As South African exporters navigate an increasingly tough and sometimes hostile global trade environment, new tariffs introduced by the Trump administration threaten to disrupt one of the country’s most valuable export markets, wine.
Size of the Wine Export Market
South Africa is one of the top three wine export destinations and the US market has been a key growth market for wine producers looking to diversify beyond Europe with the UK currently the largest export market for South African wines, with over 90% of export wines heading that way. However, the USA is a key premium export destination for bottled wines, with a market share of around 5% of local wine export volumes.
According to Cornelius Coetzee, Country Director of Verto South Africa, the new tariffs, aimed at protecting domestic producers, are expected to drive up costs and squeeze margins for South African exporters already dealing with rising operational expenses, FX volatility, and regulatory challenges.
South Africa is the world’s ninth-largest wine producer, with more than 2,600 wineries and exports of about 10.6 million hectolitres reaching over 100 countries. While international demand remains strong, particularly in the UK, Germany, and the US, producers face ongoing financial hurdles.
Wine Industry Challenges
- 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: With Canada having imposed a 25% tariff on U.S. wines earlier this year and the U.S. now following suit with protectionist measures, exporters are navigating a more fragmented and politicized 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.
“The wine export economy is deeply exposed to global trade dynamics,” Coetzee added. “Shifting currency values, compliance obligations, and payment friction can often matter more than demand when it comes to sustaining profit margins abroad.”
Financial Planning Key to Resilience
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.
With the U.S. market potentially becoming more difficult to serve profitably, industry stakeholders will need to make strategic choices; balancing traditional trade partners with emerging markets and adopting solutions that increase financial resilience.
The South African wine export industry stands to benefit significantly from digital financial solutions that can streamline their trading with other countries.
With operational costs rising due to tax hikes, exporters must adopt cost-effective measures to remain competitive. By addressing critical challenges in foreign exchange, cross-border payments, and regulatory compliance, wine exporters can be empowered to streamline operations, cut expenses, and enhance overall profitability.
