No banks for ganja business
MAYBE WHEN he gets around to the promised reorganisation of his Cabinet, which he says will happen in short order, Prime Minister Andrew Holness will act on Chris Tufton’s not-so-subtle recent hint of where Jamaica’s fledgling medical marijuana industry should reside. Dr Tufton is the minister of health.
In a speech at the formal launch of the company, Medicanja, Dr Tufton embraced the possibilities of marijuana’s contribution to the global pharmaceutical industry. But at the same time, he highlighted the potential dangers of the unregulated use of ganja, especially among young people with still-developing brains, against which he made this observation:
“It is not surprising ... that when you look at countries that have advanced medicinal ganja, among them Israel, and now Canada, the industry is now lodged in the health portfolio. That premise begins the process of ensuring that the ethical protocols of the industry are established, maintained and then protected.”
Perhaps Dr Tufton may well be right about what agencies of the public bureaucracy are best suited to provide oversight and guidance to an industry that is only a few tentative steps out of the haze of illegality and whose critical ingredient remains controlled and, in some quarters, deemed dangerous.
But whoever has responsibility for medical marijuana’s research and development, it won’t grow into a serious enterprise in the absence of the basic infrastructure that facilitates the conduct of business in a modern economy. Not least of these are structured and predictable banking arrangements and other facilities for financial mediation.
The licensing of growers of marijuana and of firms wanting to engage in research and development is now a function of an agency of the Ministry of Industry, Commerce, Agriculture and Fisheries, but there is a unit at the health ministry that is concerned with the safety of what they produce, with which, Dr Tufton reported, “61 medical cannabis products” are registered.
IT’S NOT CHEAP
It wouldn’t have been cheap. For instance, a licence for cultivating up to five acres of marijuana would cost US$3,000 per acre, while processing the crop in a space of more than 200 square metres demands a payment of US$10,000. It costs up to US$5,000 for a licence to conduct research and one for US$10,000 to transport the ganja. These costs do not include the actual R&D expenditure or others related to running the business.
But an entrepreneur operating a medical ganja R&D facility, or a therapeutic marijuana cafe, couldn’t, on the face of it, directly borrow from his bank or directly lodge to his domestic accounts proceeds from the business. They are unlikely to touch the business.
The point is that while some US states have legalised marijuana and others allow it for therapeutical use, the drug remains federally illegal and operates mostly outside the formal banking system because of the fear among banks, especially the big ones that operate across state lines, of regulators if they took on customers in the marijuana business. It is these banks, with which Jamaican financial entities have corresponding banking relationships, that would fall into jeopardy if they serviced the domestic marijuana business.
Essentially, this sector, which is being aggressively promoted by the Jamaican Government, is unbanked. There is no obvious strategy on the part of the administration to deal with the problem, except calls by Industry Minister Audley Shaw for banks to search for solutions.
There may be short-term methods to deal with the problem, but ones that will keep small players out of the industry and the profits, if there are any, outside Jamaica. It is possible, for instance, for a Jamaican player to source his operating capital, in cash, from an entity in a country where the business is legal, say, Canada or Israel, while routing income to that country, where some of it would be offset against his debt.
But it would be difficult to repatriate that profit to Jamaica, at least through the formal banking system ... . Therein lies a problem to be sorted out by Dr Tufton, if he gets the job.