Exploring the socio-economic potential of an emerging and innovative business model
Written by Maryke Steynvaart, edited by Marc Wegerif
Read the article in the Daily Maverick here.
Cannabis Social Clubs (CSC’s) started emerging across South Africa in the past two years. CSC’s are an innovative business model that presents various opportunities for South Africans. In the context of continuous policy ambiguity, it enables citizens to engage in the legal use of cannabis for private purposes. Furthermore, it presents financial and small business opportunities to citizens and avenues of taxation for the state.
As the number of clubs across the country is increasing exponentially, so too are the uncertainties around them. This was exacerbated by the recent arrests of two cannabis social club operators. CSC’s hold a lot of socio-economic opportunities that must be seriously considered, by academia, state representatives, industry leaders and public members alike.
To kickstart these critical discussions, COUP is hosted a webinar on ‘Cannabis Social Clubs in South Africa and beyond’ during which this innovative business model will be unpacked.
Please click here, to watch the webinar now.
To understand CSC’s we need to go back to the start of the 1980s when Spain had the largest prison population in Europe. This problem emerged due to many citizens being arrested for minor drug dealing, possession, and use. In 1982, the Madrid government decriminalised drug use and implemented what is called the ‘Shared Consumption Doctrine’. As Tom Decorte (2016: 46) explains, this doctrine contends that “the use and possession of cannabis (as with the rest of controlled substances) is not punishable under Spanish criminal law (in the case of possession, as long as it is intended for personal consumption).”
CSC’s were developed on the basis of this doctrine, Decorte (2016: 46) continues, “cannabis (...) is distributed on a non-profit basis among a closed circuit of adult users.” According to the ENCOD (European Coalition for Just and Effective Drug Policies) a CSC is defined as “an association of adult people who are exercising their constitutional right to possess, cultivate, consume and share their cannabis in private.” CSC’s are founded on several principles including community orientation, full transparency, public health and supply-follows-demand.
CSC’s are distinct from other types of distribution networks because they are self-regulatory and operate on a non-profit basis. In Europe, most CSC’s are not state-regulated and adapt to meet each country’s unique legal framework. But in the absence of formal state regulation, organisations such as the ENCOD have developed self-regulatory measures that CSC’s are encouraged to adhere to in Europe.
The ENCOD (2011) states that CSC’s can be set up legally in any country where the cultivation of personal amounts of cannabis has been decriminalised. The legal basis of all cannabis social clubs is based on the basic human rights found in most democracies. In Europe, most CSC’s are based on Article 12 of the Charter of Fundamental Human Rights of the European Union, which states, “everyone has the right to freedom of peaceful assembly and association at all levels.” Similarly in South Africa, the first relevant law is the right to privacy, and the second law is your right to freedom of assembly, association, belief, opinion, and expression.
CSC’s started emerging all over South Africa after the 2018 Constitutional Court ruling, which decriminalised personal cannabis use and possession within a private space. Since 2018, cannabis use, trade and control have been thrust into a state of legislative ambiguity. Even though the Proposed Cannabis for Private Purposes Bill was passed by the cabinet in August 2020, it is still to be considered by parliament.
Several actors are developing and operating their own CSC models that are similar to those in Europe. But the models that are emerging in South Africa are heavily based on your right to privacy. There are predominantly two types of CSC models that are emerging. The first type operates exclusively as online ‘private grow clubs’, which offer a service of growing your cannabis plants for you. Whereas the second type of model also has a physical club space where private members can meet. Some models have much more restrictive requirements and measures in place than others.
The second type of CSC’s has opened a physical space in which individuals who use and grow cannabis can converge. These spaces enable a large but mostly disconnected cannabis community to connect with each other in a social setting. This has helped many new relationships to form and flourish, especially for people who have been socially isolated due to the Covid-19 pandemic.
In October 2020, one of the online ‘private grow clubs’ namely The Haze Club (THC) was closed down in South Africa. The owners were charged and are now awaiting trial. On 17 May 2021, the SAPS published an affidavit regarding the THC case, making their opinion on cannabis clubs clear. Their view is that cannabis clubs are not sanctioned by law; that exchanging money for cannabis in any way or manner is still a criminal offence; and that the proposed cannabis bill has not been formally passed.
CSC’s need serious consideration as a potentially innovative business model. There is a high potential to make a positive socio-economic impact through stimulating the economy with small-scale businesses. This includes the thousands of existing cannabis growers who can then contribute to the legal economy. And enables the millions of cannabis users to gain access to cannabis for private use within the law. In addition, the model presents various tax opportunities for the state without the need to formally regulate cannabis social clubs.
CSC’s are emergent in South Africa, hence there are bound to be some limitations to the model. Arguably one of the biggest limitations is that to be a member and grower is expensive, and consequently it excludes many citizens who are economically disadvantaged. Furthermore, the equipment and systems that need to be implemented in order to be recognized as a ‘compliant’ grower, requires significant capital to design and implement.
The financial barriers restricting access to these cannabis social club spaces does not promote South Africa’s democratic values of equality and advancing human rights. Although CSC operators are adapting and improving their models continuously, as CSC’s continue to establish themselves in South Africa. Developing these models are resource-intensive, which makes it especially difficult to drive down costs and make CSC’s more accessible. Regulating CSC’s is a potential way to encourage an enabling environment for a more equitable sector. It also falls on the operators and members of cannabis social clubs alike to consider ways of promoting diversity.
Even though this model has been operating in several countries across the world for years. These clubs have only emerged in South Africa recently, and have been caught in a context of continued legislative ambiguity. This model presents a lot of potential opportunities for countries where there is not a formally regulated way of distributing cannabis to citizens. As well as economic opportunities for small-scale cannabis farmers. Albeit, the model needs to be adapted to suit the South African context and to fully encompass the values of our democracy. CSC’s are budding with potential, and waiting for South Africans to harvest the benefits.
Decorte, T. Pardal, M. Queirolo, R. Boidi, F, M. Avilés, C S. Franquero, O, C. (2016) Regulating Cannabis Social Clubs: A comparative analysis of legal and self-regulatory practices in Spain, Belgium and Uruguay. International Journal of Drug Policy, Volume 43, Pages 44-56, ISSN 0955-3959.
Accessed through: https://doi.org/10.1016/j.drugpo.2016.12.020
Last accessed: 06 January 2021
ENCOD (2011) Code of Conduct For European Cannabis Social Clubs, in How to create a cannabis social club. ENCOD organisation.
Last Accessed: 07 January 2021
Gamella, J. Rodrigo, J. Luisa, M. (2004) A Brief History of Cannabis Policies in Spain (1968–2003). Journal of Drug Issues - J DRUG ISSUES. 34. 623-659. 10.1177/00220426040340030
Maja (2020) The European Guidelines for Cannabis Social Clubs, Cannabis Social Clubs, FREEDOM TO FARM, HOW TO CREATE A CANNABIS SOCIAL CLUB. ENCOD organisation.
Last accessed: 06 January 2021
Sánchez, C. Collins, M, (2018) Better to Ask Forgiveness Than Permission: Spain’s Sub-national Approach to Drug Policy. GDPO.
Last accessed: 06 January 2021