South Africa, Embracing ‘Dagga’ for Economic Development

By Oliver Bennett, Special Contributor to New Frontier Data

Representing the continent’s third-largest economy, South Africa  is the latest African nation to be making legislative inroads to legalizing cannabis. A draft of the country’s cannabis master plan has been revealed by its Department of Agriculture, Land Reform, and Rural Development (DALRRD) to transform the country’s cannabis policies.

The master plan’s key objective is to get the Cannabis for Private Purposes Bill past the National Economic Development and Labour Council (Nedlac) by the end of this month.  After that, Nedlac is expecting by October to issue new national permits for cannabis and hemp in order to nurture its budding medical cannabis industry while advancing reforms around recreational cannabis.

The plan is the latest step following a historic 2018 Constitutional Court ruling effectively proposing that cannabis use, possession, and cultivation be permitted and regulated in South Africa. The draft Cannabis for Private Purposes Bill became public in September 2020, establishing the possession rules at stake this month. Its recommendations are to allow 600 grams (or four plants) per single household, or 1.2 kilograms (or eight plants) for homes with two or more adults. Those adults would be allowed to share cannabis with friends, provided that no money changes hands. The law also attempts to keep cannabis use invisible to the wider public; one of its strictures is that cannabis use should be kept away from the public gaze.

In several ways, South Africa’s bill would seem to serve as a relatively cautious reform and decriminalisation effort. Yet some critics have qualms: From one perspective, the draft bill has been seen as  “narrow and traditionalist”, more concerned with restrictions rather than embracing cannabis as a potential revenue source to provide some economic good following the devastation of COVID-19. Opponents also suggest that it keeps cannabis in an illicit ghetto.

While there is a commercial cannabis infrastructure in South Africa, there has been a backlog of applications to the South African Health Products Regulatory Authority (SAHPRA), holding the nascent cannabis industry back from becoming internationally competitive. It argues that cannabis should be reclassified as an agricultural crop and the lack of take-up runs against South Africa’s obvious regional advantage: that it is the only African country that is a member of the Pharmaceutical Inspection Cooperation Scheme (PIC/S) – a primary reason why it already hosts many pharmaceutical companies. Theoretically, South Africa could readily negotiate the regulatory obstacles facing other producer countries, and export to Europe.

The European market is of key interest to go-ahead companies in South Africa. SafriCanna is gaining EU-GMP certification. Listed company Labat Africa is selling combustible “cannabis light” style 20-packs of Ace & Axle with distribution rights across the continent. Labat has also acquired a stake in Northern Cape-based cannabis cultivation company Leaf Botanicals, having planned in 2019 to “develop an integrated cannabis business in South Africa”, licensed by SAHPRA to cultivate and export medical cannabis. Called “one of South Africa’s first legal dagga growers”, Labat Africa’s deal with Leaf Botanicals has been valued at 15 million rand (about $10 million USD) with intentions to become a big exporter of medical cannabis.

Certainly, South Africa cannabis represents a big domestic and continental market with huge export potential to Europe, with which it propitiously shares time zones as well as historic cultural links. The regions expected to be the biggest cultivators are the Eastern Cape and KwaZulu-Natal provinces.

Whether characterised as the world’s third- or fourth-largest cannabis producer, South Africa has an estimated 2.8 million users of “dagga”, adding up to a total estimated market value between $1.8 billion and $4.8 billion.

There are reasons for optimism: As Leslie Zettler of Felbridge (the first producer to receive a cultivation license) recently observed, “It might take a little time, but I firmly believe that SA will find its niche, maybe not in flower production, maybe in research or seed production. We are a big agricultural economy, so it only makes sense that we are going to be an important player in the next years.”

That is not to suggest that there are not issues to solve. Through its legacy of apartheid, South Africa has particular social issues associated with cannabis. The apartheid government criminalized cannabis in 1922 prior to the wider 1925 ban on international cannabis, and it also lobbied for global prohibition – despite the fact that cannabis has been used both for recreation and medicine by indigenous communities for hundreds of years. As some have argued, the legacy of apartheid is the reason for relatively slow uptake of cannabis, taking until 2018 for the government to decriminalize personal possession and use. Showing that some of these factors linger on, Black farmers recently marched in the country’s fifth-largest city, Pretoria, claiming that they have been excluded from cannabis licenses, with the Black Farmers Association of South Africa (BFASA) accusing the minister of health and medicines of issuing licenses to White people and foreigners to the exclusion of the Black community.

As the next two years are expected to prove instrumental in South Africa’s cannabis industry, it is vitally important that the country be inclusive about its gigantic opportunities.