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Is SA on the path to a cannabis economy?

The main aim of getting this industry going is to generate income and job creation for rural communities, explains Agbiz’s Wandile Sihlobo.

NOMPU SIZIBA: A few days back Finance Minister Tito Mboweni hinted that it would be handy if cannabis was legalised – then his office would be able to tap some much-needed tax revenue from it.

Pouncing onto the minister’s tweet, Agbiz agricultural economist Wandile Sihlobo, who has written time and time again about the potential growth industry this could be in South Africa, again wrote a piece this week reminding us of the fundamental pillars of the cannabis market.

Well, to tell us more, I’m now joined on the line by Wandile Sihlobo. Thanks very much, Wandile, for joining us. Ideally, in the South African context, what cannabis industry should we be looking to cultivate, because in talking about this area there is concern about people becoming addicted to the stuff, and the social implications that would have – and so on?

WANDILE SIHLOBO: Thanks for having me on the show, Nompu. I think in last year’s judgment by Judge Raymond Zondo, he dealt with that matter, because now it has been decriminalised for personal use; so people can still deal with that. But I think what we are missing is the broader context in the market to which the minister was referring, with the industrial side of the cannabis sector and the medicinal side. That is where I think we can actually get the [benefit] because, allowing only for personal use you won’t really gain much. But obviously trading would also be one of the areas where South Africa could get some income.

But I think we are talking a lot about what could possibly happen, or what we could possibly get, without laying down some of the fundamentals. There is a lot of work that needs to be done in setting regulation and production conditions, and just laying out the testing ground for the market as to what will actually be happening. I think we should be putting more and more pressure and more effort into that side to get the market ready.

NOMPU SIZIBA: So what are the fundamental pillars that we need to fulfil in South Africa to be able to get started, build the industry, create jobs, and earn revenue and pay tax as the finance minister would like, in those sectors that you’ve identified?

WANDILE SIHLOBO: I think the clear thing to build on, Nompu, is first setting up the policy because, as we speak now, cannabis is still regarded as a drug – not yet as a plant. So, working on the regulation and reclassifying it as an agricultural crop, and also setting up the policy of how to go about the production as well as trading it.

Also on the taxation side, we say we can get tax from these businesses, but we haven’t thoroughly considered how that would take place –…… testing, compliance issues – even on the production and the cultivation side; and more and more education is needed.

So I think going back to the drawing board and saying, ideally if you are introducing a new agricultural crop, these are the standards that we need to set. South Africa should be looking into that, because the market broadly on its own, the value is there and is expected to continue to grow. We’ve seen the studies coming out of the many people who have looked into this, and they have been looking into it with optimism. And, despite the decline in prices over the past few months, the long-term outlook is still as positive. But let’s get the regulation; the production conditions in place.

NOMPU SIZIBA: You indicate that a number of government departments are including cannabis in their master development plans, but one thing that lets us down here in South Africa is lots of plans but little execution. If we look at the Eastern Cape, for example, where there has been much official talk about exploiting cannabis, what’s been the reality to date?

WANDILE SIHLOBO: On the Eastern Cape side, you are right. There is potential. But to date, again, to both the minister and the broader national side, we say there is not clear regulation. But putting it on the master plan as well is a good thing, because it forces us to confront some of these questions which we are not really asking. If you had to look back, last year and the year before that in South Africa we wrote and talked a lot about the possibility in terms of jobs, but not about what needs to be done on putting the regulations in place. Right now, for example, for all of those who are getting licences, prices range around R300 000. With those prices, to acquire licences small-scale farmers in the Eastern Cape would be excluded from the market. Therefore, being conscious of all of those dynamics in South Africa and thinking about them inclusively will require all of those dynamics. I think that on the master plans this time around they might actually see some implementation. And in the agricultural one, for example, which I am partially involved in, I think that we are on the right path so far.

NOMPU SIZIBA: You quote the New Frontier Data study’s caution that policymakers and regulators who fail to recognise or fully appreciate the why and the how for establishing the fundamental elements of the cannabis industry – whichever one you decide to go for – can jeopardise the project of creating a viable industry. Perhaps you can just try to break down what that means, and what would be the best way for policymakers to proceed.

WANDILE SIHLOBO: In the South African case, taking the cannabis and mixing it up on a broader agricultural sector, for example, one of the key questions that we had when looking at the rural economy is the twin challenge of low economic activity on the rural side of South Africa and high unemployment. Well, when you are thinking about cannabis, you are thinking about it helping lift agricultural activity in the country, which you want broaden.

The key goal to really getting this industry going is generating some economic value for those communities, and some job creation.

But minister, when you are writing your policies or your regulation, you have to be cognisant of both of those things by allowing the barriers to entry to be relatively low for people to be able to get in; but also what gets to be produced should be of ultimate standards demanded by the world, because the world doesn’t need all of the cannabis that people produce. There are all sorts of classes that people might be interested in.

Or maybe in South Africa we are interested on growing hemp, which would apply to a textile industry.

I think being clear on that and also sorting out the regulation for the entire value chain – because here we are introducing a new plant and its value chain in South Africa – is not as advanced as you would find in Canada and other places. I think that’s where even the jobs will come out, Nompu. Thinking about it in that context is what could bring a little extra value to South Africa and its rural economy.

NOMPU SIZIBA: Wandile, you’ve hinted that you’ve written a book about cannabis. Presumably it’s going to stimulate the mind. When can we get our hands on a copy?

WANDILE SIHLOBO: Cannabis is part of a chapter. The book is coming out at the beginning of April, published by Macmillan. I think it would be in the first days of April. The publisher hasn’t finalised the date. It would be out around that time. The book covers the wide range of South African agriculture, the main story being jobs in agriculture – and I think people might find value in some of that.

NOMPU SIZIBA: Well, that’s going to be one to watch. Thank you so much, Wandile, for your time, as always.

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A cannabis economy? You mean, where everyone sits around in a stupor, expounding lofty visions, but unable to get off the couch?

Government got there a while ago.

How u going to tax it. Just try put a hefty sin tax on it. People will just grow there own in there backyards. There is no cash cow here. Once it’s legalized the profit factor drops out the window….. Currently in its banned status its providing the most jobs it ever will, at the best pay…. Legilize it and it falls flat. The only people not getting a buck is government.

Finally, thinking out the box to generate new sources of revenue. This is fantastic! And this plant is huge in North America for the healing properties it contains.

End of comments.

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