Many countries across the globe are in the process of decriminalising the medical and recreational use of Cannabis, and Africa is no exception to this growing trend. Governments across the continent are hoping that the decriminalisation of the plant will aid them in their quest to diversify their economies and generate transactions in hard currency. The Cannabis industry is one with a multi-billion-dollar footprint, and businesses are already benefiting from growing, distributing and exporting medicinal Cannabis. According to The Consumer Staples Report by Barclays, the global Cannabis market could be worth up to USD 272 billion in the coming years.
Africa is reported as being the world's largest producer and consumer of Cannabis, albeit that the laws on medicinal use of the plant are still in their infancy. The African Cannabis Report, released by Prohibition Partners, noted that South Africa was capable of becoming one of Africa's largest medicinal Cannabis markets, with an estimated potential industry value of over USD 1.7 billion by 2023. Further, the same report noted that Africa’s legal cannabis industry could be worth around USD 7.1 billion a year by 2023, if laws were introduced to govern the industry.
Currently, only three African countries permit the cultivation of medical Cannabis, namely South Africa, Zimbabwe and Lesotho, with Lesotho having been the first in 2017. Additionally, in September 2018, South Africa decriminalised the use and cultivation of Cannabis for private use. The governments of these countries are actively engaged in attempts to harness the potential of their respective Cannabis industries by establishing legal and regulatory frameworks that adequately provide for the cultivation, sale, transportation, manufacturing, processing and exportation of Cannabis products.
Two further African countries worth observing in the coming months are Swaziland and Uganda. This year, Swaziland is set to pass a law that aims to regulate the commercial production of Cannabis for medicinal and scientific purposes. Uganda is also in the process of crafting a regulatory framework on the topic; however, the cultivation or use of Cannabis remains an offence, punishable with up to five years in prison.
Despite the current perception surrounding the instability of African markets, the current trends in the Cannabis industry in Africa show that the continent is positioned to be a potential market leader, provided that favourable regulatory frameworks are introduced.
The proverbial "race to the bottom" in the Cannabis industry is expected to take place across those African countries who have legalised the cultivation of Cannabis. This will be brought about as businesses attempt to cut costs and to produce the product as cheaply as possible. Those companies that are able to outgrow their competitors will pre-empt the ever-changing markets and establish themselves in every level on the supply chain.
By Darryl Bernstein, Partner, and Rui Lopes, Associate, Baker McKenzie Johannesburg