Why foreign money is flowing into Cape wine farms

Amid wilting wine production and consumption globally, South Africa has seen a surge in foreign ownership of big-brand vineyards, which is set to uncork the local industry’s export potential.

Bloemendal Wine Estate, founded as a farm more than three centuries ago in the fertile Durbanville Valley on the northern outskirts of Cape Town, is expected to fetch at least R270m when it goes under the hammer on October 29.

That could set a new benchmark for South African vineyard prices and mark what is believed to be the highest-value transaction since Boschendal in Stellenbosch was reportedly sold for about R700m in 2011. It also eclipses the price fetched for the prestigious Constantia Uitsig, the 60ha wine estate which it is understood was sold for about R175m to Pepkor CEO Pieter Erasmus in late 2013. 

The award-winning Bloemendal, acquired by a subsidiary of former politician Tokyo Sexwale’s Mvelaphanda Holdings in 2008, is one of the country’s oldest wine farms. It spans a colossal 240ha, with 128ha under vine. The winery produces about 130,000 bottles annually and supplies Durbanville Hills, among others.

The record-breaking R270m reserve price may seem steep at first glance, but industry players say it reflects the scarcity value of heritage farms of this scale and calibre — they seldom come onto the market. Big-ticket wine estates typically change hands discreetly off-market, with sale prices rarely disclosed. Still, estate agents say prices for agricultural land in Durbanville tend to start at about R1m a hectare, placing a value of at least R240m on Bloemendal’s land alone.

The winery is also home to two restaurants — Bon Amis and 360° Restaurant, both now closed — a conference venue and two guesthouses, as well as offices and wine production, packaging and tasting facilities. It is the second time this year that Bloemendal is going on auction. A bid of R270m was apparently accepted in May but the buyer, rumoured to be a local investor, could not secure full funding post-auction.

This makes it likely that this time around Bloemendal will go to a foreign bidder with pockets deep enough to pay the premium for a heritage property that offers both wine production capabilities and tourism development opportunities.

There’s been a surge of foreign investment in the Cape winelands in the past five to seven years, with at least a dozen commercial wine farms sold to offshore investment consortiums and wine producers — several with price tags north of R80m.

Most international buyers are targeting the “golden triangle” of Stellenbosch, Franschhoek and Paarl, regarded as South Africa’s premier destination for top-end vineyards. Foreign investors are providing not only capital but critical access to global markets.

Notable pre-pandemic deals include Warwick Wine Estate near Stellenbosch, sold to San Francisco-based investment firm Eileses Capital; Indian billionaire Analjit Singh buying Dieu Donné, Klein Dassenberg and Von Ortloff in Franschhoek, now amalgamated into Leeu Estates; and Franschhoek landmark Chamonix Estate being acquired by a Norwegian investor. 

More recently, heavyweight German and French industry players have entered the fray.

A German consortium led by Baron Hans von Staff-Reitzenstein, which bought a stake in Ernie Els Wines 10 years ago, has since added three more wineries to its South African portfolio — Stellenzicht, Alto and Bilton.

Les Grands Chais de France (GCF), France’s largest privately owned winemaker and exporter, acquired Neethlingshof Wine Estate in early 2022 — underscoring the depth of foreign confidence in South Africa’s wine sector. A year later, GCF added Villiera Wines to its portfolio.

French family-owned Oddo Vins & Domaines branched out to South Africa in 2017/2018 when it acquired Taaibosch Wines and Pink Valley Wines, both near Stellenbosch.

Then there’s also French wine company AdVini, which is becoming a major player in South Africa’s premium wine segment. The group, which was founded in 1870 and is listed on the Euronext Paris stock exchange, owns 22 wine properties, estates and winemaking facilities across France — including in Burgundy, Bordeaux and Châteauneuf-du-Pape. AdVini first entered South Africa in 2010 when it bought L’Avenir Estate in Stellenbosch.

The group’s commitment to growing its South African footprint was further affirmed through the acquisition of four more prominent wineries in the region: Le Bonheur Estate and Ken Forrester Vineyards in 2016, Stellenbosch Vineyards in 2018 and Kleine Zalze in 2022. South Africa is the only country in which AdVini has invested in land, vineyards and infrastructure outside France. AdVini South Africa vice-president Naretha Ricome says the group’s Stellenbosch operations already contribute 13% to the company’s turnover, which clocked in at €278m in 2024.

The quality of Cape wine is stunning — overwhelming actually

—  Naretha Ricome

She believes revenues from local wineries are poised for strong growth as these brands start to penetrate offshore markets via the group’s extensive sales, marketing and distribution channels. The group exports to 110 countries.

With AdVini’s backing, Le Bonheur has already managed to position its chardonnay as the top-selling white wine in Canada. Similarly, Kleine Zalze and Ken Forrester are enjoying a growing following among European wine drinkers.

Ricome is keen to expand AdVini’s Stellenbosch viticulture footprint. But why South Africa? She says AdVini has looked at other countries, Chile among them, “but no-one offers more untapped potential than South Africa — both in terms of wine production and tourism”.

She adds: “The quality of Cape wine is stunning — overwhelming actually. My French board and shareholders would not be here otherwise.’’

Despite a slowdown in wine sales worldwide amid declining consumption and a global oversupply, Ricome says there’s increased demand for premium-priced South African wines, especially in Europe and Canada.

But she concedes there’s still work to be done to elevate South Africa’s reputation as a premium wine-producing country. Ricome believes innovation and product diversification are key to unlocking growth opportunities.     

The group is already making inroads in this area with the introduction of recyclable Frugal packaging, 250ml cans and low-alcohol wines, along with fruit-infused sparkling drinks for some of its South African brands.

AdVini also recently won a tender with Qatar Airways to supply 3-million litres of wine under Stellenbosch Vineyards’s Star of Africa label in 750ml flat-based polyethylene terephthalate bottles.

It is not the only foreign investor looking to snap up more of South Africa’s wine estates. Industry expert Emile Joubert estimates that about 30% of the country’s top-branded vineyards are already in foreign hands — and that number is rising.

Political uncertainty, load-shedding and looming water supply issues have seemingly done little to dampen offshore appetite for trophy vineyards. The weak rand helps, of course. As Joubert points out, you can buy a 100ha wine estate in Stellenbosch, Paarl or Franschhoek for the price of a three-bedroom flat in a posh part of London. “The value proposition for hard currency buyers is undeniable,’’ he says.

Still, international investors aren’t just buying legacy assets as a hobby or a lifestyle purchase because they have spare cash lying around. They see it as a serious money-making opportunity and are investing heavily in new vineyards, cellars and hospitality infrastructure. All of this supports job creation.

Joubert believes the rising tide of hard currency inflows marks a turning point for the local wine industry, which has been under pressure in recent years.

South Africa’s bulk wine export volumes have dropped to 15-year lows, according to the latest figures from South Africa Wine Industry Information & Systems. For the 12 months to end-August, total wine exports dipped 7.7% year on year to 284-million litres. That’s more than 30% down on 2017/2018 peaks.

Data from Wines of South Africa, a nonprofit industry organisation that promotes wine exports, shows that the number of primary grape producers has fallen 36% in the past 13 years — from 3,527 to 2,255.

Local wine cellars that crush grapes have dropped from 582 to 508 over the same time while land under vine has decreased from 89,000ha to less than 80,000ha.      

South Africa has also slipped on the world ranking of largest wine producers — from seventh place in 2020 (by volume) to eighth in 2024, just behind Chile. That’s according to the Paris-based International Organisation of Vine & Wine. Italy, France and Spain occupy the top three spots.

Joubert ascribes the South African wine industry’s woes partly to the fact that its exports are dominated by mass-market “cheap and cheerful’’ offerings — roughly 85% of these exports sell for under R50 a litre. He says competing with European producers on price and margin at the lower end of the market has become increasingly difficult amid rising input costs. In addition, people around the world are drinking less alcohol.

“Most local farmers are struggling to keep vines in the ground. Only about 30% of South African producers are believed to be profitable these days,’’ he notes.

Despite boasting some of the world’s finest wines and exceptional terroir (the soil composition, climate and topography that influence the character and quality of grapes), South Africa has yet to gain recognition as a premium wine producer on the global stage — along with the price tags such status commands.

Joubert points to acclaimed wines such as Meerlust or Kanonkop cabernet sauvignon, which hardly fetch more than $40 a bottle abroad, while French or Italian equivalents sell for $160. That’s where the new foreign investors are stepping in to bridge the gap. Many have already established wine-producing businesses offshore, giving them access to international sales, marketing and distribution networks.    

“International buyers recognise South Africa’s untapped potential to earn global acclaim among the world’s top premium wine producers,’’ he says. “They’re in it for the long haul, backed by the capital and expertise needed to unlock new export markets for South African producers in this segment.’’

A common thread across deals involving foreign investment in local branded wine farms is the continued involvement of the original South African owners.

Chris Cilliers, CEO and principal of Lew Geffen Sotheby’s International Realty in Stellenbosch, tells the FM that international buyers of branded wine estates usually look for properties with a strong management team to ensure operational continuity. That also helps to preserve brand equity and local credibility.

This hybrid ownership model has allowed top-tier wine estates to scale and globalise, while smaller and mid-sized farms reliant on local funding have struggled to keep pace, she says.

Rising running costs have also dented the desirability of owning a smaller 10ha-20ha wine farm as a trophy asset or weekend bolt-hole. “Passive lifestyle assets don’t make money and the costs usually outweigh the benefits,’’ says Cilliers.    

Apart from a favourable rand exchange rate, Cilliers says buying a commercial wine estate in South Africa — as opposed to Europe — involves fewer regulatory hurdles. Other advantages, for European investors in particular, are that operations run in the same time zone, and English is widely spoken, so language barriers are not a problem.

Diversification is becoming a big theme. Successful estates now rely on multiple income streams — from olive oil and fruit trees to restaurants, delis, bakeries, Airbnb rentals and other tourist amenities. Many are adding residential developments to boost returns.

They see South Africa as an attractive opportunity to grow their footprint while benefiting from the currency advantage

—  Clarence Collins

Cilliers cites Babylonstoren, Boschendal and Ernie Els Wines as examples of estates that have evolved beyond wine production into fully fledged lifestyle destinations with year-round tourist appeal.

Clarence Collins, sales agent at Pam Golding Properties in Stellenbosch, says international investors are typically drawn to branded wine farms.

“These buyers — often large corporates or multigenerational family wine businesses — have a deep understanding of viticulture and brand management and are expanding their portfolios globally. They see South Africa as an attractive opportunity to grow their footprint while benefiting from the currency advantage.”

Meanwhile, rising demand from hard currency buyers has caused a sharp uptick in wine farm prices in recent years. Pierre Germishuys, licensee for Seeff Winelands, says valuations have been further bolstered by a scarcity of premium properties and increased potential to grow income streams from tourist operations.

Big-brand wine estates are increasingly cashing in on the Western Cape’s growing reputation as an up-and-coming destination for global foodies.

Several wine estates already have critically acclaimed restaurants that combine culinary excellence, architectural charm and vineyard ambience, including La Colombe at Silvermist Wine Estate in Constantia, sister restaurant La Petite Colombe at Leeu Estates in Franschhoek and Orangerie at Le Lude, also in Franschhoek.

The pricing of wine farms remains opaque, as many large transactions are structured as confidential share deals and don’t pass through traditional real estate brokers.

Still, real estate agents say land under vine tends to sell for between R1m and R2m a hectare. Before Covid, most wine farms typically achieved below R1m a hectare. Germishuys says wine farm prices can differ considerably in range, depending on location, quality of the terroir, size of land under vine, age of vines, type of grape cultivar, building infrastructure (such as hotels, restaurants and wineries) and whether it’s a lifestyle or commercial farm.

He says buyers can expect to pay R20m-R40m for smaller boutique farms (generally less than 30ha) and R50m-R75m for larger, commercial farms. Price tags for top-end branded wine estates range from R100m to R250m-plus.

The Wealth Report 2025 by UK-based real estate consultancy Knight Frank confirms that global wine consumption is falling, especially among Gen Z, which it labels as “the most alcohol-shy generation ever”.

Global sales have dropped 12% from the 2007 peak while production has fallen 20% over the past 20 years, placing pressure on vineyard values across many of the world’s wine-producing regions. The emerging markets of New Zealand and Chile have been hardest hit.

The report cites punitive import tariffs and shifting weather conditions as other threats to the global wine industry.

Knight Frank says there’s a growing disparity in the prices being paid for vineyards in wine-producing countries. Italy’s Barolo region is now the most expensive in which to buy a wine farm, with prime vineyards selling for a staggering $2.08m a hectare (see graphic).

That’s followed by France’s Bordeaux at $1.25m, California’s Napa Valley at $1.2m a hectare and Burgundy’s $1.09m.

South Africa is one of the few countries that has seen an uptick in vineyard prices in 2024 (3%). So it should probably not come as a surprise that vineyard prices in Stellenbosch are now on a par with Spain’s Rioja region, both at an average $80,000 a hectare. Stellenbosch has overtaken Australia’s Barossa Valley ($60,000), Chile’s Colchagua Valley ($70,000) and Argentina’s Mendoza region ($40,000).