South African provinces jostling for cannabis positioning to cash in on hemp: Will Gauteng become the processing capital of cannabis in South Africa?

This question becomes relevant as South African provinces are increasingly claiming their strategic places in the value chain of this multi-billion rand emerging industry.

By Edward Tsumele

Gauteng Premier David Makhura this week during his State of the Province (Sopa)  address delivered good news for cannabis entrepreneurs in the country in general  and in the province in particular, when he singled out  industrial hemp as one of the 10  growth priority areas for the country’s wealthiest province. Gauteng’s GDP at R1.5 trillion, which represents 35% of South Africa’s total GDP of R4.5 trillion, is the 7th biggest economy on the African continent.

Making his address in a hybrid Provincial Legislature on Tuesday, February 22, 2021, Makhura identified high priority growth areas in the provincial economy as the following fields: automotive aerospace and defensive, transport and logistic sector, ICT and digital services, energy sector, tourism and hospitality, construction and infrastructure, financial services sector, the cultural and creative sector and industrial cannabis.

The premier revealed that a hemp processing hub has been identified in the province, and it is expected that cannabis entrepreneurs will base their cannabis processing entities at these hubs.

“The new sector of the economy is the cannabis industry, we want to be the industrial hub, we already have the industrial infrastructure for industrial processing of cannabis, not to smoke.

 “The processing of cannabis will be particularly for health purposes and for other parts of improving the life of humanity. Not so much to grow it, but to process it. It may be grown in the Eastern Cape. The province says it wants to be the heartland of growing cannabis. We want to process it as the industrial heartland of our province,” he said.

Although no further details were given about how far the province  is with regards to the launch of this cannabis processing hub is, as well as dealing with the hurdles to entry, currently affecting those who would like to get into the legal cannabis business in the province, encouragingly, Makhura has been consistent in identifying the potential of cannabis  as a sector that could drive economic growth in the province, and certainly the country as a whole.

For example, he first committed to the development of hemp in the State of the Province address in July last year. This is significant because it means that there is  political will at government level to develop this new emerging industry that is worth billions of Rands once it is in full swing. The cannabis industry is estimated to be worth R27 billion, rivaling the cigarette industry, which is worth R30 billion.

“Our first and foremost economic goal is to grow the economy in order to massively increase the number of new jobs, while sustaining existing jobs in Gauteng. Our number one goal is to create jobs. We will achieve this by focusing on high growth sectors and new industries that have a greater potential to create new jobs. We have learnt from the partnerships we have forged through action labs with various firms in the past five years.

We are now ready to establish social compacts with each of the following 10 high growth sectors (that also include hemp, the non psychoactive part of the cannabis plant and therefore does not make people high If they smoke it).

“We are working with relevant national departments, State-Owned Enterprises (SOEs), development finance institutions and business leaders to develop detailed implementation plans for each of these 10 high-growth sectors.

We will improve the ease of doing business in each sector, develop the skilled workforce for each industry and build enabling infrastructure, including special economic zones and industrial parks.

All this work will translate into social compacts with industry leaders and organised labour to implement sector growth strategies.

By 2025, the Gauteng-City-Region will have three fully operating Special Economic Zones in Ekurhuleni, Tshwane and Sedibeng, and a Special Agro-Processing Zone in the West Rand. In addition, there will be fifteen (15) revitalised industrial parks, twelve (12) agri-parks and five (5) agro-processing facilities across the five corridors.

This will be a single industrial ecosystem that supports the 10 high-growth sectors and township SMMEs.

We are working with relevant national departments, State-Owned Enterprises (SOEs), development finance institutions and business leaders to develop detailed implementation plans for each of these 10 high-growth sectors.

We will improve the ease of doing business in each sector, develop the skilled workforce for each industry and build enabling infrastructure, including special economic zones and industrial parks.

All this work will translate into social compacts with industry leaders and organised labour to implement sector growth strategies,” the Premier said.

As the on going conversations are unfolding around the issue of legal cannabis production in the country, it has become increasingly clear that certain provinces have  are starting to claim their stake in the value chain of cannabis.

For example, Eastern Cape, due to its good soil for the cannabis crop is increasingly positioning itself as the grow province, Gauteng as the processing region and Cape Town as the centre of medical cannabis for both to grow and export.

”The Western Cape region in particular has already attracted significant investor interest based not only upon its strength in agriculture, but also because Cape Town is fast becoming Africa’s leader in pharmaceutical research and development, as well as health- and biotech. The Western Cape is home to four world class universities, making it a hub in Africa for skills and innovation. The Western Cape as an agricultural investment destination The Western Cape is the powerhouse of South Africa’s agricultural exports. In 2017 the province accounted for 49% of South Africa’s agricultural exports, with seven of the Western Cape’s top 10 export products being agricultural products. The province exports the equivalent of a million bottles of wine per annum. The African continent is also an increasingly important destination for the province’s exports, consuming an estimated R45 billion worth of the Western Cape’s agricultural exports in 2017. In light of recent climatic challenges and the probability of lesser rainfall going forward, the local agricultural sector recognizes the need to embrace new technology in order to overcome changing climatic and hence, agricultural conditions.

Examples hereof include controlled environment agriculture as well as precision agriculture amongst others, with intense greenhouse agriculture increasing by 43% between 2013 and 2017. Approximately 186 hectares of land are currently under tunnel infrastructure,” The Western Cape’s not so cannabis-shy marketing pitch  by its  rather active marketing arm Wesgro pronounces on  its website.

This is a clear sign that the country in the near future will experience a cannabis boon as provinces fight each other to claim their positions in the value chain of this multi-billion dollar emerging industry.

Edward Tsumele is Editor and Publisher of Cannabis Business Africa/CBA

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