damage in Italy was due to farmed land not being able to absorb water as well as natural soil. But one can observe that extreme weather events are becoming more and more frequent, he said, with heat waves or rainy periods striking certain regions and adding to existing problems like mildew.
According to SA Wine, South Africa was the world’s 6th largest producer of wine at 9.3 million hectolitres out of the total global production of 244 million hectolitres or 3.8% of global production.
The big 3 in the world were France, Italy and Spain which collectively contribute 49% of global production and whose variation in harvest had the largest impact.
Basson said South Africa annually sold 55% of its production in the domestic market and exports 45% to more than 120 countries globally.
He said exports were extremely important for the South African wine sector and an important source of revenue for both the sector with a value of R10 billion and the South African economy and job creation.
The SA Wine CEO said the industry contributed R55bn to the GDP of South Africa, which includes job opportunities but also a wine tourism sector that saw exponential growth with visitation higher than pre-COVID.
Asked by the Business Report what support does the local sector need and from whom, Basson said the sector did not get any direct support in terms of subsidies (unlike the EU countries) and was reliant on private sector investment.
"We are in continuous discussions with various national and provincial government departments to ensure that we create policy certainty for reinvestment, excise taxation in line with inflation or lower, enforcement of illicit trade (non-wine related) to poor communities and support with global market access such as African Growth and Opportunity Act (AGOA), African Continental Free Trade Area (AfCFTA) Agreement," Basson said.
Following a smaller harvest in this year, wine grape producers were positive that the season on hand held great promise, according to harvest predictions compiled by the industry bodies Vinpro and SAWIS.
Ideal winter conditions and above-average rainfall across all cultivation regions were said to have set the scene for a promising harvest next year.
Cool, wet conditions that prevailed throughout the 2023 harvest continued into autumn. These conditions brought much-needed relief during the critical period when vines were recovering after the harvest.
Etienne Terblanche, head of consultation services at Vinpro said despite a series of challenging climatic events faced by some producers, a spirit of optimism could be observed at this early stage.
“Good decision-making and agility will however be crucial to harness the full potential of the season,” Terblanche said.
BUSINESS REPORT