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The Cannabis Chronicles: Notes towards a post-revolution economy

Now that the Economic Freedom Fighters have forced white monopoly capital to pay attention to their demands, the rest of the country may want to consider the party’s stance on the potential of the cannabis plant. With the help of a management consultant who is unpacking the business case for legalisation, KEVIN BLOOM attempts to assess the real value of South Africa’s fabled dagga fields.

1. The giggling speaker

A caveat: As the following multiple-choice question is intended to disentangle from a single, cohesive thread a number of strands that are by definition bound to each other, we are proceeding in the hope that by the end of the experiment we’ll have a clearer understanding of the issues. So here goes:

Last November, when the Economic Freedom Fighters (EFF) proposed in parliament that cannabis be nationalised, why did the motion pass unopposed?

  1. Because members of the house were too busy laughing at the EFF for wanting to nationalise a banned substance.
  2. Because members of the house were too busy laughing at the EFF for identifying the cannabis plant as a primary item on its economic agenda.
  3. Because members of the house had been decoding the latest international data on the economic implications of cannabis legalisation, and had thus agreed unanimously with the EFF’s proposal (the laughter, it transpired, was an expression of delight at the nationalisation bit).
  4. Because members of the house pretended not to care what the EFF did, especially given that it was bad form to be seen taking the party too seriously.

Evidence that parliament really did break out in collective laughter can be found in this video, where you’ll also observe that the acting speaker was so tickled he could barely get his words out, but for now we’ll simply highlight the key sentences from the proposed (and accepted) motion: “The EFF notes that it will be important at some stage for the country to nationalise all natural resources, including marijuana. This will be important to make sure that the substance is actually turned into an economic activity.”

A little under a year later, on Tuesday 27 October 2015, as a sea of red berets were moving down Johannesburg’s Oxford Road in a paradigm-shattering display of political power that was about to bring 50,000 disenfranchised black South Africans (and their list of demands) to the door of white monopoly capital, a tweet went out from the EFF’s official account. The words were attributed to the EFF’s leader Julius Malema, and were another unambiguous clue as to the rung cannabis occupied on the party’s policy ladder:

Who was laughing now? “Ok, let’s compromise,” responded @JethroSteve, a white guy with no apparent political affiliations. “Take the mines and the land…”

Aside from that objectively hilarious chirp, there wasn’t much. Not from the African National Congress (ANC), not from the Democratic Alliance (DA), and not from the Inkatha Freedom Party (IFP), all of whom had been rolling in the aisles at the self-same proposal the year before. Suggesting, if you answered “a” or “b” (or both) to the above multiple choice, that these options have since fallen away: it isn’t funny anymore that the EFF wants to nationalise all of South Africa’s dagga because, hey, a 50,000-person protest at the gates of South Africa’s financial nobility also isn’t funny. If, on the other hand, you answered option “c”, may we humbly submit that you haven’t been paying attention: leading members of the ANC, DA and IFP know very little about global trends in cannabis legalisation, as evidenced by the statements cited in the third article of this Daily Maverick series. Leaving option “d”. Once upon a time, there were a lot of South Africans who pretended not to take the EFF seriously. Nowadays, the party can command at short notice the awkward acquiescence of the people behind the continent’s largest stock exchange.

And so to return to the single, cohesive question from which we have drawn out all of these sub-strands. What is the true economic potential of South Africa’s fabled dagga fields?

2. The serious seeker

Vlada Lakcevic, a 31-year-old management consultant born in Zimbabwe to Serbian parents, has what is by all accounts the most comprehensive foundation from which to approach an answer. This is because, prior to Lakcevic, practically zero post-graduate work had been done on the economics of cannabis in the South African context. It took a guy who arrived in the country to study engineering and finance in 2003, and who since 2009 has been offering strategic business advice to some of Africa’s largest corporations, to make a start.

In 2013 my father was diagnosed with cancer,” Lakcevic told the Daily Maverick. “He went to Serbia for treatment, the chemotherapy route. On my second trip to visit him, the doctor told me the cancer was terminal. In effect, all that the surgery was for was to minimise discomfort. I found that mind-boggling, so I started investigating the alternatives. I discovered some lab studies which documented how cannabis kills cancer cells.”

Lakcevic’s father died in October 2014. The cancer was at an advanced stage, he explained, before adding that it was “more than possible” that cannabis suppositories – prescribed by a doctor in Slovenia, where the law provides for medicinal use – extended his father’s life. Whether he knew it or not, Lakcevic had become a crusader.

In the first paragraph of the introduction to Lakcevic’s thesis proposal for his Masters in Business Administration at the University of Cape Town – a paper entitled “Is there a socio-economic business case to be made for cannabis legalisation in South Africa?” – the reader is confronted with a pair of remarkable facts. First, according to the United Nations Office on Drugs and Crime (UNODC), roughly 25% of global cannabis production takes place on the African continent. Second, South Africa is believed to be the world’s third largest producer of cannabis, with seizures of the banned substance by the South African Police Service (SAPS) accounting at the turn of the millennium for as much as 16% of the seized global total.

A slight problem inheres in these facts, however, which has to do with that last statistic. Lakcevic had originally assumed that he would be able to test the economic case for legalisation by using purely quantitative data. In the event, when he realised that the baseline numbers would have to come from SAPS seizures – and that these were a perpetually moving target – he saw that his only option was qualitative research.

About a month ago,” Lakcevic told the Daily Maverick, “SAPS announced that it had confiscated something like 99% of what the UNODC said was the worldwide total for confiscations in 2013.”

As it turned out, Lakcevic had severely under-quoted this figure. The day after our meeting, he sent through a scan of an article from The Star – published in late 2015, the article stated with dripping irony that SAPS had confiscated 8 kilograms of dagga for every citizen in South Africa during the 2014/15 reporting year. Lakcevic also sent a link to this article, confirming Commissioner Riah Phiyega’s assessment of 440,000 seized tons.Attached is the latest UNODC world drug report,” wrote Lakcevic. “On page 58 you can see that global cannabis seizures for 2013 were in the region of 5,800 tons while SAPS claims to have seized almost 75 times that amount in 2014/15. Clearly I got my figures mixed up when we were speaking so it’s for the best that I checked this, but the discrepancy is even more perplexing and probably highlights that they have been measuring much more than just the flowers.”

A more eloquent expression of the data-gathering challenges facing the South African dagga legalisation movement, which now includes by default the EFF, it would be very difficult to come by. To be clear, we can’t tell from Lakcevic’s research if our cannabis market is actually much bigger than anyone has estimated – although, from anecdotal evidence about the endless dagga fields in the Eastern Cape, this remains a distinct possibility. Neither can we conclusively tell if SAPS is more incompetent than anyone has estimated – although, based on the above, this appears a distinct likelihood. But we do know that there is an important wildcard in the mix.

Daily Maverick has learnt – and is continuing to learn in emails and correspondence sent to us by affected parties – that SAPS is extremely enthusiastic when it comes to chasing and arresting citizens for even the smallest of cannabis offenses.

Whether that is because the plant represents low-hanging fruit to police officers with quotas to fill, because the majority of police officers live in a reality-tunnel that casts marijuana smokers as deviants and lowlifes, or because of some much darker purpose, we intend to give the matter its full investigative due in a forthcoming feature. For the objectives of this story, it suffices to point to a figure that Lakcevic cites at the top of his research proposal: “The total cost (financial and social) associated with the enforcement-led policy on cannabis in South Africa has not yet been fully quantified in any published work, but an Anti-Drug Alliance SA paper published in 2011 determined conservatively that the cost of all cannabis related arrests in Gauteng province alone was in the region of ZAR 290 million.”

Lakcevic’s research, it should be clear by now, is not chiefly about the positive business case to be made for cannabis legalisation in South Africa. It is chiefly about something far less glamorous (and perhaps far more important): the savings and improvements in efficiency that will be effected throughout the criminal justice system if cannabis is legalised. Factoring out from the R290 million for Gauteng in 2011, a R1.5 billion estimate on national cannabis related arrests for 2014 is probably in the ballpark. But even that, Lakcevic argues, wouldn’t be close to the full social cost.

What happens to the people who get arrested?” he asked rhetorically when we met. “It’s fine to say a lot get away with a slap on the wrist, but what about those who don’t? They have a criminal record. Look at South Africa’s unemployment rates – you are preventing these people from entering the workforce.”

3. The gift-wrapped fix

To jump, then, to a man who was instrumental in removing the devil from the marijuana debate in the United States. His name is Professor Jeffrey Miron, and he is the director of undergraduate studies and a senior lecturer in economics at Harvard University. Miron’s 2005 paper entitled “The Budgetary Implications of Marijuana Prohibition” received support from around 500 leading economists, including three Nobel laureates and Milton Friedman himself (a dubious endorsement if you consider the implosion of free-market capitalism to be partly Friedman’s fault, but a big name nonetheless). Lakcevic believes it is time for South Africa’s version of the Miron report.

On page 27 of Lakcevic’s research proposal, we read this epoch-changing extract from Miron’s work: ““Prohibition entails direct enforcement costs, and prohibition prevents taxation of marijuana production and sale. If marijuana were legal, enforcement costs would be negligible and governments could levy taxes on the production and sale of marijuana. Thus, government expenditure would decline and tax revenue would increase.”

Seems obvious, no? While legalisation was indeed a no-brainer to lawmakers in Colorado, Washington, Alaska and Oregon – and while Miron’s scenario appears indeed to be playing out in these states – the South African government prefers to live in the dark. Like outgoing Canadian prime minister Stephen Harper, Republican US presidential hopeful Carly Fiorina, and pasty-faced conservative politicians the world over, the ANC is sticking with the received wisdom: marijuana is harmful to the mental development of children; it is a “gateway” to more hardcore drugs; in order to safeguard the psychological health of society, it must remain banned.

To which Lakcevic had a clear-eyed retort. “I don’t believe a 12-year-old smoking weed is good, but it can be regulated, like alcohol. If you’re caught selling to a kid, you lose your license. These are policing options that need to be explored.” He also pointed to some of the early data coming out of the abovementioned US states, which indicate that child use has either not changed in a statistically significant manner or has in fact decreased. “Some commentators have suggested that marijuana has started to lose its cool factor,” said Lakcevic. “Suburban moms are now users.”

Equally interesting was the economic spin that Lakcevic was putting on the containment of abuse. If dagga were legalised in South Africa, he claimed, the price would need to be maintained at current levels – prices set too high would lead to the growth of a black market; prices set too low would incentivise a society-wide binge.

And then there was the fact that the UNODC, as celebrated by Richard Branson (yes, drug abuse is the Virgin guy’s pet social project), had only a few weeks before our meeting announced a momentous about-turn: criminalisation, the global body had admitted in mid-October, had failed as a policy.

The old world order was crumbling – Lakcevic’s thesis, it seemed, was a worthy first stab at what the new world order might look like if it ever landed in South Africa. Sure, the thesis doesn’t include export projections for South Africa’s legendary dagga strains. Outside of industrial hemp, with Uruguay and North Korea being the only two countries where marijuana is at present fully legal, how would one extrapolate? Neither does it include an estimate as to the size of the South African market. Outside of the stuff still growing, with 440,000 tons allegedly confiscated by SAPS in 2014/15 at street prices of R50 per gram, how would one keep a straight face when saying “R22 trillion”?

But again, Lakcevic’s research proposal does include the beginnings of an economic roadmap for a post-legalisation South Africa: a roadmap where potential billions can be saved on enforcement costs, hundreds of millions can conceivably flow as tax revenue into state coffers, and positive knock-on effects can be felt up and down the line.

If the EFF ever decides that nationalisation of South Africa’s dagga resources is not the most efficient way to unlock the value of the plant, they might want to give Lakcevic a call. DM

Read more:

  • The Cannabis Chronicles: Dramatis personae, part I; in Daily Maverick

  • The Cannabis Chronicles: Dramatis personae, part II; in Daily Maverick

  • The Cannabis Chronicles: A truthful account of the most evil plant ever; in Daily Maverick

Photo: A marijuana plantation in glass houses in Roelofarendsveen, The Netherlands on 13 August 2011. EPA/VALERIE KUYPERS

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