Cannabis referendum: What it means for business and the New Zealand economy

Recreational cannabis would give New Zealand a share of the US$100 billion (NZ$150b) global cannabis market, if this year’s referendum on the issue leads to legalisation.

In September, Aotearoa will become the first country to vote in a national referendum on recreational cannabis.

Voters will be asked whether they support the proposed Cannabis Legalisation and Control Bill, which has been developed to help give New Zealanders an idea of how the law might work.

Here’s what it could mean for business and the economy:

READ MORE:
* Cannabis referendum: What are we voting on in the Cannabis legalisation and control referendum?
* First ‘stepping stone’ to commercial cannabis cultivation in Marlborough
* AUT University to offer country’s first medicinal cannabis paper

ISN’T CANNABIS ALREADY LEGAL?

No. Medicinal cannabis is already legal under the Medicinal Cannabis Scheme, which came into effect on April 1, enabling access to cannabis-based products through a prescription.

In 2017, the Government lifted restrictions on the drug cannabidiol (CBD), allowing GPs to prescribe it without the Ministry of Health’s permission.

As a result, a number of medicinal cannabis companies including Hikurangi Hemp, Helius Therapeutics and Cannasouth, which listed on the NZX last year, cropped up.

Then in December 2018, the Government passed its medicinal cannabis bill to allow those in palliative care to consume marijuana legally, as a bridging mechanism until the full Medicinal Cannabis Scheme was set up.

Under the new scheme, commercial cultivation of cannabis and the manufacturing of both CBD and THC, the psychoactive compound that produces the cannabis high, became legal.

The 2020 referendum will decide whether cannabis can be grown in households, and purchased and consumed, for personal use.

Under the proposed bill, licensed cannabis retailers could sell up to 14 grams of dried cannabis (or its equivalent) a day, per person, to customers over the age of 20. Enough to roll about 42 joints a day.

It would also allow people aged 20 and older to consume cannabis on either private property or licenced premises and grow two plants, with a maximum of four plants per household.

The level of THC in products would be set at 15 per cent.

WHAT IS THE ECONOMIC OPPORTUNITY OF LEGALISING CANNABIS IN NEW ZEALAND?

Work by the NZ Institute of Economic Research (NZIER) shows with an estimated excise tax rate of 25 per cent, the legal cannabis industry could raise about $490 million per year in tax, including GST.

The US state of Colorado, which has a similar population to New Zealand and legalised cannabis in 2012, received US$199m in revenue in 2017 from cannabis sales of US$1.3b.

In 2015, cannabis sales were so profitable that the state declared a tax-free day.

Research commissioned by the NZ Drug Foundation, and carried out by economist Shamubeel Eaqub​ in 2018, said New Zealand could be $86m a year better off in “societal gains”, if cannabis was legalised.

According to a Drug Harm Index (DHI) released in 2016, police spent about $90m a year on cannabis-related “interventions”, with another $109m of costs in the courts and justice system.

Currently, possession of cannabis smoking apparatus is punishable by a year in jail. Based on prison costs of $250 a day, that totals about $90,000 of taxpayers’ dollars, for one person.

While medicinal cannabis can be imported and exported, under the proposed bill for recreational cannabis, only seeds could be imported.

However, international companies manufacturing CBD have already started establishing footholds in New Zealand in anticipation of a yes vote in the referendum.

This could open the floodgates to a new multi-million dollar industry.

WHO COULD SELL IT?

Under the proposed bill, people over the age of 20, without certain previous convictions, would be eligible for a retail licence. Staff would also have to be 20 or older.

A business could apply for a licence to grow, supply or consume cannabis on its premises from the Cannabis Regulatory Authority. This would be the regulatory body to oversee the legal supply and use of cannabis.

A cannabis retailer would have to apply for a separate consumption licence if they also wanted to sell food.

An unlicensed seller could face up to two years in jail for selling cannabis to someone over the age of 20 and up to four years imprisonment for selling it to a minor.

Cannabis could only be sold through a licensed dealer, and could not be sold online.

Under the draft bill, a number of different businesses could be set up, including cannabis farms and shops.

More specifically, the legal market activities outlined in the draft bill are:

• Importing cannabis seeds
• Growing cannabis
• Manufacturing and processing cannabis products
• Wholesaling
• Operating cannabis consumption premises
• Transporting cannabis and its products
• Destruction of cannabis and its products
• Conducting research on cannabis

Under the current proposal, a person holding a licence to grow cannabis would not be able to sell cannabis at the same time.

It has also been proposed that cannabis retailers would not be able to sell tobacco or alcohol.

Licensed retailers would be able to buy seeds from the black market for a transitional period while the legal market got established.

However, there would be a cap to limit the amount of cannabis available for sale in the licensed market and no licence holder could hold more than 20 per cent of the cap.

WHAT ABOUT TAXES? WOULD THERE BE A LEVY?

The bill is proposing a progressive excise tax at the point of production, based on the weight and potency of the products.

That means the higher the THC content, the higher the tax.

A levy is also being proposed, similar to the alcohol and gambling industries, to ring-fence money for harm reduction services.

Businesses would be charged licensing fees to cover the cost of administering and monitoring licensees.

WHAT CAN BE SOLD AND WHO CAN BUY?

A daily limit per person of up to 14 grams of dried cannabis (or its equivalent in cannabis-infused products, edibles and concentrates) could be sold to customers over the age of 20.

Cannabis accessories could also be sold, including rolling papers, holders, pipes, water pipes, bongs, and vaporisers.

Under the proposed bill, cannabis-infused gummy bears and lollipops would be banned, as edibles would need to meet specific requirements, including that they do not appeal to children.

All forms of cannabis advertising would be banned. Retailers could only display signs that they sell cannabis inside their shop.

Edibles would be required to be solid at room temperature and be restricted to baked products that do not require refrigeration or heating. They could only be produced in separate premises to those used for conventional food production.

The bill bans beverages that include cannabis, products designed to increase the psychoactive or addictive effects of cannabis, packaged dried or fresh cannabis containing roots or stems.

Products containing alcohol and tobacco and injectable products, suppositories, and products for the eyes, ears or nose would also be banned.

Cannabis would be sold in a sealed, tamper and child-proof packaging with clear labelling and expiry dates as well as the quantity of THC (15 per cent maximum).

A cannabis plant could not be budding or flowering at the time of packaging, with a maximum of two plants packaged in one container.

COULD I SELL MY HOMEGROWN WEED?

No, cannabis could only be homegrown for personal use, and shared socially with those above the legal age.

To protect the integrity of the licensed market and minimise harm, the unlicensed sales, gifting and promotion of cannabis would be banned under the proposed bill.

People aged 20 and over could grow up to two plants without a licence for personal use. For households with more than two people over 20, the limit would be four plants.

Plants would have to be grown out of public view.

While cannabis-infused products could be homemade, extraction of resins and other concentrations will not be allowed at home.

WILL A ‘YES’ VOTE TURN THE CANNABIS LEGALISATION AND CONTROL BILL INTO LAW?

If more than 50 per cent of people vote “yes” in the referendum, recreational cannabis would not become legal straight away.

After the election, the incoming Government can introduce a bill to Parliament that would legalise and control cannabis.

This process would include the opportunity for the public to share their thoughts and ideas on how the law might work.

If more than 50 per cent of people vote “no” in the referendum, recreational cannabis would remain illegal, as is the current law.

Stuff