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1. The Wine Economy today Core business activities/Stakeholders

TOWARDS TRANSFORMATION IN THE WINE INDUSTRY: THE WINE CHARTER & INDUSTRY SCORECARD Johan van Rooyen CEO, SA Wine & Brandy Company and Chair, WCSC Technical Team. 1. The Wine Economy today Core business activities/Stakeholders producers - 4435 : < 100 ton + 50%

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1. The Wine Economy today Core business activities/Stakeholders

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  1. TOWARDS TRANSFORMATIONIN THE WINE INDUSTRY:THE WINE CHARTER & INDUSTRY SCORECARDJohan van RooyenCEO, SA Wine & Brandy CompanyandChair, WCSC Technical Team

  2. 1. The Wine Economy today • Core business activities/Stakeholders • producers - 4435 : < 100 ton + 50% < 500 ton + 80% • wineries - 505 : small private 83%; Co-ops 13% • Trade (?) - 97 : 67 wholesalers; 30 exporters • Civil society and community based organisations (±80) • Labour groupings (±11) Note: Size definitions (DTI-CGP) and stakeholders important

  3. Economic value of the wine industry • + R22 billion GDP contribution • Turnover + R10 billion • Exports + 3 billion and expanding • 4x added value multiplier • + R4 billion wine tourism • Household income + R10 billion • + 250,000 employment opportunities (add 50,000 tourism); Positive employment & income linkages • Skew ownership; social legacies (later) • Highly competitive and fragmented industry, but business consolidations are developing

  4. Trends in the competitiveness of the wine industry in South Africa (1961-2003)

  5. Trends in the competitiveness of selected wine producing countries (1990 – 2003)

  6. Key role of Government – national and local: Policing & regulatory Service: certification Support systems: trade, R&D, DTI support, etc Levers and levies: licensing, water allocations, etc • Industry – Government partnership important: The Wine Industry Strategy Plan (WIP) as framework • Goals: • Competitiveness and profitability (tariffs, taxes, R&D, trade policy, etc) • Economic transformation & Empowerment (BEE Charter) • Sustainable Natural Resources Management (BWI, IPW) • Socially responsible consumption (ARA, “papsak”, BEE Charter)

  7. 2.The context • Increased competitiveness and world standing of the South African wine industry • A highly skewed ownership, skills and business regime • Racialised political economy • A history of problematic labour relations, social evils and fragmented civil society relations • Substantial positive rural linkages: income, employment, value add • Positive & negative legacies; but positive future prospects: productivity; power of ownership; unlocking resources; social sustainability; Fair trade prospects, etc

  8. The reasons for Black Economic Empowerment • Legislation requires and regulates • An economic growth strategy to support the attainment of an equal dispensationforblack groups: Focus on business mobilisation and entrepreneurship development • Voluntary, except when doing business with the state or as a strategic industry • Agriculture is a strategic industry and licences are required to produce and distribute wine • Performance assessment and grading of contribution towards BEE required (in terms of definitions and a scorecard)

  9. 3. Wine industry Charter Process (since October 2003) • Wine Charter Steering Committee (WCSC) • Representative of all role players (Table of role players) • Regular monthly meetings • Technical support by specialists and industry groupings • Linking with other groups (manage overlaps) • Liquor traders and trade-mark owners • AgriBEE • DTI – Codes of Good Practice (CGP)

  10. WCSC: Role players

  11. WCSC: Role players

  12. Wine Industry Charter • 7 “Internal” Drafts to date • WCSC meeting of 25 April 2006 took decision to distribute Charter among interest groups first for workshopping • End of July : to the public and the media • August/September : presented to the Minister • Electronic version available from - nv@sun.ac.za or gerhard@sawit.co.za

  13. Contents of the Charter • Introduction • Challenges • The mission statement • The scorecard Annexures: The context of the wine industry (That which directs the Wine Charter) • Historical context • Globalization • Economic context • Local context • Transformation to date • Wine industry Strategy Plan (WIP)

  14. Wine Industry Charter: Consultative Process • Invitation to interest groups to give: • Comments on the proposed scorecard, its expected contribution to transformation, and problems likely to be encountered during implementation • Advice regarding the completion of the Charter. These include: • Strategies to support projects and programmes across all elements of the scorecard; and • The institutional structure of the ‘Wine Charter Council’: institutions to implement the support strategies, and institutions to monitor progress during implementation • Appropriate linkages with other charters (AgriBEE, Liquor Industry, etc) • Scenarion planning / what-if analysis to set realistic and effective targets (GP&A facilitation)

  15. Link to Government’s Code of Good Practice (CGP) • Important guideline to all in the wine industry • Qualifying enterprises are expected to complete a scorecard to determine their contribution to BEE (qualifications still outstanding) • Industries may propose their own scorecards, but there is a limit to deviations from the code of good practice of the Department of Trade and Industry (DTI) • For the wine industry, it is necessary that the scorecard be fully aligned to the AgriBEE and Liquor Trade scorecards i.e. complete overlaps

  16. Scorecard for large enterprises (GP) Note: GP + R2m turnover; AgriBEE proposal + R50m turnover wine industry?

  17. Scorecard for smaller enterprises (GP) (QSEs) Note: GP + R300 000-R2m turnover; AgriBEE proposal + R5m-R50m turnover wine industry?

  18. Small enterprises (GP) • Exempt (receive level 4 basis points), but could still have an opportunity to accumulate a high score and position themselves as “preferential partners” • GP below R300 000 turnover – to be revised? • AgriBEE below R5m turnover • Wine industry?

  19. Contribution levels (GP) Wine Charter proposal for “small enterprises” = level 1 score GP&A proposal for “small enterprises’ = level 4 score

  20. Who completes the scorecard? • From a wine industry perspective, participants are defined as enterprises whose core business focuses on any aspect of the value chain for wine and who over three financial years have earned on average more than 50% of their turn over from these activities before being rated. • Producers, cellars, trade, services, service providers • Overlap with other Charters?

  21. 5. Details of the Wine Charter: The Scorecard - Ownership

  22. How does this promote land reform?

  23. Control

  24. Control (QSEs)

  25. Employment Equity

  26. Employment Equity (QSEs)

  27. Skills development

  28. Skills development

  29. Skills development (QSEs)

  30. Preferential procurement

  31. Preferential procurement (QSEs)

  32. Enterprise development

  33. Enterprise development • The following multipliers apply:

  34. Enterprise development (QSEs)

  35. Rural development and poverty eradication: farming community

  36. Rural development and poverty eradication: farming community

  37. Rural development and poverty eradication: No farming community

  38. Rural development and poverty eradication: No farming community (QSEs)

  39. Summary:Wine Charter & Industry Scorecard * Voluntary in order to move to a level 2 contributor (level 1 if black owned)

  40. 6. Strategic Focus on Growth with Equity: Deviations based towards:

  41. Wine industry accepts cut-off level of Codes of Good Practice but must align with AgriBEE and “Liquor Industry” Charter. Deviations from the Code of Good Practice 3. Includes land reform as an option in the Ownership and Enterprise Development elements; 4. Change the name of the Management Control element to the Control element, reduce its weight to 5 points and include only those indicators dealing with representation on the Board; 5. Group the Senior and other Top Management indicators with the Employment Equity element of the scorecard

  42. 6. Increase the weight of the Rural Development and Poverty Eradication element to 15 points (Large enterprises) 7. Distinguish between enterprises with and those without people living on the farm 8. Change the indicators, weights and targets where there are people living on the farm

  43. Concluding thoughts: • Management tool (complicated) • Size critical • Perceptions critical • Provide comments

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