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South Africa: Fragile Flower of the Wine World
By Michael Franz
Sep 30, 2008
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I'm writing this column on the heels of a trip to South Africa, reflecting on a week of observation that leaves me doubting that any wine producing country in the world can match South Africa for fascination--or fragility.

I've followed developments in South Africa as closely as I could since first visiting nearly a decade ago, and during that time have seen the country's wine industry knocking on the door of vinous excellence while also glancing furtively over its figurative shoulder at the possibility of social and political disaster. 

If pressed to identify a single wine-producing country from which a conscientious consumer should consider buying wine in the hope of helping a place in peril, South Africa would be my choice.  However, there's no doubt that the wines are extremely attractive when considered solely on their vinous merits.  I tasted some truly extraordinary wines last week as well as some amazing values that I'll be telling you about over the course of the next month.  But I also saw and heard some pretty disturbing things that need to be addressed as well.

This column--the first of two on South Africa--will consider some of the perplexing aspects of the current situation in South Africa, most of which relate to social, political and economic aspects of the country, but which nevertheless have a real bearing on prospects for the wine industry.

A few readers may be aware that, aside from my activities related to wine, I also happen to be a professor of political science, and I could certainly understand if they might wonder whether I was wearing the wrong hat when writing this column for a wine review website.  In my defense, I'd note that the first two addresses in the opening seminar at last week's Cape Wine 2008, South Africa's bi-annual national wine trade show, were delivered by an economist and a political analyst, whose tasks were to assess the country-wide challenges that confront the wine business.

The fact of the matter is that South Africa is the one country in the world of wine that really cannot be understood adequately except in the much broader context of its nearly unique social, political and economic condition.

*  *  *

Half an hour's drive almost anywhere around Cape Town provides a study in the broader national contrasts that are reflected in the wine business:  One sees spectacular natural beauty, impressive commercial progress, shockingly unequal distribution, and heart-rending squalor.

I encountered all of these on the incongruous half-hour drive that took me, after arrival at the airport, past an unbelievably huge, desperate-looking "township" (or "slum" or "shanty town," depending on your preference) to my beautiful new hotel.  The automatic revolving door that twirled me out of the street and into the gorgeous lobby of Cape Town's Westin Grand seemed to usher me into an untroubled enclave of modern luxury--but that sensation was short lived.

After checking in, I headed up to my room on an elevator ride that provided a little study in South African contrasts.  The ultra-modern elevator car could only be operated by inserting my magnetically-coded room key into a device that was obviously intended as a barrier to crime, which South Africa has in frightful abundance.  There are 50 murders per day on average in the country.  I would also find a card-operated lock serving a partition that blocked the way from the elevator landing to the guest rooms on my floor.

The upward ride showed that the elevator was not an impervious barrier against potential trouble so much as a permeable membrane through which trouble could be seen.  After fumbling with my key card for a moment to get the elevator moving, I noticed a small TV monitor above the control panel.  It was tuned to CNN, which might have offered a reassuring reminder of home to a tired traveler if not for the image of a visibly distressed man above a caption reading something like, "Breaking News:  South African President Ousted by His Own Party."

Sure, it was a matter of coincidence that I arrived just in time for these events, but the political story that broke as I landed here shows the precariousness of the place.

To make a long (and ongoing) story short, President Thabo Mbeki was removed from power by his own party, the African National Congress (ANC), shortly before the end of his second term.  That would have been his final term, though only because Mbeki's attempt to revise the constitution to permit him to continue in office had failed.  Mbeki's removal occurred  largely at the behest of ANC President Jacob Zuma, Mbeki's principal rival, after a court found evidence indicating that Mbeki had improperly used state agencies to dig up dirt on Zuma in an earlier legal attempt to oust him on various counts of racketeering, money laundering, corruption and fraud.  Mbeki's attempt to do away (politically, that is) with Zuma ended in failure when the charges were thrown out on a procedural point (unrelated to their validity) on September 12.  Zuma's tit-for-tat effort to shove Mbeki from office appears to have been successful, and Zuma himself is widely favored to assume the Presidency of the country in elections early next year.

Sound like a mess?  It sure looked like a mess to me, and respected Archbishop Desmond Tutu characterized the affair as one of personal revenge.  The incident seems to recall the sort of factious, personality-based power struggle that often roils the political waters in developing countries. 

And yet, it would appear that power has changed hands without a drop of blood being shed, which is quite often not the case in the "Third World."  Again and again, this is what one sees in South Africa:  Potential disaster that doesn't quite result in actual disaster.

What does all of this have to do with wine?  Think about it this way.  Considering the performance of South Africa's wine industry since 1994 (when it returned to international markets upon the election of Nelson Mandela as President), we could offer the following summary:  Potential excellence that hasn't quite resulted in actual excellence.  But looking ahead, will South Africa realize its potential and make the grade as one of the world's premier producing countries?  The answer to that question will probably come down to politics as much as to matters of climate or technical prowess.

That reality makes South Africa virtually unique in the world of wine, as the one country where vinous progress is--at least arguably--principally imperiled by politics.

Argentina could perhaps be viewed in this light as well, but South Africa currently looks like a much more problematic case.  This is especially true with South Africa sitting adjacent to Zimbabwe, which is an actual disaster in terms of race relations, political infighting, hyperinflation and economic collapse.  Life expectancy in Zimbabwe has declined since 1990 from 60 to 37 for males and 34 for females, which is the lowest in the world.

Considering South Africa's glaring inequalities of income and wealth, the most distressing aspect of Zimbabwe's free-fall would be the process of 'land reform,' a euphemism for what has often been expropriation--at gunpoint--of white-owned farms without compensation.  Whatever one thinks about possible justifications for these widespread incidents, which have reportedly been encouraged by President Robert Mugabe's notorious government, they have clearly been ruinous for Zimbabwe's economy.

The possibility of similar actions in South Africa does not seem terribly high, since there is no South African parallel to an empowered demagogue like Mugabe.  And yet, the possibility is not so low that lenders do not figure it into their risk calculations.  Interest rates approaching 15% in South Africa are nearly three times as high as those prevailing in Western countries, and they have seriously hampered advancement in many industries--including the wine industry.  The specter of instability--or, in the worst case, "land reform"--is also inhibiting foreign direct investment in South Africa, and one sees far fewer foreign-owned or joint venture wine enterprises there than in Argentina.

What will determine whether South Africa continues to develop in a relatively moderate and stable manner or whether it will lurch toward trouble akin to that seen next door in Zimbabwe?  It seems likely that this will depend largely on whether there exists a prevailing sense that things are getting better, that they are getting better at a reasonable pace, and that future prospects are better if change occurs incrementally rather than through something like a revolution.

Interestingly, the statistical indicators bearing on these factors can be viewed from two perspectives that have always characterized my view of South Africa since first visiting:  Things are pretty bad, but they are getting better pretty impressively.  For example, according to prominent South African political analyst J. P. Landman, poverty stands at a (shocking, in my view) 41%, but it has fallen dramatically from 51% in 1994.  Likewise, 23% of the population lacks public sanitation and 28% lack electricity, but those figures are down from 1994 percentages of 50% for sanitation and 49% for electricity.

And there's more good news.  Personal income has risen by 27% since 1994, and 2.6 million houses have been built for the poor.  Employment levels have improved markedly.  In 1995, only 39% of those between ages 15 and 64 were employed, but today that figure stands at 44%, which is more impressive than it may look at first glance, taking into account population growth levels that have been raised by an influx of refugees from other African nations.

Economic growth has been running at a pace of about 5%, which is strong in the abstract and particularly strong in the African context.  However, according to Dennis Dykes, Chief Economist for Nedbank, levels are likely to fall to 3.5% in 2008 due to problems caused by global prices for food and energy.  Nevertheless, growth would be slower still were it not for the strong performance of the agricultural sector.

Dykes notes that wine has been a particularly important commodity in terms of South Africa's export earnings, and that fact enhances the odds that the wine industry will be seen as an engine of progress rather than a holdover from the era of enforced inequality.  Another promising factor is that the wine industry employs 100,000 members of "historically disadvantaged groups," which is well over one-third of the 257,000 total employees.  Finally, South Africa's Black Economic Empowerment initiative has been taken up within the wine industry under the auspices of the South African Wine & Brandy Company (SAWBCo) and, as a partner, the South African Wine Industry Trust (SAWIT).  An effort is underway to assure that a more representative ownership structure will emerge in coming years.

That effort has already enjoyed some notable successes.  According to the Wines of South Africa website, 'The historical Boschendal estate changed hands at the end of 2003 in a black empowerment deal valued at R323 million [about $40 at current exchange rates], putting it at the forefront of BEE initiatives, and wine and spirits producer KWV Limited signed a deal with Phetogo Investments, a black empowerment consortium, last year.  Phetogo acquired a 25.1% stake in KWV, which supports several empowerment projects, sending out a powerful message for transformation.'

However, the last word in this column must be that continued wariness is advisable on account of the fact that actual progress has been negligible in making the wine industry look like an exemplar of progress.  According to the 'The Wine Industry Transformation Charter,' adopted by the South African Wine Industry Council in July of 2007, "…effective black involvement in the industry remains minuscule, with less than 1% of the land under wine grapes under black ownership, management or control."

As long as that remains the case, it will be impossible to consider the future of South Africa's wine industry without a sense of concern--if not foreboding.

On my way to the Cape Town International Airport last Saturday, after visits to the gorgeous, gigantic Lourensford and Vergelegen estates, I drove past an impossibly huge slum of makeshift huts that houses 1.2 million South Africans.  The contrast in impressions was almost violent in its impact upon me, and I flew home with a sense of unease that was nearly as strong as the one with which I arrived.

*  *  *

I'll devote next month's column to an assessment of the current state of South Africa's wine industry based on my recent tastings.  Over the course of the next month, I'll also publish dozens of reviews of the best values and top performers of the 300+ wines that I tasted in South Africa.  If you have questions or comments related to this column, please write to me at mfranz@winereviewonline.com