SA vineyards make African inroads

South African wine producers are trying to capitalise on the booming middle-class market in Africa.

But not many seem to have developed strategies to pounce on opportunities presented to them, according to Mike Ratcliffe, owner of the Warwick wine estate in Stellenbosch.

Anthony Hamilton Russell, owner of Hamilton Russell Vineyards, prefers to say the booming African middle class is taking advantage of the spectacular value and ever-improving quality to be found in the South African wine industry.

"There is without doubt a growing interest in wine, which is benefiting both consumers and the industry," Russell said.

The past decade has seen improved political stability and economic reforms resulting in average real gross domestic product (GDP) growth of more than 5% a year on the continent.

The African continent is now estimated to have a collective GDP of $1.6-trillion (R17.5-trillion) and $860-billion in combined consumer spending. Collective GDP is expected to be $2.6-trillion and consumer spending $1.4-trillion in 2020.

In the past decade, African economic output more than tripled. According to The Economist, in eight of those 10 years Africa grew faster than East Asia. Research shows six African countries were among the 10 fastest-growing economies in the past decade. It is forecast that seven African nations will be among the 10 fastest-growing economies over the next five years.

So there are plenty of opportunities for wine producers.

The African wine market features strongly in the ranking of South African export statistics and growth strategies.

Packaged export volumes to Kenya were recorded at 4.3million litres last year, up from 1.8million litres in 2008. Bulk exports fell from 20820 litres in 2008 to zero last year. It is estimated that 90% of Kenya's imported wines come from South Africa.

In Nigeria, packaged export volumes rose to 3.2million litres last year from 2.2million litres in 2008.

Packaged export volumes to Angola dropped from 1.4million litres in 2008 to 700000litres last year. Bulk export volumes decreased from 23.1million litres to 48205 litres in this time.

Matome Mbatha, head of marketing for Africa at Wines of South Africa (Wosa), said the increase in bottled wines and the decrease in bulk exports was due to consumers finding good quality in South African wines. He commended individual wine producers for working hard to market their brands across the continent.

Other key markets are Tanzania, Uganda, Mozambique and Ghana. Red wine is the most favoured.

As Ratcliffe points out, South African wine producers do not own the market so they have to compete against wines from the whole world. "Luxury brands are starting to make inroads [into Africa]," he said.

Distell, owner of Nederburg, Graça and Two Oceans wines, has earmarked more than R500-million for investments into a number of African countries. Its African operations achieved a 20% increase in revenue for the year to June, contributing 49.6% to revenue.

Wade Bales, owner of Wade Bales Wine Society, said there was a strong trend among consumers moving from beer and spirits to wine in line with aspirational lifestyles that had emerged with improved economies, upgraded infrastructure and exposure to lifestyles enjoyed in more developed markets.

Bales said the biggest opportunity wasthrough the confidence large South African retailers had shown by expanding their presence in the rest of Africa. Urbanisation and rising affluence had fuelled a consumer boom, with a rising middle class demanding quality brands and modern goods.

Elsewhere in Africa, Shoprite is now in 16 countries with 192 stores, Pick n Pay has 95 stores in eight countries and Massmart has 28 stores in 11 countries.

Over the past decade, Wosa has been actively encouraging South African wine brand owners to engage with African consumers. Initiatives to boost the sale of South African wine this year include missions to Uganda, Angola and Ghana.

Bales said some challenges that South African producers faced were route to market issues such as cold storage, which would undoubtedly delay many initiatives. Other issues were piles of red tape in some countries as well as the costs of doing business and, finally, harmonised systems to ensure the free flow of goods into markets.