Kaiser EDP and Ignited Unlimited, CanPlan Consultants
The Western Cape’s recently released CanPlan analyses the current production and value chain activity in the Western Cape. It warns that several current operations are not viable and that landraces are not top of mind for local growers.
An analysis of the Cannabis production licenses based on the list available on the SAHPRA website as at October 20222, shows that the Western Cape now has 17 licenses, which equates to 23% of total licenses in South Africa.
Within the Western Cape, licenses are spread across the West Coast, Boland, Metro, Overberg, and Klein Karoo, with possibly a bigger concentration in the Cape Winelands. In terms of hemp permits, latest publicly available information is that there are now 11 permits in the Western Cape, and over 300 permits nationally. These permits are spread throughout the Western Cape.
Traditional primary production of Cannabis in the Western Cape is not at the scale of those provinces with a long history of small farmer such as Pondoland in the Eastern Cape and KZN, where it is estimated that there are many thousands of small-scale growers.
In the Western Cape, traditional communities do nevertheless grow for own-use and subsistence in all areas of the Province, with the West Coast, towns throughout the Cape Winelands and the Southern Cape being the best-known areas for the production of lower grade dagga for the mass adult use market. Localised adaptations abound and growers will go to great lengths to acquire better genetics.
Land races are seen as inferior in many ways and traditional growers don’t see the value in preserving it, except for a few traditional healers that grow it for compounding purposes. Other growers have found a market through the private Cannabis club system and growing (often illegal) is happening throughout the province, mostly under controlled conditions and concentrated around the bigger metros.
Commercial growing and growing for research purposes by licensed companies and public research institutions has started, including:
• Felbridge (14,000 sqm hydroponic facility)
• Neopharm (400sqm facility)
• Beyond Buds
• White Lion
• Uncle Rooneys
• Atlantis facility
• Bien Donné research cultivation
• ARC research cultivation
• Drakenstein Municipality / Mike Mangena research cultivation
Some of these operations are currently experiencing challenges with commercial viability. There is a divide between the often-high quality of genetics available on the informal market and the genetic material available for commercial production.
There has been a lack of collaborative research in the past between the informal and commercial parts of the industry. Genetic mapping services and development is available should sufficient budgetary support be found.
Hemp was grown in previous seasons in the West Coast, Winelands, Southern Cape and Klein Karoo, with varying levels of success and mostly under irrigation. Most existing hemp growers have applied for hemp permits through DALRRD.
Pilot dryland production of hemp is taking place in the Southern Cape A range of processing activity in the Western Cape is evident based on publicly available information.
Cannabis processing Afriplex is already producing and exports medical Cannabis extracts, leveraging their capability in processing a range of medicinal plants and natural products extracts and APIs.
GES Labs provides specialist processing of Cannabis active pharmaceutical ingredients on a private label basis, and is already working with a range of local primary producers and universities.
Industrial hemp related processing Hemporium produces a wide range of clothes, accessories and other hemp cord or textile-based products based on imported fabrics, rope and cord.
Afrimat is producing hempcrete and hempcrete blocks in a brick-making facility, using local lime and mostly imported hemp hurd, and they had used some inputs from the hemp pilot projects with a small-scale decorticator. They are currently supplying the construction of the “Hemp Hotel” in Cape Town. There is also some pilot production of hemp fibreboard panels.
There are various hemp foods being processed and packaged based on imported raw materials and hemp seeds e.g. Health Connection, Soaring Free, Real Food Co. Animal and pet foods with hemp-based ingredients are also being produced in the province.
Various companies are also already producing a range of products in the province with hemp oil ingredients and CBD (typically with imported CBD extract, some with low CBD levels)– ranging across oils, skincare and personal care, food, waters, honeys, sweets, alcoholic and non-alcoholic beverages, teas.
The previous round of hemp permits issued by SAHPRA were administered through the Cannabis Development Council of SA. This made the process inclusive, with good representation from traditional communities and hemp enthusiasts alike.
Many growers assumed wider definitions of hemp and lack of enforcement has created a framework for the marketing of non-compliant products. These products include cosmetics, personal hygiene, natural medicine, food and pet health.
Products are supplied through online stores, farmers markets, boutique shops and private clubs. In addition to the locally processed goods, a vast range of Cannabis and hemp value chain products are retailed in the Western Cape, many of which are imported and fall within a regulatory grey space, and there have been various seizures at the port; challenges are currently in the courts relating to SAHPRA’s jurisdiction.
The home grower market is supported by a range of auxiliary services. There are now Cannabis grow shops in most towns. Most commercial garden centres also support the industry, often with dedicated Cannabis sections. Online retail is also emerging.
There are also a range of other Cannabis value chain services, including lab services and analytics such as Qure, Eco Green, and Vinlab, with various existing labs adding Cannabis related lab services to their portfolio. There are also companies focusing on biotechnology development, consultancy and value chain development.
Legal services companies are also developing specialisation in Cannabis law. There is also an architectural firm specialising in hemp architecture.
In terms of R&D, top academic institutions are showing an interest in hemp. International genetic focused companies have expanded into South Africa, with one example Puregene represented in the Western Cape. Currently PhD research into fibre and flower quality are being done through University of Stellenbosch.
The hemp research farm in Simondium cooperating with academic and research institutions to establish a platform for collaborative research. Projects include fibre and animal feed research through University of Stellenbosch as well as adaptability trials for the ARC. CPUT’s Applied Microbial and Health Biotechnology Institute is conducting basic research using a laboratory-based model to assess the modulation of high glucose-induced oxidative stress by various Cannabis sativa plant extracts in liver cells, and has the capacity to provide scientific substantiation of health claims of Cannabis and hemp.
A range of education and training services are already available in the Western Cape, such as Cheeba Academy (dedicated Cannabis academy) and Medical Cannabis courses for health professionals (Sustainability Institute and Happy by Nature), as well as the Overberg Training and Development Initiative and U Can Grow.
Cannabis tourism and the promotion of Cannabis-friendly establishments tap into a new and growing market. Some establishments are already offering cannatourism services e.g. Cannabis-themed city tours and 420 friendly camp sites and B&B’s. There are also some clubs and dispensaries that are popular with tourists.
Various investment plans have been announced for facilities within the Western Cape, including the following:
• Expansion of Afrimat decorticator plant and hempcrete production facility
• Real food Co plans for hemp seed and oil production, with an investment proposal to sell the factory to the workforce.
• Hemp panel production plans, with scope to focus on the affordable housing market (championed by Wolf & Wolf Architects)
• Hemp Solutions is seeking funds to invest in fibre decortication, cottonising and hemp seed processing.
• Seed Oil South Africa – potential processor
• Distell and Invenfin have both invested in ReThink as part of their product innovation strategy, focusing on teas, shots, skincare.
However, questions remain about the commercial viability of some of these investments.
Most previous hemp research in South Africa has been focused on agronomy and genetic suitability, although there has been some research on natural fibres and composites e.g. for fibre board and automotive components. This research and product development would needs acceleration through a targeted approach from government, institutions and the industry.
Existing facilities in other industries have the potential to support the Cannabis and hemp industry. For example, irrigation infrastructure could be utilised. The fodder and grain industry also have potential to be adapted and utilised for some aspects of the value chain, including animal feed and hemp grain. Pack houses and sheds could be used for basic processing. Similarly, other existing manufacturing facilities and equipment could potentially be adapted for hemp inputs e.g. sail-making, furniture and homeware, fibre glass and marine component manufacturing.
Summary status quo assessment
Positive, mixed and negative factors:
+ Long history and traditions around Cannabis, in particular traditional healers
+ Significant informal and grassroots activity and trade– growing, processing, distribution, trade, services, clubs etc.
+ Base of license and permit holders in the WC
+ Various established value chains in the WC – e.g. food, beverage, construction
+ High level of interest and innovation in Cannabis and hemp
+ Technology available
+ Some coordination of research e.g. within industry
+ Current and planned investments in various types of processing
+ Base of Cannabis and hemp training and education in the province
+ Strong tourism in W Cape (including medical, health and nature-based tourism)
+ Energy assets e.g. solar potential
+ Sophisticated and aware local consumer base, environmentally conscious
+ Provincial government strengths – reputation for service delivery, being responsive and pro-active relative to other SA provinces, clean audit, agri value chain expertise
± Environmental imperatives (risk and opportunity)
± Rapidly evolving regulatory landscape locally and internationally
± Rapidly changing markets (risk and opportunity)
± Existing (or lack of) seed IP and registered cultivars (ARC)
− W. Cape growing conditions not optimal for production without modification (incl. irrigation, light, temp) although parts of Southern Cape more suitable
− Fragmented and unclear regulation
− Fragmented industry, no representative industry body
− Lack of coordination of – and access to - all research efforts, including academic, public sector, state research (e.g. CSIR)
− Gaps in value chain facilities/processing capability
− Exclusion of much of legacy activity from permitted space
− Water scarcity and climate change
− People generally not well educated about Cannabis
− Gaps in youth-focused and female-driven institutions
− Inadequate small farmer and entrepreneur support
− Wine industry dynamic (competition for land, water and support resources, environmental practices can damage other agricultural activity)
Assets by type:
PEOPLE AND CULTURE
• Long tradition and culture with Cannabis plant, other plant medicines/natural products
• Traditional knowledge – production, formulation, healing
• Love and passion for Cannabis plant amongst many people
• Relatively aware and conscious market, sophisticated local consumer base, aware of wellness, healing, health
• Existing commercial and strategy skills around Cannabis and hemp
• Global association of Africa, SA, to some degree WC, with Cannabis
• Diverse expertise that is relevant – Cannabis production, wider agri production and agri-processing for export, knowledge how to compete in regulated industries (e.g. alcohol), financing, brand building and marketing, IT. Logistics, biotech FACILITIES, INFRASTRUCTURE • Existing areas of irrigation and water
• Relevant existing agri-processing capacity e.g. extracts
• Competitive value chains and end use processing capability and market linkages e.g. food, beverages, textiles, boatbuilding
• Labs, analysis and testing facilities • Natural products coops, consolidation, logistics systems
• Wider tourism infrastructure and facilities (agri and wine tourism, food tourism, leisure and lifestyle tourism, heritage and culture
• Well-maintained road infrastructure
SUPPORT / INSTITUTIONAL CAPACITY
• Research capacity and academic institutions e.g. universities, Dept of Agri and ARC crop testing, R&D in public and private • Education and training support base
• Agri extension and farmer support capacity
• Trade and investment promotion capacity
• Enterprise support
• Relatively well-functioning municipal support
• Information sharing systems e.g. Hemp hub, Cape Farm Mapper, planned alternative crop assessment decision support system
• Relevant industry cooperation and support e.g. agriculture, horticulture, natural products, traditional healers and medical practitioners, WC Cannabis coop, Cannabis traders, hemp hub.