This report is by JEREMY KAHN, FORTUNE MAGAZINE
International money and investment magazine Forbes says cannabis exports hold enormous potential for Africa but warns that all benefits could backfire if traditional small-scale farmers are not included in the cannabis value-chain.
At the bustling Indian Ocean port of Beira, in Mozambique, steel cranes stack containers full of raw tobacco leaves into ships’ holds, ready for export to processing plants around the world. But, in recent years, the amount of tobacco loaded at Beira has been in decline as smoking becomes less popular in much of the world, and those desiring a nicotine hit increasingly switch to vaping.
Public health officials may applaud this trend, but it has caused consternation in Beira, and throughout sub-Saharan Africa, where tobacco’s broad, green leaf serves as a critical warp thread in the economic tapestry. Nowhere is this truer than in Malawi, Mozambique’s landlocked African neighbour, which grows much of the tobacco exported through Beira. Tobacco accounts for more than 10% of Malawi’s GDP and 60% of its exports, and in the past decade the annual value of its yield has been cut in half to just $210 million. Deprived of vital foreign exchange reserves, the country has struggled to maintain the value of its currency, the kwacha.
So it’s not surprising that Malawi’s President, Lazarus Chakwera, has been urging his nation’s farmers to abandon tobacco in favor of other crops. What’s more surprising is one of Chewkra’s leading alternatives: cannabis.
“Clearly, we need to diversify and grow other crops like cannabis, which was legalized last year for industrial and medicinal use,” he said in a speech last month. Malawi has also recently altered its laws to allow for investment in cannabis cultivation, and has issued licenses to 35 companies allowing them to grow the plant.
Malawi is not the only African country to see potential gold in ganja, which has increasingly been legalized or, at least, decriminalized in parts of the U.S., Canada, and Europe, with sales booming, especially during the COVID-19 pandemic. Zimbabwe, Zambia, Uganda, Kenya, the Democratic Republic of the Congo, Lesotho, South Africa, and Ghana are among the African countries that have also taken steps to encourage cannabis farming as a legal cash crop. A 2019 report from Prohibition Partners, a research and consulting firm specializing in the legal cannabis industry, estimated that Africa’s cannabis business could be worth as much as $7.1 billion by 2023.
Meanwhile, international pot companies are flocking to the continent in the hopes of cashing in. Canadian cannabis suppliers EXMceuticals, Canopy Growth, the Supreme Cannabis Company, and Aphria (which merged with fellow Canadian marijuana firm Tilray), as well as Israel-based Together Pharmaceuticals and the U.K.’s Medi Kingdom are among the companies that have invested in cannabis cultivation in various parts of Africa in the past five years.
ICan, an Israel-based firm that offers consulting services to the cannabis industry and helps incubate startups in the field, has also touted Africa’s potential as both a source of production and potential sales. “With abundant land, an experienced labor force and climates conducive to cannabis cultivation, if legitimized, cannabis could contribute to a continent-wide economic uptick,” Saul Kaye, iCan’s CEO, wrote in a blog post for The Times of Israel.
So will pot become, as Kaye suggests, a savior of Africa’s economies? A lot of international experts have their doubts. For one thing, while in many parts of Africa, farmers have traditionally grown marijuana for recreational or religious use and have sometimes made money through the illegal drug trade, the varieties of pot plants these small-time producers have cultivated are not the type of cannabis being authorized for large-scale cultivation, according to Chris Duvall, a professor of geography and environmental science at the University of New Mexico who has researched the history of African cannabis farming.
The international market is primarily focused on the species of plant, including hemp, with high cannabidiol (CBD) yields, whereas the forms of marijuana traditionally grown in Africa, some of which do command high prices in the illegal market, are those varietals higher in tetrahydrocannabinol (THC). “Those are not the ones that the African countries are investing in at all,” Duvall says.
CBD and THC are both psychoactive substances, but they have different effects in the brain. THC is the substance that produces the feeling of euphoria—of being high—that people get when they smoke marijuana. CBD, on the other hand, is what makes people feel mellow when using the drug. In clinical studies, the latter has been found to help with a variety of medial conditions, including anxiety, depression, pain, nausea and seizures. In many places, CBD has been legalized for medical use while THC remains illegal, even though it has also been found to relieve pain and anxiety.
Duvall says Africa could be missing a potential opportunity by shunning local strains of weed that already have well known geographic-related brands, such as “Malawi Gold” and “Durban Poison,” that could be developed as single origin cannabis “appellations,” similar to those that exist for wine. “Right now it is a new global industry, and Africans are in a place to set the tone and rules and the address the problem of uneven trade,” he says. “They should look really hard at how to make it an equitable industry.”
Africa’s pot paradox
Instead, the need to ensure consistent chemical composition of the cannabis being produced for the legal market, especially for medicinal uses, has meant that even in Africa, which has excellent growing conditions, much of the crop needs to be cultivated indoors, in greenhouses, and carefully irrigated and monitored. As a result, local farmers are being largely cut out of the burgeoning market, with the gains flowing primarily to international companies that employ relatively few local workers, as well as to facilitation companies owned by people with government connections that have helped these international companies secure licenses, he says.
That’s certainly been the case in Malawi, says Blessings Chinsinga, a professor of public policy at the University of Malawi’s Chancellor College who studied the country’s agricultural political economy. He says that all of the companies that have been granted licenses so far are either international businesses, or local firms owned by elites. The license fees are even quoted in U.S. dollars, rather than local currency, he says. They range between $1,000 to $10,000 in a country where the average annual income is only about $200, far beyond the reach of most of Malawi’s farmers. He also says that the new government rules for cannabis cultivation licenses require those applying to prove they have a market for their product, something most indigenous producers can’t do. Only the international pot companies can show they already have a customer base.
What’s worse, in Malawi, Lesotho, and many other parts of Africa, an explicit quid-pro-quo of allowing large-scale cultivation of high CBD-yielding cannabis varietals has been met with a renewed crackdown on small-scale production for the illicit market, Duvall says. It’s also the case that while many African countries have legalized industrial cannabis farming, fewer have eased drug laws to allow citizens to legally consume what is being produced locally. Only in South Africa, Kenya, and Morocco have reforms either been enacted or proposed that are aimed at legalizing small-scale artisanal marijuana farming and allowing personal cannabis use.
Meanwhile, in terms of replacing tobacco as an economic driver in Malawi—something Chinsinga agrees is an imperative for the country—current cannabis cultivation plans seem inadequate, the professor says. Most tobacco is grown by small farmers who cultivate just over an acre of land. These farmers, Chinsinga says, are largely dependent on government subsidies to purchase basic production inputs, such as seeds and fertilizer. Finding an alternative income source for all of these people requires a huge investment in training and subsidies, and the amount of money the government has so far allocated for cannabis cultivation is not nearly enough to transition most farmers away from tobacco, he says.
Previous efforts to find a substitute for tobacco, including soya beans, pigeon beans and ground nuts, have also run into problems, Chinsinga says. One of the issues is that it puts farmers at the whims of unpredictable international price swings. When prices are high one year for soya beans, for instance, many small farmers rush to plant those beans, which often results in a glut and lower prices the next year, on top of the possibility that the international price may also have fallen, leaving farmers impoverished. “It is very difficult without a structured market domestically that would cushion farmers,” he says.
This problem is compounded in the case of cannabis because the legal market is relatively new and awash in faddish, speculative cash that could vanish as easily as smoke from a bong hit if investing fashion changes. Already, some of the Canadian pot companies—including Tilray and Canopy Growth—that charged into Africa, flush with money from stock exchange listings, have announced plans to retrench.
If the bloom truly comes off the budding bud industry, Malawi and other African nations hoping to give their economies a buzz could wind up burnt.