A multibillion-rand industry capable of saving the country from the current financial doom is hidden behind backyards and left for the black market to exploit. Permitting the trade and cultivation of cannabis is a long-term solution to South Africa’s financial crisis.
Cannabis, also known as marijuana, was decriminalized in South Africa in 2018. This follows after several countries made the sale and consumption of cannabis legal.
Unlike the rest of these countries, in South Africa cannabis remains prohibited per the Drugs and Drug Trafficking Act 140 of 1992  and the Prevention and Treatment of Substance Abuse Act, No 70 of 2008 . These acts prohibit the sales, trade, or cultivation of cannabis.
Accountants petition for the allowance for the public to trade, cultivate, or sell cannabis, they would be required to acquire a license from The South African Health Products Regulatory Authority (SAPRA) which is the organization in charge of regulating the use of all Health Products throughout the country. Currently, SAPRA does not issue out these licenses to the public.
Accountants can serve
A simplified process to acquire the license to trade and cultivate cannabis is the solution. The coming out of illegal traders into the market would bring a change. Registered small businesses would mean job creation and the need for financial services from accountants.
A well financially managed business equals the exponential growth of the business, industry, and the overall economy.
According to the founder of Biomuti and chairman of Cannabis Trade Association Africa (CTAA), Tebogo G. Tlhopane, there are over 900 000 cultivators and farmers all over South Africa. These farmers supply the black market with cannabis for exportation.
“Imagine 900 000 farmers registering their businesses, registering for tax and financial assistance from finance professionals. That would mean every one of those farmers would need an accountant, farmworkers, advisors and would create above 5 million jobs which is exactly what the country needs. In addition to the jobs, the legal exportation of cannabis would mean taxes opportunities for economic growth.
South Africa is the 2nd highest exporter of cannabis in the world, with over 3.5 million users in the country, what figure would account for worldwide usage?
Accountants are calling for the government and relevant stakeholders could remove cannabis from these criminalising acts, there would be an opportunity for massive growth. Just as much as alcohol and superette have a regulatory board, the same should be allowed with cannabis.
Regulatory bodies and organisations should rally for this and that is when the government can act. “
The founder of a cannabis movement, Brett Hilton-Barber says:
Globally, the legal cannabis industry is booming with estimates that its value is around US$20 billion and is projected to grow by over 25% over the next three years.
Cannabis may be one of the biggest sectors for the financial market to tap into over the next three to five years. Once a comprehensive legal framework is in place, investment funds will rapidly flow into this sector. Current licence requirements are that a GMP certified cannabis facility is built by the licensing applicant before a license is given. The cost of erecting such a facility can be north of R15m.
The demise of Section 12J of the Income Tax Act was a blow to attracting investors into the industry and there is scope for a specialist cannabis financing vehicle to be established to help entrepreneurs overcome the barriers to entry into this dynamic new market. The immediate opportunities for the finance industry are in structuring export and Capex deals for the medical cannabis export market, insurance and funding and advising small businesses. However, until the Drugs and Drug Trafficking Act of 1965 is amended to drop the definition of cannabis as a narcotic, the finance industry’s options are limited.
The National Cannabis Master Plan envisages legalization as a way of bringing illegal farmers and traders into the formal economy. The provinces are leading the way with the development of a hemp economy, which could create thousands of jobs and small business opportunities. The Eastern Cape Rural Development Agency has put out for public tender the supply of cannabis seeds to its East London offices, it’s funding a hemp training farm in Uitenhage and is looking for a partner to develop a cannabis incubation hub in Lusikisiki which will be geared to support farmers and develop local businesses. Gauteng has identified cannabis hubs to be developed in the Vaal Triangle and the West Rand as economic drivers post Covid-19. The finance profession says if government handles cannabis reform properly, this could lead to the biggest boom that small businesses have ever experienced in South Africa.
According to Daily Maverick, Economic development and job creation are the driving forces behind the Master Plan. “The purpose of the master plan is to provide a broad framework for the development and growth of the South African cannabis industry in order to contribute to economic development, job creation, inclusive participation, rural development and poverty alleviation,” it says.
Its key objectives are as follows:
- Create opportunities for creation of small and medium-sized enterprises across the cannabis value chain.
- Increase investments in research and technology development to support the increased production, productivity and competitiveness of the cannabis industry.
- Establish and increase the manufacturing capacity of the South African cannabis industry.
It is plausible to say that the legalization of cannabis trade will be a big gain for the economy and the finance fraternity. Auditors, bookkeepers, accountants, tax practitioners, business advisors and many other services would be needed from day one.
A plea from accountants for careful consideration, drafting of regulations and process to issue out licenses to the public by the government. This will curb the increasing unemployment rate and create the need for finance and accounting professionals to serve the industry.