South Africa’s Cannabis Economy

South Africa’s Cannabis Economy

In today’s blog, guest writer Jessica Steinberg discusses South Africa’s cannabis economy with Tandadzo (Tando) Matanda, Founding Director of Zambezi Investment Fund. This is the second installment of Jessica’s in-depth series on the African cannabis landscape.

Africa’s cannabis economy and value-focused growth

Cannabis is the new cash crop, so they say, and Africa is one of the next hotbeds. Trends of legalization fill the region with long-term economic hope. Hope which extends past African governments eager to explore the plants role in driving economic growth, to global investors who have recognized the potential of Africa’s cannabis economy. 

Investing in cannabis has been a risky play from the outset. Yet this has not stopped capital from flowing in like a level five rapid down the river. A small proportion however, is being invested directly in Africa by investors who see the continent as an untapped market with an entire value chain worthy of attention (note the emphasis on the entire value chain and not simply cultivation). 

Unfortunately, for the nations eager to drive economic empowerment from this emergent industry, some of these investors see African cannabis as a means to conquer more territory. 

Some are arguably using license acquisitions as a chance to inflate stock prices and signal market dominance rather than using cannabis’ rapid legalisation as a true opportunity to create value focused and equitable industries. 

Whatever reason you choose to believe, there is reason to look deeper.

Accessibility, affordability and equitability in Africa’s cannabis economy

In order to get that greater insight, I spoke to Tando Matanda, a Zimbabwean born, Cambridge educated social activist and venture capitalist. As Founding Director of investment advisory firm Zambezi Investment Fund, Tando is committed to deploying international capital to African investment opportunities – including the medicinal cannabis economy.

With a focus on identifying opportunities that drive the accessibility, affordability and equitability of medical cannabis, Matanda brought forward ideas that require reflection and follow-up action.

“There is no better chance than with African cannabis to right our wrongs and avoid the creation of yet another exploitative crop built on neo-colonial value-chains and structures.”

-Tando Matanda

‘How do we seize this once in a lifetime opportunity in cannabis to create the first agricultural value chain that isn’t exploitative of developing countries and that truly empowers the people in these countries and regions?,’ she asked. 

Part of this answer entails looking beyond the attractiveness of labor costs or the exemplary ecological conditions, to appreciate the value of Africa and her countries in regards to the full supply chain  (i.e laboratories, R&D facilities and infrastructure for logistics and traceability). 

Driving wealth creation and access in Africa’s cannabis economy

‘We need to make sure that Africa is not just producing the raw material, or churning out commodity items that are gets shipped abroad with little value-addition. This is what we did for tobacco, which is why Zimbabwe is the fourth largest producer in the world and gets pennies in terms of the value of that industry.’

The agricultural trail of tobacco (i.e. pennies received for billions earned) cannot be adopted in the cannabis industry. ‘That’s something Africa cannot afford to do again,’ Matanda continued.

The industry loves to speak about the opportunity we have to shape the market and the world. There is no better chance than with African cannabis to right our wrongs and avoid the creation of yet another exploitative economy built on neo-colonial value-chains and structures. 

For Matanda, this is about equitability and propelling a conversation about driving wealth creation and access to it by ensuring that as much of the value addition in Africa’s cannabis economy occurs on the continent. 

‘We need to set it up, so that cannabis is an exemplar of how a fair, equitable and transparent agricultural value chain operates. We need to leverage all the resources at our disposal, of which technology is but one, to illustrate a new standard,’ she added. 

Exploring medical cannabis as a product cultivated and processed in Africa raises the question of where that supply will go. Economic driven conversations suggest Africa, similar to Latin America, should become a supply hub. The low-cost of production is attractive. But, it’s best to leave lust at home. 

The role Arica will play in driving demand however, is a lot more contentious.  

With increased accessibility driving industry growth, Matanda suggests that consideration must be placed on how to ensure that African medical cannabis has a role in the continent’s future healthcare system. 

‘In most nations the dialogue around production is far ahead of that around its usage within the country. Both Zimbabwe and Lesotho have only legalised medical cannabis for export. So where does that leave the millions of patients who could benefit from its access locally?’

Matanda continues, ‘There should always be an allocated proportion for local demand, at a price that is affordable, which the government can set as needed. With a focus on value addition and R&D across the continent, we could ensure the development of strains, types and cannabinoids that reflect the needs of the local market. Antibacterial cannabinoids, for instance, will have a keen role in the future of cannabis in African healthcare’.  

Meanwhile, she acknowledges that export is inevitable. 

‘We live in a global world and a capitalist society, so it’s not particularly fair for it to be said that producer X must sell internally to local markets when export markets will be more lucrative. We must not however, ignore the potential of the African market. Particularly given that this century Africa will see its population treble and account for 40% of the world (from 17% currently). ’

There are regulatory processes that may help to protect local interests and local markets, whilst facilitating access to foreign markets as well. 

African cannabis economy

“Contextualizing cannabis in Africa means unlocking the power of the plant’s potential. “

-Jessica Steinberg

As this process unfolds, one aspect that began to steal my time while researching this article were stories about exploitation in a neo-imperial approach. I’m an anthropologist with a background in International Relations, and it seems innate at this point to question modern day practices against historical mistakes. 

Stumbling upon stories about land-grabs and license-plays distracted me from the ultimate potential of Africa’s cannabis economy. I uncovered that in some cases press releases about companies in Africa are short-term affairs. They’re not necessarily talking about marriage-type commitments in the business field. To be frank, that seduction should be left at home.

License values range from a few million to hundreds of millions. Some are producing, most are not. There’s speculation on speculation on speculation, and that’s not mutually exclusive to Africa. That’s a global trend. 

Yes, the story continues as the hype builds, numbers soar and the (public) market is happy. It’s a good read, sure. Yet, the conclusion raises an issue about parking licenses and waving goodbye to the passengers. 

Having come across enough companies not in operation, with misled intentions, demands attention. Land in Africa isn’t for holiday purposes, governments have implemented rules and regs for national benefit both in the short and long term. 

Opening up markets, economically, also means opening up markets legally and culturally. This creates access to medicine, which is imperative because there are patients around the world that could benefit from the properties of this plant. 

Matanda shed light on Africa’s cannabis economy:

‘This opportunity goes beyond THC and CBD, beyond pain and anxiety. To how cannabis, can drastically change and save lives.  Antibacterial cannabinoids for instance, will likely play a critical role in saving millions of lives across the continent, but we will need to have a long term focus on value addition and research.’ 

This is cannabis and this is Africa. Contextualizing Africa’s cannabis economy means unlocking the power of the plant’s potential. 

That’s the topic for the final part of this series, so join us in conversation in context. 

cannabis economy Tando
Cannabis economy Jess

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