The Premier of the Eastern Cape Province has been very vocal about the untapped economic potential of dagga in his province. This has culminated to a Summit that was hosted by the Department of Agrarian Reform and Rural Development (DRDAR) in July – East London. Due to other commitments, I could not attend it. However, I heard that the Summit went well and the unaccepted talk by the audience, among those that were made, is the one that unveiled the high costs of registration (a potential barrier to entry). Known commentators, such as Mr. Wandile Sihlobo and Prof Mzukisi Qobo have been very vocal about dagga in a positive light. Let me state it upfront that – I agree with their sentiments their sentiments. I would like to share a number of ideas on how I see this industry move forward.
Establishment of the Dagga industry value chain
I would like to argue that the value chain exists with the associated services but illegal (information asymmetry). This takes me to my next argument that, maybe, instead of talking about the establishment of the value chain we must be talking about the legalisation. In order for the active participants to come out of the underground operations there has to be clarity on the legalities of their operations. Even though the talks have stimulated the interests the participants have not received a clear message.
It is a known secrete if there is such in English that some parts (in the inaccessible gorges of the rivers especially the Eastern part) of the Eastern Cape have been producing dagga for some time. Institutions like the Agricultural Research Council need to work with the producers of dagga in order to register the available seed varieties before they get commercialised by business interested parties. These producers without knowing and at time knowingly have developed the locally available varieties.
Dagga market access
Another talk has been on the export market of dagga for the producers or prospective producers. There is no study that has been conducted to confirm the size of the local market. A study of that nature will be very difficult to conduct if the legal implications of uncovering the participants are not clarified. That study will also help to uncover the level of product development and levels of innovations in this value chain.
Profitability of the product
The profitability of this product needs to be done using good accounting practises. Those who call the product using the word weed may give an indication that its planting does not require much more intervention after germination (low input costs – with high returns). I am aware that a small match box content is worth much more than one would get for any of the agricultural products. This could substantiate the claim that dagga is one on the most profitable cash crops. I emphasise that its profitability needs to be checked. Perhaps, its undercover status meant limited volumes hence artificially high prices (supply and demand concepts in price formation). Its legalisation may lead to more supply and prices may adjust accordingly.
There is a huge difference between investments and donations. Investors, because the bring foreign income into a country’s circular flow are seen in the positive light. A word of caution needs to be put that the shareholders will only agree to an investment consideration if there are financial benefits to it in the long run. Since the start of the public engagements about dagga a number of foreign companies showing interests. Their intentions are not donations but business and the associated reception needs to safeguard the local role players from being bullied.
I would like to argue that instead of pretending like this product has just been discovered, let us awaken to the reality that its been there for all this time (under cover). This means, among other things, asking for the services to the product to come out of the hiding instead of developing a completely new value chain. I would like to ask that:
- We acknowledge that there are people who are in this business currently (with the institutional knowledge): we need to uncover them;
- The legal implications of the participants coming out are not yet clear (if they are – I am not aware), urgent clarity must be made;
- Available seed varieties need to be safeguarded in the interests of those who have been using them through public investment; and
- A clear understanding of the existing value chain needs to be done and not assumed.”
By: Mr Bonani Nyhodo