Emerging Businesses: The South African Wine Industry Case

Emerging economies such as South Africa, only a few years out of apartheid, have been feeling the strains of socio-political change. While South Africa has experienced political reform, economic reform and access are slow to come. Currently, South Africa is the 7th largest producer of wine in the world. Although this industry is impressive, the apartheid era production practices have caused primarily the European consumers and media to be vocal about this issue. However, this concern has spread to other regions. The South African government and wine industry must respond to the external and internal market pressures and minimize transaction costs. Both entities want to increase wine exports and expand market share, however, given the socio-economic and political climate in the country neither knows how to manage this difficult process which emanates from deeply rooted distrust of groups within the country. Socio-political constraints facing previously disadvantaged groups (PDG) as emerging business owners need to be understood; and, measures which could be undertaken by government and industry need to be identified. The objectives of this research were to identify: institutional constraints and transaction costs faced by PDGs aspiring toward production and leadership roles in the wine industry; ways the government can collaborate with the KWV to build social capital and promote PDG ownership in the wine industry, thus minimizing social conflict; and, identify industry strategies to increase exports and international market share under the "New South Africa" banner. This analysis was based on primary and secondary data and information gathered on site. Several potential solutions were suggested for ways to include PDGs in the South African wine market while minimizing the impact on the market shares of existing producers. It is anticipated that the window of opportunity to increase exports and involve PDG is quite small.