Bound for many decades by international treaties that established prohibition across the world, the cannabis industry is coming into its own. Until recently, the stigmatisation of medicinal cannabis was linked to it being deemed a hallucinogen, a category of drugs causing profound distortions in one’s perception of reality.
The flowering plants belong in the family Cannabaceae and has at least 1 200 street names (marijuana, weed, pot, etc.). With its iconic serrated-edged leaflets this ‘miracle’ plant may yet give the palm family, as the most versatile group of plants used by man, a run for its money.
Paving the way to commercialisation
The use and production of cannabis has been legalised gradually and in varying degrees in different countries. It is currently approved in at least 50 countries.
Interestingly, South Africa and Mexico seem to be running in the same race after the high courts in both countries legalised private cultivation of cannabis. In South Africa, the Constitutional Court ruled on 18 September 2018 that adults could legally grow, use and possess up to 600g dried cannabis for personal use, not to be sold or given away. Yet, the cultivation of commercial cannabis cultivars for recreational use, still remains illegal.
The South African government was given 24 months since its ruling to establish laws that would be in line with the Constitution in terms of cannabis use. The big question is whether South Africa will fully legalise cannabis in September, when government will decide on the amount of usage and whether the use of cannabis will remain restricted to private use only.
In Mexico, the Supreme Court ruled on 31 October 2018 (for the fifth time) that the law prohibiting the recreational use of cannabis was unconstitutional and the government was mandated to formally legalise cannabis within 90 days. However, on 17 April this year, Mexico’s Supreme Court extended the deadline to 15 December 2020.
Setting objectives for commercial gain
According to the African Cannabis Report, Nigeria and South Africa stand to become the continent’s highest value markets by 2023 if cannabis usage is permitted for medicinal and recreational use. South Africa’s cannabis industry alone could be worth more than R107 billion once it becomes fully legalised.
South Africa’s market for commercially grown cannabis or related products has an estimated value of $1,2 billion. The climate in KwaZulu-Natal and the Eastern Cape is especially suited to cannabis cultivation, which means that the country’s economy stands to benefit immensely from the decriminalisation and legal farming of cannabis.
By legalising the value chain in the cannabis industry, South Africa may reap the following rewards:
- Substantial revenue for the government.
- Attracting investors who will reap the benefits.
- Reduced law enforcement costs.
- Increased tax revenues.
- Job creation.
- Boosting secondary industries such as production and distribution.
- Socio-economic upliftment, i.e. housing.
- Medical cannabis-based products benefitting consumers.
Governing and policing regulations
Many believe that the sooner a predictable policy and legislative framework is promulgated, the better for the country’s economic future. However, government has been slow in shaping a clear policy framework to set the economic uses of cannabis in motion.
While the country recognises its potential to unlock and promote social sustainability and a healthy and competitive environment, there remains a labyrinth of confusion and unanswered questions regarding the cannabis trade and the legality of farming the crop in South Africa.
Trying to fast-track transformation, president Cyril Ramaphosa announced earlier this year that government would draw up and finalise a policy on cannabis production, mainly hemp, speed up regulations relating to the commercial use of hemp products and help equip small-scale farmers with opportunities.
Becoming a global player
But will the South African government be able to timeously speed up the process before global oversupply depresses prices and flattens margins? Does it truly understand the positive impact this industry could have on the country’s gross domestic product (GDP)?
This is especially the case if we were to capitalise on the fact that South Africa is a counter-season production location to the US, Canada and Europe, says Marianne Brown, director at CanAgri Global (Pty) Ltd who believes there are still far too many restrictions and backlogs in efficiencies in granting permits and licenses.
Given the effects of the COVID-19 pandemic, financial depression and recession, Brown says it would be foolish to ignore the potential South Africa has to become a global player in the cannabis industry. “I believe that with good governance, regulated quality standards and regulations and government support, we could be a hugely successful production hub for the global market. If experts in the private sector could somehow support the burden of the ‘unknown’ in government, we could quickly push the needle forward.”
The regulatory environment
Picking up on regulations for licenses to import, cultivate, manufacture, distribute and export, she says that South Africa is already mirroring the regulations in some of North American states, the only difference being that it has been adapted for the South African environment.
“It is an extremely difficult set of regulations to comply with and somewhat expensive, requiring substantial capital to get started, thus excluding a significant number of South Africans. That being said, since we will be in the business of cultivating and manufacturing medicine, it stands to reason that there should exist strict regulations.”
Brown believes the most critical part of regulating the industry, is the ability to govern and police the regulations. The South African Health Products Regulatory Authority, SAHPRA, which governs the industry, is understaffed and a backlog of applications is waiting in the pipeline. “This is a problem that will prevent the cannabis industry in South Africa from reaching an effective and efficient competitive production level globally, while still on the upswing of a new emerging industry.”
The regulations have been adapted for licensing and permits, with a research permit granted to applicants at a cost of R902 to cultivate two hectares of hemp. It allows cultivation for hemp product research, but is still unclear as to the trading of harvested goods.
Establishing agricultural cannabis
It is important for cannabis to be reclassified as an agricultural crop and much research is needed to establish where cannabis can be grown most successfully in South Africa. The Agricultural Research Council (ARC) has been running trials for several years in order to identify varieties that will grow well in the South African climate, mostly using cultivars from Europe.
Opportunities in South Africa are lending themselves to exploration in areas of cannabis and hemp cultivation, as well as new strand development, seed distribution, logistics and transportation, and the like. Potential growers are also becoming interested especially in cultivating for the cannabinoid oil and medicinal market, leaving room for clinical trials and research, as well as the creation of retail outlets and dispensaries.
Commercially grown hempbelongs to the strain of Cannabis sativa which does not contain, or has only trace elements of tetrahydrocannabinol (THC), and is typically cultivated and harvested for industrial use which includes industrial textiles, paper and building materials. In terms of human consumption, hemp seeds amount to a great source of polyunsaturated and essential fatty acids. Hemp oil also possesses beneficial properties for skin medication. It can furthermore be processed into silage for animal feed, while the leaves can be used as bedding for animals.
South Africa started performing trials in 1996 and a handful of private companies such as Hemporium, have successfully trialled hemp. A participatory research permitting system was furthermore proposed in September 2018, under an incubator programme known as i-Africanna-inc. Despite many promising efforts in the right direction, laws in South Africa still don’t make any distinction between cannabis and hemp, and farmers are not yet allowed to grow hemp and industrialise it – it still has to be imported.
While the Department of Agriculture recognises hemp as an agricultural crop, there is still no legal distinction between cannabis and industrial hemp. The Department of Health still controls the process of issuing research permits, which involves applying for a permit to possess a narcotic drug. Hence there are no commercial hemp farms in South Africa so far.
According to Hemporium, efforts are being made especially in the Western and Eastern Cape, to get legislation amended in order to establish a hemp industry. The sectors that have been identified and will create jobs, are agri-fibres for car parts such as dashboards and door panels, eco-friendly paper, natural cement, bricks and insulation for housing, animal bedding and nutrition from seeds.
Agricultural specs for success
Afriplex is a South African company rooted in the development and manufacturing of botanical extracts, complementary medicines and food and beverage product solutions.
“There are various obstacles to overcome with about 80 potential cannabis projects in the country at different stages of development,” says Afriplex director Danie Nel. “The majority will never get to producing product for use. For instance, farmers wanting to diversify their farming projects, should be careful about whom they employ for consultancy work on cannabis production. It can be a rude awakening after paying a consultant a small fortune, to realise that there are hidden costs such as security and quality systems that should be in place according to the regulations.
“Millions is being spent on greenhouses and bulldozers, despite a market that is already flooded with excess produce. At this point, many of our farmers don’t even know what exactly it is they want to produce and where their market will be. Only cannabidiol (CBD) products are currently legalised, meaning the rest of the plant won’t be used except for export purposes.”
He remarks on the level of sophistication needed to cultivate cannabis, stating that it is more suited for commercial farmers who will be prepared to invest at least R20 to R50 million in such a facility. “Production and manufacturing are capital intensive investments and there are huge risks involved for both cultivators and processors.”
He says there should be a place in hemp production for small-scale farmers and the answer could possibly lie in a managed co-operative model between commercial farmers and small-scale farmers, driven by the market and demand. “Afriplex, other role-players and the Cannabis Research Institute are also currently working on a model which we hope would accommodate small and commercial farmers,” he says.
Legalised medicinal cannabis
Many countries in the world have legalised medicinal use of cannabis for millions of people in pain and in need of cannabis and cannabis-related medication, while still deeming recreational use illegal.
While the process of unlocking economic guidelines is still ongoing in South Africa, there are a set of interim regulations and guidelines in place that have been issued by the Medicines Control Council until parliament comes up with a permanent framework.
More information must still follow regarding the practical implications for farmers in terms of challenges such as cultivar choice, farming practices, economic infrastructure, agricultural equipment, climate impact, the dangers of cross-pollination and finding a market for your product.
In the US, California became the first state to legalise cannabis for medicinal use in 1996 and by 2017, the value of the industry was estimated at $3 billion. Uruguay was the first country in the world to fully legalise cannabis in 2013, followed by Canada in 2018.
A total of 29 countries in Europe enjoy some form of legalised medical use, with Georgia as the only one with fully legalised adult use. In the Netherlands, for example, citizens can keep and cultivate cannabis and so-called ‘coffee’ shops can sell it with specific requirements and only to adults.
There are close to 40 countries in the world that have legitimised industrial hemp, including some that have never stopped growing it. These include Canada, the United Kingdom, France, China, Germany and Hungary.
Israel has been showing off its pharmaceutical and emerging technological innovations to countries such as China, who already controls more than a third of the world’s hemp market (sales of hemp textile fibre came to $1,2 billion in 2017).
Closer to home, Lesotho is being followed by other African countries such as Swaziland, Zimbabwe, Botswana and Uganda, who are all attracting investment to the cannabis sector by rolling out licensing regimes. In December 2019, Claudi Nortjé reported on www.agriorbit.com that the decriminalisation of cannabis in Lesotho took place in 2017. Commercial farmers who can afford the initial (R500 000) and annual (R130 000) licencing fees required to legally produce cannabis, have utilised this opportunity to expand their farming enterprises. However, many smallholder farmers have not been able to benefit from the legalisation of dagga solely because of the expensive licensing fees. Instead, they illegally capitalise on South Africa’s high demand for cannabis.
For more information, contact Marianne Brown at CanAgri Global on 076 395 8929 or firstname.lastname@example.org; Altair Richards of ENSafrica at 011 269 7852 or arichards@ENSafrica.com; Danie Nel of Afriplex at 082 787 3336 or DanieN@afriplex.co.za; and Hemporium at 021 702 4988 or email@example.com. – Carin Venter, FarmBiz