The news of successful negotiations between SADC (Southern African Development Community) and the EU that improves access to the EU market for South Africa’s agricultural products, was released this week.
“What we have obtained in this agreement is that there are more opportunities for us to [market] sugar, wine, ethanol and some fruit products than we had before, and that could create jobs in those particular industries”, said Trade and Industry Minister Dr Rob Davies.
The improved market access for 32 South African agricultural products such as flowers, some dairy, fruit and fruit products, also entails the duty-free importation of 150 000 tons of sugar, 80 000 tons ethanol and 110 million litres of wine.
This is very good news for the wine industry. The duty-free allowance has increased from 50 million litres to the new allocation of 110 million litres. It is specially bottled wine exports from South Africa that will benefit.
According to the Department of Agriculture dealing with wine certification and export documentation for wine, the duty-free quota only applies to wine packed in containers of less than 2 litres. (Interestingly, all rosé and red wine exported in bulk with alcohol of less than 13% as well as all bottled sparkling wine, are exempt from import duties in the EU. According to the Department, South Africa does not have many red or rosé wines destined for export, with an alcohol by volume lower than 13%).
In 2013, South Africa exported more than 60% of its wine in bulk. While it would be better for quality control and job creation to have wine packaged locally, the UK supermarket price points do not allow for this, especially not if taking into account the ‘alcohol duty escalator’ introduced in the UK in 2008, whereby wine duties are automatically increased by 2% above inflation each year. In order to stay competitive – especially on entry-level products – many South African producers were forced to ship in bulk. Shipping and CCT (common customs tariff) are less for bulk wine.
“But what may have been good for Avonmouth and, overall, good for the planet, has been bad for Australia and bottlers in other major wine-exporting countries with their mothballed bottling plants. The big bottle producers are international companies that have merely switched their supply bases, but in countries such as South Africa, bulk shipping has had a serious effect on local employment”, says MW and wine critic, Jancis Robinson in her blog.
A further loss of job opportunities in South Africa – a country where the unemployment rate is around 25% – is a serious matter. The increase in the duty-free allocation for bottled wine is therefore very positive for creating job opportunities in the many supporting sectors of the wine industry.
Supporting the export of our premium bottled wines will also be positive for the image of South African wine.