by Wandile Sihlobo | Feb 24, 2020 | Agricultural Production
Written for and first published on Business Day on 18 February 2020
CAPE TOWN – My agricultural take on President Ramaphosa’s State of the Nation Address (SONA) can be segmented into three areas. Firstly, the President reaffirmed the government’s commitment to various sectoral master plans that are currently being developed, with specific mention of the textile and clothing, sugar and poultry master plans. These are industries that have been under pressure in the recent past, in part, because of rising input costs and stiff competition from imported products. Trade policy has a role in stabilising these industries. Importantly, the master plans highlight that leveraging public-private partnerships is key to ensuring that plans are not only drafted on paper and shelved, but there is a commitment to execution.
Secondly, the President noted that the government will implement key recommendations from the Presidential Advisory Panel on Land Reform and Agriculture to accelerate land redistribution, expand agricultural production and transform the industry. There has been a lot of talk about this report, which I won’t delve into in this particular column. Worth noting is that not all proposals made in this particular report will require legislative amendments – a long process that requires wide-ranging consultations.
The following nine recommendations contained in the report do not require legislative amendments, but merely political will and stakeholder commitment to initiate: (1) create innovative financing mechanisms, (2) create a ‘land register’ to house donations, (3) identify and release state land, (4) conduct a land audit, (5) subdivide land already acquired by the state, (6) providing tenure grants for certain occupiers, (7) root out corruption in the Department of Agriculture, Land Reform and Rural Development, (8) reallocate water rights in conjunction with land allocation, and (9) finalise outstanding restitution and labour tenant claims.
Be that as it may, the ongoing debate about Section 25 of the Constitution, is the most contentious issue in South Africa’s land reform and agricultural policy circles at the moment. I hope that an unequivocal policy direction will emerge in the coming months when the Parliamentary Ad Hoc Committee on Section 25 finalises its work and reports to the National Assembly. Whatever decisions will be taken, lawmakers should be cognizant of the fact that South Africa’s agricultural sector is capital intensive. Hence, to achieve growth and prosperity, the policies the country adopts should attract capital investment.
Thirdly, and perhaps most interestingly, the president noted that “this year we will open up and regulate the commercial use of hemp products. Thereby providing opportunities for small-scale farmers, formulating policy on the use of cannabis products for medicinal purposes and building this industry in line with global trends. The regulatory steps will soon be announced by the relevant ministers.”
South Africa is not the only African country that is taking interest in cannabis. African countries have in the recent past reformed their cannabis regulations – moving away from it being a prohibited drug to a source of income as an exportable commodity. This seems to be particularly the case for South Africa, although it is still unclear how much revenue the country can derive from this plant.
Such countries include Lesotho, which was the first African country to issue licences for the cultivation of medical cannabis in 2017. Zimbabwe issued its first cannabis licence in March 2019. Zambia is the latest country to legalise medical cannabis, announcing in December 2019 that medical cannabis for export would be permitted in the country. Eswatini have also put in place a draft bill regulating cannabis. Uganda has also taken positive steps towards legalisation of medical cannabis, looking at formalising the process in 2020. Malawi is also making strides in putting in place its own licensing regime.
These agricultural focal areas of the SONA present relevant policy areas that could expand South Africa’s agricultural fortunes, hence, they should resonate well with agricultural and agribusiness stakeholders, as well as venture capitalists. Going forward, swiftly moving formulation and implementation of the necessary policies will be critical.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Feb 19, 2020 | Agricultural Production
In his 2020 State of the Nation Address, President Cyril Ramaphosa noted that “this year we will open up and regulate the commercial use of hemp products, providing opportunities for small-scale farmers; and formulate policy on the use of cannabis products for medicinal purposes, to build this industry in line with global trends. The regulatory steps will soon be announced by the relevant ministers.” This is already part of the sectoral master plans that are being developed, specifically the Department of Agriculture, Land Reform and Rural Development, as well as at the Department of Trade, Industry and Competition.
South Africa is not the only African country that is suddenly taking interest in cannabis. A number of Africa countries have in the recent past reformed their cannabis regulations – moving away from it being a prohibited drug to a source of income as an exportable commodity. This is motivated by the promise of riches, with many policymakers viewing the burgeoning cannabis industry as offering prospects for boosting rural economic growth and job creation. This seems to be particularly the case for South Africa, although it is still unclear how much revenue the country can derive from this plant.
Such countries include Lesotho, which was the first African country to issue licences for the cultivation of medical cannabis in 2017. This saw international investment being directed into the country in 2018. Zimbabwe issued its first cannabis licence in March 2019. Zambia is the latest country to legalise medical cannabis, announcing in December 2019 that medical cannabis for export would be permitted in the country. However, the government has stressed that cannabis will remain prohibited for domestic use. Uganda has also taken positive steps towards legalisation of medical cannabis, having issued commercial licences to two operators, and looking to potentially legalise medical cannabis cultivation in 2020.
Other countries, like Eswatini, have also put in place a draft bill regulating cannabis. Similarly, to Zimbabwe, cannabis production in Eswatini is restricted to medicinal purposes and scientific research. Malawi has also moved glacially in putting in place its own licensing regime. Export markets and foreign exchange earnings are the key drivers for cannabis regulatory reforms in this country.
In short, many African countries are gradually considering legalising the cultivation of cannabis for medical and scientific purposes. Those countries where reforms are in motion are using the Canadian code as a guide for developing their licensing regimes. For many of them, the major motivating factors are boosting exports to earn hard currency, reducing unemployment, rural development and increasing agricultural productivity. Broadening their tax base is another important consideration, which in the South African case has been noted by the Finance Minister, Mr Tito Mboweni.
I won’t dwell much on my ideas about how South Africa should explore the virtues of cannabis as I have also covered the subject in one of the chapters in my upcoming book — Finding Common Ground: Land, Equity and Agriculture — which will be published by Pan Macmillan in April 2020 (It will be available nationwide. You can pre-order it here).
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Feb 4, 2020 | Agricultural Production
With the cannabis discussion steaming up in South Africa, I have been monitoring developments in other countries that have liberalised this plant. South Africa still has a tough road to walk in formulating the proper regulatory system for the entire cannabis value chain. The encouraging part, however, is that various government departments are considering this plant for the Master Plans, that are being drafted, with the hope of stimulating growth.
I have written a bit on this plant but won’t dwell much on my ideas as I have also covered the subject in my upcoming book which will be published by Pan Macmillan in April 2020 (it should be available nationwide and online, I will communicate the exact date for the launch in due time).
What caught my attention this afternoon is an article from New Frontier Data. It spells out Nine Foundational Pillars for establishing the stable and healthy development of a new legal cannabis market. These include; policy, regulation, taxation (South Africa’s Finance Minister seems to be very keen on this, see here), compliance, lab testing, data and reporting, cultivation, and education.
New Frontier Data cautions that “policymakers and regulators who fail to recognize or fully appreciate the why-and-hows for establishing the fundamental elements can not only slow down the development or maturation of a legal cannabis market but ultimately lead to unintended consequences and undesired results, defeating the very purposes of reform and legalization in the first place.” This point is relevant for South Africa as the country is finding its standing in this hazy cannabis world.
You can read more here.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Aug 2, 2019 | Agricultural Production
Essay by Professor Mzukisi Qobo[1] and Wandile Sihlobo[2]
A spectre of cannabis is hovering above Africa. The boom is on the horizon and for some countries, it will be a slow burn.
A number of countries in Africa have in the recent past reformed their cannabis regulations – moving it away from being a prohibited drug to a source of income as an exportable commodity. This is motivated by the promise of riches, with many policymakers viewing the burgeoning cannabis industry as offering prospects for boosting rural economic growth and job creation.
It is thus not surprising that reforms in the regulatory regime have been championed mostly by politicians and lawmakers. This is in contrast to trends in advanced industrial economies such as Canada, the US, Germany, and Italy where citizens and private businesses have been the leading advocates for decriminalisation and legalisation of cannabis and its products. The large users of cannabis by value are in advanced industrial economies. They consume the product for medical, recreational and industrial purposes. Moreover, demographics play a part as many Western countries have ageing populations who often require medical attention.
A number of African countries are finalising their cannabis regulatory reforms, and global output may rise. Lesotho was the first African country to decriminalise cannabis in 2017, and the first licence for production was issued in 2018. The ministry of health is the licensing authority. Applicants are vetted through the Lesotho Narcotics Control Board. The licensee has to meet a number of requirements, including access to land and commitment from off-takers, so as to curb diversion to illicit markets. The process can take up to six months.
The fee to obtain a single licence in Lesotho is equivalent to R540,000, which is a steep amount for smallholder farmers. The licence has to be renewed annually at R130,000. This poses a risk of deepening socio-economic stratification, with Lesotho’s cannabis sector likely to be dominated by big players, and smaller producers pushed to the shadows of illegality. Since Lesotho’s output is mainly for export, the country may not develop a thriving sector across the value chain.
Zimbabwe issued its first cannabis licence in March 2019. Export markets and foreign exchange earnings are the key drivers for cannabis regulatory reforms in Zimbabwe. The licensing regime in Zimbabwe has changed a few times in the past year. The licence was initially set at R700,000 ($50,000), and there were suggestions that this could be revised downwards to R140,000, which will still be prohibitively high in view of Zimbabwe’s tough socio-economic conditions.
At the time of writing, only one medical cannabis project had been approved, Precision Cannabis Therapeutics, with more than 37 licences still under consideration. Skewed moral concerns raised by communities and religious leaders have undermined progress in the licensing process. Further, the uptake by Zimbabweans has been low due to the expensive licensing regime and ambiguities about how to obtain licences.
Other countries like Eswatini (formerly Swaziland) have also put in place a draft bill regulating cannabis. Similarly to Zimbabwe, cannabis production in Eswatini is restricted to medicinal purposes and scientific research. Decriminalisation has been actively championed by the Minister of Commerce, Industry and Trade, Manqoba Khumalo, who sees this as an avenue for economic development.
The licence is valid for five years and can be renewed. Licences are approved at ministerial level in the department of health, with applicants having to meet 13 requirements. The proposed licence fee is prohibitively high at the equivalent of R1-million. So far, only one company has been granted a licence, Profile Solutions Inc from Florida, and this is for a minimum of 10 years to produce hemp and medical-grade cannabis.
Malawi has moved glacially in putting in place its own licensing regime. The factors influencing a shift towards decriminalisation are similar to those of other African countries: to diversify foreign exchange earnings in response to depressed prices for other commodities and to create jobs. Malawi’s tobacco economy has come under pressure as a global shift away from cigarette smoking in developed countries intensifies as a result of regulation and health concerns.
Although parliament has given the go-ahead for the drafting of the Medicinal Cannabis Cultivation Bill, encompassing industrial and medical hemp, progress has been extremely slow, in part due to elaborate consultative processes and technicalities related to distinguishing the banned Indian hemp from medicinal cannabis. Malawi has a thriving hemp association that lobbies strongly for decriminalisation.
In short, many African countries are gradually considering decriminalising the cultivation of cannabis for medical and scientific purposes. Those countries where reforms are in motion are using the Canadian code as a guide in developing their licensing regimes. For many of them, the major motivating factor will be foreign exchange earnings to diversify their income. Broadening their tax base is another important consideration. However, constituencies championing decriminalisation are either non-existent or outnumbered by religious and other conservative groups.
Unlike in many other African countries, South Africa has a diverse consumer base for cannabis. This includes Rastafarians, ordinary users, and medical patients who have been at the forefront of lobbying for legalisation. Data from New Frontier suggests South Africa has a market of $1.2-billion of cannabis and its products as of 2018. Apart from low-income consumers, South Africa has a potential market at the high-end for products such as edibles, cannabis-infused beverages, nutritional foods, textiles, topical lotions, essential oils, and medical cannabis.
South Africa can draw important lessons from the nascent cannabis regulatory regime on the continent. The first is that the country should take a value chain approach and emphasise economic inclusion. This means the licence fee should not be prohibitive.
Take the example of Lesotho where a licence is R540,000. For communities in fertile areas such as Lusikisiki in the Eastern Cape, this means a farmer would need to sell 54 head of cattle to obtain just one licence if we were to follow the Lesotho example. This does not take into account the capital expenditure on constructing greenhouse tunnels, water systems, energy, storage, and security measures. High licensing fees can be anti-development.
Second, South Africa should have a very clear and sound licensing regime with a single authority that can make a determination between the various types of licences, such as for scientific and medicinal use, dispensary, and industrial hemp production. This would mean a recognition of cannabis as an agricultural crop through rescheduling, as well as a key ingredient for medical uses. The licensing process should take less than a month since longer periods undermine the ease of doing business.
Third, South Africa should avoid being trapped in primary production. The policy should aim to enrich the value chain, including R&D, seed breeding, and biotechnology on the medicinal side; as well as supporting the production of high-value products on the industrial hemp side to improve niche-based competitiveness in the clothing and textiles sector in line with the country’s industrial policy. This could lead to positive spill-overs in knowledge upgrading, and help stimulate job creation across the value chain.
Finally, this sector offers an opportunity for the government to create a unique suite of incentives to promote the participation of black players in this sector, and to uplift smallholder farmers and rural communities. In addition to labour-intensive jobs, new opportunities could be created for agronomists, master growers, lab scientists, compliance officers, as well as give rise to side-stream jobs in branding, packaging, and logistics and transport.
It is important that South Africa has a simple, clear, and predictable licensing regime that is aimed at promoting economic growth, competitiveness, and economic inclusion. For the country to reap benefits, speed and purposeful action will be critical.
[1] Mzukisi Qobo is Associate Professor: International Business & Strategy, Wits Business School.
[2] Wandile Sihlobo is Chief Economist at the Agricultural Business Chamber of SA (Agbiz).
*Written for and first published on the Daily Maverick on 28 July 2019.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Jul 21, 2019 | Agricultural Production
Essay by Professor Mzukisi Qobo[1] and Wandile Sihlobo[2]
Marijuana, cannabis, dagga, weed, pot, Durban poison, ganja, mbanje, insangu, umya — call it what you may, cannabis is set to become a booming industry in the foreseeable future. Cannabis has now been decriminalised in over 50 countries in the world, with others joining the bandwagon.
Canada has been one of the leading countries in developing the sector, with stocks such as Canopy Growth, Aurora Cannabis, and Aphria attracting attention. Many Canadian entrepreneurs and investors have been streaming into Lesotho and some are waiting for the floodgates of this new wealth to open across the continent. Green Fund estimates that the global cannabis market is worth $150bn and the forecast by Barclays places the value of the sector at $272bn by 2028.
Apart from Lesotho, which is Africa’s first mover in decriminalising cannabis, African countries such as Botswana, Swaziland, Zimbabwe and Uganda are at varying stages of rolling out their licensing regime to attract investment to the sector. SA has been a laggard.
One of the factors that account for slow adaptation in the cannabis industry in SA has been the stigma associated with the plant. The emphasis has been on its recreational use and as one of the fuels for the drug economy, overlooking its medicinal benefits. Globally, the existence of “weed” stigma is a relatively new phenomenon that spread in the 19th century. Very few appreciate that this plant has been in existence for 12,000 years, traced in Asia in the main, and later spreading to other parts of the world.
Countries that have decriminalised cannabis and mainstreamed it in the economy and the health sector are contending successfully with negative perceptions associated with “weed”. There is a need to separate extremities of recreational use from the medical and economic benefits of cannabis, which can help a great number of people.
In countries that have decriminalised cannabis, it comes in handy for ameliorating the pain associated with rheumatism, Parkinson’s disease, Alzheimer and cancer within a sound regulatory health regime.
On the economic front, there are beneficial industrial uses of cannabis that are associated with hemp, fuel and textile. In the state of California, the value of the cannabis industry was estimated at $3bn in 2017. Colorado and Florida were valued at more than $1bn. In the same year, Canada spent over $5bn on cannabis for medical and non-medical purposes. In China, the sales of textile fibre made from hemp totalled $1.2bn.
At home, the City of Cape Town is freeing up land for medical cannabis, hopefully, opening up untapped economic opportunities. This is after parliament promulgated a legislative framework as required by the 2018 Zondo judgment.
It is worth highlighting that the judgment does not make it legal to commercialise cannabis, it merely decriminalises its use in the private space. However, this opens up a window of opportunity that politicians will need to cast wide open.
Oscar Mabuyane, premier of the Eastern Cape, has in recent times been the most prominent politician to take a courageous step in extolling the virtues of cannabis, and signalling that he wants to position his province in this direction. That province has been afflicted by economic ills and is lagging behind in both agriculture and industrial development. Citizens in this part of the country are at the bottom rung of the socioeconomic ladder.
There is anecdotal evidence in places such as Lusikisiki, Flagstaff and Libode in the Eastern Cape, and parts of Kwa-Zulu Natal and Limpopo provinces where this crop has been cultivated in the shadows of the law. Illegality has hindered economic prosperity.
SA has been slow in taking advantage of the Zondo judgment to spawn a clear policy framework that could catalyse the economic uses of cannabis. In the interim, there are a set of guidelines in place that have been issued by the Medicines Control Council. These are interim regulations until parliament comes up with a permanent framework. The guidelines anticipate legislative measures that not only decriminalise cannabis but pave the path to commercialisation.
Cannabis could very well be a catalyst for revitalising rural communities that are economically marginalised and excluded from the agriculture value chains, as well as create opportunities for canna-tourism especially in the Eastern Cape, KwaZulu-Natal and Limpopo. If SA tarries longer, it could suffer a latecomer competitive disadvantage in the future.
SA still has an opportunity to build a competitive edge in the sector despite the fact that countries such as Lesotho are first movers. Lesotho is building its cannabis economy on the back of cheap labour, water abundance, relatively affordable electricity and high altitude which reduces costs associated with pest management, thereby positioning the country as a supplier of an organic variety of cannabis.
SA’s competitive advantage could be built on the back of a clear and predictable regulatory framework; an open investment regime; strong research and development support; knowledge networks that bring together university researchers, centres of excellence, and other industry players; product quality and standards authority; and low-cost licensing regime. Yet still, there could be ample opportunities to build regional value chains of hemp products among Southern African Customs Union countries, as well as develop harmonised standards on medical research and clinical trials.
The immediate task should be to reclassify cannabis as an agricultural crop, not “weed” which reinforces its stigma. More research and data will be needed to reveal additional benefits of cannabis as well as getting a better sense of regions that can grow cannabis more efficiently.
All music comes to an end, and so will the cannabis boom. The CEO of Green Fund, Mark Bernberg, has projected that by 2023 cannabis will become a commodity with everyone racing to produce it, and with oversupply depressing prices and flattening margins.
For now, there are ample opportunities for new entrepreneurs to ride the wave of this emerging sector. These include cultivation and production; hydroponics; industrial hemp (fuels, chemicals, environmentally friendly plastics, biodegradable nappies, sanitary pads and textiles); compound isolation and new strand development; seed distribution; logistics and transportation; retail outlets or dispensaries and clinical trials and medical research, among others.
The thrust of policy should be a balance between equity and a liberal investment regime, a value-chain approach, a bias towards uplifting rural communities, and the provision of financial and nonfinancial support for new black entrepreneurs.
Globally, the industry has just taken off. SA can still compete, but it will need to move with speed. While it may not make our economy high, the cannabis sector could help ease the country’s economic pains that were outlined in finance minister Tito Mboweni budget vote.
Even though it is a late starter, SA can learn valuable lessons from the mistakes committed by first movers as well as best practices in countries such as Australia, Canada, Italy and Uruguay. The cannabis sector promises to be the new avenue for growth and job creation in SA, and the sooner a predictable policy and legislative framework is promulgated the better for the country’s economic fortunes.
*Written for and first published on Business Day on 16 July 2019.
[1] Mzukisi Qobo is Associate Professor: International Business & Strategy, Wits Business School.
[2] Wandile Sihlobo is Chief Economist at the Agricultural Business Chamber of SA (Agbiz).
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
