The impact of an increase in wine industry exports on the South African economy, focusing on the Western Cape

A marketing strategy undertaken by role players in the wine industry is expected to lead to increases in South African wine exports. A multi-sector analysis, which takes into account the linkage effects in an economy, was conducted to estimate the impact of an increase in wine exports on the South African economy. The increase in wine exports will be the result of changed perceptions and hence increases in the export price faced by South African wine producers. Results of a 10% increase in the international wine price indicated an increase of 0.1% in gross domestic product (GDP). The general positive effect on the economy is reflected by the creation of 5 824 employment opportunities, of which 20% is in the Western Cape. Factor incomes shows varied results, but are positive for all five labour groups identified in the Western Cape (increase between 0.11 and 0.16%). Domestic production of wine increases by 4.5%, while the volume of exports increases by 26.7% and domestic sales volume by 1.45%. When comparing long-run and short-run results it becomes evident that capital might be a binding constraint over the short-run, but seen in the light that in practice the increase in the international price will not happen overnight, this becomes less of an obstacle. A successful marketing strategy is likely to cause additional investment in the industry.