Prohibitive fees exclude farmers from lucrative marijuana farming

Tobacco farmer Alfred Phiri was thrilled last February when the Malawi Parliament passed legislation for the cultivation of marijuana in the country.

According to a government notice, farmers will have to pay between $100 (about K77 800) to $10 000 (about K7 780 000) annually for the cultivation, selling, storage, distribution of either class of industrial and medicinal hemp while hospitals will pay between $200 (about K155 600) and $500 (about K389 000) to dispense cannabis medicines.

Phiri, from the town of Kasungu, 100 kilometres north of the capital Lilongwe, has been working at the tobacco farm for 20 years since it was passed on to him by his late father.

But the returns from tobacco, dubbed the ‘Malawi’s Green Gold’, have dwindled over the past decade due to declining global demands driven by anti-smoking lobby groups.

“Which is why I was excited about the prospects of the cannabis business,” he said.

But like most smallholder farmers looking at cashing in on the recently legislated cannabis business, Phiri excitement quickly turned into bewilderment once the Cannabis Regulatory Authority announced the levies.

Ray Harawa, a farmer and elder of the Rastafarian community that has been advocating for the legislation of cannabis for the past 30 years, says government hijacked and commercialised a people-driven initiative.

“The fees only show that government wants to benefit from this initiative yet, for 30 years, the same government refused to legalise the crop. Now that we have managed to push for the legislation, they now want to exclude us?” he said.

Farmers Union of Malawi Chief executive officer Jacob Nyirongo told Business News that the fees are not feasible for the Malawian market since poverty rates are high and per capita income is low.

“Considering both the economic situation and the reality on the ground, the position of the union is that license application fees for the production of marijuana and cannabis are not just exorbitant and inhibiting, but also discriminatory,” he said.

“Economic statistics indicate that more than 51.5 percent of the total population live below the poverty line of $1.90 (about K1 478.20) a day. Poverty levels are even higher for the rural population that mostly depends on agriculture for livelihood.”

Nyirongo further argues that Malawi’s GDP per capita of $411.6 (about K320 224.80) is below the proposed application fees.

“This therefore implies that the application fees that have been set are far beyond the reach of a common farmer hence the potential promising industry is likely to benefit only a few affluent individuals,” he said.

He cited that what is even more difficult is that the exorbitant rates are coming at the time when farmers are already facing declining incomes due to the Covid-19 pandemic and dysfunctional produce markets.

Nyirongo claims the farmer’s union was only consulted when the government was drafting regulations.

“The union was never consulted on the fee structure. A draft copy of the cannabis regulation was shared with the union to provide its input. However, a section on the application fee structure was submitted without figures,” he said.

Nyirongo explained that most of their members have been put off cannabis farming due to the fees.

“Most farmers became disinterested once the government announced the application fees siting that the fees are just too high. The union has therefore, been advising its members to form groups and pool resources together so that they can take advantage of collective action to mobilise the application fees and access the licenses,” he said.

Chauncy Mofo Jere, who is chairman of the 250-member National Cannabis Cooperative Limited, argues that the business is capital intensive, hence the need to make it exclusive.

“At CanCoop, we don’t have a problem with the fees. Cannabis business is not for small boys,” he said.

Jere explained that the National Cannabis Cooperative we will not only influence decisions to benefit local cannabis production participants, but it will also ensure Malawian growers enjoy the following several benefits such as license cost sharing, bargaining power, access to training, tax negotiation, enhance local production and access to markets.

The group has already received K168 million ($230,000) from membership fees only with each member paying a K500 000 membership fee.

But the Cannabis Regulatory Authority (CRA) has justified the $10 000(about K7 780 000) licence fee for a cannabis cultivation licence.

Speaking to Business News the authority’s board chairman Boniface Kadzamira explained that the fee structure was formulated with entities and not individuals in mind.

“We didn’t have time to sensitise the people about the industry and how it is supposed to be managed and what is involved. The CRA Act only allows legal entities to grow or participate in this industry therefore we would like to encourage our local farmers to work in groups, associations or cooperatives which will be manageable for them and the issue of fees won’t be problematic,” he said.

He said before they came up with the fees, the authority went around the region to compare the fee structure.

“That is how we ended up coming with those fees. I dare say that in terms of fees, Malawi is the cheapest if you compare to what other countries are charging,” he said.

But Harawa argues that the fee structure should have been localised.

“Malawi is one of the poorest countries in the world, hence you cannot copy and paste fees from other countries. You have to bear in mind the country’s poverty level. Especially if the legislation of cannabis is based on the premise that it will uplift people from poverty. The irony is that those poor people will not even afford the fees,” he said.

Kadzamira noted that the prospects are that the cannabis industry will compliment tobacco and other cash crops “but we believe in the near future cannabis will be hugely dependent on terms income for the country.”

According to Kadzamira, the Cannabis Regulatory Authority has so far received and is processing about 100 applications both from local and foreign investors.