Round table dialogue discusses troubled wine sector

The Department of Rural and Social Development in the Cape Winelands District Municipality has appointed Phuhlisani to deliver a broad programme promoting farm worker civil rights. The programme combines development of farm worker forums, civil rights education workshops, research led roundtable dialogues examining key issues impacting on the agricultural sector and the lives and livelihoods of people working on farms.


The 3rd November Round Table on local and global trends affecting the wine grape sector in the Cape Winelands was well attended by farmers, wine industry representatives, farm worker forum members, trade unions, NGOs, provincial and local government officials  and elected representatives. 


Greg West, the CWDM project manager opened the dialogue proceedings and welcomed all present. He provided backgroud on the CWDM programme. Rick de Satge of Phuhlisani introduced the objectives of dialogue framed by credible research. He set out some of the guildelines designed to enable people from different backgrounds and with different views and positions to properly listen to one another.


Agricultural economist and Phuhlisani Associate Mike Murray provided an overview of his research into the key trends impacting on the sector. He noted that:


·         46000 permanent agricultural workers were employed in the CWDM as a whole, together with almost 67000 casual workers


·         Viticulture accounts for 30% of permanent agricultural jobs in the District


·         There had been a sharp increase in direct costs coupled with declining profitability in the wine grape sector over the past few years


·         Profitability in the wine sector was dependent on having vineyards of a least 40 ha. 


·         61 % of farmers have vineyards of less than 27ha in extent while 82% of farmers have less than 54 ha


·         In 2010 profitability per ha is only 65% of what it was in 2006


·         Smaller and medium producers are increasingly being forced out of business


·         There had been an increase in mechanical harvesting and that new vineyards were being laid out to accommodate mechanical pruning


·         There had been an extremely steep rise in wine duties levied by government which had escalated from 89 cents a litre in 2003 to R2.14 a litre currently which costs the farmer the equivalent of about R875/ton in excise fees


·         South Africa produced 980 million litres of wine annually of which only 300 million were sold on the domestic market


·         The wine sector is hugely dependent on the export market which is coming under immense pressure from other 'New World' producers and shrinking demand from traditional European markets - a trend further threatened by the current Eurozone debt crisis and the projected impact of related economic austerity measures


·         Supermarket chains increasingly exercised control over the wine trade


·         Overall while the average retail price of a bottle of wine increased by 59% between 2004 and 2010 wine producers suffered a 73% decrease in net farm income


·         A recent Weekend Argus lead story by Henriette Geldenhuys concluded that the wine industry is facing its worst period in 40 years and that many farms are being put up for sale .


·         Farm workers were extremely vulnerable under these circumstances as they were under pressure to produce more for less and when estates went up for sale many faced displacement and eviction


He recommended that: 


·         Municipalities need to engage proactively with organised agriculture and farm worker bodies to listen, monitor and better understand the implications of the evolving situation in the sector


·         More opportunities need to be created for research led structured dialogue to find solutions and prevent unnecessary conflict


·         Municipalities need also to engage more closely with Provincial DoA, DoL and DRDLR to monitor trends on farms and find ways to address the needs of unemployed and tenure insecure farmworkers


In the dialogue that followed all parties acknowledged that the industry was facing hard times. Representatives from all groupings acknowledged the need for better communication in the sector. Poor communication was felt to be a major driver of conflict and difference.


Workers expressed concerns about loss of jobs and casualisation of labour in the sector. A representative from Sikhula Sonke stated that 'our people don't understand that there is such a problem in the sector. If you are lied to a lot then you don't trust'. 


A representative from FAWU invited Phuhlisani to come and present to shop stewards and union members so that the union could better evaluate the current situation in the wine sector and the implications for workers.


A farmer observed how South Africa is now part of the global village and that the current recession is having a profound impact on the industry. He anticipated that the crisis would deepen in the new year because of a glut of unsold wine destined for the export market. He attributed part of the problem to South African farmers having to compete with subsidised producers in European Union while in South Africa our government does not provide any support the industry. He urged a rethink from the side of the government. He argued that the figures presented by Mike Murray did not tell the whole story as they did not factor in finance charges and the cost of debt. Because of the long lead time before farmers secured any return on investment they became reliant on loan finance to carry them through. Finance charges on loans and the rising rate of default was going to result in a further decrease in net farm income and estates going out of business. He drew attention to the cost structure in the industry noting that the agricultural sector is the only economic sector that must also provide the housing for workers - something which was largely unrecognised and unsupported by government which was to the detriment of both workers and employers.


A speaker from the Department of Social Development stated that while he did not want to paint a negative picture there was increasing evidence of social problems related to the downturn in the industry which required urgent and co-ordinated attention.


Neil Hamman a farmer and the current chairman of the Agribusiness Chamber proposed that farmers, workers and unions needed to unite to ensure that at least 30% of the excise tax on wine was ringfenced for the improvement of living and working conditions of farm workers. Currently there was no evidence that the steep increase in excise tax was delivering any direct benefit to workers in the sector.


Representatives of government departments observed the persistent lack of coordination and synergy between different provincial and national government departments and urged better coordination of initiatives to support the vulnerable in the agricultural sector.


In summarising the dialogue session Rick de Satgé observed how workers and farmers had highlighted the complex and globally interconnected nature of the problems and challenges facing the industry. While Phuhlisani had been able to carry out research and start a dialogue this initiative needed to be taken further. He spoke about how internationally such introductory dialogues became the basis for solution finding and that a next step was often to set up a joint study group to deepen understanding and share ideas on what could be done. He highlighted the example of the reinvestment of a portion of wine excise duty proposed during the dialogue as a good example of what could be done if parties started to put their heads together across the traditional lines of division. He concluded by saying that the pressure on the industry would have the greatest impact on the poor and that this would be felt across the district. This should incentivise CWDM to continue to promote research led dialogue to find practical solutions.


After the meeting one of the participants - a landowner and former Dutch member of Parliament wrote to Phuhlisani with his observations on the dialogues.


'I was quite impressed with the meeting and especially the atmosphere in which attendants dealt with the issue at hand. We have a problem and it is not going to go away soon…numbers and figures translate the problems we face, from poverty to crime and deteriorating products, from people losing their jobs and farms getting closed, to a industry that is losing its existing right and fading into the deep. We need to create wealth again, maybe in another part of the industry or in a sister product, but preferably in agriculture as this is and always will be the backbone in every society by the given fact that people need to eat and drink.


Social entrepreneurial thinking by individuals who proved capable of creating wealth and a supporting civil servants group who is capable of bending laws that form an obstacle for swift processes which are needed to turn the tide, should find the solutions together and maybe the group of today can be the glue'.


Daan van leeuwen Boomkamp via email


It’s clear that there is an urgent need for constructive and practical dialogue which results in workable solutions. Hopefully the CWDM in partnership with local municipalities can champion and co-ordinate the process going forward for the benefit of all.


Dialogue on solution finding
Dialogue on solution finding
Posted: 11/8/2011 (2:54:43 PM)

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