How cannabis can solve South Africa’s economic crisis

The rise of the global cannabis industry has seen a number of nations loosen cannabis laws to increase revenue earned through taxation.

Notably, in the United States and Canada cannabis is one of the fastest growing industries with it being predicted to be worth $66.3 billion globally in 2025.

The Leaf Desk recently covered an article on how India could be the next cannabis trailblazer, and now South Africa is putting its case forward too.

Cannabis has been decriminalised in South Africa since 2018 while in Lesotho – a small landlocked nation within South Africa – there has been an overhaul of medical cannabis laws with the region commencing legal cultivation of the crop for medicinal use.

South Africa has recently struggled to keep afloat from an economic standpoint, with several reports pointing towards high levels of unemployment, poverty and crime.

With neighbouring Lesotho taking the lead in terms of cannabis innovation, the pressure is on South Africa to buck up its ideas to save a flailing economy.

Cannabis has long been part of the healthcare and folklore in the African continent due to its medicinal properties, with records of usage dating back to times in Ancient Egypt where cannabis pollen was buried amongst mummies and the papyrus Ramesseum III contains one of the oldest mentions of cannabis discovered.

Still illegal

Although cannabis is still illegal in most African countries, the continent is estimated to produce at least 38,000 tonnes of the plant per year, as the global demand for tobacco has fallen and consequently hit the economy hard, the agricultural workers remain experienced in cultivating crops and thus turn to cannabis.

Due to the high rates of unemployment, many former farm workers have turned to illegal cannabis cultivation as a means to earn enough money to support their families and put food on the table.

The Prohibition Partners’ African Cannabis Report stated that ‘poverty could be the driving force of cannabis legalisation in the region. A decline in demand for key cash crops, such as tobacco, is pushing the region’s governments to look for alternative income streams’.

Considering the amount of illegally grown crops already on hand across the continent, legislation and regulation of cannabis could be turned into much-needed income for many countries, whilst creating more jobs and encouraging new businesses to be launched.

Local and foreign businesses could see a strong opportunity to profit off the future legal cannabis market in South Africa as the land is affordable, the labour cost is low and the workforce for agriculture is already experienced with similar crops.

Further north, Malawi Gold is a legendary cannabis strain amongst cannabis connoisseurs that grows naturally in Malawi and is unique in that the buds are cured after being tightly wrapped in banana leaves.

Similarly, Swazi Gold is a strain native to Swaziland – one of South Africa’s poorest states. It’s cultivated in the same manner as Malawi Gold and is desirable across the globe.

 This notable feature of the sativa-dominant buds could enable legal sellers to potentially command a premium for the purchase and export of the strains.

A downside to potentially distributing medicinal cannabis would be getting the product to the patients as the healthcare system remains inadequate and inaccessible for some, as much of the population lives in rural areas.

Religious beliefs

If medical cannabis were to come into force, the distribution would be in the hands of health charities, and many of these charities operating in the region hold strong religious beliefs and may disagree with the legal stance of weed.

Cannabis grows extremely well in South Africa, especially in the Dagga Belt, which is between the Eastern Cape and KwaZulu-Natal provinces.

Cannabis is a key cash crop for those living in the Eastern Cape, where it often sustains whole communities despite it being illegal to distribute.

South Africa’s climate is mainly comprised of mountainous high-altitude areas, high humidity places around the coast and a few hotter areas, all of which can be suitable for different types of strains to thrive in the particular regions.

Lesotho has an extremely favourable climate for growing cannabis as the high-altitude mountains in the region serve as an abundant water source alongside rich and fertile soil making the conditions optimal for cultivation of the plant. 

While many other countries in the continent hold the same abundant climate as Lesotho, there are a lot of regions that experience a shortage of water and would need to utilise irrigation technologies to supply potential crops with the water amount needed, which seems an unlikely feat in the near future.

Next steps

As the economy reaches tipping point, South Africa needs to act fast to prevent a further crisis from developing across the country.

South Africa’s public finances are currently in a woeful state, with economic growth being extremely low while tax revenue collection is drastically below previous forecasts. Debt levels are also at their highest in the post-apartheid era.

Cannabis has bolstered economies in American states where it has been legalised for recreational use, and with a population of 56 million, there is a huge untapped market growing in South Africa.

If legislation was introduced, recreational use regulated and medical cannabis was legalised, the cannabis industry in the African continent could potentially be worth more than $7.1 billion annually by 2023, bringing much needed financial prosperity and a boost in employment to the continent.

The cannabis market could be a huge game changer for South Africa while enabling large-scale exporting opportunities for new businesses, which then pay taxes to reinforce the region’s struggling economy.

The potential of exporting remains high. However, the consumer demand within the continent is also full of opportunities as the demand for cannabis in Africa continues to grow, with the annual prevalence rate of cannabis use being 13.2% making the region one of the top cannabis consumers in the world.

Despite the high amount of cannabis users in the area and the high potential consumer quantities, more than 33% of Africans live below the poverty line meaning the recreational market would have to remain low-priced, so the sale potential would be better suited to exporting to Europe or North America.

Whilst the potential profit from the new industry may look tempting to foreign businesses, any companies looking to dip into the market will need to prioritise local communities in the process. They need to enable locals to reap the benefits of the new industry and not at the expense of their livelihood due to the low-cost land and labour.