Inevitably, one of the countries where it is a particularly live issue is South Africa, due to its political history, economic difficulties and unemployment levels of nearly 33% that are among the highest in the world.
Low minimum wages in South Africa
Minimum monthly wages rose in March 2023 from R18,673 ($1,015) to R20,092 ($1,090), but these salaries, poor living conditions and health and safety standards, as well as the way migrant workers and labour unions are treated, have attracted criticism from international civil rights organisations and investigative journalists.
One of the organisations that has recently been focusing on the South African wine industry is Finnwatch, an NGO that, since its founding in Finland in 2002, has sought to influence Finnish and EU corporate responsibility policy. It publishes reports widely in Scandinavia and its work is closely followed by governments & corporations. Among the criteria it uses are the United Nation’s Guiding Principles on Business and Human Rights which states, for example, that wages – irrespective of legally-mandated minima – have to be sufficient for normal life.
United Nation’s: Wages – irrespective of legally-mandated minima – have to be sufficient for normal life.
Interventions by international NGOs
Finnwatch’s efforts can have a significant impact. Following its intervention, a supplier to the clothing company Patagonia improved the compensation given to its workers. In the wake of its 2014 report about the palm oil producer IOI, supplier to over 300 companies, the Roundtable on Sustainable Palm Oil’s (RSPO) suspended the Malaysian giant’s certification.
In March 2023, after raising questions about Alko, the Finnish monopoly’s, decision to list wines from Israel’s contested Golan Heights, Finnwatch released its first South African wine production report including field studies and analysis. In it, the NGO highlighted three wineries that, between them, supply 11 wines to Alko, including South African best sellers Pearly Bay, Grinder Pinotag, Green Nature and the local celebrity-branded Kuronen Red. Among the issues raised were salaries and working and housing conditions. One employee was quoted as saying “They treat employees unequally. Some are favored at the expense of others. When spraying chemicals, someone gets the protective gear, the other doesn't, depending on whether they like you or not. It's wrong, we're all human.” Also noted was the use of the herbicide Paraquat which has been banned in the EU since 2007.
Compliance with mandatory requirements
However, despite its association with Parkinson's disease and cancer, Paraquat is not only legal in South Africa, but also in the US and Canada. Similarly, the wineries named in the report have pointed out that they are all paying the legal minimum wage and provide living quarters that comply with mandatory requirements. Zane Meyer, managing director of Louisvale Wines, one of the three firms cited by Finnwatch told Meininger’s that his business is committed to treat and pay its workers fairly and is constantly improving their working and housing conditions. While stressing that he sees the importance of ethical values within EU and Scandinavia, he felt that Finnwatch had not offered sufficient time to reply to the report.
Significantly, Meyer also raised the issue of wine pricing. A highly competitive market for inexpensive wines naturally pushes producers to look for savings. If EU and Scandinavian markets were prepared to pay more, he said, the workforce would benefit.
The price of the wine
This last point should have particular resonance with the Nordic monopolies, because, as Kristian Hogstad, Director of the Sustainability Responsible Supply Chain for the Norvegian monopoly, Vinmonopolet, acknowledges, they have all undertaken to implement the BSCI – Business Social Compliance Initiative – amfori Code of Conduct in their respective supply chains. Including the UN Guiding Principles for Business and Human Rights, OECD Guidelines, UN Global Compact and International Labour Organization (ILO) Conventions and Recommendations among its foundations, the amfori goes beyond requiring businesses to obey domestic laws. “In countries where domestic laws and regulations are in conflict with, or set a different standard of protection than the amfori BSCI Code of Conduct, business enterprises should seek ways to abide by the principles that provide the highest protection to the workers and environment.”
Low retail prices are not generally associated with well-paid workers.
Later this year, following a revision to the amfori, businesses are further obliged to “assess the pay gap accurately, and work progressively towards the payment of a living wage that is sufficient to afford a decent standard of living for the workers and their families.”
As Meyer implied, this has clear implications for the wine industry in the case of countries like South Africa. Wine is no different to t-shirts and trainers. Low retail prices are not generally associated with well-paid workers.
The responsibility of the Scandinavian monopolies
Tom Heinemann, director of the 2016 documentary on the South African industry, Bitter Grapes, believes that the nature of Scandinavian distribution sets these countries apart from importers and retailers elsewhere. “From my point of view, the monopolies have a bigger responsibility than all others. The state-owned companies do not rely on shareholders' value but on the state's responsibility, and - at the end of the day - what the consumers wish.”
This last point raises another question: do bargain-hunting Scandinavian wine drinkers care as much about social responsibility in a distant country as Finnwatch and Heinemann might hope? The monopolies and their Scandinavian customers cannot have it both ways: they cannot have shelves full of inexpensive – by Nordic standards – wines and a clear conscience about the way the people who made those wines are treated and paid.
Do bargain-hunting Scandinavian wine drinkers care as much about social responsibility in a distant country as Finnwatch and Heinemann might hope?
While all the Nordic monopolies are committed to the same amfori rules, it is not clear that they are approaching them with the same level of seriousness. Seven years ago, Heinemann found that “When I did my investigation, all the four monopolies had a joint agreement on CSR – Corporate Social Responsibilty – etc. However, it seemed like Sweden’s Systembolaget didn't honestly care much about workers' health and safety. I do not know a lot about Alko, but to my point of view, Vinmonopolet in Norway took my investigation much more seriously (at least much more than Systembolaget).”
More recently, Finnwatch researcher, Anu Kultalahti, similarly singles Norway out, reporting that it “already has national corporate value regulation. This was clearly seen in our study. The local wine importers had already started to map their possible risks in accountability and problems in their respective supply chains. All was done much broader than previously and based on the new national law.”
More regulation in the EU
National laws are being introduced elsewhere. Germany’s recent Supply Chain law requires businesses with a German workforce of over 3,000 to check whether their suppliers meet environmental human-rights standards. Next year the number of employees will drop to 1,000 and companies that fail to ensure compliance by their supply chain face possible fines of up to €8m ($8.6m) or 2% of their global sales. France and the Netherlands have similar legislation, while the EU as a whole has launched a Corporate Sustainability Due Diligence Directive (CS3D) which is supposed to come into force in 2026.
These initiatives, along with the lobbying efforts of organisations like Finnwatch, are certain to have an impact on European wine distribution in general and the Nordic monopolies in particular – and on their suppliers.
Cause and effects
If South African wineries fails to comply with their demands, will they be delisted? And if so, what will happen to their employees? Kultalahti says that “withdrawing from business co-operation can only happen in cases when the business partner fails to correct the issues or does not show willingness to do so. Still, even in these cases the means have to be responsible in nature such that the labour in the wineries face minimal consequences.” This is easier said than done.
Producers who do comply may have to raise prices. Will that lead to reduced sales? And what if compliant employers reduce their workforce, on the basis of employing fewer people but treating them better? This, too, may have consequences for their domestic unemployment levels.
As the wine industry is certain to discover, however noble one’s motives, working towards social sustainability for all can be far from straightfoward.
