Billions in revenue from taxing cannabis is an argument for legalisation – analyst

Home National Billions in revenue from taxing cannabis is an argument for legalisation – analyst

WINDHOEK – The subdued domestic, regional and global economies are constantly searching for light at the end of what seems to be a never-ending  tunnel and the recent decision in South Africa to decriminalise cannabis for private consumption, not for industrial purposes, could be the beginning of an answer. In May this year Zimbabwe already became the second country in the region to announce that farmers could grow and sell cannabis for medical and research purposes, with Lesotho being the first to do so in 2017. 

This month Canada will become only the second country in the world and the first G-7 nation to bring cannabis prohibition to an end. And with this legalisation comes the potential for billions of dollars in added annual revenue. In fact, cannabis is already legal in at least 46 US states, although the majority only allow the consumption of medical marijuana. A cannabis market of almost US$13 billion (N$183 billion) has been projected for the US market in 2019. Uruguay became the world’s first country to legalise the plant in 2013, and even North Korea allows the sale, consumption and cultivation of cannabis. 

Make no mistake, there is currently a flourishing cannabis black market in Namibia where the possession, sale and growth of the plant are still illegal. This flourishing black market is obvious from the number of traffickers and illegal sellers being arrested on a regular basis. However, a local economic analyst, preferring anonymity, states that the regulation and tax that could be gained from such a sector provide an argument for legalisation. 

“Some of these companies are even listed on stock exchanges, so the ‘benefits’ could extend beyond commodity markets into the financial markets. I can’t put a dollar value on the contribution to the national revenue pool or the extent to which unemployment could be impacted but perhaps the gains from the alcohol and tobacco industries can provide a yardstick,” said the analyst.  

 “Reforms backed by major corporations like Coca-Cola stand a strong chance of being enacted anywhere in the world. If Namibia were to legalise cannabis we would be among a few countries to do so; possibly putting us at the front of the queue as a farming and manufacturing site as the country is socially and politically stable, property rights are secure, we have expansive land and we have an ample supply of unskilled labour,” the analyst added. However, he warned of the adverse consequences to such a decision. “Cannabis is not unlike alcohol, tobacco, gambling or even sugar as there is an avenue for abuse,” the analyst cautioned. 

“The monetary gains will have to be weighed up against the socio-economic costs. Perhaps the Zimbabwe model can be adopted: Legalisation of production for the purpose of exporting it to countries where medicinal use is legal could generate export revenue and offset our above 30 percent unemployment rate without assuming the social risks associated with widespread domestic consumption,” the analyst suggested. 

However, Research Associate from the Economic Association of Namibia, Klaus Schade, warned: “Namibia needs to weigh the costs and benefits of legalising cannabis (be it for private consumption or for market production) and put the necessary legal framework and institutions in place. Like with other drugs, including alcohol, it would necessitate an awareness campaign to inform about the consequences of cannabis consumption. The priority should be to discourage the use of any kind of drugs and of smoking due to the health risks.”  

An extraction of the cannabis plant, cannabidiol, commonly called CBD, has already entered the Namibian market and is available locally in the form of ice-tea, skin creams and CBD oil. A local company called Meme Earth currently imports the CBD from Europe where it is infused into local products as an added health ingredient. “The production cost of one litre of CBD is about US$32 000 (N$451 000). With our vast tracts of land and our high unemployment we could be exporting tonnes of this product,” said Jean-Pierre O’Callaghan from Meme Earth, which focusses on natural food products.  

CBD has been hailed by medical professionals as a potential answer to relieving a long list of ailments, from pain to epilepsy to multiple sclerosis. While this chemical compound comes from marijuana or its close relative hemp, CBD does not get users high, unlike another compound from the marijuana plant, tetrahydrocannabinol, or THC. Globally, the CBD market is exploding and is expected to multiply sevenfold by 2021, to US$2.15 billion from roughly US$292 million in 2016, according to a market research firm that specialises in cannabis.

Major corporations are also jumping on the bandwagon and don’t want to be left behind as Coca-Cola recently announced it is eyeing cannabis-infused drinks. According to a statement, the company is “closely watching” the use of CBD in “functional wellness” beverages.  Also, recently in South Africa a craft brewery backed by two prominent CEOs of JSE-listed companies said it has launched that country’s first beer made with cannabis. The brewer says it  received funding from a number of well-known Durban-based investors, including RCL Foods CEO Miles Dally and Spar CEO Graham O’Connor.