Despite the elapse of over 21 years since the first democratic elections in South Africa, the rosy picture of the “Rainbow Nation” is still the sustaining myth of the country's propaganda machine. To a large extent, it is one in which most members of the body politic are willing to collaborate. No one wants to admit that the tidal wave of good will which swept through the country following the election of Nelson Mandela has petered out. As the economy grinds to a halt, as corruption, cronyism and political jockeying replace the elation and faith in the future, the wine lands of the Western Cape have emerged as the one good news story to lighten the gloom.
Misery economics
The reasons for the economic and social meltdown are not particularly complex. The African National Congress (ANC), which rules every province except the Western Cape, applies a policy of “cadre deployment”, using its power of patronage to reward the party faithful with positions in the civil service and state-owned enterprises. Government employs roughly half the country's active workforce. Almost all state enterprises are in a parlous condition. Eskom, the national electricity supplier, is running five to ten years late on maintenance and upgrades, leading to power outages that caused the factory sector to shrink dramatically in the past six months. The national airline under-recovers billions every year. The state petroleum business has just reported a loss of R14.9bn ($1.07bn). The president recently spent R250m upgrading his private home – at the state's expense. The list is endless.
The result of this has been a meltdown of the economy. The country is hovering on a recession, with exchange rates now at their lowest level in the country's history. Since 1995, the South African Rand has dropped to one quarter of its value against US dollar. South Africa derives the bulk of its income from primary resources, so the current Chinese crisis (with the commensurate drop in commodity prices) has hit the country particularly hard. A confrontational relationship between the mining sector and government has seen a precipitous decline in the country's gold industry. In 1983, South Africa accounted for 63% of the world's gold production – today it's less than 6%. With a tax base of less than 10% of the population, a lower tax take as the downturn bites, and an ever-increasing number of families dependent on social security, the unemployed, and growing social unrest, South Africa is not a picture of health.
Labour regulations, drafted to meet the ideological expectations of the ANC's alliance partners (the South African Communist Party and the trade union movement) do not make things easier for employers: it's difficult to dismiss or retrench staff. Despite this, unemployment continues to grow in all sectors except government. It now runs to around 40% (if the entire labour force is considered) and to at least 26% if you exclude those who have abandoned hope of ever being employed.
Against the tide
The Western Cape-based wine industry is the one sector about which the ANC knows very little, and where its powers of intervention are slightly more limited. Contrary to the litany of misery that pretty much characterises everything else about the South African economy, the country's wine producers are thriving. At a reputational level Cape wine has never received more plaudits. Major critics in most of the export markets are singing the praises of the country's avante garde producers and at the same time commenting on the extraordinary value of the supermarket offerings. Tim Atkin's latest country report lists over 700 wines scoring 90 points or more. At the 2015 Six Nations Challenge South Africa won more trophies and dominated more classes than Australia, the US, Chile and Argentina. On the export front, which accounts for almost half the country's production, packaged wine is up 4% by volume for the 12 months to end August. These figures, coming with an increase of nearly 20% in net rand revenue as a result of the currency devaluation over the past 12 months, have delivered a meaningful cash injection to the country's producers. The rest of South Africa may be depressed: the country's wine farmers, who have had to survive without support, subsidies or even a sympathetic legislative environment, are riding the crest of a wave.
However, given that agriculture (and especially the wine industry) is among the least-transformed sectors of the economy, producers would be wise to avoid complacency. The ANC does not like its shortcomings highlighted. The better things are for wine producers, the more they will attract the attention of the national government – especially with municipal elections scheduled for next year.
