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Institutional innovation and pro-poor agricultural growth: cannabis cultivation in the Eastern Cape province of South Africa as fertile opportunity.



Paper presented at the 56th annual AEASA conference
Institutional innovation and pro-poor agricultural growth:
cannabis cultivation in the Eastern Cape province of South
Africa as fertile opportunity.
Heinrich Gerwel
AEASA Annual Conference
26 September 2018
Outline of Presentation:
1. Introduction
2. Induced institutional innovation in South African
3. Induced Innovation:- the Recursive Model
4. Cannabis cultivation in the global context
5. Cannabis prohibition in Southern Africa
6. Opportunities for the Eastern Cape’s cannabis
7. Conclusion and recommendations
A high share of South Africa’s poor population living in rural areas of the
country, and especially the former homelands of Transkei and Ciskei, now
part of the Eastern Cape.
Rural poverty and underdevelopment is a signi+cant problem in the
Eastern Cape Province.
The National Development Plan 2030 (NDP 2030) (NPC, 2011) includes a
chapter dedicated to the creation of “an integrated inclusive rural
Hayami and Ruttan’s Theory of induced innovation interprets technical as
well as institutional change as endogenous to the prevailing economic
system (Hayami and Ruttan, 1971, 1984, 1985; Ruttan, 1984).
The gap this paper aims to address is looking at the poverty reduction
potential of opening up the international market. What remains to be
seen is whether ‘elite capture’ can be mitigated to make cannabis
cultivation an inclusive, pro-poor industry in South Africa.
Induced institutional innovation in South African
For the purposes of this study, pro-poor growth will be broadly
understood to mean inclusive economic growth that enables the
poor to actively participate in and bene+t signi+cantly from
improved economic activity, or growth with the maximum pay-
o= in terms of poverty reduction (Kakwani & Pernia, 2000;
Christiaensen et al, 2010).
The interpretation of technical and institutional change as
endogenous to the economic systems is an important
advancement in understanding how agricultural production
systems operate and how productivity changes are induced.
To begin the discussion on institutional innovation it would be
prudent to +rst present de+nitions of what the constituent
components of the abovementioned pattern model should be.
Induced Innovation:- the Recursive
Source: Ruttan and Hayami
Cannabis cultivation in the global
Although the cultivation, use and distribution of cannabis remains prohibited in
most countries, the legal framework on cannabis is changing and governments
are showing more tolerance.
Recently, four states in the USA—Alaska, Colorado, Oregon and Washington—
legalised cannabis for personal use, followed by California legalising
recreational use as of 1 January 2018.
Canada is also well on its way to legalising the plant. A licensed retail and
production system for cannabis was introduced in Uruguay in 2014.
There are several alternatives to prohibition varying from decriminalization to
regulation and legalization.
Whereas decriminalization refers to the removal of the criminal status for
personal possession or use, regulation refers to limits on access and
restrictions on advertising, Legalisation refers to cannabis use and cannabis
supply, making lawful what previously was prohibited (Palali and van Ours,
The abovementioned regions attest to the economic bene+ts of the institutional
innovations in cannabis legislation, with increased tax revenues from cannabis
sales, as well as evidence of reduced cannabis use among young people.
Cannabis prohibition in Southern
In 1922, regulations were issued under an amended
Customs and Excises Duty Act which criminalised the possession and use of
"habit forming drugs", including cannabis. Under regulation 14, the cultivation,
possession, sale, and use of the plant were prohibited.
In 1937, the government of South Africa introduced the Weeds Act, which made
the occupant or owner of a property accountable for preventing the growth of
cannabis, or any other plant classi+ed as a "weed", on the property.
Under the Drugs and Drug Tracking Act of 1992, people found in possession
of more than 115 grams of cannabis were presumed to be guilty of dealing.
Lesotho has taken the role of vanguard in using the changing global
institutional framework in cannabis markets, granting licenses to a number of
commercial growers to export medical cannabis.
Surely this is a fertile opportunity for the South African government to revamp
its current prohibitionist stance against cannabis cultivation to further the goals
of poverty reduction and inclusive growth of the rural economy as articulated in
the NDP 2030?
Opportunities for the Eastern Cape’s cannabis
Cannabis grows well in South Africa's climate, especially in the
so-called "dagga belt" (cannabis belt), an area including the
former Transkei region of the Eastern Cape where, per the 2011
International Narcotics Control Strategy Report, it is a traditional
Cannabis is "an important cash crop" that "sustains entire
communities in the rural Eastern Cape", which otherwise survive
in a subsistence economy characterised by communal farming
The traditional nature of cannabis cultivation speaks to the
inhabitants of this region already having the cultural
endowments and technical expertise to make cannabis
cultivation a successful export crop, if the institutional
framework is incorporated so as to enable, and not constrain the
agency of the cultivators by providing access to inputs,
infrastructure and markets.
Conclusion and recommendations:
The inexplicable lack of willingness of the South African
government to repeal the racist laws of cannabis cultivation is a
gross violation of the constitutionally enshrined right to dignity
of rural communal farmers that also infringes on the cultural
traditions of the indigenous population.
Cannabis cultivation, which is already a livelihood strategy of
the marginalised communities of the Eastern Cape Province, is a
fertile opportunity for contributing to the NDP 2030’s goals of
creating 1 million agriculturally based jobs by 2030.
With the creation of an enabling institutional environment
through setting up Special Agricultural Zones within which
cannabis cultivation is unencumbered by the SAPS, the
emerging international cannabis market could be an avenue
through which positive rural outcomes through inclusive growth
and increased tax revenues can be supported.
And +nally…
The majority of research on induced innovation focus on the
technical change component of the recursive model discussed
Seeing the institutional and technical innovations as well as
cultural endowments as equally important endogenous
processes in economic development is an important extension
of general equilibrium analysis (Hayami and Ruttan, 1984).
The lack of poverty focused social scienti+c research on the
potential of cannabis cultivation to promote inclusive growth
compared to the wealth of natural science research on the
impacts of cannabis highlights a gap in the literature that should
be exploited towards the goals of creating conditions of
improved social justice and economic emancipation for people
in developing societies of the global South.
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