Hemp 4 Life on cannabis & hemp producer challenges; BRRR

Meeting report

The Chairperson was excused to attend plenary and Dr Manketsi was asked to chair.

Hemp 4 Life briefing on government support to cannabis and hemp producers
Hemp 4 Life owner, Mr Ben Sassman, 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.
10. DALRRD Budget; Committee Report; Committee Report on oversight visit to the Perishable Products Export Control Board and District Six; with Minister, extract explains disconnect between Cannabis Master Plan and what farmers are enduring (see presentation).

Discussion
The Acting Chairperson thanked Mr Sassman for the presentation. She noted Acting Director General, Dr Dipepenene Serage Deputy Director-General-General: Agric Production, Biosecurity and Natural Resources Management, on the platform.

Ms B Tshwete (ANC) expressed her appreciation for the Hemp 4 Life presentation which shed light on the challenges that small-scale farmers face. There is a Cannabis Master Plan which the Department has been working on but she emphasised the need for the Department to address the lack of financial resources and formal support mechanisms, which are the biggest challenges that small farmers face.

Ms Tshwete confirmed that licences and permits are issued but it was important to extend support to the farmers who have been granted these. Public programmes solely focus on big businesses and no attention is given to small scale farmers.

The presentation was an ‘eye opener’ and this prompted her to share a story of a small hemp producing farm in the Eastern Cape which was forced to cease operations due to financial constraints. This case underscores the urgent need for intervention to prevent similar outcomes for other small-scale hemp farmers.

Mr N Masipa (DA) commended the presentation for shedding light on critical issues within the cannabis and hemp farming industry. He also described it as an 'eye opener’ and noted how the Department’s oversight in this industry has been ‘particularly weak’. While there have been reports of licences and permits issued, he asked about the profitability and tax contributions resulting from such licences and permits. DALRRD has the resources and there is a need for their effective utilization to support farmers in the industry. He called on the Department to provide a detailed account on the challenges faced in this industry and how assistance could be provided to such farmers.

He requested Mr Sassman to shed light on the resources used and the extent of consultation that has gone into the formulation of the Cannabis Master Plan.

Mr N Capa (ANC) asked about the involvement of original cannabis producers in the evolvement of the cannabis industry. He was fearful about the potential marginalization of originally cannabis producers, particularly those who have been historically trading illegally. The perception is that only those with capacity may participate in the legal cannabis market, potentially excluding smaller producers from participation.

Mr Capa sought clarity on the distinction between cannabis and hemp based on the assumption in the industry that hemp is a means to override the cannabis industry. Addressing these concerns was essential to provide clarity on planning and further understanding the complexities of the industry.

Mr R Cebekhulu (IFP) asked how many of the 102 cannabis licences were issued to Africans.

He sought clarity on the practical use and consumption of cannabis, noting differing opinions on the use thereof. He pointed out how it may be cultivated, but not sold and smoked or illegally distributed.

Mr Cebekhulu asked about the existence of an organization representing cannabis and hemp farmers.

He highlighted the challenges faced by impoverished individuals in participating in cannabis farming such as difficulties in planting, harvesting, and distributing the crop. He asked if initiatives, such as those led by Mr Sassman, involve partnerships or leasing agreements to facilitate access to land for cultivation, particularly in urban areas.

Ms M Letlape (EFF) saw the presentation by Mr Sassman as a ‘cry for help’ as it emphasized the significant economic potential that remains untapped in the industry. The current laws afford opportunities to big farmers, but it is concerning how the full economic benefits of cannabis and hemp are not being realized. She highlighted the disparity between the potential revenue that could be generated and the total revenue indicated by SARS, indicating the exclusion of the industry in the economic cycle.

Ms Letlape identified two primary challenges hindering the industry’s potential. First, the current laws and regulations on cannabis and hemp are too restrictive, thus limiting growth opportunities for existing farmers. Secondly, there are the funding conditions, particularly the water licensing requirement, which disproportionately affects small-scale farmers with limited access to resources. In consideration of these challenges, she emphasized the importance of the government’s role in ensuring that small scale farmers get assistance.

Ms Letlape agreed with Mr Masipa about the lack of tangible progress that the Committee can account for at the end of the Sixth Term, in comparison to other countries who have legalised cannabis for personal use. South Africa need to acknowledge the economic value of the industry, but also consider advantages outside of the monetary value.

She called on Mr Sassman to clarify what he sought to gain from his presentation that would benefit him as a hemp farmer, but also all other small-scale farmers considering stepping into the space of cannabis and hemp.

Ms T Breedt (FF+) stated that she had no questions on the presentation.

Ms T Mbabama (DA) sought clarity on the Land Bank water licence requirement and if Mr Sassman had considered collaboration with farmers who already possess the requisite licences. She specially referenced the Port St Johns area, where numerous farmers have been informally cultivating cannabis through off-take agreements.

She asked if Mr Sassman’s current licence would allow him to enter into off-take agreements with small farmers. She emphasized the mutual benefit of such agreements which would facilitate market access for small farmers whilst also enhancing Mr Sassman’s standing with financers.

Lastly, she asked Mr Sassman if he had any agreements to buy his products and from where these agreements came.

Mr S Matiase (EFF) echoed Ms Letlape’s characterization of the presentation as a ‘cry for help’ emphasizing the widespread questions and concerns amongst stakeholders, like Mr Sassman, in the industry. He questioned the type of answers that Mr Sassman sought from the Committee and highlighted the need for clarity on the Committee’s role in addressing these concerns. While the Committee plays a crucial oversight role, the responsibility for providing direct answers lies with the Department.

Mr Matiase acknowledged the concerns around the benefits of the industry not being utilized. However, there is complexity due to institutional departmental policy and legislative incoherence. He emphasized the need for parliamentary intervention to address these challenges and ensure that the policies are conducive to driving economic growth in the cannabis sector. Coherent policies are important to facilitate and support meaningful contributions to the economy.

The Acting Chairperson expressed disappointment in the Department's lack of action for funding hemp and cannabis farmers, despite numerous requests. She questioned why hemp and cannabis were still not recognised crops in South Africa and highlighted the challenges faced by farmers in complying with licensing requirements and ultimately accessing funding.

She asked if the sector is organised as this allows requests better to be heard. She sought clarity on the concept of ‘licence brokers’ giving the example of people offering to obtain a SAHPRA licence in exchange for large sums of money. She expressed her concern that if this licence is accessed illegally this would kill the sector.

She raised questions about water requirements for cannabis farming, particularly considering reports of extensive irrigations systems on cannabis farms.

Response
Mr Sassman noted the comment about the closure of hemp farms producing hemp juice, attributing it to the lack of financial viability in cultivating hemp solely as a raw material. Substantial initial investment was required to set up a hemp farm for producing products such as CBD oil or CBD isolate in order to generate profits. Setting up a hemp farm would likely require minimum of up to R2 million which after cultivation of 50 hectares of hemp, would only result in R73 000 profit which is an insubstantial profit to pay off loans. Significant initial capital investment was required for full-scale hemp farming, referring to his own business plan which reflected an estimated investment of R79m.

Mr Sassman was unaware of any involvement of current licence and permit holders in the development of the Cannabis Master Plan. It was this disconnect between the industry and the formulation of the Master Plan which prompted him to approach the Committee for intervention.

Mr Sassman stated that because of the POPI Act he does not know how many Africans were holders of cannabis licences and hemp permits. The question should instead be posed to SAHPRA. However he shared that he was only aware of white owned cannabis farms.

Mr Sassman clarified the distinction between cannabis and hemp, noting that only cannabis can be smoked due to its high THC levels, while hemp requires processing into products due to its low THC level. He explained the limitations surrounding the sale of hemp requiring a section 21 licence which he stated ‘SAHPRA is not capable of administering’.

Mr Sassman said that there is an absence of formal cannabis or hemp associations in South Africa. The only form of stakeholder engagement was through social media groups such as Whatsapp, Facebook and Twitter.

Mr Sassman emphasized the critical need for government to support rural farmers, particularly concerning the financial burden of obtaining a water licence which could amount to as much as R800 000. He noted how this is money that rural farmers do not have access to. Upon seeking assistance from government, these farmers are often instructed to procure the funds independently.

Mr Sassman expressed his intention to purchase 75 hectares of seeds, with an estimated cost of R250 000, excluding expenses for irrigation systems or compost. He underscored the stringent regulations governing licences and permits, noting their binding nature to the specific coordinates of a farm. These permits cannot be transferred to another individual. To secure a licence, a 10-year lease agreement must be obtained, and in the event of selling the farm, the new owner must reapply and adhere to all regulatory requirements anew. These regulations include stipulations such as maintaining a minimum distance of 5km from the nearest school and 3km from public gathering places such as bus stops, libraries, or swimming pools. However, the licence or permit is non-transferable and subject to strict enforcement by regulatory bodies such as SAHPRA and DALRRD.

Mr Sassman affirmed that his presentation was a ‘cry for help’ for him and all his colleagues in the industry. He thus advocates for the relaxation of the licensing and permit requirements whilst acknowledging that the police clearance requirement has been removed. He calls for further relaxation, particularly on the funding constraints.

Mr Sassman accounted for his own plea for funding reflecting a 12 page report documenting all his interactions with the relevant financiers. He had confidence in his business plan, having already secured a client for his produce in the United States, the only constraint he still faces is securing the funding for the water licence.

He clarified that no partnerships with any other farms are allowed because of the water licensing requirement. This is an internal policy of the Land Bank where they are prohibited from giving any permits, unless there is a water licence attached. Stealing water from rivers or boreholes would jeopardize his chances of keeping his permit. The laws on the water licences regardless of the amount of funding requested, has no exceptions and is applicable to all farmers.

Mr Sassman discussed the complexities of tunnel cultivation and the implications for cannabis production. He explained the necessity of tunnel cultivation for medicinal cannabis to prevent cross-pollination and yield a healthy crop. However, because of the extraction process, hemp farming typically occurs outside thus no tunnels are needed.

Mr Sassman pointed to the industry’s need for financial support, particularly to obtain water licences, which is an essential requirement to accessing the funding from institutions such as the Land Bank. He challenged the statement that ‘governments hands are tied’, advocating for regulatory relaxation to capitalize on the significant economic opportunities presented by the legalisation of smoking cannabis. With the illegal cannabis market currently being valued at R60bn a year, this presents an opportunity for government to tap into this money.

In addition to the economic prospects, there is the potential for job creation within the industry, citing examples of a 50 hectare farm being able to cultivate jobs for over 200 people. The current statistics of 371 hemp permit holders and 102 cannabis licence holders gives an indication of the level of employment that could be created.

Mr Sassman condemned the exploitative practices of ‘licence brokers’ who charge exorbitant fees for assistance with the lengthy licensing process, abusing the good will of potential licence owners. He underscored the financial strain faced by farmers who often resort to selling assets, taking out personal loans or extending mortgages to cover the cost of obtaining a water licence.

Lastly, Mr Sassman described the application process as ‘a nightmare’, the completion of which extends up to two/three years. He called for government intervention to address the challenges in the application process so that in turn SARS would also be able to benefit from the revenue generated.

Department comments
Dr Julian Jaftha, DALRRD Chief Director: Plant Production and Health, acknowledged the Department’s lack of prior access to the Hemp 4 Life presentation but proceeded to address its core concern: the challenge of accessing funding. The Departments primary obstacle lies in the current legal status of cannabis in South Africa. For as long as cannabis remains ‘illegal’ in South Africa, funding institutions would be hesitant to support cannabis-related activities due to the prevailing legal position of the crop. As long as cannabis remains classified as "illegal" under the Prevention of Organised Crimes Act, funding institutions are legally constrained from providing financial assistance.

Mr Jaftha noted the implications of the Cannabis for Private Purposes Bill on the legal landscape surrounding cannabis. While the bill decriminalizes cannabis possession and use for private individuals, its impact on institutional funding remains uncertain. Clarity is needed to ascertain if the Bill alleviates legal barriers to funding for cannabis-related initiatives.

Mr Jaftha outlined the inclusion of hemp into the Comprehensive Agricultural Support Programme (CASP). However, there has been low uptake through provincial applications, potentially due to other issues such as seed availability. He discussed ongoing efforts to address the legality of cannabis, including proposed amendments by SAHPRA and the Private Purposes Bill.

Mr Jaftha highlighted the Department's declaration of hemp as an agricultural crop, leading to relaxation of permit conditions as well as the South African Police Service (SAPS) national directive preventing arrest for personal cannabis possession and use.

SAHPRA has also proposed amendments which aim to limit SAHPRA’s oversight of cannabis for medicinal purposes. If the use is for industrial purposes, DALRRD would need to intervene. As long as there is no medicinal claim around cannabis, no authorisation from SAHPRA is required. However, these are proposed schedule changes which are now out for public comment until mid-March 2024.

In conclusion, Mr Jaftha emphasized the need for overarching legislation involving multiple government departments to regulate the legalization of cannabis. Consultation and inclusion of stakeholders in the development of the Cannabis Master Plan was important. A steering committee has been formulated recently, under the Master Plan Framework. That committee consists of various stakeholder such as traditional leaders, Rastafarian community members and traditional health practitioners that meet with the department. He recognized this was not an inclusive representation of all stakeholders. Representation would be discussed in the next meeting. The lack of an organisation for members of the industry is a significant challenge to having their concerns heard.

Deputy Minister’s comments
Deputy Minister Rosemary Capa appreciated Mr Sassman's presentation and response. She emphasized the Department's need to request the full presentation to clarify discrepancies between its statements and the Department's stance. She noted the previous disorganization in managing the programme, citing challenges in coordination between provinces and the national government amid debates over cannabis decriminalization and trading restrictions.

The Deputy Minister underscored the hazard posed by the lack of clear legislation regulating cannabis use, particularly for medicinal purposes. The absence of scientific research and regulatory guidance may encourage unauthorized cultivation and usage, leading to unintended consequences. The Deputy Minister voiced concerns about the displacement of food gardens by cannabis cultivation, exacerbated by delays in implementing legislative measures to regulate cannabis.

Deputy Minister Capa spoke about the necessity for a ‘political champion’ to unite departments responsible for justice, social development, agriculture, and health on this matter. There is a need for clarity on which entity would spearhead coordinated efforts to address the social and health implications of cannabis use. She urged the Department to reassess its approach and facilitate inclusive dialogue to develop a comprehensive and reflective report on the matter.

Mr Masipa requested the drafting of a written summary outlining the discussions held during the meeting. This suggestion was endorsed by the Acting Chairperson, who confirmed its facilitation during the Committee’s tenure. The report will be disseminated to relevant stakeholders for further consideration.

The Acting Chairperson extended gratitude to Mr. Sassman for his presentation and assured him that the Department had noted the concerns raised and would ensure accountability.

Agriculture, Land Reform & Rural Development Budgetary Review & Recommendations Report
Dr Tshililo Manenzhe, Committee Content Advisor, read through the BRRR for 2023. for 2023.

A Member raised a question on the accommodations of labour tenants.

Mr Manenzhe noted how there are no specific recommendations on labour tenants but in the discussion the challenges of labour tenants are highlighted. He proposed that members could make a proposal on the inclusion of such.

The Committee adopted the BRRR.

Meeting adjourned.