Could medicinal cannabis be a cash cow for our poorest regions?

by Max Towle / 25 May, 2018

Hikurangi Enterprises wants to be front and centre in the medicinal cannabis industry. Photo/The Wireless.

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Earlier this month, Pohatu Poutu made the short trip from Hicks Bay to Te Araroa with a firm number in mind.

Fifty bucks, he’d decided.

The 23-year-old teacher took a seat at Hinerupe Marae shortly before 5pm and clasped his hands.

For 90 minutes, he and a few dozen others listened to a business pitch.

This was the first of six public meetings on the East Coast. The Ruatoria-based company, Hikurangi Enterprises, was asking for investment in its plans to produce medicinal cannabis.

After hearing the pitch, Poutu put down $500.

“Lots of my whānau were encouraging everyone to go, so I went and had a listen and it sounded fantastic,” he recalls.

“I had decided to give $50 just to have a share of a local business, but listening to the korero inspired me, so I upped that amount a bit. I went there with my wallet, let me put it that way.”

Poutu wasn’t the only local wrapped up in the dream - Hikurangi Enterprises’ investment arm raised more than $180,000 from the small, rural township that evening.

Days later, after the sixth and final meeting in Gisborne, the amount had reached $1.4 million - a staggering amount to conjure from an area that’s the maximum 10 on the deprivation index.

“People without email addresses or cell phones gave their money,” says Hikurangi’s managing director, Manu Caddie.

Grandparents invested their savings. A woman who had been diagnosed with cancer and had been secretly smoking cannabis signed up for $10,000. Whānau pooled their money and invested tens of thousands.

“I think if we’d turned the roadshow around and gone back up the coast we would have reached $2 million.”

In 2015, the only bank in Ruatoria closed. Locals, many of whom had limited access to internet banking, faced the prospect of having to travel at least 150km. The bank was the only branch north of Gisborne.

Westpac said its decision was down to viability. It offered to leave behind an ATM .

Caddie, a former university lecturer and youth worker, was among a group of community leaders who campaigned tirelessly to prevent the branch shutting, but to no avail.

Yet their efforts were noticed by Credit Union Central, which quickly set up banking facilities in Ruatoria. Caddie and others helped persuade more than 100 locals to transfer their Westpac accounts.

The same year, he was among a group that founded Hikurangi Enterprises.

The social enterprise started with a kaupapa to produce natural health products, and provide economic development for a region sorely in need of investment.

Since then, Hikurangi has secured funding to trial the health benefits of kānuka, and a government licence to grow hemp.

With the government’s medical cannabis amendment bill almost certain to pass by about October, Caddie and his partner Panapa Ehau have a new focus.

To build a processing plant and glass houses, pay staff and for clinical trials, they settled on a goal of $10 million.

Some would come from institutional investment, some from the government, some from crowdfunding, but first, they wanted to drive up the coast.

Regional development has been a political football for too long, says Caddie.

“People here have been made a lot of promises that haven’t been fulfilled.

“Forestry, for instance, was supposed to be an industry that took off on the coast, but it didn’t deliver. Some vineyards were planted up here in the 80s but were pulled out because they were the wrong variety.”

He says Hikurangi could have easily been bankrolled by private investors, but they wanted shared ownership. They believe this is what tino rangatiratanga and self determination is about.

“We want people here to have a stake in what we’re doing. This hasn’t been about a big corporate coming in, but locals who got organised and found an opportunity,” he says.

“There’s been nothing really like this in the region - for people to be able to put their own money into something.”

During the roadshow, Caddie says he went to great lengths to warn locals that medicinal cannabis isn’t a sure thing. Like most investments, he describes it as “high risk”.

Even he was stunned by the positive response.

“I told a few people beforehand - don’t put your life savings into this thing, it’s not a sure bet - and people knew that,” he says.

“But there was so much positivity and hope that this could be something that not only creates jobs and raises household incomes, but will be good for people’s health.”

Hikurangi Enterprises has hired locals with experience growing cannabis. Photo/The Wireless.

Some did invest their life savings. Caddie is well aware of the burden Hikurangi now carries.

“It was both humbling and pretty full on taking their money,” he says.

A referendum for legalising recreational cannabis could happen as early as next year - Caddie says Hikurangi would be perfectly positioned to meet the new demand.

The biggest risk is how long the government takes to establish regulations and standards for the medicinal industry.

“Once law reform happens, we’re hoping that takes 6-9 months,” he says.

“Some of our overseas experts say if the government takes two years to develop regulations, we can forget about selling to international markets. The world will have moved on by then.”

He wants to get on with growing as quickly as possible. Hikurangi already has a $160 million supply agreement with a Seattle-based company.

“The world is short on CBD Extract (cannabidiol) right now. The price will drop at some point. The opportunity to earn money is right now.”

Not everyone is excited about Hikurangi Enterprises.

AUT senior law lecturer Khylee Quince, whose family are from Ruatoria, says cannabis is not an industry Māori should be supporting.

She supports law reform, both for medicinal and recreational cannabis, but doesn’t want the burgeoning industry to be seen as a silver bullet.

“We have a right to be involved from a self-determination perspective, but I think this is a low aspiration game to get into. We could be getting involved in health, housing or education, for example. There are better things we could prioritise,” she says.

“Given our history with marijuana and its problematic impacts on our communities, I just don’t think it’s an industry we should be involved in.”

Anyone with a licence will have a right to make cannabis, but the social harm it has caused rural, predominantly Māori communities is clear, she says.

Almost half of those imprisoned for drug use are Māori, who are twice as likely than non-Māori to have substance abuse disorders in their lifetime.

Quince has studied the effects of police discrimination against Māori. She knows historically, Māori who are found in possession of cannabis face worse outcomes.

“Not all cannabis users are problematic users, but of those who are, the majority are Māori,” she says.

“It’s ironic that something that has caused such social harm is now being seen as an economic saviour.”

Regional Economic Minister Shane Jones shares a similar, if more blunt, view. In February, he told Newshub he probably wouldn’t direct regional funding to Hikurangi Enterprises.

“I'm hard-line on drugs, so it'll be a bloody big stretch for me to start popularising cannabis … I don't pretend to have views about how cannabis has wrecked my own society, and now it's P - I'm not going to back away from those views,” he said.

Nevertheless, Quince wasn’t surprised at the success of Hikurangi’s roadshow, which she compares to a “Destiny Church roadshow or some other evangelical event”.

“Who else would make a business case in Ruatoria? Who else would go to Te Araroa or Tokomaru Bay or Tikitiki? In a way, this is a case of people jumping at the chance to just be involved,” she says.

“People are going to cling to any opportunity to change their situation.”

Yet she says ethical investment and protection rights should provide a counterbalance.

“We should be thinking about what type of business we want to be involved in. Why are grandparents who are investing in cannabis for their grandchildren not opening university accounts or a term deposit?

“It’s just madness to me.”

As a youth worker, Manu Caddie saw firsthand the harm caused by cannabis.

He used to work in an alternative school and would encourage students to avoid the drug.

“It was never healthy, but it was more of a symptom of wider issues within their families or community - I saw cannabis being used as a way for kids to escape hurt or trauma.”

There is a fundamental difference in his and Quince’s viewpoint.

He accepts many in the community are still getting their heads around cannabis having a potentially positive effect, but he believes embracing the drug is empowering.

“In a way, it’s similar to kānuka - the older generation have spent their lives trying to clean it off the hills.”

Caddie has hired locals with experience growing cannabis - people who have marijuana convictions. He wants to use their skills and help them earn a legitimate income, though regulations could prevent this.

“I think public perception has done a U-turn in the past few years, and Helen Kelly and others who told their stories had a big impact. More people are understanding that cannabis can help those who are desperate for it.”

A cup of former Council of Trade Unions president Helen Kelly's cannabis tea. Photo: RNZ/Rebekah Parsons-King

Hikurangi Enterprises may not be officially connected with Ngāti Porou, but after its fundraising efforts, the majority of its local investors are descended from the iwi.

Ngāti Porou has previously cited Hikurangi’s success as a potential motivator for whānau members to move back to the coast. Yet the iwi has been publicly quiet about Caddie and Panapa Ehau’s latest venture.

“We’re talking to Ngāti Porou about investment, and also other iwi that are interested. Of course, they would like to see a successful industry in their area,” says Caddie.

Yet he hints at some skepticism.

“I think having a lot of whānau sign up has encouraged the iwi to look seriously at us. They can see that their people are really behind us.

“We may have had our skeptics early on, but we haven’t had much criticism lately.”

Helius co-founder, Paul Manning.

Hikurangi isn’t the only frontrunner in the game.

A few months ago, a group of business titans - former advertising executive Paul Manning, former Red Bull NZ manager, Gavin Pook, and entrepreneur JP Schmidt - started Helius.

Like Hikurangi and a handful of others, Helius is expecting to be granted a license from Medsafe in the next few weeks so it can go to work.

The company, which relies solely on private investment, will hire experienced botanists, scientists and horticulturists who will have to pass a “rigorous” background check run by security firm, Global Security.

Manning, like Manu Caddie, says medicinal cannabis could be a billion dollar industry in New Zealand, and there’s plenty of action to share.

“We’re running our own race and we think there’s plenty of room for both companies. We both have a common objective to make medicinal cannabis products available to people.”

He says Helius has $15 million to build a manufacturing, research and development facility that he reckons will be as good as any in the world. He says this will be the biggest competitive edge.

“Our strategy is to set the highest possible standards in the industry for quality, ethicacy, consistency and safety,” he says.

“I think what will also set us apart is capital. We won’t need to cut any corners.”

Unlike Hikurangi, Helius is yet to sign an export deal, but Manning says that doesn’t matter. He’s waiting for law reform before heading down what he says will be an “easy avenue”.

“I know there has been talk of existing export agreements - I think you need to look really closely at those - a letter of intent, for example, isn’t worth very much in the commercial world.”

He and Caddie agree on one thing - delays in finalising regulations could cost them dearly.

“Of course, we’ll be burning capital waiting for legislation - our facility alone will cost more than $1 million per year,” says Manning.

“The other big risk is we hope the government doesn’t tightly lock down the type of people who would be allowed to access medicinal cannabis. If the legislation is narrow, our market gets smaller.”

Pohatu Poutu has no regret about his $500 investment in Hikurangi.

After finishing high school in Hicks Bay, Pohatu Poutu left the township to study teaching at Waikato University.

He returned when his mother was diagnosed with cancer. His father had died of the same disease when he was seven.

“Neither of them smoked cannabis, but I’m sure if they knew it could have provided them with some pain relief, they would have,” he says.

Poutu hasn’t had any sleepless nights since his $500 investment.

He remembers the “joyousness” in the marae and the optimism that firmly lingers on the coast.

“When you think about it, there’s been lots of information around medicinal cannabis and it’s not a matter of if, but when it’s going to happen. I can see that, and so can many others in Hicks Bay,” he says.

“The people at Hikurangi have all had the same upbringing as us in the community. We have some great growers on the coast - they’re going to be employed.”

He says any doubt was extinguished listening to a Hikurangi board member speak that night.

“He said he had seen many businesses try and fail to get off the ground, but this one was legit. That was reassuring - that he was going to put his time and effort into this kaupapa.”

He knows $500 is a lot of money. He knows $1.4 million is a staggering amount.

“But when this kicks into gear, it’s going to be phenomenal. I don’t have my own whānau yet, but I am thinking about my wider whānau, and my whānau to come.”

In the days after investing, he had family messaging him on Facebook desperate to do the same.

On May 8, Hikurangi opened up its investment offer to the wider world.

That night, so many people flocked to crowdfunding website PledgeMe that it crashed.

The next night, the cap of $2 million was reached within 17 minutes.

Poutu is glad Hikurangi drove up the coast first.

“They chose to bring it to us before the people with heavy cheque books.”

This article was originally published on RNZ's The Wireless.

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