The Economic Pressure Behind Zambia’s ‘Weed licenses’

The Economic Pressure Behind Zambia’s ‘Weed licenses’

Crippling debt, weakening currency and poor budget performance pushes the Southern African government to join the weed race…

Zambia’s cabinet on 4th December 2019 approved the production and export of Marijuana, effectively lifting a longstanding moratorium on the issuance of licenses for this purpose.  A Ministerial Technical Committee for the cultivation, processing, and export of cannabis for economic and medicinal purposes has since been set up and the issuance of regulations expedited with government pegging Marijuana licenses at an annual fee of USD 250, 000 per license.

The decision to peg the Marijuana license at a staggering $250,000 by the government has shocked Zambians who fear that they will be excluded from participating in the venture. Zambians have received the news with a mixture of excitement and skepticism. Many have wondered how Zambia suddenly u-turned on its consistent objection to the production of Marijuana.

Zambia destroys over 60 tons of Marijuana each year. Secretly and culturally the consumption of Marijuana is accepted in many regions of Zambia and is believed to have religious and spiritual effects by some sections of society. But some Christian leaders have loudly condemned the decision by government arguing that it amounts to a betrayal of the country’s Christian values.

According to a UN survey, more than 10 000 tons of cannabis are produced in Africa each year, which could be worth billions of dollars in a rapidly expanding global market for legal cannabis. In 2017, Lesotho became the first African country to legalize the cultivation of marijuana for medicinal purposes, spawning a new sector in a country where the economy struggles to create employment opportunities.

The market for legal marijuana is set to be worth around US$146 billion (£114 billion) a year by 2025, with medicinal marijuana set to make up more than two-thirds of that, according to consultants Grand View Research.

The African Cannabis Report shows that the African legal cannabis market could top US$7.1 billion by 2023 if key markets legalize medical and recreational cannabis. Lesotho, Uganda, and Zimbabwe have already taken steps in this direction. Malawi and Zambia have just joined the bandwagon.

In June 2019 Green Party President Peter Sinkamba lost a court bid to compel the Zambian government to grant him a license to cultivate and sell cannabis. Mr. Sinkamba had argued in court that legalizing marijuana could generate US$36 billion annually for Zambia and that it was frustrating that many countries had seen sense in legalizing the use of the crop for medicinal use when Zambia is refusing to see it.

Mr. Sinkamba sued Zambia’s Health Minister Dr. ChitaluChilufya for refusal to grant him the license to cultivate, manufacture, distribute, export and import medical marijuana. According to the Court of Appeal, the dangerous Drugs Act which is the principal Act for Administration of Dangerous Drugs, in Section 22 gave discretion to the Minister of Health to reject or grant an application to cultivate Cannabis. Judge FulgencyChisanga said the Court of Appeal cannot impose its position on the Health Minister’s discretion. Sinkamba has welcomed the new decision by the government but strongly opposed the exorbitant license fee.

The license fee is arguably an open invitation to big-money foreign and local cartels to not only use Zambia as a platform to clean up their dirty money but also an opportunity for them to make an easy killing at the expense of Zambians.

One commentator observed: “If this happens, we would have laid the perfect breeding ground for an underground Cannabis market which will undoubtedly be punctuated by gun violence as participants look to claim a share of what they believe is an opportunity systematically denied them.”

Zambian laws do not allow quoting of goods and services in foreign currencies but Zambians are surprised that the government is quoting licenses in US dollars a clear indication that this is not an opportunity for ordinary Zambians.

A desperate government

There are a number of factors that have motivated the decision by the Zambian government to turn to the Marijuana business with the most obvious one being –economic.

Zambia’s economy is ailing and the government desperately needs to plug a huge hole in its national budget which keeps widening. Zambia spends over 91% of its national budget on personnel emoluments and debt servicing leaving less than 9% for spending on social services such as health, education, social protection and delivery of programs.

The public sector wage bill in Zambia is one of the highest in the world. This, coupled with general low productivity, detracts from the optimal use of scarce resources. Expenditure on personnel emoluments as a share of domestic revenues still remains high at 47.1 percent in 2018, and already over 50% in 2019 thereby, constraining other developmental expenditures.

The Zambian government also has a huge backlog of domestic debt, owing almost everyone ranging from suppliers to farmers and banks in millions. Will the production and export of marijuana turn around Zambia’s economy? It could and may not.  The reasons why Zambia may fail to use Marijuana to uplift Zambians from poverty is well known, the country has a reputation of failing to manage its resources prudently and derive maximum benefits for the economy and for citizens.

Furthermore, there are genuine fears that politicians may hijack this enterprise away from the people. This has happened with trade-in Mukulaa famousRosewood which is a subject a global scandal implicating top Zambian politicians including the first family according to a recent report.

In support of the economic benefit argument for Marijuana, a Zambian analyst Anthony Bwalya argues that the Cannabis industry has the potential to replace Copper as Zambia’s leading foreign export earner.

“It must be noted that the level of technical expertise and intensity of capital associated with the cannabis supply chain, from growing, marketing to selling; is relatively friendly and nowhere near as laborious as the mining industry, perhaps save for a few stringent global regulatory requirements. But what this means is that Zambia and Zambians can own the Cannabis industry 100% and internalize 100% of all forex revenues arising from this business. Capturing even a paltry 1% of the global Cannabis market could potentially generate a staggering $3.4 billion per annum for the country. But again if we are not careful, this amount of money could very easily end up in the hands and pockets of cartels who I imagine are well poised to pounce on this multi-billion honeypot.”

Critics argue that ordinary Zambians will not benefit anything from this new lucrative opportunity just like many other natural resources have not benefitted Zambians but only produced a clique of wealthy well-connected individuals to those in power.

Zambian business and financial analyst Blessings Kafwankaraised a red flag on the frenzy surrounding Zambia’s decision.

“Those thinking that Zambia will now be earning about $3bn per annum from the export of marijuana alone as projected by Green Party president Peter Sinkamba, please relax. There’s so much more that still needs to be done than just legalizing the cultivation of the crop. Zambia is endowed with many natural resources that are more valuable than Marijuana that we have lamentably failed to take advantage of. We have Gold, Mukula, Copper, cobalt, the Best Gemstones in the world, etc. None of these resources is bringing in anything close to $3bn.”

However, the Zambia Medical Association has commended the Zambian government for the bold and innovative decision it has taken to allow cultivation, processing and exporting of cannabis for economic and medicinal purposes.

Dr. Samson Chisele, the Association President said the association had in the past few years advocated for the decriminalization of cannabis to allow for locally generated clinical research to assess the long-term safety and medical relevance of marijuana.

“In modern medicine, medical marijuana is known to reduce nausea and vomiting during chemotherapy (cancer treatment), improve appetite in HIV/AIDS patients, reduce chronic pain and muscle spasms, treat migraines, glaucoma and severe forms of epilepsy”, he said.

However, DrChisele said in light of the euphoria exhibited by members of the general public regarding Cabinet’s decision to give approval, in principle, to the Ministerial Technical Committee for the cultivation, processing and exporting of cannabis for economic and medicinal purposes, has clarified that ordinary marijuana differs from medical marijuana.

He explained that the former contains over 400 chemical compounds, some of which have serious psychoactive effects (the ‘high’ feeling), while the latter usually only contains 2 well-refined extracts of the plant, with scientifically proven benefits to treat specific medical conditions.

With more African economies facing financial constraints, and increasing demand for marijuana as a raw material for the manufacture of painkillers, we can expect more countries turning into licensing marijuana production as a revenue stream. The challenge, however, will be how to regulate the sector so that drug dealers do not take advantage of the same.

Bruce Chooma
Bruce Chooma
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