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Monday Jun 06, 2016

Winelands at risk from new bill

The Cape's beautiful wine farms are much more than just agricultural land – aside from producing grape and related products and bringing foreign currency into the country, they are also a vital tourist attraction.

This wine farm is for sale for R39 million.

"As the Expropriation Bill gathers momentum, it is perhaps a good time to reflect on the potential impact of government's plans to restrict foreign ownership of agricultural land and the effect that expropriation could have," says Seeff chairman Samuel Seeff.

"The effect could be quite adverse as far as the Cape wine industry is concerned. Wine farms are not just agricultural farms, but also a vital part of the growing tourism sector. Foreigners have been keen investors in the wine regions of Stellenbosch, Franschhoek, Paarl and Wellington, but they did not just buy farms already in production with top class wine brands, beautiful historic buildings and tourists flocking there."

He says much development of the wine region has been driven by foreign and corporate investment. These investors brought the capital that rehabilitated and developed the wine farms and tourism infrastructure to international standards. And, with that have created a whole agricultural sector that provides and sustains skilled and semiskilled jobs, tourism and vital economic spin-off benefits.

"Although the overall percentage of foreign land ownership is estimated at around 5 percent of all land ownership at most, it is somewhat higher when it comes to the wine farms," says André Malan, Seeff Winelands and Boland agri-agent.

"Foreign investors also brought vital expertise and entrance to overseas markets to the wine industry. By exporting wine, the farms earn foreign exchange for the country."

He says Stellenbosch is the premier wine region with about 100 wine and wine grape farms of which more than 20 are foreign owned. Foreigners mainly own the wine estates as the returns are better than the wine grape farms. They export a major portion of their wines to their countries of origin.

Franschhoek is especially popular with more than 12 of the more than 40 wine estates and wine grape farms owned by foreign investors, says Malan. Here too, it is mainly the wine estates that actually produce and market the wine brands that are foreign-owned.

The picture is similar for Paarl and Wellington, where more than 23 of the 78 or so wine estates are owned by foreigners.

Aside from the export component, the farms are major tourist attractions, drawing visitors from across the globe who bring US dollars, euros and British pounds.

Seeff says that foreign ownership does not influence the price of agricultural land. It is the normal market forces of supply and demand that determine the price that a buyer or investor pays. If there is strong demand and very few properties on the market, it follows that sellers can ask and achieve higher prices. Conversely, a sudden flood of listing, say as a result of negative sentiment, will likey drop prices.

"Aside from affecting the sentiment and desire of foreigners to invest in the country, a move to force foreigners to sell, or expropriating their land, will almost certainly adversely affect the wine industry," says Malan.

"Wine exports could be negatively influenced by countries presently buying SA wines, such as Germany, the UK, France, the Netherlands and the USA as many of the farms are owned by citizens of these countries.

"SA operates in a global environment and these countries can decide to source their wine from elsewhere. There are many wine producing industries in the world in the same New World Wines' category as SA and it is a competitive business."

SA produces less than 5 percent of the world consumption of wine. The per capita consumption in SA itself is as low as 8 litres as South Africans are traditionally beer drinkers. For European wine-drinking countries, it is above 20 litres a person a year. It therefore follows that the domestic wine market is not going to sustain the sector.

Franschhoek agent, Melina Visser, says that a ban on foreign ownership of agricultural land will not just affect investment in agricultural properties, but will affect the perception of general investment in SA property. This may affect the sale of luxury homes in the Franschhoek and surrounding areas and could dent demand and pricing.

The wine and tourism sectors of the Cape have expanded year-onyear and with that the interest in property across the Boland and wineland areas.

Tulbagh agent Nelia Retief says that foreign buyers are now also heading to this valley to invest in property, a move that would bring compounding economic and job creation benefits to the area.

Some of the most sought-after property in the country are found in the winelands, and while property prices have grown notably over the last years, they still compare well with luxury residential areas such as the Atlantic seaboard, say agents Kevin Layden and Esme Wildman.

"Along with Stellenbosch, the Franschhoek Paarl Valley ranks as one of the country's most sought-after wine areas with wine brands such as Babylonstoren, Backsberg, Boschendal, Haute Cabriere and La Motte.

"A 48ha wine farm with a beautifully restored 1900s Sir Herbert Baker Cape Dutch manor house, directly opposite L'Ormarins at the entrance to the Franschhoek Valley, is priced at R39 million

"The house has Berg River frontage and spectacular views of the surrounding countryside and mountains. About 10ha is planted with vineyards and a further 4ha with pears, all irrigated from the Berg River. Additional buildings on the farm include garages, a cottage and a conference and games centre."

Layden and Widman say that although the property is an excellent investment as it is, it also has development potential and could be expanded into a boutique wine estate or further hospitality facilities.

Call 021 886 7905, 021 876 4592 and 021 975 5290 or visit www.seeff.com.

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