PRETORIA – The decision by the Constitutional Court to legalise personal use of cannabis has been met with mixed feelings.
Those who oppose the decision base their opinions on the outdated, traditional approach which demonised the plant. Others are just too excited at the prospect of not being harassed by law enforcement.
In the midst of this excitement, one academic from the Tshwane University of Technology declared that the legalisation of marijuana will be good for the country. He said a new industry “ganja tourism” will attract millions of holidaymakers for the experience.
Another view is that the change in the law creates new economic opportunities for communities that traditionally grow the “holy-herb” such as those in the Drakensburg and the Eastern Cape. It is not clear if the legalisation will lead in the reduction of prices.
But what is less spoken about is the global cannabis market that is slowly moving towards the control of large multinational corporations. It is therefore interesting that South Africa decided to decriminalise marijuana when corporate interests in the plant is in the up.
Whether it is by chance or not, marijuana is now no longer a dirty drug that makes people high.
According to the Grand View Research, the global legal marijuana market size was valued at $9.3 billion (R132bn) in 2016, and this figure is likely to go up $146.4bn by end of 2025 when more countries decide to legalise the product. Canadian growers such as Canopy Growth, Aphria, Aurora Cannabis, Tilray and Tikun Olam dominate the market.
Medical and recreational
The market is broadly segmented into medical and recreational, and the former presently accounting for about 80.3 percent of the revenue in 2016. This picture is likely to change as beverage companies look to enter the market as well.
Capital has already identified cannabis as good source for growth, especially for beverages companies such as Coca-Cola that face uncertain future as soda consumption slows. For example, South Africa on April 1, 2018 joined many other countries by introducing tax on sugar-sweetened beverages. Other countries with soda tax include Australia, Colombia, France and Mexico.
As people become aware of their health, they consume less soda drinks or beverages with high sugar content. Coca-Cola is one company that has seen a decline in its economic fortunes. When South Africa first introduced its intention to impose sugar tax, Coca-Cola SA was among the companies that opposed the proposal. It argued that sugar tax “could result in South Africa losing 60 000 jobs”. The company deployed the same tactics in Mexico but was not successful.
Coca-Cola is reportedly interested in entering “the world of cannabis drinks, but says it’s not interesting in getting its customers high”. Marijuana contains cannabidiol (CBD), a non-psychoactive ingredient found primarily in its extractions “that doesn’t get you high”.
Canadian news service BNN Bloomberg said talks were in advanced stages between Coca-Cola and an Edmonton-based cannabis producer Aurora to develop weed-infused beverages.
Cannabis infused drinks appeal to people “who want to medicate but want another option besides smoking”. Some of the famous cannabis infused drinks already selling in the market are Dixie Elixirs, Sprig Citrus Soda, Zasp, Keef Cola etc.
The drinks are also reportedly good for anyone who wants to reduce alcohol consumption but still want to enjoy a drink or two on social occasions.
The introduction of cannabis-infused drinks could be a positive development for a country like South Africa with its high state drunkenness. Too much alcohol is responsible for violence and road fatalities.
Well the legalisation of the marijuana in South Africa will therefore not necessarily result in any economic gains for locals. Besides Coca-Cola, the market for the hemp plant is also attracting interest from large beverage-makers who all have intentions to manufacture cannabis drinks, or “wellness beverages” as they are sometimes called.
Molson Coors Brewing is starting a joint venture with Quebec’s Hydropothecary. Diageo is also in discussions with at least three Canadian cannabis producers. Also, Mexican large brewery Constellation Brands, which produces Corona beer, will spend $3.8bn to up its stake in Canopy Growth, another the Canadian marijuana producer.
The implications for the legalisation of marijuana in South Africa are yet to be known. Although the argument for decriminalising the plant has generally been on using it for medicinal purposes, the court ruling opens new avenues. Smokers will enjoy their “joint” at leisure.
Smoking has been the focus but the general population isn’t aware that the dagga market is already in the hands of multinationals. Nonetheless, South Africa can take advantage of its favourable climate to become a net exporter of cannabis. But the challenge that will face still illegal growers is how they can compete in this lucrative market.
Cannabis is also legal in Canada and the north American country is anticipated to expand its hemp production at a CAGR of 66.8 percent between 2017 and 2025. There is great opportunity to stimulate rural development in some of the most neglected areas in the country.
Marijuana can easily become “green gold” for rural South Africa and bring much needed capital to the rural areas and create jobs. Black entrepreneurs need to be supported to be first ones to be involved in the early stages of legal production.
It is predicted that the likes of Coca-Cola and Diageo, for example, will be the first ones to buy “umthunz’ wenkukhu” (chicken shade, as marijuana is called in certain parts of South Africa). There is therefore an opportunity for cannabis farmers in KwaZulu-Natal and Eastern Cape.
But their subsistence methods will work against them, unless they receive government support. Large corporations chase after profits and provide their products to large markets – so they will not be content with inadequate supplies.
Supposed that Coca-Cola and Diageo indeed step up their efforts to diversify their product ranges, the next contested terrain will be farmlands in the foothills of the Drakensburg mountains. Arable land will be used to plant cannabis. Brazil went through similar issues when biofuels became fashionable.
Brazil increased sugarcane plantations at the expense of other crops. Most of the sugarcane is used to make ethanol, a biofuel. At this point, at least 14 percent of total agricultural land in Brazil is used to grow sugarcane. This growth has come at a price for food producers due to pesticides that affect their land.
Possible high yields from cannabis sales and demand for the drinks will compel farmers to switch from regular crops like maize to the hemp plant. Farmers will thus push out subsistence cannabis growers in the mountains and position themselves as key suppliers to Coca-Cola, Diageo and other new players in the market. The large overseas growers are salivating at the prospect of entering the largely underdeveloped South African market.
In addition, these large companies will most likely use their infinite financial resources to control cannabis production not just in South Africa but in the entire region using the same strategies as tobacco companies. The green leaf market will be contested from Mutare in Zimbabwe to Lusikisiki in the southern Drakensburg.
Marijuana production presents yet another window of opportunity for South Africa to grow its economy as well as to solve some of the long-standing and stubborn socio-economic challenges facing the country to date.
Marijuana is not only about fumes but it has multiple uses from medicine to commerce. Consequently, it is advised that South Africa take the necessary steps to cushion small marijuana producers and also to expand production for the benefit of the citizens. Land reform should also be sped up in order to give people more ground to grow the hemp plant.
Researchers and experts should take advantage of this burgeoning industry by providing the necessary technical skills, support and information to cannabis growers.
Marijuana has potential to become a game-changer for rural South Africa for as long as there is a clear industrial policy to regulate its value chains.
Siyabonga Hadebe is an independent commentator on socio-economic, politics and global matters based in Pretoria.
The views expressed here are not necessarily those of Independent Media.
- BUSINESS REPORT