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SARS Earns Crumbs From Cannabis: Only R6,3 M in 2021/22

SARS Earns Crumbs From Cannabis: Only R6,3 M in 2021/22

Parliament hears how billions of tax rand could be earned if South Africa put in place a proper commercial environment for cannabis.

Banele Ginindza, IOL News

11 March 2024 at 08:00:00

This report from IOL News on 11 March 2024.

The paltry R6.3 million the South African Revenue Service (Sars) scraped in the 2021/2022 financial year from the multibillion-dollar cannabis and hemp industry due to a restrictive regulatory environment for farmers yesterday rattled the cage for parliamentarians in the portfolio committee on agriculture, land reform and rural development.

This as the sector with looser regulations could net potential billions in revenue of the cannabis industry pie and create jobs in South Africa.

Hemp4life CEO Ben Sassman detailed the zero lack of funding for farming and processing of the industry to regulatory bottlenecks from the expensive water licence to stringent laws that make it illegal still to trade in hemp and cannabis products in the country.

He said there was a serious disconnect between the Cannabis Master Plan and what farmers and agro-processors in the industry faced.

The Cannabis Master Plan, crafted in 2021, proposed to integrate small growers into formal cannabis value chains by organising them into licensed groups and providing them with technical and financial support.

According to estimates, a formalised cannabis industry could be worth R28 billion and could create between 10 000 and 25 000 jobs.

It identified issues that still had to be ironed out, including: licensing and confusion about hemp permits; illegal products on local markets; high barriers to entry, including high licensing costs; the inclusion of existing dagga growers and traders; and the role of the provinces.

Sassman said of the more than 3 600 applications before the South African Health Products Regulatory Authority (Sahpra), only 102 had been issued in the five years of the review of the Cannabis Act and of those, only three companies, including Hemp4Life, had managed to negotiate off-take agreements with companies in the US, Canada, the Netherlands and Germany for products the locals are restricted to supply.

“For Sars to collect only R6.3m in revenue is insulting to the economy because the bottlenecks and regulatory standards could be eased to allow people to cultivate cannabis and hemp. Allowing the use of cannabis for recreational purposes would allow Sars to collect more from the industry currently worth R50bn to R60bn,” Sassman said.

He said according to estimates, more than four million people in the country used cannabis, which was too overwhelming for the Sahpra to monitor through section 21 notices that gave the public licence for private use of cannabis.

Hence, Sassman said a carte blanche easing of regulations would yield revenue for the fiscus.

Sassman said there were formidable barriers to entry in the cannabis sector. For example, barriers included affording the R886 000 for a water rights licence.

He said the integration of indigenous cannabis and hemp growers was impossible under current legislation, leading to sector players all looking after their own interests while the water licence was granted to the farm by co-ordinates, which restricted the licensee from sub-licensing, shifting, transferring or selling the farm.

Furthermore, the Industrial Development Corporation, Land Bank, National Empowerment Fund and private institutions were currently unable to get involved in the industry because it was still legally restrained.

Julian Japhta, the chief director for Plant Production and Health in the Department of Agriculture, Forestry and Fisheries, confirmed the current barriers presented by legislation, particularly in terms of the prevention of organised crime statutes.

He said the department had included hemp in the list of products for production in the country, but there was a slow uptake from local farmers.

Restrictions came with the classification of cannabis in the medical category, which immediately attracted close scrutiny of the standards to be adhered to, hence, with more red tape.

Parliamentarians said they were sympathetic to the farmers and agro-processors, urging for an acceleration of processes to review the barriers.


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