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Update 2019/2/19
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FINANCING INDIGENOUS CANNABIS VENTURES SOUTH OF 60
Interview with Mohan Denetto, Director General of Indigenous and Northern Affairs Canada
By Gillian Ward
As Indigenous leaders and business investors gathered in Ottawa this past week for the Second National Indigenous Cannabis and Hemp Conference, WaterToday spoke with the Director General of Economic and Business Opportunities for Indigenous and Northern Affairs Canada (INAC), Mohan Denetto. INAC has mobilized resources to support Indigenous community owned ventures and partnerships entering the regulated cannabis industry. We asked Director Denetto to cast Canada's vision for Indigenous participation in the budding industry.
"Potential is unlimited", says Denetto, for First Nations and Inuit participation in cannabis-related business ventures. Deloitte has valued the base market value of cannabis consumption at between $4.9 billion and $ 8.7 billion annually, with the ancillary market of growers, value added production, laboratories and security amplifying the value to potentially 22.6 billion dollars annually.
The opportunities for new business start ups are precedent setting, says Denetto, offering hope to close the socio-economic gap for the First Peoples. Health Canada reports that six Indigenous enterprises have been licensed for cannabis production, processing or distribution, including the first official cannabis licensee under the new regulations, BeeHigh Vital Elements Inc. in Corner Brook, NL.
Health Canada has placed no limit on the number of licenses that may be issued for cannabis production, nor tonnage limits for producers. According to a list provided by Health Canada, 128 cannabis cultivation licenses have been approved to date, with approximately 30 applications in process from Indigenous applicants, according to Health Canada communications staff. Another 18 Indigenous applications are in process for various licenses, including processing and distribution. Health Canada has designated resources to assist Indigenous applicants through the complex regulatory process. INAC has accepted 26 applications for the cannabis industry finance program. Water Today asked about priorities or excluded sectors. Denetto explained that the program is designed to be reactive, rather than prescriptive. The communities will drive the priorities for development by the proposals that come forward, and no particular sector has been excluded.
In terms of strategic opportunities, Denetto says provinces are experiencing a range of supply conditions from glut to scarcity with a general shortage of processing capacity. As processed and labeled products may not be transferred from one jurisdiction to another, there are opportunities in the supply of processed product in certain jurisdictions. Denetto added that the recreational market is expected to be larger than the medical market. Opaskwayak Cree Nation, one of Canada's leading licensees in partnership with National Access Cannabis, would agree with Denetto's assessment. Since launching an on-line cannabis store, 4 on-reserve outlets and 17 storefronts in western municipalities, Onekanew (Chief) Sinclair confirmed his belief in the enormous potential that lies in recreational cannabis, as he repeats, "cannabis is the new coffee!"
When asked about barriers to entry for Indigenous ventures, Denetto advised that the biggest challenge for any business start up in cannabis is going to be working through the requirements of the highly complex and challenging regulatory process. The second significant barrier will be to establish the human resource component with highly qualified, technical staff. Employment and Skills Development Canada offers the Indigenous Skills and Employment Training Program, (ISET) which may be accessed for technical skills training for the cannabis industry. The third barrier is access to the relatively large capital requirements that new ventures require, a topic discussed extensively at the conference. Watch for the details about INAC's financing program for the regulated cannabis industry including eligibility and equity requirements, coming soon.
gillian@watertoday.ca
WaterToday requested additional information regarding the funding of cannabis projects from Indigenous Services Canada (ISC). We received this email reply from an ISC spokesperson, after the article was published.
ISC: Funding Indigenous Cannabis Ventures South of 60
Indigenous Services Canada, Economic and Business Opportunities Department manages the Community Opportunities Readiness Program.
This program provides project-based contribution (no loans or grants) funding to First Nation and Inuit communities for a range of activities to support communities’ pursuit of economic opportunities and leverage private sector resources necessary to realize the full potential of these opportunities.
Cannabis economic development funding is delivered through existing programs. There is no program that specifically focuses on business opportunities in the cannabis industry, no separate funding budget or capital pool for cannabis projects.
Cannabis community businesses funding requests need to compete with all other community businesses funding requests from a variety of industry sectors.
Minimum equity contribution from communities is 10% of total project costs. Project funding limitations vary from 40% of total eligible project costs (up to a maximum of $1M) for equity gap capitalization to 80% for economic pre-development costs (up to a maximum of $3M) with economic infrastructure project capitalization maxing out at 66.7% (up to a maximum of $3M).
All Community Opportunities Readiness Program funding is sourced from annual parliamentary appropriations. For more information on the Community Opportunities Readiness Program (recipient and project eligibility or funding limitations) please visit the Community Opportunities Readiness Program Guidelines at : https://www.aadnc-aandc.gc.ca/eng/1100100033417/1100100033418
First Nations entities and entrepreneurs can also seek financing through the network of Aboriginal Financial Institutions. The Aboriginal Financial Institutions are Indigenous-owned and controlled financial institutions that provide non-repayable contributions, developmental lending and business support services to Indigenous entrepreneurs to start-up small-to-medium sized enterprises. Support will vary depending upon the needs of the client, the availability and sources of funding, the eligibility of costs, the economic benefits, and the project viability.
Through the Program Delivery Partners (PDP) initiative, Aboriginal Financial Institutions deliver funding for business development. Aboriginal Financial Institutions are located in all regions of the country and are well-positioned to meet the needs and aspirations of Aboriginal entrepreneurs and communities at the local level. Aboriginal Financial Institutions have responsibility for the management, distribution and administration of an equity fund and have the authority to approve funding for activities up to a maximum of $99,999 for Aboriginal individuals and incorporated businesses and up to $250,000 for community owned businesses.
If you are seeking financial assistance we encourage you to speak with an Aboriginal Financial Institution in your area before you begin the application process to ensure you have the latest information https://www.aadnc-aandc.gc.ca/eng/1100100033216/1100100033220.
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Cannabis Report
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