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The cannabis industry in South Africa is touted as a potential saviour of the country’s ailing economy. There is R107 billion of value in the local industry waiting to be unlocked.
In 2019 Prohibition Partners released their African Cannabis Report ,which forecasted the South African medicinal cannabis market value and the recreational cannabis market value at R11 billion and R20 billion by 2023, respectively. The projected growth rate is 28.4%.
The country is poised to become a leader in this dynamic space. South Africa enjoys a strong head start compared to others, a good reputation internationally for the quality of its product, and is rated as number one in Africa for technical competence and cost of production.
But it remains in the very early stages of ironing out the various legal, political, economic, regulatory and social obstacles standing in the way of its potential. Its favourable climate, loosening laws, arable land and pre-existing experience in farming and hemp production makes it a formidable force to reckon with.
Some advanced economies and sophisticated markets have not been shy to bestow their faith in South Africa’s medicinal cannabis industry as it grows around the world. Germany, for example, has recently become the most developed market to allow the use of cannabis to treat medical conditions, with recreational cannabis (adult-use) to be ratified within the next 12 months. A number of European countries have also relied on South African producers to source medical cannabis products.
South Africa needs to urgently address the constraints standing in the way for the country to begin reaping the fruits of the local industry’s potential.
Ever since the constitutional court decriminalised cannabis in 2018, discussions around regulation have been ongoing. The Cannabis for Private Purposes Bill was drawn up and is still waiting on parliament to be ratified. The department of agriculture, land reform and rural development presented parliament with a master plan in 2021 detailing how cannabis can be incorporated into the business sector. And in last year’s State of the Nation address, President Cyril Ramaphosa said the government is looking to streamline the cannabis regulation process, which can unlock 130 000 jobs.
The legal cogs, however, have been grinding achingly slow.
An enabling framework needs to be developed as soon as possible so that growers can be involved in every part of the value chain. South African businesses can obtain a licence to grow, cultivate and export cannabis. All levels of government are saying how much money can be made out of cannabis. But they will not make that money if the legislation is not changed.
The sluggish regulatory process is due to cannabis’s stigma as a narcotic tied to illicit trading. Development banks and potential financiers are reluctant to invest in cannabis because of its legacy reputation which is not yet dealt with as a new and emerging economic sector. They do not yet have a clear picture of what the commodity can bring to the economy.
Changing legislation means amending a number of laws, for best regulatory reform. Cannabis can be regulated through the Drugs Control Amendment Act or decriminalised through safety and security legislation, among others. All of these different regulations were amended and can be reissued specifically for the cannabis sector to inform the commodity’s commercial trajectory.
The absence of a sophisticated policy framework is an absolute indictment on government and state agencies. In South Africa, we should have, by now, a recommended price per gram of different profiles of cannabis, for different markets and purposes. And from the specific price point each constituent in the value chain gets their share.
The new auditing metrics for cannabis can potentially land the industry in the same dilemma as the wine industry whereby high-quality products were under-priced for the international market.
South African companies should not allow the international market to dictate the price of our commodity. We should not booby trap ourselves by compromising on an abject price point to suit their needs. We will run the risk of becoming the backyard of the global pharmaceutical cannabis industry.
If we can get the laws right, market enablers and the regulations aligned, we can attract the ideal investors. When that happens, cannabis can begin to navigate its way out of the dark alleyways of the illicit trade and into the formal economy, as a legitimate economic category.
The country needs to get serious about the industry. Fostering enabling legislation across the value chain should fuel the cannabis sector to new highs, and in doing so, boost the economy and assist with economic recovery.
We already boast a high altitude, plenty of sunlight, and an abundance of land suitable for industrial hemp, making it an ideal location for productive cannabis crops.
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