How Globalisation and Competition Policy Inhibit Poverty Reduction: the Case of the South African Wine Industry

After more than a decade of deregulation and incorporation into global markets, access to the South African wine industry and ‘empowerment’ remain difficult. The government’s land reform policy notwithstanding, it is very difficult to gain entry into the industry, especially on the upstream side. Given the capital, technology and knowledge intensity of the industry, it is not easy to establish new farmers on the basis of a market driven land reform policy. As the recent KWV ‘Black Economic Empowerment’ (BEE) deal has demonstrated, it is easier to create equity on the downstream side. Stiff competition has followed in the wake of deregulation, both in the domestic and in international markets. This has created ‘winners’ and ‘losers’ at the grower and cellar level – especially in the cooperative sector. Those who have ‘missed’ the transition and are unable to produce grapes/wine for the premium market face the danger of bankruptcy or mergers. Market pressures and stringent supermarket standards are exacerbated by government attempts to regulate employment conditions, tenure arrangements and labour relations in agriculture. For many farmers the combined effect has meant an increase in labour cost, to which they have responded in a variety of ways. Although aggregate employment in the wine industry may have increased, the general trend is towards the downsizing of the permanent on-farm labour force and the increasing use of casual and contract labour instead. The latter are much worse off than the former, having no secure employment or share in the fringe benefits provided by the farmer. The winners amongst labour are the permanent workers who have managed to retain their jobs on the farm. As part of the ‘core’, they have access to reasonable housing, earn the statutory minimum wage and become the recipients of new skills deemed necessary in the ‘quality era’ of the wine industry.