Photo Credit: iMattSmartBryan VerpoortHow do we unlock the value of the Cannabis industry for the benefit of the greater South African community?
It was the landmark Constitutional Court judgement in September 2018 which ruled that the use, possession and cultivation of cannabis in private dwellings was not illegal and should be allowed in South Africa.
That judgement created great excitement and optimism for hobbyists, private home growers and grow clubs. Unfortunately, that optimism subsequently transformed into frustration and a lack of clarity for the greater cannabis community.

Two years on, the government published the draft Cannabis for Private Purposes Bill for public comment. Unfortunately, public comment has sparked great public debate and behind the debate lie many hidden agendas.
The insurance industry is based on the fundamental principle that it is illegal to insure an illegal act and therefore, any claim arising from an unlawful activity or operation would be rejected. Until such time that the Cannabis for Private Purposes Act is promulgated, there exists the possibility of a home grower operating outside of the law.

For now, insurers are awaiting the new act which leaves the hobbyist and private home grower in a difficult spot. 
While the insurance for tents, lamps, dehumidifiers and related infrastructure can simply be added onto a typical household contents policy as hobby equipment, the Insured may well find that there is no cover for confiscation of equipment by the authorities.
Confiscation and detention of goods as a result of an act by the authorities would typically not be covered. The Insured would need to look at the Policy Exclusions which typically exclude loss or damage resulting from such actions. This vagueness will continue until such time that there is a clear point of reference against which a claim can be determined.

Currently, for personal use or consumption, there is no cover available for fines, penalties and legal liability resulting from the activity of growing cannabis or personal consumption, nor will insurers provide cover for the product resulting in the death or injury of a person receiving a gift or self-consumption of a home-grown product.

For commercial licensed growers, the situation is somewhat different in that there is a formal SAHPRA license process which the Grower must adhere to. As the activity is legal, it is possible to insure for grow rooms, greenhouses, manufacturing facilities including the wrongful confiscation of plants, product and equipment by the authorities. Products Liability and Professional Indemnity of own labs and testing facilities is also insurable. There is also potential recourse against a party operating outside of their authority (this could be the Industry Regulator or the law enforcement agency that wrongfully confiscates equipment from a licensed operator).

It is therefore both urgent and critical for the long-term success of the industry to have clear cut rules for all industry participants.
One must also consider the supply chain of specialist equipment to the industry and the correct classification of equipment being imported. The authorities need to correctly identify its purpose and use, whether it is for personal or commercial purposes and the law relating to that segment of the industry.

Delays, withholding of critical items and possible misinterpretation of the various regulations has a damaging effect on the industry which shows so much promise in terms of both sustainable job creation and revenue collection through taxation.

SARS should be equally committed to finalising the legislation so that that it can collect revenue from growers and users alike.
It should be in their interests to support the growth of the industry and to assist in clearing the path for rapid formalisation of the industry and acceptance into the main- stream economy. 
Such acceptance would enable easier access to credit / finance through the banking sector, risk mitigation through the insurance sector and the use of legal and accounting support services.
Bryan Verpoort
Managing Director Berkley Risk (Pty) Ltd.
The Berkley Risk team provides Insurance advisory services to licensed growers, producers, manufacturers and distributors throughout South Africa and Lesotho. Berkley Risk is a registered FSP #43194 and has registered offices in Johannesburg and Maseru. They can assist you with all your insurance requirements and work closely with start-ups in the management of their operational risks.
Photo Credit: BudHerd Team