Cannabis and Hemp Industry: Challenges and Opportunities

Meeting report

Chairperson's opening remarks
The Chairperson noted the President is to sign the Cannabis for Private Purposes Bill into law which will be well received. It decriminalises cannabis for personal use which prior to this was illegal and a serious offence. Parliament had been directed to decriminalise cannabis use and also look into commercialising it. The Committee is in favour of this Bill because it offers a sensible legal framework for the personal use of cannabis. This would end the unnecessary arrests and imprisonment of persons possessing cannabis for private use. Cannabis usage had resulted in criminal records for many young people, particularly those from historically disadvantaged backgrounds. We also acknowledge that Rastafarians employ it in their religious practices. Thus, the law attempts to strike a balance in decriminalising cannabis, adhering to the Constitutional Court ruling, as well as controlling the growth of both the commercial and medical industries.

Decriminalisation of cannabis would be very beneficial in freeing the sector from the grip of lawbreakers and organised crime. It will also create much-needed jobs and beneficial medicinal and commercial products. We employ hemp and cannabis for a wide range of commercial items, including construction. The first two presentations would touch on the opportunities and challenges of the cannabis industry and the third presentation would be by SAHPRA on the licensing process and how the process could be eased so that everybody, including small business can be part.

Hemp 4 Life promoting diversity in entrepreneurial support
Mr Ben Sassman, Hemp 4 Life owner, presented:
1. Cannabis and hemp mainly differ in THC levels.
2. SAHPRA regulates the issuing of cannabis licences, and the Department of Agriculture, Land Reform and Rural Development (DALRRD) regulates the issuing of hemp licences. In total DALRRD has issued over 371 hemp permits to South African farmers and SAHPRA has issued 102 cannabis licences across the country.
3. Every Premier/MEC wants their province to be ‘the hub’ for cannabis or hemp but there is no SA government-funded cannabis and hemp farms. The reasons for this are:
- High risk sector
- Only offer refunds/reimbursement
- Budget is depleted
- Hemp and cannabis is still not considered a recognised crop
- No start up funding
Annual profits over R50m cannot be funded
4. Capital required for Hemp 4 Life was dropped from 79M down to 25M.
5. Funding from Land Bank comes with conditions, such as:
- Having a Water Licence.
- Cost of this licence for Hemp 4 Life was R886,000.
6. The industry is worth R50bn per year, SARS only collected R6,337,811 in tax revenue for 2021/22.
7 The Law on cannabis:
- Only legal for private use at home
- Cannot be bought or sold
- Cannabis can be shared amongst friends but no money must exchange hands
- Private and social cannabis clubs are not legal
- Cannot use cannabis in public or around non-consenting adults
8. SAHPRA created section 21 licences, 3681 issued.
9. These licences allow ‘man in the street’ to legally buy and smoke cannabis without being arrested
(see presentation).

House of Hemp
Dr Thandeka Kunene, House of Hemp CEO, spoke to purposeful intervention to assist economically challenged enterprises to overcome barriers of entry in the emerging legal cannabis industry in South Africa

• Hemp product supply chain – demand-driven opportunities are possible across rural communities to increase employment. For example, one could process fibre pads which are currently imported – this is an untapped industry in the country.
• Hemp textile pipeline:
- Fibre extraction
- Hemp has the possibility of employing millions of people in the value chain
- Hemp fibre products produced in SA are imported. Local women produced 20 000 bags which were sold in New York
- There is a need for aggregators to help people in rural areas such as paper value chain
• CSIR work in bio plastics – huge corporates are not willing to support rural value chain
• Frame fibre, bio plastics, automotive all made of hemp
•  Hemp biodiesel - one has industries such as Eskom and PetroSA interested
• Government needs to allow hemp to use local seeds in production
• Challenges:
- poverty
- permits (R600)
- commercial licence total 107 of which only seven are blacked owned
- stringent compliance requirements
- market flooded with imported products
• Apply sandbox theory to empowerment (see presentation)

SAHPRA
Mr Deon Poovan, SAHPRA Senior Manager: Inspectorate and Regulatory Compliance presented:
1. Cannabis Master Plan. The scope of the master plan includes both low- and high-THC Cannabis. The is a national cannabis master plan framework
2. Authorities regulating the plant:
- DALRRD: Low THC Cannabis for industrial purposes (less than 0.2% THC).
- SAHPRA (Department of Health): THC for medicinal purposes (including cannabis plant material that exceeds the 0.2% THC limit).
3. Current SAHPRA Regulation of Cannabis for Medicinal Purposes:
- Section 22C(1)(b) requires manufacturers of scheduled substances licensed by SAHPRA. 
- Section 22A(9) permits are required for possessing THC for cultivation / manufacturing
- Section 22A(11) permits are required for exporting THC containing product
- Licences are for export by default unless demonstrated otherwise.
- Cannabidiol (CBD) is listed in Schedule 4
4. Cannabis Phakisa Action Lab:
- SAHPRA participated in the Cannabis Phakisa Action Lab hosted by DALRRD and Operation Vulindlela from 19 to 23 June 2023
- Important outcomes were actions identified by responsible departments and agreed foundational policy principles for cannabis
- Actions identified for SAHPRA included a schedule amendment to enable DALRRD to regulate cultivation of all cannabis
-  Revision of licensing framework based on DALRRD development of Good Agricultural Practice standard
5. SAHPRA has proposed amendments to Schedule 6 of Medicines Act for THC
(see presentation)

Discussion
Mr J De Villiers (DA) thanked all the presenters for their vast information spanning the industry and its challenges. As this was a new industry, government was also grappling to deal with it. There was little history on how government should engage with the sector. As such, he understood the frustration from the SMMEs on seeing the potential profits they could generate but not having financial support to firmly establish themselves.

However, he understood government on the financial side and private financers such as banks being hesitant in providing capital for an industry they also do not fully understand. Money lenders have always been conservative by nature and want to ensure it will be a home run. For great entrepreneurs who want to take their business to the next level and get past this obstacle of government and financial institutions not yet adjusted to these new business models, the question to ask is “What is the role of government? What part would we play in all of this?” Examining what is considered best practice globally could be a start.

This matter was outside of his immediate field or knowledge, but seeing the legislative climate what other countries where cannabis and hemp thrive would be a good starting point to find a history South Africa could pull on to empower these entrepreneurs. “Our place as a Committee is to ask how do we create business development opportunities from a government perspective?”

Mr De Villiers suggested a joint investigation by the Departments of Agriculture and Small Business Development and even Trade and Industry to ensure the industry has the best possible outcome for all involved especially because it is very capital-intensive. What would be best as government is to find best practices and implement them to fit the South African context.

Ms N Muller (ANC) thanked the presenters and agreed about best practice for this industry on a global scale. Understanding the different criteria but more specifically on funding implementation and how these countries overcame the challenges faced.

She asked SAHPRA if there was any kind of talk about a pilot project or an incubator model. Referencing the House of Hemp presentation which showcased different industry streams for small businesses, could government build an incubator model and support these small businesses in the different streams?

Ms Muller asked SAHPRA how long the licensing process was from the start of the application to the issuing of the certificate. Were there significant costs as mentioned in the first two presentations?

Ms Muller asked the Chairperson if there were funding institutions in government. Given the experiences of the presenters, how could the process be streamlined and made better?

Mr M Hendricks (Al Jama-ah) stated that as a matter of faith, he could not support or promote anything related to cannabis or hemp. However, he understood that there were some medical benefits and economic opportunities and would not stand in the way of that.

Mr Hendricks asked that it be noted that his constituency could not in any way be seen to participate or be involved in this new industry. Al Jama-ah was of the view that the industry had been captured by white monopoly capital and would largely benefit the captains of industry. This was evident from the barriers to entry for small businesses to get a foothold in this market.

Mr H April (ANC) disagreed with Mr Hendricks' position based on faith but respected his right to represent his constituency. He empathised with Mr Ben Sassman of Hemp 4 Life who spoke of his experience in trying to attain funding to no avail. This has increased worries that many small enterprises have been left out of doing meaningful business due to South Africa's past where previously disadvantaged people never received state assistance.

He did not agree with Mr Sassman politicising the conversation to the ANC or DA party because small businesses have never been assessed on their political affiliation but have been supported based on being South African-owned. 

Mr April stated that Dr Kunene's presentation showed her knowledge and years of experience and Mr Sassman could learn a lot from her. He suggested that they network for future opportunities as such platforms were made for that.

Mr April said the elected had a big responsibility to ensure that the obstacles identified in the discussion such as the lack of ease of doing business or getting access to funding is addressed. 

Mr B Luthuli (IFP) asked why cannabis licensing took so long even after the submission of all necessary documents. He noted the examination and testing of the cannabis plant by SAPHRA. If this was about uplifting people, why the stringent application process?

He said people living in rural areas have no access to expertise, putting them at a disadvantage. How could government make this process less lengthy and more accessible? Equipment for testing is expensive and money has to be spent before people can enter the industry. How could government assist those people?

Mr Luthuli asked how “fly by nights” would be stopped. There have been companies especially in KZN that come from Joburg claiming to teach people about the industry. Some charge consultants fees yet never deliver. How can government ensure that people do not lose money in this process?

Ms B Tlhomelang (ANC) welcomed the presentations. She agreed with the previous speakers, especially Mr Hendricks, on how the cannabis / hemp permits would benefit small businesses that have waited for a while. It seemed as though the industry had benefitted and had been privatised only for certain individuals.

She recalled Hemp 4 Life discussed permit holders and mentioned discrimination to do with cannabis and hemp permits. She questioned the accuracy of stating the South African population as 60,000, particularly regarding permit holders. She was concerned that the presentation separated the coloured community from the overall population of the country. Therefore she queried the distribution of licence holders across provinces. She voiced concern about potential illegal activities and the need for government oversight.

Ms Tlhomelang emphasised the need for an inclusive discussion with the Agricultural Portfolio Committee due to the significant impact on agriculture. They should involve all relevant departments to ensure comprehensive handling of agro-processing. She proposed further discussion by the Portfolio Committee to address various concerns which could not be easily raised in the presence of presenters.

The Chairperson emphasised the importance of understanding the historical context of cannabis in South Africa, including its rich history among the people and the impact of past discriminatory practices on the industry. He acknowledged the delay in implementing legislation to decriminalise cannabis but stressed the need to destigmatise its use for recreational, medicinal and religious purposes.

He highlighted the plight of individuals like Mr Sassman, who represent marginalised communities who have faced challenges in accessing opportunities within the cannabis industry. He called for efforts to rectify these and ensure inclusivity.

The Chairperson noted the value of the information and recommendations provided by Dr Kunene’s presentation, particularly in protecting local industries through measures like import tariffs and promoting the use of local seeds.

The Chairperson raised concern about the licensing process and its potential to perpetuate economic exclusion, particularly among black communities. He called for measures to formalise and regulate small growers and cooperatives, ensuring they benefit from the industry’s growth. He called for collaboration among government departments to address challenges faced by stakeholders and to ensure the benefits of the cannabis industry are distributed equitably.

The Chairperson questioned the necessity of using foreign seeds and expressed frustration at the complexity of the SAHPRA presentation. It was important to ensure that the licensing process does not perpetuate economic exclusion of black individuals. He noted the prevalence of informal and illegal cannabis cultivation, particularly in rural areas, and called for mechanisms to formalise and regulate these operations while promoting job creation and tax compliance.

The Chairperson asked SAHPRA for strategies to achieve these objectives. He emphasised the need for ongoing dialogue and action to address the complex issues in the cannabis industry in South Africa, including economic empowerment, inclusivity and regulation.

The licensing process has caused unintended consequences, particularly the perpetuation of racial exclusion due to the affordability barrier for black individuals. He stressed the importance of formalising small-scale cannabis growers to ensure they benefit from the industry and contribute to tax revenue. 

The Chairperson advocated for a shift towards commercial use and regulation of cannabis, emphasising the need for both commercialisation and decriminalization and the importance of respecting diversity. He invited presenters to offer their remarks and he also encouraged further debate and collaboration with other Portfolio Committees. 

Response
Mr Sassman said they do not use the word “dagga” but rather refer to cannabis, cannabis sativa or medicinal cannabis in the industry. The word “dagga” has many negative connotations attached to it. If a news article had the caption “dagga”, it is always negative. The industry avoids the use of the word in our presentation or in correspondence because of the negative connotations. 

Mr Sassman spoke to Members' comments on colour. He did not mention that in his presentation and it did not separate the races into coloured, white and black. It made a point about the funding percentages in South Africa. If IDC were asked for access to its funding records on how many black, white and coloured businessmen got funded, it would show  where out of 100 applicants, only ten would secure funding. His aim was to highlight the discrepancy in funding allocation for coloured South Africans, given their significant population. He pointed out the exclusion in government employment as per gazetted policy.

Mr Sassman noted Members' suggestions for a pilot programme and he proposed allocating R1 billion for setting up eight to ten farms to assess effectiveness and share best practices. He referred to the R500 billion spent on COVID relief investment and its outcomes and urged for proactive measures in the cannabis industry. 

Mr Sassman criticised the delayed efforts in formulating strategies, given the industry’s five-year existence and international engagements. He also criticised the lack of inclusion of farmers in formulating the cannabis and hemp master plan, despite their significant role. 

Despite feeling sidelined in the political discourse, he expressed gratitude to the Chairperson for understanding his presentation’s purpose. He emphasised the need for collaboration, particularly with individuals like Dr Kunene, involved in multiple projects, to avoid isolated struggles within the industry. He noted the absence of unified associations representing the cannabis and hemp sectors in South Africa, with each entity navigating independently.

Dr Kunene emphasized that small businesses were crucial at this time. During the first phase with the National Hemp Foundation, small businesses emerged as the champions, with deliverables aimed at supporting them, along with small farmers from historically disadvantaged backgrounds and various other groups. There was a significant opportunity with the Presidency part of the steering committee, urging small businesses to advocate for themselves. However, they were absent in the last two meetings. Notably, there were substantial orders for fibre, bioplastics, seed biodiesel, and construction. 

She said the focus was on using local low-THC seeds, which had received approval from SAHPRA and the Department of Agriculture. A champion was needed to ensure implementation. Compliance with legal standards was crucial. Efforts were directed towards utilizing all parts of the plant, recognizing its value. A team was proposed to handle the significant orders and establish value chain aggregators, potentially impacting millions of people. She suggested forming this team immediately, rather than waiting until 2025.

Mr Gareth Prince, Cannabis Development Council chairperson, expressed gratitude to the Portfolio Committee for granting them the chance to showcase their ability to collaborate with all South Africans for the betterment of society. He emphasised the concrete opportunity presented by cannabis / hemp and highlighted other avenues for sustainable advancement. It was crucial to narrate this story without allowing foreign influence to sway opinions.

He advocated for creativity and pioneering efforts, believing in the government’s commitment to improving people’s lives alongside the cannabis community. 

Mr Prince urged for the employment of South Africans in cannabis development instead of causing them stress or putting them in prison. He stressed the need to leverage unique competitive advantages promptly, recognising the potential of the industry. Despite the challenges, both the people and government were willing to progress.

Mr Poovan summarised his key points such as the importance of meeting stringent requirements for medicines, which represent a significant market; the need for a comprehensive approach beyond medicinal regulation, considering various demand pathways outlined in the Cannabis Master Plan. 

He highlighted South Africa’s obligation as a signatory to international conventions on controlled substances, stressing the importance of adherence while enabling economic growth. He underscored the role of different government departments, including Health, Agriculture, and others, in leveraging legislative mechanisms to create opportunities in the cannabis industry. 

Mr Poovan concluded by acknowledging the validity of points raised by Dr Kunene on low-THC demand pathways and the necessity for collaborative efforts to foster economic participation.

Concluding remarks
The Chairperson thanked all participants including the public. He emphasised that the debate was ongoing on this product known as cannabis, hemp, ntsangu and dagga – acknowledging the different nomenclatures used within communities.  He stressed the importance of tolerance and inclusivity.
 
The Chairperson highlighted the need for access to finance for all South Africans and promised to follow up on the specific concerns raised, amplified by Mr Sassman. Government has a role in ensuring that everyone realises their potential and benefits from opportunities like the cannabis industry. He underlined the need for a new approach that benefits all sectors of society and emphasised the industry’s potential for job creation and revenue generation. 

The Chairperson urged researchers to explore next steps and administrative follow-ups with the relevant departments and agencies. He hoped for continued engagement and realisation of the outlined goals.

Meeting adjourned.