Opinionista Nicholas Heinamann 20 April 2020

Cannabis cultivation could be a key economic driver for reconstruction after Covid-19

The potential for cannabis in South Africa is enormous. The country has drought-resistant acclimatised genetic strains that have naturalised over hundreds of years, combined with tens of thousands of existing farmers who are familiar with the crop and how to grow it.

Covid-19 is having a disastrous effect on the South African economy that had already entered into recession, the Reserve Bank expects GDP to shrink by 6% adding pressure to the already high 2019 unemployment rate of 29.1% with an estimated loss of an additional one million jobs, taking the country to 7.7 million unemployed.

The lockdown will lead to a significant reduction in tax revenue at a time government has had to prioritise unplanned spending towards healthcare and economic support measures for disaster relief efforts, pushing the already high debt to GDP ratio of 62% to unsustainable levels.

SA’s growth prospects are grim with the country facing a very real human catastrophe. Government’s short-term policies are all focused on Covid-19 mitigation and disaster relief within the very limited means of state finances.

What will urgently be required post-Covid-19 is a clear and coherent economic policy where government can, through targeted interventions, achieve rapid socioeconomic development that has been elusive to date. It’s clear that new regenerative thinking is required that seeks to provide long-term sustainability, is resistant to external shocks such as global economic markets and climate change and is based on maximising our abundant human and natural resources.

SA will need policy along the lines of Roosevelt’s “New Deal” that helped lift the US out of the Great Depression by putting people to work building social infrastructure and the Marshall Plan designed to rebuild Europe after World War II. What would this sort of policy look like for SA? Would it be an extension of business as usual? Or is it an opportunity to innovate out of the ashes of the old and chart a course for the much-vaunted African Renaissance?

In his acceptance speech to the African Union in Feb 2020, President Cyril Ramaphosa said “we have trained our sights on supporting green growth on the continent, and on ensuring that the continent takes advantage of the opportunities presented by the green transition. This includes new industries in energy, materials engineering, the circular economy, sustainable agriculture and clean production.”

The time to implement this vision of advancing inclusive green economic growth and sustainable development has come. We boldly need to step into this green future and design systems that allow us to live within our economic and ecological limits. We can achieve this by setting our sights on genuinely transformative economic growth and the potential of a plant that has been naturalised and traded in Africa for a thousand years.

President Ramaphosa talked about this in his 2020 State of the Nation Address, acknowledging that cannabis farming happens throughout the country, pledging to “open up and regulate the commercial use of hemp products, providing opportunities for small-scale farmers”. Cannabis offers an opportunity unprecedented in South Africa’s history since the discovery of gold on the Witwatersrand in 1886 as South Africa’s much-maligned and excluded green gold, with massive potential to birth a new sunrise industry to lift us out of economic recession, poverty and unemployment.

Globally, cannabis has a long history as one of the mainstays and drivers of early industrialisation, providing fibre for ropes and canvas for sails that powered maritime trade to help build the global market that exists today, as well as textiles for clothing and an important role in medicinal apothecaries.

It was South Africa’s colonial government that nominated “Indian hemp” to be listed as a dangerous drug by the League of Nations in the mid 1920s followed by the banning of industrial hemp as the result of a corporate agenda of nefarious interests in the US in the mid 1930s. It has been illegal for the past 80 years in most parts of the world for its narcotic properties while the industrial capacity continued to contribute to the economies of China, India and parts of Europe.

Currently, more than 30 countries have legal cannabis for medical use and a growing number of states in the US and other countries are legalising or tolerating cannabis for recreational use, including South Africa where the Constitutional Court ruled in September 2018 that it was legal to cultivate and use cannabis in the privacy of your own home and gave Parliament two years to amend legislation.

Today, the global medical and recreational cannabis market is growing from an estimated $9.6-billion in 2017 to a projected market value of $57-billion-plus by 2027. These estimates exclude existing and potential new markets for industrial cannabis for which little information is available.

The potential for cannabis in South Africa is enormous. The country has drought-resistant acclimatised genetic strains that have naturalised over hundreds of years, combined with tens of thousands of existing farmers who are familiar with the crop and how to grow it. The potential value chain is being explored by the Department of Trade and Industry and the Department of Agriculture, which have been tasked with finalising an agro-processing masterplan by the end of June.

What is not clear is whether SA will base its future cannabis industry regulations on the existing resource base and farmers or follow the western model of narcotic levels in the plant for which our country would have to import genetics, and is considerably behind the curve by global standards.

The cannabis value chain is based on the components of the plant that have economic potential: the seed offers food and oil that is high in essential fatty acids that will noticeably improve the diet of SA’s poor, resulting in improved cognitive performance and boosted immune systems. In addition, the plant can be used to produce both ethanol and biofuel that could potentially feed directly into the energy and plastic sectors. The stalk offers two main agro-processing streams, the outer layer that can be stripped providing one of the longest fibres known to humanity to be used for an extensive range of consumer and industrial textiles. The inner part of the stalk is known as hurd and is used in the paper, automotive and building industries. The flower and most controversial part of the plant is where the medicinal and recreational benefits lie.

There is very little economic data available for an integrated cannabis model as the plant and its benefits have been suppressed for such a long time. Early estimates for a co-operative farming and agro-processing model based on empowering small farmers as a strategy to regenerate rural economies indicate considerable economic potential.

An agricultural co-operative hub model of 20,000 hectares supported by an estimated 10,000 small farmers, each farming two hectares and employing an additional agricultural labourer per hectare would create 30,000 jobs. The processing hub would house a series of decortication technologies required to process up to 50,000 tons of fibre and 120,000 tons of hurd employing 150 plant and support workers.

The potential income per farmer per hectare is dependent on bio-region, climatic conditions and seed strains. Conservative estimates indicate that per hectare, stalk biomass is worth R50,000, fibre R18,000, seed R155,000 and cannabinoids R100,000. Average income per hectare is about R175,000, generating revenue of R350,000 for a small farmer on two hectares and revenue of R3.5-billion per co-operative hub farming 20,000 hectares. Ten hubs farming 200,000 hectares could potentially generate R35-billion in revenue. Additional added value from developing finished products still needs to be determined.

There are also noteworthy climate crisis mitigation benefits to cannabis farming and the possibility to access climate funding to roll out an industrial cannabis strategy. Cannabis sequesters up to 10,000 tons of carbon per hectare, where one co-operative hub could sequester up to 200 million tons of carbon.

The objective is to develop a multi-billion-rand industrialised cannabis value chain that enables the empowerment of small-scale farmers and the development of agro-processing co-operative hubs that focus on developing the following value chains:

Seed

The seed can be processed into food with a focus on preventative healthcare to boost the diet of the poor in the form of hemp hearts, the inside of the seed, or protein powder made from crushing the seed shell. Both are extremely high in proteins and omega essential fatty acids. The seed can also be cold pressed into an oil for human consumption.

Bio-fuel and plastic

The seed can be cold pressed into oil, the whole plant can be processed for fuel through a pyrolysis process or converted into ethanol by a fermentation process. There is also huge potential for an eco-friendly bio-plastics industry that will start to reverse land and sea plastic pollution.

Building

The inner part of the stalk, the hurd, can be processed into hempcrete for building houses that are stronger, fire- and moisture-proof and more durable. Communities can grow and build their own homes transforming the government’s housing programme from handouts to skills development and empowerment. The hurd can also be processed into eco-friendly insulation and pressed fibre-board similar to existing wood-based options.

Textiles

The outer part of the stalk, the bast fibres, can be used to make textiles that are extremely versatile and used for a wide variety of applications from accessories, shoes and furniture, to home furnishings.

Paper

Paper is made from either the hurd or bast fibre. Industrial cannabis/hemp paper is a valuable alternative to conventional paper made from trees, and could provide a more renewable source for much of the world’s paper needs — one acre of hemp can produce as much paper as four to 10 acres of trees over a 20-year cycle. Hemp stalks grow in four months, whereas trees take at least 20 years.

Medicine

Cannabis medicines were once the most commonly used medicines in the world until the 1920s and were listed in the US Pharmacopoeia until the mid-1930s. Today medical cannabis is playing an increasingly significant role and offers potentially cheap healthcare solutions for a variety of ailments that can directly contribute to primary and preventative health care on a community level and pharmaceutical medicines for specific conditions.

There are also substantial opportunities to develop new technologies for modern processing and to adapt or use existing technologies lying dormant in the country such as the R100-million DTI-funded fibre processing plant near Winterton.

In order to rapidly develop the economic potential of cannabis in SA, innovative world-leading legislative changes will be required to create the enabling conditions to rapidly unlock cannabis markets where:

  1. Industrial cannabis irrespective of THC/narcotic strength is treated as a cash crop managed by the Department of Agriculture, regulated on a co-operative level by end use, utilising existing genetics and small farmers as the cornerstone of production; and
  2. Medical cannabis, differentiated by use where pharmaceutical cannabis is utilised for specific conditions obtained via a doctor’s prescription and manufactured under Good Manufacturing Practice conditions and treatments for non-specific conditions accessed through traditional and complementary health channels.

The existing Constitutional Court ruling for Responsible Adult Use needs to be expanded as it excludes all people without access to private land from cultivating cannabis and therefore access to cannabis so as to include the ability to cultivate, extract, process, manufacture and sell cannabis-based products for recreational use, along the same lines that alcohol and tobacco are currently regulated so as to be inclusive.

Covid-19 provides South Africa with the economic and social necessity to draw on all its available resources to ensure a resilient recovery and to make policy decisions that work towards rapidly regenerating our society and economy. The country’s long history of illicit cannabis production and export puts us in a strong position to develop a local cannabis market that unlocks the entire value chain, stimulates economic growth and generates substantial tax revenue for the fiscus.

The rapid introduction of far-reaching, proactive and empowering legislation is required to create the conditions to allow cannabis the possibility to restore the dignity of ordinary people, creating jobs for meaningful work, to grow and manufacture their own food, fuel, fibre, shelter and medicine in a green sustainable way. DM

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