Seeds of Change: Realising South Africa's Hemp Potential

Part 3: Navigating the Challenges Ahead

Introduction

Having journeyed through the historical evolution and legislative framework in Part 1, and explored the potential economic benefits created by the legalisation of hemp in Part 2, we now examine the challenges that confront South Africa's budding cannabis industry. Part 3 aims to dissect these challenges, spotlighting the hurdles small-scale farmers face, from regulatory confusion and exclusion to financial constraints and market access issues. This segment underscores the delicate balance required to foster an inclusive, competitive, and sustainable cannabis industry. We will scrutinise the implications of current policies and the critical need for reforms that embrace the diversity of participants within the industry, from traditional growers to small enterprises.

Challenges

While the potential opportunities and economic benefits may seem like a slam dunk for South Africa, the cannabis industry is not without its challenges. In a meeting of the Parliamentary Monitoring Group on February 27th, 2024, the discussion centred around such challenges facing the small-scale cannabis and hemp farming sector. Among these challenges were the notable lack of financial resources and formal support mechanisms available to small-scale farmers, compounded by the rigorous process and associated costs of obtaining licenses and permits. Concerns were also raised regarding the disparity in accessing government assistance between large corporations and smaller producers, underscoring the necessity for inclusive support programs. The complexity of licensing and permitting procedures, coupled with stringent regulatory conditions such as water licensing requirements, were highlighted as formidable barriers to entry for small-scale farmers.

A similar sentiment regarding the inclusion of small-scale farmers is echoed in the Institute for Economic Justice’s report on the South African Cannabis Industry, published in February 2023. The report identifies two primary challenges facing the industry as a whole: achieving industrial growth and international competitiveness that fosters decent work, and establishing an inclusive cannabis economy that accommodates traditional growers and small enterprises. Focusing specifically on hemp in the report, three key challenges were noted:

The regulatory framework appears to prioritize diversion control (Diversion control in this instance deals with the prevention, detection, and investigation of the diversion of controlled substances from legitimate sources for illegal distribution or use for purposes not intended by the cultivator) over inclusivity, making it challenging for small-scale producers and traditional growers to obtain hemp permits. Reforms are thus necessary to reduce barriers to industry participation.
The 0.2% THC threshold for industrial hemp is considered too low for South African agro-ecological conditions and is expected to create problems with ‘hot hemp’ (‘Hot hemp’ refers to hemp with a THC level above that set out by the jurisdiction in which it is cultivated and/or traded. For example, with South Africa’s 0.2% threshold for industrial hemp, if a farmer were to harvest hemp with a THC level of 0.3% or more, this hemp would be considered ‘hot hemp’). Advocacy is thus made for raising this threshold.
The regulatory system is generating uncertainty and constraining supply. It also prevents the adoption of dual or multi-use cultivation systems (systems by which both fibre and seeds are produced), which may have an important role in inclusive rural development. Further regulatory considerations are thus needed.

These challenges not only impede the inclusion of small-scale farmers in the South African cannabis industry but also impact the global competitiveness of South African hemp exports. With the European Union setting its THC threshold at 0.3%, and thresholds of 1% in countries like Australia, Uruguay, and Switzerland, South African farmers thus risk crop destruction due to non-compliance with local standards despite such crops meeting international standards. Furthermore, the regulatory limitations on implementing dual-use cultivation systems diminish farming efficiency, undermining the ability of local farmers to compete globally against competitors who have no such restrictions.

Addressing the Challenges

In light of these challenges identified, it is imperative to consider the actions being taken to address them, and further action that may be needed. Key stakeholders, including policymakers and industry representatives, must collaborate to identify necessary changes to current regulations and procedures, aiming to eliminate barriers preventing access of farmers to the South African Cannabis Industry and barriers hindering South African competitiveness in the international hemp market. South Africa should strategically target the most profitable hemp subsectors, prioritizing efforts to achieve economies of scale. Our national objective should be not only to establish leadership in cannabis cultivation but also to develop comprehensive production and supply chains nationwide. This entails leveraging every aspect of the value chain, from cultivation to processing and the final product to maximize the industry's potential impact. By doing so, South Africa can achieve greater economic benefits, bolstering exports and fostering job creation across the country.

The barriers to entry for small-scale farmers are, as previously mentioned, also a vital challenge that must be overcome. It is crucial that we ensure fair access to the hemp (and cannabis) industry for small-scale farmers, especially considering South Africa's historical context and the enduring challenges faced by previously disadvantaged communities. We must be vigilant against the potential for large corporations to dominate the industry, which could deepen economic inequality and worsen existing disparities. By prioritizing inclusivity and designing support systems that cater to the specific needs of small-scale farmers, we can empower marginalised and previously disadvantaged communities to participate fully in this emerging sector. This approach not only promotes economic empowerment at the grassroots level but also contributes to broader societal transformation and addresses historical injustices.

KwaZulu-Natal

Thankfully, positive action to provide access and support to this sector can already be seen in play, with significant investment already being made. Last year October in KwaZulu-Natal, Premier Monusa Dube-Ncube stated that they had “facilitated an investment commitment of R120 million…” The Premier further stated that “[t]hrough DARD [Department of Agriculture, Land & Rural Development] we have set aside an amount of R47 million for cannabis research” and “…allocated R10 million to assist farmers in cannabis production and hemp permit application” (SAnews.gov.za). The impact of government initiatives in KwaZulu-Natal have been significant, with 664 farmers receiving permits for cultivating, storing, and transporting low-THC content cannabis (as of December 2023). This has opened up access to advanced technology (through the Analytical Lab based at Cedara, near Pietermaritzburg) and market opportunities for these farmers (SAnews.gov.za). These permits were part of a broader strategy to boost the local cannabis and hemp industry, as demonstrated at a provincial Cannabis Expo and Conference, which saw the coming-together of government departments, industry experts, and local farmers to propel the sector forward through collaborative efforts.

It is clear through ongoing government actions and pilot projects that significant investment is being directed into this burgeoning industry, but greater effort is needed in order to allow for the equitable participation of small-scale farmers in this industry. Government and public interest groups should pay specific attention to licensing and regulatory policies with a view of their impact on and attainability for small-scale farmers. Legislators, if necessary, should consider establishing a separate regulatory framework specifically designed for small-scale farmers. This framework would aim to promote their economic development and enable their transition beyond small-scale operations.

KwaZulu Hemp Association

Alternatively, we could see a further emergence of organisations such as the KwaZulu Hemp Association (KHA), a non-profit Cannabis Hemp industry representative body founded in 2023 by a group of corporate, traditional & commercial farmers, industry manufacturers, consumer suppliers, and academic and government stakeholders, which is working on the establishment of regional agricultural processing facilities that will serve as hubs for both formal and informal growers. The goal of these processing centres is to reduce the need for long-distance transport of harvested plants by acting as a local facility that buys crops from farmers for testing and grading. Additionally, these hubs will offer training, supply seeds, fertilizers, lighting, irrigation systems, and marketing insights to farmers. The establishment of such will also provide mechanised harvesting and farm equipment to aid farmers with their harvests and transportation to agricultural processing facilities. This approach of establishing regional agricultural processors provides a viable gateway for both formal and informal (small-scale) growers into the formal cannabis industry, enabling them to market their products efficiently and in compliance with government regulations.

Conclusion

South Africa's legalisation of cannabis and the more recent differentiation between low-THC (hemp) and high-THC cannabis (marijuana) represents a pivotal shift towards economic and agricultural advancement, with significant potential for job creation, rural development, and poverty alleviation. The distinction between hemp and marijuana (high-THC cannabis) and the respective regulation of the two, has set the stage for a thriving industry, poised to potentially contribute an estimated R28 billion to the economy and create upwards of 130,000 jobs. However, realising this potential requires addressing the barriers faced by cannabis farmers, with an emphasis on small-scale farmers in the interest of promoting inclusive growth. Initiatives in KwaZulu Natal and the formation of bodies like the KwaZulu Hemp Association illustrate progressive steps towards integrating both formal and informal growers into the market. By streamlining regulations to support small-scale farmers and focusing on high-value hemp subsectors, South Africa can position itself as a leader in the global hemp industry. This approach not only promises economic empowerment but also serves as a means to address historical injustices, ensuring a prosperous and equitable future for the nation's burgeoning hemp sector. While this industry is still in its infancy, it is important to lay strong regulatory and infrastructural foundation on which the future of the sector can be built. This will not be possible through the government or private sector alone and will require cooperation and collaboration between all the respective stakeholders to realise the immensity of this industry’s potential.

Timothy Brown