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South Africa Globalization Case Study

The following is a guest post from Dr. Cynthia Howson, Lecturer in Politics, Philosophy and Economics at the University of Washington, Tacoma.  Please read her full bio at the end of this post.

 

How has globalization changed the wines that are available and the way we decide what counts as quality?

 

You probably know that terroir and the traditional knowledge of small, established producers is no longer the only important marker of a high end wine. If you follow debates about globalization and international trade, you might have thought about global value chains, where powerful actors like multinational corporations drive standards. Who decides what kinds of technology are used? How much control do producers have over the way a product is designed and

Photo Robbie [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

marketed to consumers? However, we don’t usually think about wine this way. There are global value chains for wine, but are they really the same as for other kinds of products? For that matter, can the wine industry tell us something we don’t already know about globalization?

 

Political economist Stefano Ponte tackles these questions and more for the value chain linking South African producers to UK retailers. He argues that markers of quality in wine are more complicated and more sophisticated than other agri-food sectors. He finds that lead firms, like big supermarkets in the UK, can only drive quality standards for certain parts of the industry. “Basic,” or low-end wines, can be quality controlled from a distance. Retailers can provide precise, technical specifications about the kind of marketing, labeling, price and winemaking standards they expect – and suppliers can communicate these expectations up the chain. On the other hand, mid-range and high-end wines are assessed in much more complicated ways. If you want to satisfy critics or develop a unique, memorable brand, you will need experts on the ground, building relationships, visiting vineyards, paying attention to viticulture techniques and investing in a long-term reputation. None of these are things that Sainsbury’s supermarket can put in a contract. This means that the quality standards for wine paint a much more complicated picture of global value chains than we might expect.

 

Methods

 

Ponte spent most of 2005 doing in-depth interviews at different levels of the wine industry in South Africa, followed by several years studying trade and consumer wine magazines to understand what kinds of conventions regulate wine quality at different levels. This kind of long-term, qualitative fieldwork and archival research come from Ponte’s

South African wine regions.
Photo By Western_Cape_rural_education_districts.svg: Htonl derivative work: Agne27 (Western_Cape_rural_education_districts.svg) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0) or GFDL (http://www.gnu.org/copyleft/fdl.html)], via Wikimedia Commons

experience with ethnographic and mixed-methods research. He was able to speak with people involved in export, marketing, winemaking, distribution, production, farming and industry cooperatives. This meant getting to know 74 different entities in the industry, including all nine major producers and exporters (more than a million cases), and several medium and small producers.

 

The important thing to remember about this kind of case study approach is that it is extremely reliable for helping us understand how this value chain works and how these conventions and standards play out between South Africa and the UK. Of course, that doesn’t mean the same rules apply between France and the US, or even between Chile and Canada. So, it’s important that Ponte is able to show why this case study matters and how it answers the larger question.

 

Discussion

 

Ponte points out some distinctive features of South Africa that make it interesting in the context of this research. Until the end of apartheid in 1994, South African wines were fairly isolated from international markets, so quality standards and expectations changed fast as the country became a major player in the wine industry. Meanwhile, the industry is crucial to the rural economy in the region and South Africa has successfully developed a regional brand that is distinct from New vs. Old World wine regions.

 

To convince us that this story tells us something bigger about global value chains, the author begins by reminding us that governance matters. Global value chains are made up of a series of nodes, different actors communicating different kinds of standards and expectations along the chain (farmers, buyers, exporters, distributors, retailers, etc.). Often, we think of these as driven by lead firms, wealthy corporations who set standards for their suppliers. Beyond that, we might pay attention to coordination at different levels. But, this doesn’t tell the whole story – especially for wine. So, it’s helpful to have a typology of conventions. We know that retailers are not the only power-brokers and that the price of the bottle doesn’t tell us everything about the quality of a wine. Pointing to convention theory, Ponte lays out six different quality conventions that determine how a wine is identified.

 

  1. Market conventions (prices tell us about quality)
  2. Domestic conventions (reputation, trust, brand-names and terroir)
  3. Industry conventions (technical standards, inspections and monitoring)
  4. Civic conventions (standards based on collective values, like organic or fair trade products)
  5. Opinion (the personal judgment of a respected critic)
  6. Inspiration (creativity, artistic genius or a marketing tool that distinguishes a unique brand)

 

There are several important lessons from these different types of quality standards. First, different levels of wine are held to different standards. Top end wines have to satisfy the critics, so opinion reigns supreme. An industry king or queen like Robert Parker or Jancis Robinson may have far more influence than even the wealthiest retailer. For top and mid-range wines, the real game is played through domestic conventions. The battle between terroir in Old World wines and

Vineyards in South Africa
Photo By Deon Maritz (originally posted to Flickr as [1]) [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

brand/varietal in the New World means constant conflict over what counts as quality. Meanwhile, inspiration can make a wine famous, whether it’s a famous visionary or a funny label like “Goats do Roam.”

 

In any case, the standards that mark a wine as solid or excellent involve a wide range of practices and conventions that aren’t driven by any one source. And for this scholar/wine drinker, that means that the power brokers of globalization are a lot more diverse than we might think – and picking a bottle for dinner is a lot more fun.

 

Citation: Stefano Ponte. 2009. Governing through quality: Conventions and supply relations in the value chain for South African wine. Sociologia Ruralis, 49(3), 236-257.

 

Author Bio: Dr. Cynthia Howson is a Lecturer in Politics, Philosophy and Economics at the University of Washington – Tacoma. She teaches courses on globalization, gender and the political economy of development, globalization. Her upcoming research project investigates trajectories of upgrading in the Chinese wine industry.

Tags: economicsglobal tradeglobal value chainsSouth AfricaSouth African winewine economics

Subject Categories

Econometrics | Growth and Development | Income Distribution | International Economics | Labor Economics | Macroeconomics

Keywords

Globalization, Trade Liberalization, Inequality, South Africa, Labor

Abstract

This dissertation examines how globalization influences selected aspects of an emerging economy, using South Africa as a case study. The dissertation consists of three chapters: two microeconomic studies and one macroeconomic paper on the effects of globalization on some of the factors affecting economic growth. One micro paper explores the impacts of openness on inequality (Chapter 1), another investigates the impacts of trade liberalization on manufacturing sector wages (Chapter 2), and the macro study, which is the final chapter, examines the effects of inflation targeting on exchange rate pass through to domestic prices (Chapter 3).

In 1994, apartheid ended in South Africa and the re-integration of the country into the global economy began. As international sanctions were lifted, South Africa’s development strategy shifted from export promotion with import controls to greater openness through economic and financial liberalization. There is a distinct effect of this integration on South Africa’s economy, judging by the difference between the GDP and the GNP. Many studies in this area of research have focused on developed countries and some emerging and newly industrialized economies. The following three essays highlight the implications of openness on different aspects of South African economy.

The first essay examines the relationship between globalization and income inequality in South Africa. Despite the importance that is often attached to globalization, its impact in developing countries remains poorly understood. To the best of our knowledge, there is as yet no conclusive empirical study of its impact on inequality in South Africa. Although the economic and social progress achieved in South Africa has been impressive, there is a growing concern about the adverse impact of trade liberalization on the country’s industries. Thus, the second essay extends the discussion in the first essay by looking at the impact of a specific aspect of globalization, i.e. trade reforms, on wages in South Africa’s manufacturing sector.

After the currency crashes of the late 1990s, a growing number of emerging economies moved away from exchange rate rigidity to the adoption of a combination of flexible exchange rates and inflation targeting. The third and final essay explores whether the direction and size of changes in the exchange rate have different pass-through effects on import prices. That is, whether the exchange rate pass-through is symmetric or asymmetric.

Recommended Citation

Oladipo, Oluwasheyi S., "The Effects of Globalization on an Emerging Economy: The Case of South Africa" (2016). CUNY Academic Works.
https://academicworks.cuny.edu/gc_etds/1381