The KZN economic Cannabis industries Model 2021
The Cannabis Development Council of KwaZulu Natal
The Bobby Greenhash Foundation (BGF) was formed in 2010, and as an organisation, they set out to achieve certain goals in the South African, and later, international Cannabis markets.
The BGF was initially started as an activist organisation lobbying for the legalisation of Cannabis. As time went by, they came to the realisation that the fight was a tedious and stonewalling process and thus began to focus on the economic perspective of the cannabis industry. They wanted to show what the company could achieve, as well as the benefits and impact it would have on the community at large. Their primary goal was to create a supply chain for rural subsistence growers through to the international markets. They achieved this goal when they opened a sister company (BGF Biotech) in Portugal, under trade off-take agreements in the EU. BGF Biotech distributes semi-processed raw Cannabis products to the European markets.
From this, BGF adopted a philanthropic strategy by establishing various grassroots charity projects, funded with the proceeds of Cannabis. They established school feeding programs and a food bank to feed the poor in the community. In 2016, BGF built a school for underprivileged kids and equipped it with learning aids, desks, stationary and a kitchen. Mandosi School in Izingazi township runs as a sustainable institution to this day. Apart from these ongoing programs, BGF is involved in many community support initiatives, from SPCA to youth development sponsorships in sport and academics.
Since the start of the green rush after the landmark Constitutional Court decision to allow for the private adult use and medicinal use of Cannabis, there has been a sudden surge of people getting into the cannabis business, mostly hemp growers. The general consensus that the private use laws do not allow for the trade of cannabis is misleading. This industry is far bigger than recreational and medicinal use; there are hemp products, fibre, nutrition and a couple thousand other applications in industry. It would be extremely naïve of government to ignore the potential, and KZN has stepped up to the plate. This was possible because they started to map the industry in KZN and evolved it into a significant group of Cannabis businesses, an organized group that is all inclusive in representation of business, medical, agricultural and cultural groups. Presently, KZN Government is in dialog with the industry in evolving an economic plan.
They do not seek to challenge legislative restrictions, but rather identify the economic value of the cannabis supply chain to the local economy, notwithstanding the legal status quo. Legislation as it currently stands, allows for low THC Cannabis Hemp, which is largely cultivated for its industrial and commercial value.
This is a summarized outlay of an economic business model that was implemented under research, to establish a supply chain from rural grower to international markets, a model which has already been established in KZN since the founding of the KZN Cannabis Development Council in 2018.
As the local Cannabis industry is evolving, we still find parts of our society viewing Cannabis as a dangerous substance that can only be used for recreational and limited medicinal use, and we fail to see it for its many industrial and commercial potential as a cash crop. Private use of Cannabis legislation has already been gazetted and is currently under public comment, and the medicinal standards for the use of Cannabis for medicinal purposes is subject to SAHPRA. Currently in KZN, there are a handful of growers, mainly those that could afford to meet the stringent standards laid out by SAHPRA.
The problem faced by this is that only Medicinal and Private consumption and growing of Cannabis is addressed, with no guidelines on how the Cannabis industry can trade in mainstream emerging markets legally. The current status quo fails to recognize the other many industrial and commercial uses of Cannabis. This information is freely available, and has been researched and developed over centuries.
We will identify the current supply chain in KZN, which includes traditional and informal, as well as registered tax paying Cannabis business that forms part of the KZN supply chain model in KZN. Our aim is to show that the industry can self-regulate under the guidance of the CDCSA-KZN, and is in fact a model which has been operational for 2 years. During this time, problems with operational entities have been identified and addressed in the interest of conducting ethical and fair trade practices, without excluding traditional informal trade.
The BGF model was developed and has oversight from various stakeholders, including the Cannabis Development Council of South Africa – KwaZulu Natal, Local authorities and traditional leaders.
OVERVIEW OF KZN CANNABIS INDUSTRY
The current Cannabis industry in KZN is fast becoming one of the most advanced and progressive in the country, mainly due to a more relaxed attitude by authorities. The model seeks to encourage historically illegal cannabis businesses to formalize and register as tax paying entities, thereby creating wealth for the economy, providing employment and attracting revenue to the province.
What is important to realise is that the Cannabis industry in itself creates many spin-off opportunities and also benefits business outside of the cannabis industry.
When the BGF model was established, we took into account that the Agricultural sector consisted of thousands of small subsistence farmers, all growing relatively small grow operations to avoid the risk of prosecution. The dilemma of regulating and policing all of these growers under any regulation, would be futile. The BGF KZN does not regulate farmers, and encourages the traditional growers to access mainstream markets by selling Cannabis to registered tax paying processors, who then establish true market values and pay tax accordingly. Don’t regulate the farmer, regulate the product.
The CDCSA-KZN was established and registered as a NPO in 2018, and the Executive Council consists of representation from main emerging cannabusiness, medical doctors, traditional IKS groups and cultural interest parties. It was established largely to assist the emerging industry and government in establishing a guideline on the industrial and commercial use of cannabis as a whole. The CDCSA-KZN is focused on preserving the historical growers, ensuring that traditional subsistence growers are not sidelined by big corporate interests, and ensuring access to markets by supplying to registered Cannabis co-operatives from which the supply chain can be fed.
The need for regional cannabis processing co-operatives is imperative to create a gateway into mainstream markets, a central point from which Cannabis processors, product manufacturers and retailers can purchase cannabis raw semi-processed products for further processing and entry into consumer markets. The co-ops will be responsible for processing, testing, quality control, grading and marketing of semi-processed cannabis. Co-ops should also supply seeds, nutrients, information and other agricultural supplies for the cannabis agriculture sector.
The CDCSA-KZN is currently undergoing reform in line with new emerging developments, and will be approaching member businesses with statistical and data requirements in terms of how we approach cannabis business. New membership requirements will no longer require specific business, personal or location details, but rather for the purpose of data capture to establish economic value of the industry.
Membership for cannabusiness in KZN will be available on our website soon. www.cdckzn.co.za.
Currently, the model in KZN consists of the following stakeholders:
- Informal Growers, mainly rural subsistence farmers that grow outdoor cannabis, with little or no control over THC/CBD levels. Traditional farmers are established in Zululand, KZN midlands, Bergville and Drakensberg regions, South Coast and Swartberg/Kokstad/Underberg regions being the most prolific. Traditional IKS groups, traditional healers, cultural users and Rastafarians form a large percentage of the informal trade in KZN, and are found throughout KZN.
- Formal or Commercial growers, consisting mostly of commercial Hemp growers are registered and permitted Cannabis farms, mainly concentrating on Hemp growing for industrial use. There are 25 permit growers in KZN, two of the biggest in Amajuba/Newcastle area consisting of 5000 Ha, and a research greenhouse facility on the South Coast of KZN.
- Manufacturers and processors, not including medical use. Most manufacturers currently in KZN are Edibles and nutritional producers, Oil extractors, hempcrete manufacturers, veterinarian product manufacturers, fibre related industries and hempseed product manufacturers. The BGF model is designed that emerging industries are able to integrate and evolve, and there are many Cannabis commercial and industrial use opportunities in the model.
- Retail Sectors consist of front-line consumer supply businesses supplying consumers with end products. Pharmacy outlets, clinics, health shops, treatment centres, medical institutions and Medical practitioners (not including traditional healers), veterinary outlets
- Dispensaries – Non medicinal products, Edibles, recreational use extracts.
- On consumption outlets (“Coffee shops”) and recreational use taverns and cannabis clubs.
- Industrial and Commercial products suppliers – Hemp textiles, bio fuel suppliers, Hemp based and processed non consumable product suppliers
- Seed Suppliers
- Hospitality and Tourism related industries, tour operators, medical tourism providers and treatment centres.
- Educational Institutions and Research facilities
- Transport & logistics, Industry related training and skills development providers (SETA Accreditation)
- Biofuel Refineries
- Other- As defined by the Minister and industry regulatory bodies – Includes retail outlets
We do not say that the model is perfect, but it’s a working model which is evolving. It’s a working model, and will give insight to legislative bodies when it comes to defining trade regulations in the future.
Cannabis Development council – KZN Executive Committee
This model is currently working in KZN, and this is a summarized version of it.
Currently, the only element that is hindering a potentially huge industry from evolving into an economy changing commodity, is legislation pertaining to the trading of Cannabis and cannabis products on the markets. Notwithstanding SAHPRA regulation on medicinal products, the rest of the commercial and industrial cannabis complex is thriving in KZN, and is providing upliftment for many poorer subsistence farmers.
By Sheldon Cramer