by Michael Fridjhon
Despite the slide in the value of the Rand from 10.60 to the Pound in the first four months of 2006 to 14.00 today, South African exporters are less than
upbeat about their prospects for 2007. At least one wholesaler has indicated that it will not renew agreements for the purchase of roughly 4,000 tons of fruit. In an industry in which almost 90% of the growers do not own the equipment to process their harvest, prices are likely to remain resolutely depressed for next year's vintage.
South Africa's largest wine and spirit producer, Stellenbosch based Distell Limited, has announced that it will be experimenting at 'mothballing' select vineyards to reduce farming costs. Though it is modelled on practices which have been applied in Australia, this strategy is new to South Africa. In short, the company will be pruning blocks radically and reducing agricultural inputs in an endeavour to minimise their vineyard investment until the market revives. It believes that inducing a partial 'hibernation' will produce no long term damage and save significant maintenance expense.
While Distell's exports, excluding Africa, for the year to June 2006 have risen by 20%, it is clearly assuming that the red grape glut will continue for some time. By making arrangements to minimise vineyard management costs for itself and for its third party suppliers, it is clearly trying to make the best of a tough situation to keep business relationships intact.
