KZN leading the way in South Africa in cannabis business modeling involving small players

By Sheldon Cramer

The purpose of this article is to identify the economic supply chain of Cannabis, currently evolving in South Africa, specifically focused on the KZN Cannabis Industry to date of this document.

This document does not seek to challenge legislative restrictions, but rather identify the economic value of the cannabis supply chain to local economy, notwithstanding 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 document will present 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.

The current value and supply chains that this document will be referred to as “BGF” model.

As the local Cannabis industry is evolving, we still find 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 is. This information is freely available, and has been researched and developed over centuries.

In this document, 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 BGF 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 – Kwa Zulu Natal, Local authorities and traditional leaders.

Over view 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 business to formalize and register as tax paying entities, thereby creating wealth for the economy, provide employment and attract revenue to the province.

What is important to realize, is the Cannabis industry in itself creates many spin off opportunities and 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 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, and 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.

Currently, the BGF model in KZN consists of the following stakeholders:

  1. 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 the informal trade in KZN, and are found throughout KZN.
  2. 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.
  3. 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.
  4. 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
  5. Dispensaries – Non medicinal products, Edibles, recreational use extracts.
  6. On consumption outlets (“Coffee shops”) and recreational user taverns and cannabis clubs.
  7. Industrial and Commercial products suppliers – Hemp textiles, bio fuel suppliers, Hemp based and processed non consumable product suppliers
  8. Seed Suppliers
  9. Hospitality and Tourism related industries, tour operators, medical tourist providers and treatment centres.
  1. Transport & logistics,Industry related training and skills development providers (SETA Accreditation)
  2. Biofuel Refineries
  3. Other- As defined by the Minister and industry regulatory bodies – Includes retail outlets
  4. Exporters

Members and associated Stakeholders:

Name:                                                           Organization:

MonwabisiSiqwayi                                     Zubenathi Trust

Dr. Thandeka Kunene                               House of Hemp

Chief Mpumalanga Gwadiso                               Khonjwayo Development Trust

Phepsile Maseko                                        Traditional Healers Organization

Magistrate Simo Mthethwa                                National Nyahbinghi National Council

Tony Budden                                                           Hemporium

Dr. VuyoMahlathi                                       African Financial Group

Nomathamsanqa Madliwa                                  Endalweni

KrithiThaver                                                 Canna Culture SA

Stella Helwick                                                          Stella Connect

Tshidi Moroka                                             Mazangani

Mr. Matinise                                                            Indalo farmers

Sheldon Cramer                                          Bobby Greenhash Foundation(Pty)Ltd

Herb Dennison-Farrar                               Perfect Grow/Nutrition Medicine College

Jason Law                                                     The Green Connexion

Ras Haile Negus Nyahbinghi                   National Council of South Africa (Rastafari

Church)

Paul Frost                                                     CDCSA-Gauteng

Howard Teng                                                           Simplex Legal Advisory

Stephen Teng                                                          Simplex Legal Advisory

Xolani Christopher Mzomba                               Rastafarian Bobshanti National Council

Carl Durow                                                   Cannabis Therapy

Cannabis Development council – KZN Executive Committee

This model is currently working in KZN, and this document 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.

.Sheldon Cramer is an Executive Member CDCSA-KZN.

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