Wine industry lurches from a new crisis – powerlessness

19 Jan 2023

Stage 6 rolling blackouts couldn’t have come at a worse time for the wine industry: at a critical phase in the harvesting period, during which farmers irrigate vineyards to manage fruit concentration and acids, to ensure better-quality grapes.

To winemakers (and olive producers), it is one of the most thrilling parts of the season, known as véraison – the onset of ripening, which translates into a change of colour and a softening of the firm green berry. At this critical stage the grapes move into the next phase of their growth by ripening, balancing their sugars and acids. It happens during a relatively brief period: the wrong vineyard management can mess up an entire harvest.

And while véraison can happen within a day in a single berry, across bunches of grapes, it can take up to four weeks before a vineyard is ready for harvest.

As the adage goes, the best wine is made in the vineyard. Without the ability to pump water to it, South Africa’s wine industry, which contributes about R55-billion to the economy and supports around 270,00 jobs, is endangered.

Christo Conradie, the manager of wine cellars, agricultural economy and tourism body Vinpro, which represents more than 2,600 South African wine producers, cellars and industry stakeholders, says the wine industry’s real challenge now, is specifically in the vineyards: Eskom’s unreliable rolling blackout schedule, which changes on the spot, makes it extremely difficult to plan accordingly, affecting irrigation.

“When you consider the various regions, sources of water [from streams/mountain water to dams or via canals, where it then must be pumped out again], industry simply needs more ‘on’ time to manage vineyards optimally and secure a good wine harvest,” he explained.

Off the back of a pandemic, during a rebuilding phase, the sector has sustained additional shocks from Russia’s war on Ukraine, shipping delays and an increase in freight costs, forcing it to fight new battles, with rising fertiliser, fuel, packaging, glass and other input costs.

At the moment, cash flow is a big concern for the sector, with sharply rising running costs.

There’s a lame joke in the wine industry: “How do you make a million dollars in the winery business? Start with $2-million.” Today, running costs are crippling producers and not many farms can absorb the additional expenses.

“Producers might be well equipped in terms of solar panels and maybe generators, but if you’re sitting with a quality product it is going to be challenging. It’s difficult.”

Some farms might be braving things dryland style, but the majority rely on irrigation. The next four weeks are critical to ripen their product to ensure quality.

To her credit, Agriculture Minister Thoko Didiza has met with industry about mitigating the situation, he said. “The minister was keen to understand the direct impact which load shedding has had, as well as the operations affected by energy loss [i.e. loss of irrigation, harvesting, manufacturing/processing, fulfilling orders, cold chain interruption]. Of interest was also the estimated direct cost associated with load shedding [i.e. additional fuel costs to run generators], and possible shortages of agricultural products, because of load shedding.”

Those engagements were unsurprisingly heated, as attendees relayed the enormous negative impact — from financial sustainability and economic growth, to labour and potential job losses — and suggested some interventions.

But the government, being the government, is in no hurry to act, as Didiza engages with her counterparts, the ministers of trade, finance, energy and public enterprises, and a smaller task team is expected to report back within three weeks. That will be at the end of this critical period and time is running out.

What the industry’s asked for:

For Eskom to determine peak periods across all the commodities, in order to inform blackout stages and the up-time hours;

To determine the flexibility or system intelligence of Eskom;

An adjustment in the diesel rebate to help offset some of their running costs;

An exemption during peak periods, as agriculture is an essential service/industry;

Ring-fencing higher stages of blackouts for agriculture. The sector says many commodities can cope with Stage 3, but anything higher makes it extremely difficult (affecting irrigation, packing, harvesting, cooling and exports). They say there might be scope to rearrange schedules in a way that will reduce consumption but make it more predictable, which will allow players to plan better for outages;

Exclude all port activities from rolling blackouts;

Determine the potential impact of blackouts on international market access, product protocols and the importance of cold chains;

Assess the risk to safety and security;

Determine the factors that prevent farmers from generating their own electricity;

Explore financing options, through subsidies or blended finance. A large portion of producers are already cash-strapped and can’t afford alternative energy; and

Agbiz, the Agricultural Business Chamber of South Africa, has compiled an online survey to fully assess and quantify the impact of the blackouts on the sector, which includes the financial impact, the risks to security and the availability of food. It is encouraging all members to fill in the survey. Find it here.

In response to the crisis, the Department of Agriculture, Land Reform and Rural Development issued a statement on 13 January, recognising that the situation is “challenging”.

“Despite the current challenges, the agricultural industries will continue to ensure that availability of food and fibre is assured,” said Didiza, acknowledging the difficulty faced by businesses and thanking the leaders for their “heroic efforts to supply food to the country under challenging conditions”.

Tough ride

Rijk Melck, whose family has been associated with the Muratie Estate in Stellenbosch since the 18th century, said the energy crisis spares nobody. “[We are] in the same boat as most of South Africa’s wine producers. As a family-run business, the power outages come as a huge source of frustration to all involved. The inability to irrigate our site-specific vineyards at the optimum time is exasperating, and I am afraid the blame must be laid at our national energy supplier’s door. Renewable energy sources are the future, but that unfortunately is a long-term plan. Additional costs incurred by running diesel generators for up to six, even eight hours a day [if cable theft occurred during an outage] obviously inflates costs. We cannot expect the consumer to absorb this, so we are in for a tough ride.”

On the West Coast, Groote Post Wines is feeling pinch as the outages are forcing them to continuously readjust production and vineyard management. Peter Pentz, communications manager at Groote Post, said wineries such as theirs have had to rely on generators to keep production going, despite rising fuel prices in South Africa.

“The costs of running a generator are extremely high, which significantly raises production costs.”

This is not a cost that the wine estate can pass on to the consumer, because it is a highly competitive industry, which means costs must be kept low.

Producers are facing difficulties not only in the cellar, but also in the vineyards, and where vine irrigation, a continuous supply of water, is required.

“Eskom has to get its ducks in a row,” Pentz said. “Alternative energy production, such as solar and wind energy, are viable options, but the initial investment is prohibitively expensive. That is still not the final solution, and the onus is on the national energy supplier to sustainably supply us with power.”

Adding to the stress is the fact that it coincides with the height of South Africa’s tourism season, as local and international visitors stream into the winelands — requiring not only food and accommodation, but also air conditioning, running water and other amenities.

Wine tourism is an integral part of the local tourism industry: A 2019 FTI Consulting report found that it directly contributed R2.4-billion to GDP and employed 12,878 people in the wine industry (5,809 permanent employees, 4,414 casual employees during peak season and 2,655 casual employees during the rest of the year). It also contributes almost 15% of cellar turnover.

One person’s challenge is another’s screw-up. And farmers are running out of options. BM/DM

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