How South Africa Can Learn from Colorado’s Cannabis Taxation Model

There are many reasons to want to go to Colorado, including the weather, the sights, and the local wildlife. However, in 2012 the state of Colorado created another incentive to visit, when they legalised the production, purchase, and consumption of cannabis. This legislation also came with a tax, the first $40 million of which every year must be invested into public school infrastructure. Since then, recreational cannabis taxation has been raised from 10% to 15%.

In addition, sales are also taxed locally. This generates wealth for the local municipality as well as the state as a whole. Aside from schools, money is also being spent on public health and safety and protecting minors from drug consumption. Far from encouraging youth consumption, the legalisation in fact is helping to combat it.

The industry has also played a role in decreasing unemployment, providing jobs that would not be available if cannabis cultivation was still illegal. Tax money has been used to build homeless shelters, and fund scholarships, which benefits the most vulnerable segments of society and creates a safer environment for everyone.

Legalisation has had a great impact on schools in particular, and has allowed the upkeep of facilities that were previously in very poor condition. Money from marijuana taxes has allowed the removal of asbestos, the improvement of indoor air quality, and the prevention of building code violations. 

In the case of South Africa, educational infrastructure has not been so lucky. The country has for a while been plagued with issues such as unemployment rates, power cuts, and a lack of public spending. National economic growth remains stagnant, and government debt is, as president Ramaphosa says, “heading towards unsustainable levels”. Unemployment is higher than ever, and yet the government remains reluctant to invest in public infrastructure.

Public spending on schooling, in particular, has been going down, and South Africa will have to think of something soon if it wants its population to retain a high level of education. At the moment, the results from public schools are poor, with a low rate of graduation from secondary level. Universities also experience high dropout rates, due to their inability to accommodate all pupils. 

The legalisation of cannabis cultivation could change this. As we have seen with Colorado, legalising and taxing cannabis can produce fast-acting results, ones that could have a long-lasting impact on many of the issues that plague South Africa today. Tax revenues from cannabis sales could ease some of the government’s difficulties with allocating budgets, allowing them to do more for the public. Unemployment would decrease in the short and long term, as more jobs are created and economic measures are put in place to support those in need. The protection of vulnerable populations could also have an effect on crime rates — with increased spending on public support, fewer people will be driven in desperation to theft or burglary.

And finally, South Africa could take a note from the Colorado model, and dedicate a large portion of cannabis tax revenues to improving their schools, which are clearly in need of care and attention. There are countless studies that show that a well-educated population leads to an increase in safety and stability, which many parts of South Africa so dearly need. By legalising cannabis and implementing fair cannabis taxation, in similar ways to tobacco or alcohol, the South African government will have more resources to invest in its future.