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CANNABIS INDUSTRY 

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The Legal Vacuum is One Thing But Where’s Government’s Plan to Mobilize Investment in Traditional Cannabis Growing Areas?

The Legal Vacuum is One Thing But Where’s Government’s Plan to Mobilize Investment in Traditional Cannabis Growing Areas?

University of Stellenbosch economist Wandile Sihlobo says cannabis could be the catalyst that could revitalize rural communities, but this needs a focused plan from Government and a clearer regulatory framework.

Wandile Sihlobo, Economics Dept, Stellenbosch University

17 February 2023 at 11:00:00

Economist Wandile Sihlobo submitted this as a letter to Business Day on 15 February 2023 in response to an article by Michael Schmidt on the challenges facing legacy growers.


Michael Schmidt raises essential questions about the pace of regulatory work to open the cannabis market and the participation of small-scale farmers.


I would add that cannabis could indeed be a catalyst for revitalising rural communities that are currently on the periphery of commercial agriculture value chains, and create opportunities for canna-tourism, especially in rural Eastern Cape, KwaZulu-Natal and Limpopo, as President Cyril Ramaphosa rightly highlighted in his state of the nation address (SONA).


Read: The President's Got the Plot, Maybe Cannabis Reform Will Take Off in 2023


SA can still build a competitive edge in the cannabis industry even though countries like Lesotho were first movers. Lesotho is building its cannabis economy on the back of low-cost labour, water abundance, relatively affordable electricity and high altitude, which reduces costs associated with pest management, thereby positioning the country as a key supplier of an organic variety of cannabis.


SA’s competitive advantage could be built on the back of a transparent 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 a low-cost licensing regime.


There are real opportunities for new entrepreneurs in this 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.


Read: If Government is Serious About Cannabis Reform Where's the Budget and the Action Plan?


But what we need to be thoughtful about is a practical means of ensuring that production and value chains don’t mainly develop in areas that have always been the leading agriculture zones and urban areas where there is better access to investment.


The communities of the Mpondoland region of the Eastern Cape, which the president mentioned in the 2022 SONA and again recently, has indeed been growing this plant in the shadows of the law for many years and should benefit from its liberalisation. But does the government have a clear plan for mobilising investment and value chain development to these regions, or will much be left to market forces to determine?


I fear these areas will likely be left out of the commercial value chains if it’s the latter.


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