Bad news for South Africa’s wine industry

South African wine exporters are set to be significantly impacted by United States President Donald Trump’s tariff policies, with experts warning about higher costs and narrower margins.

Verto South Africa’s country director, Cornelius Coetzee, explained that South Africa plays an important role in the global wine trade.

South Africa is one of the top three wine export destinations in the world, and the United States market has been vital for producers looking to diversify beyond Europe and Asia. 

However, new tariff policies in the world’s largest economy could threaten the local wine sector’s competitiveness and profitability.

This comes after Trump announced severe reciprocal tariffs on nearly 60 countries in early April, with South African goods being slapped with a 31% levy.

Trump has since walked back this policy decision, implementing a 90-day pause on these reciprocal tariffs but keeping the 10% flat duty he announced earlier this year.

Coetzee warned that these new tariffs, aimed at protecting domestic producers, are expected to increase costs and narrow margins for South African exporters.

This is concerning for the local wine industry, which is already facing several homegrown challenges, including rising operational expenses, foreign exchange (FX) volatility, and regulatory challenges.

Wine is one of the country’s most valuable export markets, and South Africa is the world’s ninth-largest wine producer.

The local wine industry boasts more than 2,600 wineries and exports of about 10.6 million hectolitres, reaching over 100 countries. 

While this makes South Africa one of the most important wine producers in the world, it also means that the local wine export economy is deeply exposed to global trade dynamics.

Therefore, as the United States market may become more expensive to serve profitably, Coetzee warned that local industry stakeholders will need to make strategic choices.

This includes balancing traditional trade partners with emerging markets and adopting solutions that increase financial resilience.

Under pressure

Coetzee said that while international demand remains strong, particularly in the UK, Germany, and the US, local wine producers face ongoing financial hurdles.

He outlined the following factors that are putting significant pressure on local wine producers and exporters:

• Foreign exchange volatility: Significant shifts in currency values, such as the 15% appreciation of the British pound against the dollar in 2024, continue to impact profitability on unhedged trades.
• Tariffs and trade barriers: Canada imposed a 25% tariff on US wines earlier this year, and the US is now following suit with protectionist measures. This means exporters are navigating a more fragmented and politicised global trading environment.
• Rising operational costs: Input costs such as barrels, bottling materials, and equipment remain high, and the weaker rand, while boosting export competitiveness, increases the cost of essential imports.
• Payment inefficiencies: Traditional cross-border payment systems remain slow and costly, affecting cash flow and making it harder to manage international distributor relationships efficiently.

“Shifting currency values, compliance obligations, and payment friction can often matter more than demand when it comes to sustaining profit margins abroad,” Coetzee explained.

“Looking ahead, exporters are expected to focus more sharply on financial planning, hedging strategies, and market prioritisation in response to trade policy uncertainty.” 

“There may also be renewed efforts to deepen trade with less volatile regions and reduce exposure to politically sensitive markets.”

However, global factors are not the only ones putting pressure on South Africa’s wine industry, as local challenges are also threatening the sector’s profitability.

In the 2025 Budget tabled by Finance Minister Enoch Godongwana in March, the government proposed to increase excise duties on alcoholic beverages by 6.75% for 2025/26.

This increase saw the excise duty rate on unfortified wine rise from R5.57 per litre to R5.95 a litre, while fortified wine’s excise duty rose from R9.40 to R10.04 per litre.

Prior to the presentation of this Budget, the local alcohol industry warned that another hike in excise duties for alcoholic products would be detrimental to the industry.

Experts warned it could drive South Africans towards the more affordable illicit alcohol market, putting consumers and the local industry at risk.

The changes in South Africa’s excise duties for the 2025/26 financial year can be seen in the table below.