Like many industries in South Africa, the wine market has seen huge growth since the end of apartheid, as the resumption of trade relations with the rest of the world encouraged the export of wine.

In 1994, South Africa exported a total of just 50m litres of wine, but by 2007 this figure had jumped a massive 500% to more than 300m litres. Of course, this rate of growth was indicative of the lack of an export market in the early nineties, however exports of wine still grew a healthy 15% last year.

By far the largest consumer of South African wines remains the UK, which gulped down 87m litres in 2007 – nearly 30% of the country’s total exports. Germany and the Netherlands were the next biggest markets, importing nearly 60m and 30m litres respectively.

While these three countries currently make up nearly half of South Africa’s export market, interest from other regions is also continuing to grow, lessening South Africa’s reliance on these key markets.

Can SA keep it up?

Robin Thomas, information services manager at SA Wine Industry Information & Systems (SAWIS), suggests that the 15% growth in exports last year is sustainable, as the wine industry is increasingly diversifying beyond its core markets.

There is still further to go, however, says Wines of South Africa's (WOSA) Su Birch, with untapped markets like the US, the world’s largest importer of wine, consuming a relatively small amount of South African produce.

“There are potential new consumers for our wine in India – which is still a small market – South Korea and China, but the biggest potential is in the USA,” says Birch. She also notes that “there is potential in Africa” with Angola, Kenya and Nigeria climbing up the list of South Africa’s biggest importers.

Cracking the American market could be within South Africa’s grasp too, as the declining US dollar is making traditional wine imports from the likes of France more expensive for Americans, who are already tightening their purse strings.

On the World’s stage

As of 2005, South Africa was the world’s ninth largest producer of wine in terms of overall volume production. A global study by Vinexpo has also predicted that South Africa, alongside a resurgent Australia and Chile, will increase production significantly over the next few years.

SAWIS is predicting a 7.7% increase in the total 2008 harvest to 787.2m litres, up from 730.4m the year before, while WOSA confirmed earlier this year that South African wine exports grew 35% in the first quarter, following a spike in bulk wine sales.

Interest in South African wines is not just coming from overseas consumers; a growing number of foreign investors are also considering wine farms as a good investment. Wine farm owners in the Western Cape now hail from Germany, the UK, US and Switzerland among others.

One example, Laibach Wines in Stellenbosch, was originally bought by German businessman Friedrich Laibach and is now run by his daughter Petra Laibach-Kuehner and her husband Rudolf Kuehner.

“My family bought the wine farm which is now known as Laibach Vineyards in 1994, ten days before the elections. We thought it would be the right time to invest in a property within the Western Cape Region,” says Petra Laibach.

Jean-Vincent Ridon of Signal Hill, South Africa’s first inner-city winery, also chose South Africa to start making wines rather than his native France. “Setting up a new project, or aiming at a new standard is somehow impossible in a country where almost everything has been tried already,” he says.

Lifestyle also played a part in the decision for Ridon. “After considering Chile, Argentina, and Australia, South Africa was offering the best potential for my projects, a wonderful quality of life for my children, and the same time zone as Europe,” he says.

A good investment?

While not cheap, for some people the idea of running a wine farm and owning a brand is a long-held dream. So with production growing, and the thirst for South African wines increasing in export markets, are the winelands a good place to invest?

Petra Laibach believes a wine farm can be a profitable investment, but notes that you have to invest a lot of money first. “It can be profitable, but you will always have to invest a lot of money into the uplifting of your vineyards as well as into cellar technology. Otherwise you won't be able to compete with the top shots.”

“In the long run I think an investment in a wine farm is a good investment opportunity depending on the right spot; Stellenbosch will always be a special place,” she adds.

Su Birch remains more cautious. “Wine farms are mostly not very profitable. Especially if you have to buy the land,” she says, noting that many are choosing to offer additional services to bring in extra revenues.

“Cellar door sales are the most profitable sale and restaurants are an added attraction to get people to the farm, and in many cases, an added source of revenue,” says Su Birch.

Jean-Vincent Ridon also notes that land cost is a negative factor in South Africa. “The price of the land in South Africa is for the moment still too expensive, due to various structural factors, so it is not always a great opportunity. That being said, I have managed to get a few French wine people investing in South Africa.”

In some cases wine estates have expanded to include a whole range of attractions. Spier, in Stellenbosch, has the traditional wine farm and restaurant, alongside a Moyo restaurant, a cheetah outreach park, an open-air theatre, swimming pool and a spa.

There are three types of projects that can make money, says Ridon: “the full integrated offer, like Spier, the world’s big brands, or the small rare hand-crafted project like Signal Hill.”

Quality comes first

Of course, what remains most important though is the quality of the wine being produced, and that is something that is continually improving.

“South African wines are growing in popularity as our quality improves and our wines get better known,” says Su Birch. “We are also influenced by world trends and it is good news for us that the global over-supply of wine is reducing, due to poor harvests in Australia and Europe.”

It is not just here in South Africa that wine producers are recognising the quality of the country’s red, white and rose wines. In fact, at the 2008 Decanter World Wine Awards, 13 vintages from South Africa were awarded Gold medals.

Perhaps the most fitting testament to the quality of South Africa’s wines is that of a French winemaker. Jean-Vincent Ridon, whose family has a history of wine making, says that “on the quality side, South Africa can definitely compare with pride with the rest of the world.”

We can’t rest on our laurels though, says Petra Laibach. “The reputation of the top South African Wines is already very good, but there is a stiff competition on the world's wine markets and the hype for South Africa has cooled down a little bit.” She adds, however, that “South Africa’s top producers can match the biggest wine countries.”

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