T Didiza: Opening of Cape Wine 2006

4 April 2006

Mr Programme Director I am told that over 340 South African wineries
including 18 black-owned brands are participating in this biennial exhibition
that is attracting wine buyers, sommeliers, importers and journalists from
every continent. To show the paramount importance of this event I have also
been reliably told that among the delegates there are representatives from all
the major supermarket chains in the United Kingdom (UK), (still South Africa’s
biggest export destination, as well as strong contingents from Europe, North
America, Africa and Asia.

The wine industry currently contributes R163 billion a year to the South
Africa’s Gross Domestic Product and employs 257 000 people either directly and
indirectly while an additional R4.2 billion is generated annually through wine
tourism. This country is known for its wealth in biodiversity. It is the same
diversity that gives rise to complex, distinctive and varied wines from which
we have become known and which provide the basis for our positioning “Variety
is in our Nature” that we use worldwide to express our uniqueness.

The Government is committed to implement the wine and spirits agreement to
the fullest extent. However, there are still some issues to be resolved before
this can happen. These relate to the question of trademarks, geographical
indications and traditional expressions. In addition there are some technical
issues that need to be resolved. Government is in consultation with its
European Union (EU) counterparts and hopes to find a solution to these issues
during the course of the year. However, at this stage it is too early to
predict as to when these discussions will be finalised. We are in constant
consultation with industry stakeholders keeping them updated on progress. We
remain committed to striking the best possible deal for the South African Wine
Industry.

The ability to be competitive in the global environment is critical for the
long-term survival of the South African wine industry. The competitiveness of
the wine industry in South Africa, however, will only increase and can only be
sustained when the business environment for participants in the industry is
dynamic, innovative, stimulating and intensely competitive.

On the other hand the wine industry will have a negative trend in
competitiveness if the local business environment detracted participants from a
market focus, a commitment to innovation and passionate productivity.

These are some of the findings of a study into the “competitiveness of the
South African wine industry”. Dr Johan van Rooyen, CEO of the South African
Wine & Brandy Company, and Dirk Esterhuizen of the Agricultural Business
Chamber, and a PhD student did the study from the University of Pretoria. This
study was partly funded by grants from ABSA: Agri-business and Land Bank. The
findings of this study were recently discussed by the Wine Economic
Intelligence Network (WEIN) of Winetech.

Using approved economic measuring techniques and data on the South African
wine industry recorded since 1961, the study indicated a sustained improvement
in competitiveness, especially since 1990 when the industry was deregulated and
was also allowed to re-enter the international markets.

It is clear, the study notes, that South Africa’s wines are internationally
highly competitive with the industry showing a sustainable and increasing
positive trend over recent years.

The wine industry in South Africa also shows positive trends in
competitiveness in the long run and it should therefore not easily lose its
competitiveness status in the near future if its dynamic ability to continue to
trade is sustained.

It is interesting to note that the deregulation of the South African wine
industry, which coincides, with the introduction of South Africa’s first
democratic government in 1994 provided the basis for a dramatic increase in its
competitiveness status.

According to Van Rooyen and Esterhuizen, it is clear that the wine industry
in South Africa can be classified as one of the winning industries together
with fruit products. The National Agricultural Marketing Council’s (2005)
report on the competitiveness of the agricultural sector in South Africa
confirms this finding and stated that the wine sector has been one of the big
success stories in South Africa agribusiness over the last 10 years.

“An interesting but highly relevant question in the current South African
environment relates to the issue of Black Economic Empowerment (BEE) and its
relationship to competitiveness,” the study stated. “From the policy directives
as set out by the Broad-based Black Economic Empowerment legislation, the DTI
Codes of Good Practice on BEE and from the positions already taken by the South
African wine industry in the process of drafting a Wine-BEE Charter and
Industry Scorecard, it is held that the selected BEE strategy for the wine
industry should primarily focus on entrepreneurship, performance and access to
achieve long-term sustainable growth while broadening the participative
capacity of historically disadvantaged groups to compete in a successful wine
industry. In this context, BEE could be viewed as:

* A major strategy to achieve sustained economic performance; and as
* A set of particular targeted outcomes (as per the wine industry BEE
scorecard) to be achieved through competitive performance.

“In this view, no inherent conflicting positions should thus necessarily
emerge between BEE and sustained economic growth and competitiveness in the
wine industry.

It is rather a challenge of strategic balance and business development
tactics to be followed to achieve these two imperatives required for a stable
and successful South African wine industry.”

For your information ladies and gentlemen this report was compiled by Ms
Emile Joubert. In conclusion, Mr Programme Director, I wish you all well in
your deliberations and hoping that these will result in positive outcomes for
the industry.

I thank you.

Issued by: Department of Agriculture
4 April 2006
Source: Department of Agriculture (http://www.agric.nda.za)