How Big Of An Industry Could Retail Cannabis Be For The Country’s Economy?

The cannabis industry in South Africa is estimated to become worth a whopping R27 billion by the year 2023. Our marijuana industry is recorded to have the fourth largest user base globally, with around 5-10% of the population actively engaging in cannabis use. 

The use of cannabis isn’t a new trend in the country. Starting in the 15th century, cannabis was used largely by the African population for medicinal purposes, smoking, and other benefits. It was the rise of cannabis laws in 1925 that criminalised this age-old tradition that framed a cultural, spiritual, and potentially lucrative pastime.

If South Africa were to create a retail cannabis industry and change its cannabis laws permanently, South Africa could see an increase in job creation, investment opportunities, tax revenue, and the reshuffling of police budgets. 

Understanding the Use of Cannabis 

Before one can advocate for the growth of a cannabis retail industry in South Africa, it is important to understand why the substance is used. Cannabis is utilized for two reasons, recreational or medicinal in purpose. Cannabis has been used for centuries starting as a medicinal herb for its so-called healing properties and later becoming part of spiritual and cultural rituals with its psychoactive properties. 

Additionally, the hemp plant has been a worldwide commodity being used for clothing, fishing nets, and other types of material. You can also use creams and tinctures that are hemp-infused. The cannabis plant is made up of two main chemicals that you have probably heard of before; THC and CBD. THC, also known as Tetrahydrocannabinol, is the chemical within the herb that causes the psychoactive or ‘high’ effect. 

CBD is formally known as cannabidiol. This chemical produces an almost opposite effect of TCH and causes a calming or pain-relieving sensation. This chemical extraction is making headway within the retail industry especially within the field of medical marijuana. It is widely believed that CBD can help the following ailments, even though not yet medically proven: 

• Anxiety.
• Neurological Disorders. 
• Cancer-related pain.
• Parkinson’s Disease.
• Depression.
• Acne.

The market for CBD is becoming one of the fastest-growing industries as CBD-infused products start popping up on store shelves across the world. This is exactly why it could be extremely beneficial for the economy to explore the creation of a cannabis retail industry in South Africa. Not to mention the income that could be created by the legalisation of the sale of recreational cannabis in a retail environment.

The Creation of Jobs 

Since the decriminalisation of cannabis in South Africa in 2018, the small-scale farming of marijuana paved the way for around 900 000 farmers to start growing cannabis legally in South Africa. With these farmers actively growing cannabis in South Africa, countless livelihoods are already dependent on the cannabis industry.  

Research has shown that South Africa is responsible for producing over 2000 tons of cannabis each year. With the potential of cannabis being both farmed and then sold at a store level, the possibility for prospective employment in South Africa would boom with the growth of the cannabis retail industry. 

To understand the power that a retail cannabis industry could have on creating jobs in South Africa, it is important to take a look at the success that the legalisation of cannabis has had in the United States of America. According to the Daily Maverick, 321 744 jobs were created in the USA once cannabis had been legalized. An impressive 35% of these jobs were purely retail-based whilst the other areas influenced were administration, manufacturing, management, and agriculture. 

With an unemployment rate of 32.5% in South Africa, the creation of a retail cannabis industry could create job opportunities in all the above-mentioned sectors. This is especially true because of Interpol’s findings that rank South Africa as having the 4th highest number of cannabis users in the world. 

Investment Opportunities 

The worldwide cannabis industry is worth around 20 billion dollars. With various CBD products now also emerging on the shelves in South Africa, cannabis has revealed itself as the new green. As CBD oils and tinctures start picking up in popularity within the retail industry in South Africa, so will the agricultural, quality control, management, and branding of cannabis products. 

These value-chain growth opportunities leave a lot of room for potential investments in both the industry and the country. Already, South Africa’s climate gives us an immediate advantage when it comes to the cultivation of cannabis, giving other countries like Canada a chance to invest a great deal of money into the South African cannabis trade. 

Tax Revenue 

Once again, it is important to look at the legalisation of marijuana in the USA when thinking about how important a South African cannabis retail industry could be in terms of tax revenue. Once legalised in the USA, 1.2 million dollars were taken in tax revenue which translates to about R5 million from a South African perspective. 

Alcohol and tobacco make up 3.5% of the South African national budget, cannabis could potentially raise this number to nearly 6%. This means that instead of raising the burden of tax in already taxed areas, the cannabis retail industry in South Africa can take the brunt and soften the potential taxation blow. 

Saving the Government Money 

A cannabis retail industry in South Africa could also help the government utilize policing budgets in better ways. Not only would this be a step in the right direction for the cannabis industry, but it will also help the police to focus on other areas of crime that need more of a focal point; such as gender-based violence. 

With a booming retail cannabis industry, the government would be creating jobs and allow lesser fortunate individuals to make a small income. The taxation of a cannabis retail industry will substitute about 2% of the national budget whilst also saving the policing budgets in drug-related offenses a great deal of money.