Impact of Cape’s water crisis on wine industry

Cape Town’s wine industry is going to have a tough time arguing for its water rights in the face of the demands of other consumers, which include those seeking potable water or those that provide more essential foodstuffs.

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As the drought now afflicts most of the agricultural and many of the urban sites of the Western and Eastern Cape cuts ever deeper into the fabric of communities, all non-essential consumption is being assessed to determine its relative priority status.

Those who still enjoy access to any water and whose need is commercial – rather than for the sustenance of human life – are already finding themselves in a competitive pitch, either in the court of public opinion or for priority once the water tenders come trundling in.

In this, the wine industry finds itself in a better position than Cape Town’s restaurants, hairdressers and hotels – if only because, for the time being at least, it’s not facing a certain Day Zero. When the taps go dry in the Mother City, the vines won’t die (at least, not overnight) and there will be years’ worth of maturing stock to sustain wine producers (as opposed to grape growers) until the rains come, as one day they will.

However, the Clanwilliam dam (Olifantsdam) level is so low that grape growers will be allocated a mere 17% of their normal uptake. While for such large-scale farming operations the drought spells bad news, their crisis will have a relatively small impact on consumers of fine wines. The price of cask wine would go up, as would the price of those beverages which depend on this low-cost grape-based alcohol. The fruit juice industry would also have to look elsewhere for the concentrate with which they create their particular brand of sugary drink.

The much more serious effect of the water shortage could be in its impact on wine producers – in other words, those who convert the fruit into wine. Wineries are food factories and consume an enormous amount of water. Many were built in an era when water conservation wasn’t front of mind.

In the past few decades planning permission has been linked to waste water management, but even here this has generally meant containing the chemicals and waste removed in cleaning and flushing the tanks, barrels and winery buildings. In a situation which is not unlike the one presently confronting hairdressers and restaurateurs, winery owners may have to find a way of performing the processes which define their economic activity without the supplies of water that they have, until now, taken for granted. Recycling what they can obtain is certainly a key component of whatever strategy they devise – but they need to be more willing (than the Western Cape authorities, for example) to work on the assumption that water shortages are here to stay – at least for the foreseeable future.

The 2018 water crisis is going to have a significant impact on the Cape wine industry. Its primary impact – looking at the whole value chain from vineyards to the distribution of finished wine – will initially be a marginal decline in fine wine availability, a more significant decline (with a commensurate increase in price) in the vin ordinaire sector, with higher average costs per litre produced. These initial shortages may help the industry achieve its objective of a structural re-pricing exercise (though don’t hold your breath). The bigger question of whether the production sector can adjust to an environment in which supplies of water are semi-permanently constrained will depend on the availability of financial resources, as well as a willingness to invest.

There is a final consideration, seemingly unimportant in the face of more pressing needs, which does need to be factored into the industry’s long-term planning: its lobbyists constantly remind government that wine is a key driver of international tourism, which in turn makes an important contribution to the GDP of the Western Cape. If there are fewer tourists because of the long-term effects of the drought, less wine will be sold. Likewise, if the wine industry declines, so may the number of tourists. There will of course be a new equilibrium – but it will come with less employment and more hardship, spread through a population whose prospects already look pretty grim.

Read the full article: DailyMaverick 


 

 

 

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