High Hopes: Navigating the growth of Cape Town’s Medicinal Cannabis and Hemp industries
Cape Town is on the brink of a transformative journey in the realms of medicinal cannabis and industrial hemp. This potential was evident during the recent two-day event hosted by Green Cape and The City of Cape Town, which brought together industry experts, stakeholders, and visionaries to explore the future of these promising sectors. Here, we delve into the key insights and strategic recommendations that emerged, offering a comprehensive overview of the current landscape and the steps needed to unlock Cape Town's potential as a global leader in these industries.
Day 1: The Promise and Challenges of Industrial Hemp
Executive Summary
Although there is great potential for the industrial hemp industry in Cape Town, there are several significant obstacles. Predominantly consisting of start-ups with limited access to financing and infrastructure, the sector requires strategic interventions to realize its promise. Addressing investment needs, value-chain development, and processing capabilities are paramount, and the role of government and private sector collaboration cannot be overstated.
Current Landscape
The industrial hemp industry faces a crucial need for investment to catalyse growth. Funding from government entities, development finance institutions (DFIs), and innovative platforms like crowdfunding is essential. Traditional investors and banks exhibit hesitancy due to the specialized nature of hemp equipment, which lacks resale value in cases of default, thereby stalling the pipeline. Furthermore, the industry must focus on value-chain development to ensure sustainability and profitability. Strengthening processing capabilities will also be key to maximizing the potential of industrial hemp products. Collaboration between government and private sector stakeholders is critical to overcoming these challenges and driving the industry forward.
Distinguishing between seeds and grains is pivotal for targeted cultivation and processing efforts. Community and industrial farmers have varying initial costs and production capacities, highlighting the need for tailored support and comprehensive training programs to enhance cultivation outcomes and elevate production standards. By understanding the specific needs of each type of hemp product, farmers can optimize their resources and improve overall efficiency. This targeted approach can lead to increased yields and higher quality products, ultimately benefiting both the farmers and the industry as a whole.
Value Chain and Processing Gaps
The lack of processing facilities stands out as a major bottleneck. An estimated R65 million investment is required to establish and equip these facilities, which would facilitate the processing of hemp biomass into market-ready products. Letters of Intent (LOIs) from domestic off-takers indicate a demand of approximately R350 million for hemp grain, with a sales pipeline valued at R170 million, predominantly targeting international markets. With the necessary investment in processing facilities, the industry could meet this demand and capitalize on the potential for growth in both domestic and international markets. By closing the value chain and processing gaps, the hemp industry would not only benefit from increased revenue but also create opportunities for job creation and economic development in the region. Overall, addressing these challenges would allow farmers to fully harness the economic and environmental benefits of hemp cultivation.
Strategic Recommendations
- Collaboration between the public and private sectors: DFIs and the government can help start-ups by providing catalyst funding. Encouraging venture capital investment by highlighting the long-term potential and strategic importance of the hemp industry is crucial. A good example to point out here would be the financial incentives and grants offered by the Canadian government to support the development of processing facilities. Agriculture and Agri-Food Canada (AAFC) provided funding through initiatives like the AgriInnovation Programme, which supported the research, development, and commercialization of innovative hemp processing technologies.
- Infrastructure Development: Prioritizing the establishment of processing facilities and implementing training programs for community farmers can bridge critical gaps in the value chain. For example, Hempco Food and Fiber Inc., a leading hemp processing company in Canada, benefited significantly from government and private sector collaboration. The company received funding from Western Economic Diversification Canada (WD), which supported the expansion of their processing facilities in Nisku, Alberta. This enabled Hempco to enhance its processing capabilities, increase production capacity, and develop new hemp-based products for domestic and international markets.
- Market Development: Leveraging existing LOIs and sales pipelines to secure market opportunities, coupled with a robust sales strategy targeting both domestic and international markets, is essential for steady revenue flow and growth.
With the right investments and strategic initiatives, Cape Town's industrial hemp industry can overcome its current challenges and thrive. Collaboration between the government, NGOs, research institutions, and the private sector will be crucial in transforming Cape Town into a hub for industrial hemp production and processing.
Day 2: Unleashing the Potential of Medicinal Cannabis
Executive Summary
Medicinal cannabis industry in Cape Town is underdeveloped but brimming with potential. Despite the issuance of 103 licenses nationwide, only 20 are operational, with less than 10 engaging in international markets. Bridging finance, market development, regulatory standards, and targeted education and training for medical professionals are vital for unlocking this potential.
Current Landscape
The industry is in dire need of bridging finance mechanisms to transition academic research into commercial ventures. An institution like the Council for Scientific and Industrial Research (CSIR) is well-positioned to facilitate this transition. Moreover, establishing regulatory standards similar to Good Agricultural and Collection Practices (GACP) and developing an Authorized Prescriber Program for medical doctors are critical steps forward.
Strategic Initiatives
- Attracting Investment: Identifying appealing indicators to attract investors and developing a local market akin to Australia's Therapeutic Goods Administration (TGA) can provide the necessary financial momentum.
- Medical Professional Engagement: Engaging international doctors to educate local practitioners and simplifying the prescription process for doctors through administrative delegation to dispensing pharmacies are essential measures.
- Market Development: Exploring the potential of a recreational cannabis market, promoting private club models, and enhancing wholesale distribution channels can significantly boost the industry.
Addressing quality and safety
It is necessary to address quality issues, particularly with regard to cannabis that traditional healers may prescribe because of potential heavy metal contamination. Establishing a government-subsidized testing facility, despite the increased input and resale costs, can ensure the quality and safety of medicinal cannabis products.
Research and Development
Conducting strain-specific research to identify suitable cannabis strains for specific illnesses and protecting indigenous knowledge through appropriate frameworks are crucial for advancing the industry. Leveraging existing infrastructure, such as research labs at local universities, can facilitate medicinal cannabis research and development.
Industry Development
Creating a one-stop shop for comprehensive information on financing requirements and market opportunities, targeting specific international markets, and reverse engineering successful models from countries like Lesotho, Canada, and Colombia can drive industry development. Additionally, enhancing competitive analysis and ensuring the South African Health Products Regulatory Authority (SAHPRA) stays aligned with global standards through active participation in industry meetings are essential.
The medicinal cannabis industry in Cape Town is poised for significant growth. By addressing financial mechanisms, regulatory standards, medical professional engagement, market development, quality and safety concerns, and comprehensive industry development, Cape Town can establish itself as a leading player in the global medicinal cannabis market.
In conclusion, the insights from our two-day event underscore the immense potential of Cape Town's medicinal cannabis and industrial hemp industries. With strategic investments, collaborative efforts, and targeted initiatives, these sectors can unlock unprecedented growth and position Cape Town as a pivotal hub in the global landscape.
Sources:
GreenCape engagements insights
Western Economic Diversification Canada. (2018). Funding for Hempco Food and Fiber Inc. to expand processing operations.