The introduction of new economic sectors is not an easy accomplishment, but it is key to ensuring economic diversification. This concept is one which is regularly practised in Malta, a country where the economy has thrived and continues to thrive on trade. Malta has built a successful economy based on regulatory innovation, which has allowed for a number of new economic sectors to emerge, which have grown to become key contributors to the country’s GDP. Regulatory innovation paths the way to diversifying a country’s economy, whilst also attracting international investment and creating high quality jobs, all proving crucial to help achieve sustained growth.
It is with interest that I read Collins Mwai’s article a few weeks ago, confirming that Rwanda is in the midst of diversifying its economy by working on the creation of a framework for the the production and medical use of cannabis. Back in 2018, Malta enacted the Production of Cannabis for Medicinal and Research Purposes Act, regulating, and allowing for, the production of medical cannabis, and opening the doors to further research in the area. In addition to this, Malta also amended further legislation, allowing doctors to prescribe medicinal preparations of cannabis to patients in Malta.
Rwanda has followed in Malta’s footsteps, by officially legalising the use of medical cannabis through the issuance of a ministerial order issued on 25th June. The legislation allows for cultivators, researchers, producers and manufacturers to apply for a license for the production of medicinal products. Research shows that the global medical cannabis market is forecast to grow from $30 billion in 2020 to $95 billion by 2025. The European market will be worth approximately €406 million by the end of this year. Germany remains the top medical cannabis consumer in Europe, owing to progressive legislation and a large and affluent population. It constitues more than half of the European market and will be worth more than €840 million by the end of the forecasted period. By 2025, countries like France and the UK will have developed patient access to medical cannabis considerably, and large European nations like these will represent a significant share of the European market. If regulations continue to progress as predicted, the UK medical cannabis market could show the most significant growth of any country in Europe .
One of the major factors fueling market growth is the expanding demand for legal medicinal cannabis, which is leading to more countries amending their legal structures to move from prohibiting, to controlling the use of cannabinoid products. Public support for cannabis legalisation is at an all-time high. There is high awareness about the medical benefits of cannabis, surging demand for plant-based treatments in pain management, and increasing legalization of cannabis for medical purposes, all key factors whichh are driving growth in the industry. Several new startups are venturing into R&D, cannabis testing, and manufacturing. There has been a significant increase in the number of cannabis cultivators around the world, whichh is expected to increase cannabis sales, and thereby open new revenue channels for market players across the globe.
The introduction of this new economic sector places Rwanda as a new entrant to an industry which is already considered to be a lucrative one and which boasts a bright outlook for the years to come. There are a number of economic benefits for Rwanda in deciding to legislate for this sector, primarily with respect to the significant revenue the country may generate through exports and the creation of new employment opportunities in the high-value agriculture, research, manufacturing and processing sectors. However, the introduction of a new economic sector is not only dependent on having a strong and attractive regulatory landscape. It is equally important to ensure that the right ecosystem is created to help foster the best conditions for a robust ecosystem to develop around the sector. There are various factors which need to be taken into consideration in order to foster the right environment for sectoral development, some of the more salient ones being:
Dynamism of regulation: the strength of the regulatory frameworks in place as well as the country’s ability to adopt a forward-thinking approach when establishing new policies is a main deciding factor for companies considering where best to establish their presence. Fiscal policy, employment law, company law, Intellectual property, data protection, insurance and health and safety considerations, are all asepcts of the regulatory landscape companies must navigate
Talent and mentorship: in a bid to continue increasing the availability and quality of talent, Rwanda needs to focus on attracting key international players, possessing know-how and experience in the sector to help guide companies looking at establishing a presence in this sector by helping developing key technical skills and competencies
Funding and financing: access to finance remains a critical component in the development of any economic sector. Companies, particularly start-ups, need investors and financial institutions to back them. It is critical for the right financial mechanisms and support measures to be in place to assist companies in investing in Rwanda and supporting them in achieving sustained growth. In addition to this, creating a regulatory framework for venture capital funding will also be key in attracting entrepreneurial talent to the country.
Rwanda can position itself as an attractive hub for the production of medical cannabis in Africa. There is a growing demand for medical cannabis products in the European Union and Rwanda can position itself as a buzzing hub which supplies the every increasing demand for such products in the emerging European market. With the introduction of the right conditions to help foster the ideal ecosystem within which this new sector can thrive, Rwanda will be well placed to attract key players to set up their activities. The value proposition is a clear one.
The writer is a senior consultant at Seed, a research-driven internationally focussed, advisory firm based out of Malta, Europe.
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