Stellenbosch - South Africa's wine industry expects increased global sales in 2010, although a strong and volatile rand currency threatens its long-term prospects, a senior official said on Wednesday.

The sector expects the 2010 soccer World Cup - which kicks off in South Africa on June 11 - to boost sales hurt by a global economic crisis and weakened economies in key export markets across Europe and in the United States, said Su Birch, chief executive officer of Wines of South Africa (Wosa).

WOSA represents all of South Africa's major wine exporters, including Distell and KWV.

South Africa wine producers and exporters were using the world's most watched sports spectacle to increase marketing, and WOSA plans special braai (barbeque) festivals in key export nations competing in the tournament, she told Reuters in an interview.

Leading supermarket retailers in Europe, such as Sainsbury and Tesco, were also eager to promote South African wines.

"There is huge interest and excitement around 2010 ... there isn't a supermarket group in Europe that doesn't want to do a South African promotion," Birch said.

An estimated 450 000 foreign tourists expected to attend the World Cup would be able to pick up quality wines usually seen on European shelves for about R30.

Exports for South Africa's packaged wines were expected to increase by between 10 to 15 percent in 2010, Birch said, adding: "The interest around South Africa and South African wines as a result of 2010 is just phenomenal."

But the strength of the rand - which gained about 30 percent against the dollar on improved risk appetite in 2009, making it one of best performing emerging currencies - was a concern for the industry.

Stronger rand hits exports

Analysts say the stronger rand has hit exporters hard as Africa's strongest economy tries to recover after exiting its first recession in 17 years in the third quarter of last year.

"The currency is a huge worry and we fear that if it doesn't move it will, long term, be the death knell of the industry," Birch said. "It is crippling because nobody can make any (profit) margins and what is worse is the huge volatility."

Key export destinations include Britain, the Netherlands, Germany, Scandinavia, Canada and America, with focus also turning to emerging economies Russia and China.

Birch said the industry, which employs some 250 000 and last year celebrated its 350th anniversary, was struggling despite exports surging by 335 percent between 1995 and 2007.

"The industry is really in financial trouble. There is no new (vine) planting going on, so we are not going to sustain growth," she said.

- Reuters