SOUTH AFRICA EMPOWERMENT – Positive Partnerships

South Africa’s black economic empowerment strategy has been slow in addressing equality in the country’s wine industry, However, recent developments show that progress is being made. By Linda Stafford

Mbhazima “Sam” Shilowa is the black oenophile of note in the South African government. Along with three friends – two of them black economic empowerment (BEE) bigwigs – the Gauteng (greater Johannesburg and Pretoria) premier recently released the second vintage of outstanding red blend Epicurean.

The wine, which has achieved iconic status along with Meerlust Rubicon, Ernie Els and  Rustenberg John X Merriman, and sells for a steep R250 (£18) a bottle, was made from sourced Cabernet Sauvignon and Merlot grapes in the cellars of Rupert & Rothschild (R&R) Vignerons. R&R is a joint venture between the Cape’s leading family (second-generation Johann Rupert is heir to a tobacco fortune and executive chairman of leading international luxury goods empire Richemont) and French banking family the Rothschilds.

Says Shilowa: “We are very happy with the way the wine has gone. We selected both blocks and barrels. When it came to blending, all four of us were present.”

Impressive stuff – and proof that wine is becoming a status symbol among the ruling elite. But that doesn’t alter the fact that the investors who really count in a post-apartheid environment – ordinary previously disadvantaged South Africans (or people of colour) – have been slower to come to the wine party. Especially at the quality end of the market.

There is only one black SA business bigwig who has invested in the winelands: Tokyo Sexwale, a former political prisoner (with Nelson Mandela) and politician and now chairman of diversified mining group Mvelaphanda Holdings. But though he owns Oude Kelder, a wine farm in Franschhoek, as well as a substantial share in Constantia Uitsig, he has so far shown no interest in the winemaking sides of the properties.

“BEE has been painfully slow in wine,” says John Platter, founder of SA’s most definitive wine guide. “About 4,500 whites own virtually all the 110,000-hectares of national vineyards, while the 300,000 who provide labour are still coloureds and blacks.”

The SA Wine Industry Trust (SAWIT), established in 1999 to advance the transformation of the wine industry and promote SA wine and spirit exports, has had some success on the BEE front. Platter, a former trustee, says: “During my three-year stint, we witnessed a sea change in the attitudes of the wine establishment. Though anxious and uncertain about BEE, many whites are now exploring partnerships and mentorships.”

A landmark for SAWIT in 2003 was supporting BEE consortium Phetogo in acquiring 25.1% of KWV, the former government-linked cooperative that is now SA’s largest exporter of wine and brandy. Phetogo, a grouping assembled by SAWIT, including thousands of winelands workers, now has a significant stake in a growing wine industry; its shares in KWV have appreciated by more than 80% since the deal was concluded.

“SAWIT’s resources, about R240 million (£17.4m) earmarked for transformation over ten years, were never going to stretch to altering land-ownership patterns. Try buying just two decent-sized, successful wine farms for that amount,” says Platter.

But the bold steps of Richard Astor and Mark Solms (see page 90) – who have ensured workers on three Franschhoek wine farms will eventually own one of the them – may inspire others to follow suit. And, slowly but surely, the land-ownership patterns in the winelands are bound to become more inclusive.

SAWIT’s Phetogo-KWV deal was the flagship. But the trust also tried to encourage a range of projects, including mentorships and partnerships. And from a dozen or so pioneering partnerships in the 1990s – such as Fair Valley at Fairview, Thandi at Paul Cluver, Klein Begin at Nelson’s Creek – the pace is now quickening. For instance, workers on the Diemersfontein farm in Wellington produced a richly spiced Thokozani Shiraz Mourvèdre 2004.

Call for quality
All-black groupings are forming, too, mostly as businesses that buy and market wine, or create their own brands and labels (without necessarily purchasing wineries and vineyards). SAWIT also tries to help by sponsoring their participation in trade shows and so on.

But the sad truth about BEE wines is that many are re-labelled old stock, purchased from co-operatives that couldn’t sell them. “Their BEE credentials tend to exceed the quality of their wines,” says Financial Mail wine writer and industry commentator Neil Pendock.

Still, there are some glittering examples of BEE deals that work. For instance, under a mentorship deal with winemaker Jeff Grier from Stellenbosch’s Villiera, the Rangaka family has produced wines under the M’hudi (Setswana for “harvester”) label.

Then, too, maverick Bruce Jack of Flagstone in Somerset West entered into a joint venture with four black teachers in the Western Cape to produce a wine called Ses’fikele (“We have arrived”) aimed at emerging middle-class consumers. “They own the brand,” says Jack, “but we will sell and distribute it. Our feeling is that BEE needs a model brand, and that this is it.”

The maiden Ses’fikele Rainsong Chenin Blanc 2006 was, says the Financial Mail’s Pendock, “a value-for-money Chenin that showcased the primacy of fruit in SA’s most widely grown cultivar”. He was even more complimentary about Ses’fikele Matriarch Shiraz 2004, saying that is set “a quality benchmark for SA empowerment wines”.

Ses’fikele may be just what is needed to change the impression that the wines produced under most BEE initiatives are generally of a poor quality.

© db June 2007